KAILUA-KONA — The parent company of Kona Brewing Co. has agreed on a tentative settlement with the plaintiffs in a lawsuit filed two years ago over allegations that the company’s packaging and advertising misleads customers.
Craft Brew Alliance Inc., which owns Kona Brewing Co., reported to investors last week that it expects to spend about $4.7 million to settle the lawsuit, though the company’s general counsel said the exact figure will depend on the number of people who file claims in the case. The settlement won’t affect Kona Brewing Co.’s local operations, said a Craft Brew Alliance spokesperson.
A federal judge in California, meanwhile, has set a June hearing to consider preliminary approval of the class-action settlement between the plaintiffs and Portland-based Craft Brew Alliance.
The lawsuit, filed in 2017, accuses the company of using “false and deceptive packaging and advertising” to mislead customers into believing Kona Brewing Co. beer was brewed in Hawaii.
Kona Brewing Co.’s Kailua-Kona facility produces about 12,000 barrels of beer annually, but its bottled and canned beers as well as its mainland draft is brewed in breweries located in Oregon, Washington state, Colorado and New Hampshire.
Among the alleged misleading representations raised in the class action complaint were a map of the Hawaiian Islands identifying the location of the company’s local brewery, imagery of orchids and palm trees and the appearance of the phrase “Liquid Aloha” on bottles.
The complaint said the plaintiffs, who were California residents at the time of its filing, relied on representations like those when they bought Kona Brewing Co. beer and believed they were buying beer brewed in Hawaii. Had they known it was brewed in the mainland, the complaint states, they wouldn’t have bought the beer “or would have paid significantly less for it.”
Craft Brew Alliance general counsel Marcus Reed said after the class was certified in the case, the parties “decided that it was the right time to mediate.” And after a couple mediations, he said, they were able to reach an agreement in principle.
“We’re not admitting any liability in this process,” he said. “We’re not admitting any fault whatsoever, but it helps us to avoid all the inconvenience and the expense and the burden of litigation going forward.”
The class covered by the lawsuit will include any consumers nationwide who, since February 2013, purchased Kona Brewing Co. beer in cans or bottles that are contained within secondary packaging, said Reed. That secondary packaging includes the company’s 4-packs, 6-packs, 12-packs and cases.
Reed said the cans and bottles already list all of the brewing locations, so anything individually packaged isn’t part of the class.
In recent months, Reed said, they started the process of adding brewing locations already identified on containers to their secondary packaging. The settlement, while not yet finalized, will involve continuing that process.
U.S. District Judge Beth Labson Freeman has scheduled a hearing on a motion for preliminary approval of the class-action settlement for June 13. She ordered that motion be filed by May 23.
Assuming the court approves the settlement agreement, Reed said, that will be followed by a notice period to then be followed by the claims period.
That process will be managed by a claims administrator to ensure class members are properly notified and claims are administered appropriately.
In a report filed last week with the Securities and Exchange Commission, Craft Brew Alliance said it expects to pay $4.7 million, based on its estimate of the likely costs of the settlement.
Reed said that figure includes attorney fees for the class counsel, administrative costs and a “rough estimate” of the payouts.
Payouts will be based on a “claims made process,” he added, meaning the amount the company actually pays will depend on how many people file a claim.
Lead attorneys for the plaintiffs in the case did not return a phone call on Tuesday.