Integrated Beverage Group Ltd. v. New York State Liquor Authority

OPINION OF THE COURT Friedman, J. At issue on this appeal is the refusal of respondent State Liquor Authority (SLA) to approve the proposed labeling of an alcoholic beverage known as “Freaky Ice,” which is to be sold in grocery and convenience stores. As the name implies, “Freaky Ice” (characterized on the labels as a “malt beverage with natural flavors”) is intended to be consumed when frozen solid, which is unusual for alcoholic beverages. Like many ice treats appealing to children, “Freaky Ice” is packaged in packets, from which a person apparently extrudes the frozen product to consume it. The product comes in three different fruit flavors (Passion Cocktail, Cherry Fusion, and Lemon Stinger). Although the “Freaky Ice” labels indicate that the product contains alcohol, and should not be sold or served to children, the SLA accurately noted that this warning is set forth in “small type.”1 The question presented is whether the SLA could rationally conclude, pursuant to its authority under Alcoholic Beverage Control Law § 107-a (2), that the proposed labeling of “Freaky Ice” fails to avoid the likelihood of “deception of the consumer,” and fails to “afford [the consumer] adequate information as to [the] quality and identity” of the product. In our view, the SLA plainly had a rational and nonarbitrary basis for concluding that the proposed labeling presents an unacceptable risk of deceiving the public about the nature of “Freaky Ice.” Accordingly, we affirm Supreme Court’s confirmation of the SLA’s determination. Significantly, petitioner itself essentially admits that the “Freaky Ice” labels do not suffice to alert consumers to the alcoholic nature of the product. Specifically, petitioner has stated that it intends to give retailers of “Freaky Ice” the following instructions regarding the product: “We strongly advise that if the retailer has no freezer wholly dedicated to alcoholic beverages, then [161] the product should be sold at room temperature. Under no circumstances should the product be mingled with non-alcoholic beverage products in a retailer’s freezer. “When selling the product at room temperature, we strongly recommend that such product be kept separate and apart from any other non-alcoholic beverage products and only be included in those areas dedicated to alcoholic beverages. “Whether the retailer sells the product in a frozen state or at room temperature, we strongly recommend that the retailer indicate, in writing, near to where such product is displayed, that it is an alcoholic beverage and will not be sold to anyone under the age of 21.” If the “Freaky Ice” labels were sufficient to warn all consumers of the product’s alcoholic nature, the foregoing precautions would not be needed. It was neither arbitrary nor irrational for the SLA to disapprove the labels when petitioner itself implicitly concedes that the proposed labels do not, by themselves, sufficiently reduce the risk that the product will be inadvertently purchased by customers who intend to purchase nonalcoholic products, or will be purchased (whether intentionally or not) by customers below drinking age. The risk of such purchases is obvious, given the similarity of the product’s form and appearance to that of a children’s ice treat, and given the absence of any indication of alcohol content in the decidedly juvenile-sounding brand name, “Freaky Ice.” It is no answer to say that retailers will know not to sell “Freaky Ice” to persons below the age of 21, since (1) safeguards against selling alcoholic products to underage customers are never foolproof, and (2) adults may themselves be misled by the product’s form and appearance into purchasing it for their children. With regard to the first point, the SLA could rationally conclude, even without conducting an empirical study, that a frozen alcoholic beverage, sold in packaging scarcely distinguishable, at first glance, from that of many ice treats, is likely to tempt children (whether or not they are aware of the alcohol content) to a much greater degree than alcoholic beverages that do not resemble child-oriented treats. There is nothing arbitrary or irrational in the SLA’s view that to place such needless temptation in the path of underage customers will unduly test retailers’ ability to prevent alcohol sales to children. Stated [162] otherwise, there is considerable logic in the SLA’s conclusion that “the possibility of underage customers purchasing this product appears to be too feasible” and (while perhaps not artfully expressed by the SLA) that the labels are—in effect if not in intent—deceptive. The SLA’s previous approval of wine coolers, such as the Bartles & Jaymes line of beverages, should not preclude it from now disapproving the proposed “Freaky Ice” labels. In supermarkets and grocery stores, wine coolers are sold in areas dedicated to alcoholic beverages. In the case of “Freaky Ice,” however, retailers are unlikely