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Bellion Spirits, LLC v. United States

United States District Court, District of Columbia

August 1, 2019

BELLION SPIRITS, LLC, et al., Plaintiffs,
UNITED STATES OF AMERICA, et al., Defendants.



         Winston Churchill once said, “I have taken more out of alcohol than alcohol has taken out of me.” Plaintiffs Bellion Spirits, LLC and Chigurupati Technologies Private Ltd. believe they can make such sentiment universal. They infuse their vodka with a compound called NTX, a proprietary blend of ingredients that they contend mitigates alcohol's damage to DNA. The Alcohol and Tobacco Tax and Trade Bureau (TTB), however, dashed their hopes of advertising NTX's health benefits when it found their claims to be unsubstantiated and misleading. Plaintiffs responded with this suit, and the parties have now cross-moved for summary judgment. Finding TTB's action consistent with both the Administrative Procedure Act and the Constitution, the Court will deny Plaintiffs' Motion for Summary Judgment and grant the Government's Cross-Motion.

         I. Background

         A. Legal Framework

         While we may have come a long way since Prohibition, the Federal Alcohol Administration Act (FAAA) still regulates the production, sale, advertising, and labeling of alcoholic beverages. See 27 U.S.C. §§ 201-219a. Specifically, it requires that alcohol advertising and labels accord with regulations issued by the Secretary of the Treasury. Id. § 205(e), (f). Those regulations must, among other things, “prohibit deception of the consumer” and ensure that products “provide the consumer with adequate information as to [their] identity and quality.” Id. The Secretary has delegated responsibility for issuing these regulations to the Administrator of the TTB.

         TTB's regulations thus prohibit statements that are “false or untrue in any particular or that, irrespective of falsity, directly, or by ambiguity, omission, or inference, or by the addition of irrelevant, scientific or technical matter, tend[] to create a misleading impression.” 27 C.F.R. § 5.42(a)(1) (labels on distilled spirits); see also 27 C.F.R. § 5.65(a)(1) (substantially identical regulation applying to advertising of distilled spirits). Although these provisions on labeling and advertising are essentially identical substantively, there is an important difference between the schemes governing the two: a regulated entity needs pre-approval from TTB to make any claims on an alcoholic-beverage label, but not for those in alcohol advertisements. See 27 U.S.C. § 205(e), (f).

         In 2003, TTB also promulgated regulations dealing with statements about health in advertising or on labels. There are two types. The first is “health-related statements, ” which refers to - perhaps unsurprisingly - “any statement related to health, ” including “statements of a curative or therapeutic nature that, expressly or by implication, suggest a relationship between the consumption of alcohol, distilled spirits, or any substance found within distilled spirits, and health benefits or effects on health.” 27 C.F.R. § 5.42(b)(8)(i)(A). Labels or advertisements “may not contain any health-related statement that is untrue in any particular or tends to create a misleading impression as to the effects on health of alcohol consumption.” 27 C.F.R. § 5.42(b)(8)(ii)(A) (labels); 27 C.F.R. § 5.65(d)(2)(i) (advertisements).

         The second - and narrower - category addressed by the 2003 regulations is “specific health claims.” Those are “a type of health-related statement that, expressly or by implication, characterizes the relationship of the distilled spirits, alcohol, or any substance found within the distilled spirits, to a disease or health-related condition.” 27 C.F.R. § 5.42(b)(8)(i)(B). Specific health claims are “a type of health-related statement, ” 27 C.F.R. § 5.42(b)(8)(i)(B), and must therefore also comply with the more general regulations of “health-related statements.” Plus, a specific health claim - whether appearing on a label or advertisement - must meet four additional conditions: The claim must (1) be “truthful and adequately substantiated by scientific or medical evidence”; (2) be “sufficiently detailed and qualified”; (3) “adequately disclose[] the heath risks associated with both moderate and heavier levels of alcohol consumption”; and (4) “outline[] the categories of individuals for whom any levels of alcohol consumption may cause health risks.” 27 C.F.R. § 5.42(b)(8)(ii)(B)(2) (labels); 27 C.F.R. § 5.65(d)(2)(ii) (advertisements).

