Getting Stiffed

Brad Goehring was always surprised to hear from fellow California winegrowers who said they were having trouble collecting on the grapes they had sold to wineries. But while the recession may be over, a lot of winemakers — especially vintners of high-end wines that really saw sales plummet as consumers moved to more affordable price points — are still reeling. And the growers who supplied their grapes are getting splashed with all that red ink.

Dale Stern, the California Association of Winegrape Growers’ legal representative, says there’s no question such problems have increased, and the wineries aren’t small unknowns. “Without a doubt I am getting more calls from winegrape growers and this is involving more wineries than in the past,” says Stern. “A lot of the calls that I get are wineries that are larger and have been around for a long time and owe quite a bit of money to growers.”

Goehring, who has been stiffed for the first time by a winery that while not overly large is publicly traded, still can’t believe he’s been caught up like some of his friends. “Now I’m one of those growers,” says Goehring, who farms 400 acres of winegrapes near Lodi. “I used to think ‘I’ve got a lien in place — I’ll be one of the first to be paid.’ But there are too many loopholes.”

Grower Payment Checklists

Do Your Research:
√ Know who you are contracting with, do a background check, see if they are properly licensed.
√ Determine the proper ownership. Don’t deal with just a field representative.
√ See if the winery has had any previous complaints.
√ Get a contract and review it carefully before signing.
√ Do not sign a contract if it contains a clause stating that you waive your right to file a producer’s lien.

If you are involved in a slow-pay or no-pay situation with a winery:
√ Don’t wait too long to take action. There is a nine-month statute of limitations to file a complaint with CDFA’s Market Enforcement Branch. (website: www.cdfa.ca.gov/mkt/meb)
√ If it is a winery that you know and trust, work out a payment schedule (with interest) and get it in writing.
√ Do not hesitate to file a producer’s lien if all attempts to receive payment fail.
√ If a winery files bankruptcy, make an immediate demand on the debtor that the producer’s lien is honored and that adequate protection be given.
√ Immediately notify the debtor that it cannot, without the grower’s consent or a court order, use, sell, or dispose of the grapes and/or products from the grapes.

Points to keep in mind regarding a producer’s lien:
√ Lien attaches automatically.
√ Lien is superior to all but wages and warehouseman’s liens.
√ Lien follows products made from your grapes so long as product remains in processor’s ownership, possession, or control.
√ May extinguish if products are transferred to a bona fide purchaser.
√ Unlawful for a processor to remove products to avoid the lien.
√ Producer’s lien is not perfect.

Source: California Association of Winegrape Growers

No Wine — No Payment

Among the loopholes, says Goehring, is the fact that if the winery has sold the wine, the grower who supplied the grapes to make that wine basically doesn’t have a lien any more. In addition, the wine must have some value. “If it’s a 2007 Sauvignon Blanc it’s not worth anything; most white wines are out of the tanks and into the store within a year,” he says. “These are some of the problems CDFA (California Department of Food and Agriculture) really needs to address and tighten up.”

Goehring says he’s not a complainer. A fourth generation winegrower, he’s never been to court before. And he emphasizes that the great majority of wineries take great care of the growers that supply their grapes. However, for those wineries who don’t play by the rules, the CDFA simply doesn’t have the situation under control. For example, in his case, the agency slapped the winery with a six-month suspension of their license to buy grapes. “But the suspension runs from December through June when there are no grapes (harvested),” he says. “It didn’t even catch the winery’s attention.”

Even if the winery’s license is suspended, that only means they can’t purchase grapes. The winery can still purchase bulk wine and bottle it.

Get The Ball Rolling

Goehring has perhaps more insight on this situation than the average grower because not only is he a member of CAWG’s Board of Directors, but he has some input on 10,000 acres of winegrapes in the state, with his involvement ranging from providing advice to custom farming. He can understand how a lot of growers can get caught, especially with the recession. “Maybe you’ve been through the ringer the past few years and you’ve had trouble selling grapes,” he says. “You just want to make a sale, so you’ll sign any contract.”

But a good contract is critical if a grower wants to try and ensure payment (see “Grower Payment Checklists”). Even with a good contract, as Goehring says he had with the winery who hasn’t paid him, growers have to be prepared to take action.

Goehring and a half-dozen other growers who’ve been stiffed by the winery are currently talking to an attorney. The growers range in size and the amounts owed, which Goehring says ranges from four to six figures.
Goehring offered the following advice to growers regarding payment. “First, hold onto those relationships with those wineries that are good, that are valued. Two, make sure you have a contract that ensures your rights. Three, on day one (of payment due) pick up the phone and call the winery.”

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