to have freezer sections dedicated to alcoholic beverages, and, therefore, the SLA could rationally conclude that the product is likely to be sold alongside nonalcoholic products.2 Further, it is highly unlikely that anyone would confuse a wine cooler with a soft drink such as Coke, Pepsi, or even Snapple. It is all too likely, however, that “Freaky Ice” will be confused with ice treats, such as “freeze pops” (of which “Freaky Ice” appears to be an alcoholic version) or popsicles. The likelihood of confusion is only increased by the “Freaky Ice” packaging, which is very much like the packaging of nonalcoholic ice treats—a type of packaging that has never previously been associated with alcoholic beverages. Wine coolers, by contrast, are packaged in bottles and cans, as alcoholic beverages usually are, and long have been. In sum, the SLA could rationally conclude that there is much greater potential for confusing “Freaky Ice” with a nonalcoholic ice treat than there is for confusing a wine cooler with a nonalcoholic soft drink. The dissent cites only two cases from the 1980s that resulted in the annulment of the SLA’s disapproval of the labeling for an alcoholic beverage; both cases are inapposite, and, in any event, neither is binding on us. In the more recent case (CIBCO Distrib. Co. v State Liq. Auth., NYLJ, Feb. 9, 1988, at 7, col 2 [Sup Ct, NY County]), the SLA had disapproved the label for so-called “Nude Beer” (which included a risqué picture) on the ground that “the proposed label would encourage underage drinking by appealing to a youthful market.” The instant case is readily distinguishable from CIBCO in that here, unlike in CIBCO, the rationale for the SLA’s disapproval of the labeling is that the product is easily confused with a child-oriented [163] nonalcoholic product, and that the proposed labeling is (in the SLA’s judgment) unlikely to prevent such confusion. The prevention of confusion and deception in the labeling of alcohol goes to the heart of the SLA’s responsibility under Alcoholic Beverage Control Law § 107-a (2), and this vital concern simply was not implicated in CIBCO. The SLA’s charge to prevent confusion in the labeling of alcohol also was not implicated in the other cited case in which the disapproval of a label was annulled, Matter of Hawkeye Distilling Co. v New York State Liq. Auth. (118 Misc 2d 505 [Sup Ct, NY County 1983] [involving vodka packaged in an apparatus intended to resemble an intravenous feeding device]). In Hawkeye, the label was disapproved primarily on grounds of taste, which, the court held, was outside the SLA’s purview. Further, since Hawkeye involved vodka, there was no question of the product confusing or enticing underage customers in grocery and convenience stores.3 In sum, we have no basis in this case to interfere with the SLA’s appropriate exercise of its discretion to disapprove the proposed “Freaky Ice” labels so as to prevent the product’s being confused with nonalcoholic ice treats favored by children. While the dissent may believe that the SLA’s concern about the possibility of such confusion is overstated, it is the SLA that the Legislature has invested with the responsibility to make the determination. The determination that the SLA has made concerning the “Freaky Ice” labels’ potential for confusion and deception of the public cannot be said to be so arbitrary, capricious or irrational as to warrant annulment. Obviously, the SLA has exercised its authority to protect children from being deceived into using a product inappropriate for them. Since this action was both rational and within the administrative agency’s lawful power, the challenged determination was properly confirmed. Accordingly, the judgment of the Supreme Court, New York County (Nicholas Figueroa, J.), entered on or about December 27, 2004, which denied the petition to annul the SLA’s determination denying petitioner’s application to register proposed labeling for three malt beverage products and dismissed the proceeding, should be affirmed, without costs. Footnotes [1] Although the dissent asserts that the admonition “Do not serve to children!” is “prominently noted” on the labels (dissenting op at 164), the warning, which is in much smaller lettering than the brand and flavor names, is not so prominent as to exclude its being overlooked. In any event, the SLA could rationally so conclude, as is evident from a review of the labels themselves. [2] Although petitioner instructs retailers not to mingle “Freaky Ice” with nonalcoholic products, petitioner does not claim that it has any ability to require retailers to avoid such mingling. [3] Still further afield from the instant case is Bad Frog Brewery, Inc. v New York State Liq. Auth. (134 F3d 87 [2d Cir 1998]), in which the SLA was held to have violated the First Amendment when it disapproved a beer label that depicted a frog making an insulting gesture. Not even petitioner contends that the instant case raises any First Amendment concerns.