         A regulated entity wishing to make a specific health claim can - but is not required to - ask TTB whether the claim is permitted under the regulations. See 27 C.F.R. § 70.471(a) (allowing “[a]ny person who is in doubt as to any matter arising in connection with the [FAAA]” to “request a ruling thereon by addressing a letter to the appropriate TTB officer”). There is an exception, however, for alcohol-beverage labels, which - as mentioned above - have a mandatory pre-approval process. Specifically, bottlers and importers are generally required to obtain from TTB a “certificate of label approval” (COLA) before circulating their products in interstate or foreign commerce. See 27 U.S.C. § 205(e). TTB, therefore, reviews all claims - including those related to health - on labels in determining, as it must, whether a COLA “complies with applicable laws and regulations.” 27 C.F.R. § 13.21(a).

         B. Facts

         On April 12, 2016, Plaintiffs Bellion Spirits, LLC and Chigurupati Technologies Private Ltd. - which the Court will refer to jointly as “Bellion” - filed a petition with TTB seeking permission to make eight advertising claims about the alleged positive health effects of NTX. See AR 2, 8. Only two of those claims are at issue here - namely, that “NTX helps protect DNA from alcohol-induced damage” and “NTX reduces alcohol-induced DNA damage.” AR 8. Those are claims 7 and 8 from the original list. See AR 8. Bellion also included a proposed disclaimer to accompany the claims. It provides:

NTX does not protect against all health risks associated with moderate and heavy levels of alcohol consumption, including, but not limited to, motor vehicle accidents, high blood pressure, stroke, cancer, birth defects, psychological problems, and alcohol dependency. Do not consume alcohol if: you are younger than the legal drinking age; you are pregnant or may become pregnant; you are taking medicine that can interact with alcohol; you have a medical condition for which alcohol is contraindicated; you plan to drive; or you cannot restrict your drinking to moderate levels. If you consume alcohol, only consume it in moderation. “Moderation” means up to one drink per day for women and up to two drinks per day for men.

         AR 9. Bellion itself did not file any COLAs. See AR 15 (“Petitioners are not requesting the use of specific health-related statements on a specific label.”). A separate entity, Frank-Lin Distillers Products, submitted nine COLAs for Bellion vodka labels less than a week after Bellion filed its petition. (The Court will discuss any link between Frank-Lin and Bellion and its legal significance later.) Those proposed labels included the eight specific health claims relating to NTX and also a ninth iteration including all eight of the proposed claims. See AR 2080.

         TTB acknowledged Bellion's petition in a letter dated May 26, 2016, and assigned the matter to its Regulations and Rulings Division. See AR 1495. It explained that it would treat the matter as a request that TTB rule on whether the use of the health claims would violate TTB regulations or, alternatively, that TTB initiate a rulemaking allowing Bellion to use the eight claims in labels and advertisements. Id. TTB also explained that it had forwarded the petition and exhibits to FDA, citing its regulatory authority to consult with that agency as to health claims on alcohol labels. Id. at 1497-98. Several months later, Bellion supplemented its petition. See AR 1375. TTB acknowledged receipt of the additional materials and notified Bellion that it would forward those to FDA for consideration as well. Id. at 1541-42.

         Approximately a year after receiving the petition, TTB denied it with respect to each of the eight proposed health claims. See AR 1557-1603. It found that all of them fell both within the broader category of “health-related statements” and within the narrower category of “specific health claims.” Id. at 1557. None, however, complied with the regulations governing either category. Id. at 1557-58. Summarizing its ruling, the agency explained that “the claims, including when viewed with the proposed disclaimer, do not comply with TTB regulations regarding the use of health-related statements or specific health claims” because they “are not adequately substantiated” and are “misleading . . . as to the serious health consequences of both moderate and heavy levels of consumption of alcohol beverages containing NTX.” Id. at 1558. In addition, the agency found that the proposed claims implied that “drinking alcohol beverages infused with NTX” would “reduc[e] the risk of damage to the liver and . . . to the brain.” AR 1575; see also AR 1576. It determined that such implication was - like the explicit claims concerning DNA damage - misleading. See AR 1597. The 47-page letter went on to describe the agency's legal framework, the scope and nature of its consultation with FDA, the health risks of alcohol, its process for reviewing the eight claims, and its substantive analysis of them. See AR 1563-82. The parties do not deign to apprise the Court of the fate of Frank-Lin's COLAs, but the Court assumes they were likewise denied. See ECF No. 29 (Defendants' Cross-Motion for Summary Judgment) at 51 n.9 (noting that Frank-Lin Distillers did not “avail[] itself” of TTB's appeals process).

