Kombucha Sugar, Alcohol Claims Dismissed
Two California courts have dismissed lawsuits brought by a competitor alleging kombucha companies misrepresented the amount of sugar and alcohol in their products. Tortilla Factory LLC v. Rowdy Mermaid Kombucha LLC, No. 18-2984 (C.D. Cal., entered September 11, 2018); Tortilla Factory LLC v. Better Booch LLC, No. 18-2980 (C.D. Cal., entered September 13, 2018). In April 2018, Tortilla Factory filed several lawsuits alleging that a number of its competitors, including Rowdy Mermaid Kombucha and Better Booch, misrepresent the alcohol and sugar content in their beverages in violation of federal law.
The court in Rowdy Mermaid found that Tortilla Factory did not suffer an injury from Rowdy Mermaid’s conduct; while the plaintiff argued that the companies are “vying for the same dollars from the same consumers,” it failed to argue that “the two companies’ products are sold in the same stores, through the same channels, or even in the same geographic areas,” the court found. “Moreover, Plaintiff has not alleged facts supporting its claim that Rowdy Mermaid’s allegedly inaccurate alcohol content labeling caused consumers to purchase Rowdy Mermaid products instead of those products by Plaintiff or other companies. The Court does not need to adopt the presumption that there are two separate markets—one for kombucha below 0.5% alcohol and one for kombucha with greater than 0.5% alcohol—in order to come to this conclusion.” Further, the court found that the alcohol issue was “best reserved” for the Alcohol and Tobacco Tax and Trade Bureau.
The Better Booch court found that Tortilla Factory had standing to sue, finding a “presumed commercial injury” because the companies are direct competitors. Better Booch argued that Tortilla Factory failed to plead the heightened standard for misrepresentation allegations, and the court agreed for the sugar-content allegation—finding “information and belief” insufficient to support the claim—but disagreed on the issue of alcohol content. “Tortilla Factory alleges that it employed a third-party to utilize the headspace gas chromatography combined with mass spectrometry from a third-party lab to test Better Booch’s product, and that this test indicated that defendants’ product contained roughly four to five times the limit for beverages considered non-alcoholic,” the court noted. “These allegations thus answer the ‘who, what, when, where, and how of the misconduct charged, as well as what is false or misleading about the purportedly fraudulent statement, and why it is false.'” Accordingly, the court dismissed without prejudice the allegation as to sugar content but allowed the alcohol-content claim to continue.