         On November 27, 2017, Plaintiffs filed suit in this Court challenging TTB's decision. As mentioned, they take issue only with TTB's disposition as to two of the claims - those concerning the relationship between NTX and DNA damage. See ECF No. 16 (Amended Complaint), ¶ 1. They articulate four counts: first, that TTB's ruling on the two health claims at issue violates the First Amendment as an unconstitutional restriction on commercial speech; second, that TTB's regulatory scheme constitutes a prior restraint also in violation of the First Amendment; third, that TTB exceeded its statutory authority in consulting with FDA, thus running afoul of the Administrative Procedure Act; and, finally, that TTB's regulations are unconstitutionally vague. See ECF No. 16 (Am. Compl.), ¶¶ 71-110.

         On June 12, 2018, Bellion moved to add extra-record evidence to the administrative record. See ECF No. 22 (Motion for Leave). Two months later, the Court denied the Motion. See Bellion Spirits, LLC v. United States, 335 F.Supp.3d 32 (D.D.C. 2018). The parties have now cross-moved for summary judgment.

         II. Legal Standard

         The proper standard is the subject of dispute between the parties. They both agree, at least, that the Administrative Procedure Act provides the standard of review for Count III - namely, the claim that TTB's consultation with FDA exceeded its statutory authority. See ECF No. 28 (Plaintiffs' Motion for Summary Judgment) at 15-16; Def. Cross-Motion at 16. Under the APA, courts must “hold unlawful and set aside agency action, findings, and conclusions” that are “arbitrary, capricious, an abuse of discretion, . . . contrary to constitutional right, . . . in excess of statutory jurisdiction, authority, or limitations, . . . [or] unsupported by substantial evidence[.]” 5 U.S.C. § 706(2). This is a “narrow” standard of review, under which “a court is not to substitute its judgment for that of the agency.” Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

         The parties diverge, conversely, as to the proper standard of review for the constitutional claims - Counts I, II, and IV. As the Government points out, this Court has already weighed in on this issue, reasoning that, although “constitutional claims are typically reviewed de novo, ” that “does not mean the same thing in all contexts.” Bellion Spirits, 335 F.Supp.3d at 42. Rather, “‘even in the First Amendment context,' a court must review certain agency ‘factual finding[s] . . . under the ordinary (and deferential) substantial-evidence standard.'” Id. (quoting POM Wonderful, LLC v. FTC, 777 F.3d 478, 499 (D.C. Cir. 2015)); see also POM Wonderful, 777 F.3d at 499 (“Our precedents . . . call for reviewing the [agency's] factual finding of a deceptive claim under the ordinary (and deferential) substantial-evidence standard, even in the First Amendment context.”). Looking forward, the Court concluded that “[w]hen the time comes, [it would] thus review de novo any question of constitutional law but . . . apply the substantial-evidence test and accord some deference to the agency's scientific and fact-bound determinations.” Bellion Spirits, 335 F.Supp.3d at 42.

         That conclusion is compelled by D.C. Circuit precedent, and Bellion offers no rebuttal of that point here. Its standard-of-review arguments, in fact, pour old wine into new bottles. Plaintiffs attempt to revisit this Court's prior decision, while scarcely acknowledging its existence or that of the controlling precedent on which it rests. Bellion's attachment of several exhibits to its summary-judgment Motion, moreover - some of which are not included in the record - appears to be a second, likewise unexplained effort to ignore the Court's past determinations. See Pl. Mot., Attachs. 2-17, 24-28, 36-40.

         Plaintiffs resist all of these conclusions. They contend first that the Court “performs a de novo review of Bellion's constitutional claims.” Pl. Mot. at 13 (citing Nat'l Oilseed Processors Ass'n v. Occupational Safety & Health Admin., 769 F.3d 1173, 1179 (D.C. Cir. 2014)). The decision Bellion cites, however, refers to questions of law and is one the Court considered in rendering its previous Opinion. See Bellion, 335 F.Supp.3d at 42 (acknowledging that, “[a]s a general matter, ” constitutional claims are reviewed de novo but explaining that agencies nevertheless are afforded deference as to their factual findings) (citing Nat'l Oilseed Processors, 769 F.3d at 1179). Bellion's other citations are similarly unavailing because they, too, address when deference is appropriate to an agency's determinations about the law rather than as to its assessment of the facts. See Pl. Mot. at 13 (citing C-SPAN v. FCC, 545 F.3d 1051, 1054 (D.C. Cir. 2008); Cullman Regional Med. Ctr. v. Shalala, 945 F.Supp. 287, 293 (D.D.C. 1996)). It offers no rebuttal to the proposition that the Court - particularly when “face[d] [with] conflicting evidence at the frontiers of science” - rightly accords deference to the agency's factual findings. See Cellular Phone Task Force v. FCC, 205 F.3d 82, 90 (2d Cir. 2000); see also Troy Corp. v. Browner, 120 F.3d 277, 283 (D.C. Cir. 1997) (reasoning that courts “review scientific judgments of the agency ‘not as the chemist, biologist, or statistician that [they] are qualified neither by training nor experience to be, but as a reviewing court exercising [its] narrowly defined duty of holding agencies to certain minimal standards of rationality'”) (quoting Ethyl Corp. v. EPA, 541 F.2d 1, 36 (D.C. Cir. 1976)).

         Bellion protests further that de novo review is warranted here because “[d]eference is owed only for matters within the agency's expertise.” Pl. Mot. at 14. TTB, Plaintiffs contend, has no such expertise here, since it disclaimed such knowledge on public-health issues in explaining its decision to consult with FDA. Id. at 15; see AR 1564, 1568. “Judicial deference to agency factfinding is inappropriate, ” Bellion concludes, “where the agency lacks expertise in the area.” Pl. Mot. at 14.

         As an initial matter, the cases Bellion cites on the significance of expertise again pertain to deference to agency legal interpretations, rather than factual determinations, which are at issue here. See Pl. Mot. at 14 (citing Pension Ben. Guar. Corp. v. LTV Corp., 496 U.S. 633, 651-52 (1990); Murphy Expl. & Prod. Co. v. Dep't of Interior, 252 F.3d 473, 479, op. modified on denial of reh'g sub nom. Murphy Expl. & Prod. Co. v. Dep't of Interior, 270 F.3d 957 (D.C. Cir. 2001); Springfield, Inc. v. Buckles, 116 F.Supp.2d 85, 88 (D.D.C. 2000), aff'd, 292 F.3d 813 (D.C. Cir. 2002)). As to factual determinations, while agency expertise undoubtedly provides a basis for deference, see Troy Corp., 120 F.3d at 283, substantial-evidence review is not premised on its existence. Indeed, “even as to matters not requiring expertise[, ] a court may [not] displace the [agency's] choice between two fairly conflicting views, even though the court would justifiably have made a different choice had the matter been before it de novo.” Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951). The APA requires this standard of review, and it does not distinguish between situations where the agency has or lacks expertise. Bellion, likewise, has pointed to no authority making such a distinction. As a result, TTB's acknowledgment - that, at least compared to FDA, it “is not an expert on public health issues, ” AR 1564 - does not alter the Court's analysis.

         There is no need to rest there, however, as TTB did bring scientific expertise to bear on the questions before it. As discussed more below, see Section III.A, infra, TTB exercised its considered judgment in deciding how to characterize Bellion's petition, analyzing it given the particular health risks posed by alcohol, and reasoning - with FDA's assistance - about the credibility of scientific evidence. That TTB also availed itself of FDA's public-health expertise, moreover, does not suggest that FDA's findings and TTB's adoption of them are subject to de novo review. Rather, agencies are entitled to rely on the expertise of another agency without forgoing deferential review. See City of Boston Delegation v. FERC, 897 F.3d 241, 255 (D.C. Cir. 2018) (“Agencies can be expected to ‘respect [the] views of such other agencies as to those problems' for which those ‘other agencies are more directly responsible and more competent.'”) (quoting City of Pittsburgh v. Fed. Power Comm'n, 237 F.2d 741, 754 (D.C. Cir. 1956)); id. at 254-55 (sustaining FERC's safety-related factual findings as supported by substantial evidence where it had consulted with Nuclear Regulatory Commission to conduct an “independent analysis”). Indeed, it would be strange if the fact of an agency's consultation with another expert body somehow divested TTB's opinion of expertise, thereby putting a court in the position of making complicated factual determinations in the first instance. This Court, consequently, has little trouble concluding that it will not review de novo either the factual findings of FDA - to the extent it reviews them - or, more to the point in this case, TTB's analysis and adoption of those findings.

         III. Analysis

         Bellion challenges TTB's decision on four fronts. They contend that it violates the First Amendment in two ways - as an unlawful restriction on commercial speech and as a prior restraint. See Pl. Mot. at 16, 31. It is also, they believe, unconstitutionally vague in violation of the Fifth Amendment. Id. at 41. Finally, Plaintiffs maintain that TTB exceeded its statutory authority - and violated the APA - in involving FDA in its evaluation of their petition. Id. at 35. The Court will begin with the statutory challenge. See POM Wonderful, LLC, 777 F.3d at 490 (“Per our usual practice, we first address petitioners' statutory challenges to the [agency's] order before turning to their constitutional claims.”) (citation omitted). It will then address, in order, the two First Amendment issues before turning to the Fifth Amendment.

         A. Statutory Authority to Involve FDA

         Bellion argues, in sum, that “TTB's delegation of scientific fact-finding [to FDA] was ultra vires agency action in violation of the APA.” Pl. Mot. at 35. They elaborate that, through the FAAA, “Congress delegated the regulation of alcohol beverage labeling exclusively to TTB.” Id. Plaintiffs go on to suggest, seemingly, both that TTB could not involve FDA at all, id. at 35- 37, and that, at the very least, TTB impermissibly rubber-stamped FDA's factual findings, “employ[ing] no procedures for review of [its] scientific conclusions.” Id. at 38. Whichever way the Court tilts the wineglass, Bellion's vintage is wanting.

         Plaintiffs are of course correct about the unremarkable proposition that agencies' power is circumscribed by statute. See La. Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 374 (1986) (“[A]n agency . . . has no power to act . . . unless and until Congress confers power upon it.”). The Secretary of Treasury has the authority to promulgate regulations to effect the FAAA's directives, including its prohibition on false and misleading advertising and labeling, and the Court searches in vain here for the statutory command that TTB contravened or the limitation it exceeded in involving FDA in the evaluation of scientific evidence. The Act tasks the Secretary with prescribing certain regulations regarding advertising and labeling so that they comply with the Act's directives. See 27 U.S.C. §§ 202(f), 205(e), (f). Treasury has done so, and it issued the relevant decision here interpreting those regulations and their application to the instant petition. See AR 1603. In addition, TTB's regulations interpreting the FAAA explicitly contemplate consultation with FDA. See 27 CFR § 5.42(b)(8)(ii)(B)(1) (“TTB will consult with the [FDA], as needed, on the use of a specific health claim on a distilled spirits label.”).

         Bellion appears to hang its hat on the assertion that the regulation of alcohol has been delegated “exclusively to TTB, ” seemingly suggesting that the involvement of any other agency in any portion of TTB's decisionmaking is therefore contrary to the statute. See Pl. Mot. at 35 (emphasis added). They source this proposition, however, not in any statutory text, but rather in a single case from the Western District of Kentucky decided over fifty years ago. See Brown-Forman Distillers Corp. v. Mathews, 435 F.Supp. 5 (W.D. Ky. 1976). That case held that FDA did not have “concurrent jurisdiction” with TTB - then the Bureau of Alcohol, Tobacco and Firearms - to regulate alcohol labeling. Id. at 12, 17. Yet, as noted, TTB issued the decision Bellion challenges here. See AR 1603. It did not cede concurrent jurisdiction to FDA to promulgate any ruling. Even if ...

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