Grape Grower Alternatives to Collecting on Winery Debt: CDFA Market Enforcement Branch
POSTED BY Ory Sandel
In our blog post on the issue of enforceability of the producer’s lien in bankruptcy, we noted the current difficult and uncertain wine market environment. Since that post, the market has not changed much. Given the risk that a lawsuit against a winery on the brink of insolvency may push it into bankruptcy, and the uncertain treatment of the producer’s lien in a winery bankruptcy, we’ve been asked by grape growers about alternative methods of attempting to collect payment from a delinquent winery. This post discusses the use of the California Department of Food and Agriculture (“CDFA”) complaint process as one such potential alternative. As explained below, although this process is an administrative procedure in the nature of alternative dispute resolution, rather than a lawsuit, it is likely to be taken seriously by respondent winery.
Basic Background
Processors of agricultural products, including processors that handle and process wine grapes (i.e., wineries), are required to be licensed by the CDFA. Cal. Food & Agric. Code §§ 55521, et seq. Such licensure is in addition to any other licenses that may be required, for example, a winegrower license issued by the California Alcoholic Beverage Commission, or a winery permit issued by the federal Alcohol and Tobacco Tax and Trade Bureau. Thus, if a winery engages in a violation of the so-called Processors Law, Cal. Food & Agric. Code §§ 55601, et seq., it may be subject to investigation, censure and punishment by the CDFA.
There’s an app – or at least a government agency – for that
The Processors Law governs wineries and other entities that buy and process agricultural products, including grapes. Under the California Food and Agricultural Code, the failure to pay a grape grower is primarily regulated under the Processors Law. This legal remedy is separate and apart from a breach of contract remedy under the contract (grape purchase agreement) and common law.
The CDFA has a branch – aptly called the Market Enforcement Branch (“MEB”) – dedicated to enforcement of the Processors Law, so as to ensure confidence and stability in the agricultural marketplace and to protect against unfair business practices between producers, handlers, and processors of California farm products.[1]
Among other things, the MEB processes complaints filed by agricultural product producers.[2] Violations of the Processors Law that are relevant to grape growers may include, for example: failure to pay in full, Cal. Food & Agric. Code § 55872; failure or refusal to make timely payment as specified in the contract, Cal. Food & Agric. Code § 55878; and failure or refusal to render a true and correct account of sales or to pay for farm products received on consignment, Cal. Food & Agric. Code § 55879.
Among other remedies, the processor/winery risks revocation of its processor’s license (which is required for a winery to operate), see, e.g., Bronco Wine Co. v. Frank A. Logoluso Farms (1989) 214 Cal.App.3d 699, 705, as well as imposition of late charges and administrative fines. Accordingly, wineries tend to take MEB investigations very seriously.
So how do I complain?
To file a complaint for failure to pay, grape growers must submit a Verified Complaint[3] to the MEB along with the relevant filing fee (the amount of the fee is based on the value of the debt). Note that any verified complaint must be filed not later than nine months from the date a complete account of sales was due.[4] Cal. Food & Agric. Code § 55745. Make sure to include copies of all contracts, invoices, bills of lading, and relevant correspondence, all in duplicate. Instructions and additional information about the complaint process are available on the MEB website, https://www.cdfa.ca.gov/mkt/meb/complaint_process.html.[5]
The Verified Complaint will be served on the respondent winery within five days of the date on which a signed verified complaint, the filing fee, and the denial of federal jurisdiction are accepted by the MEB. The respondent winery will then have 30 calendar days to answer and submit its supporting documents. After receipt and review of the answer, the MEB will issue to both parties a written factual summary based on the documentation that has been filed, typically within 90 days of the date of the initial filing of the verified complaint.
During the process, it may be determined that the issues involved in the dispute can be remedied by informal mediation with a neutral and unbiased party. However, if a settlement cannot be reached within 30 calendar days after the MEB summary is issued (approximately 120 days from the date the verified complaint is accepted), and for matters involving a debt of $30,000 or less, either the complainant grape grower or the respondent winery can request expedited arbitration, before an arbitrator from a panel of arbitrators registered with the CDFA, upon payment of a $600 filing fee.[6] See Cal. Code Regs. tit. 3, § 1703.3(a); Cal. Food & Agric. Code § 56382.8(g).
Thus, the entire CDFA complaint procedure is, in essence, an alternative dispute resolution process that occurs outside of the courtroom, but under the auspices of a state agency with disciplinary powers. See Bank of Am., N.A v. Cap. Med Farms, LLC (E.D. Cal. May 6, 2025) No. 2:24-CV-02309-DJC-CKD, 2025 WL 1307793, at *1, fn. 3 (“The [California Department of Food & Agriculture] cannot issue judgments but will consider a complaint, a response, and issue factual findings that may lead to further alternative dispute resolution and/or potential disciplinary actions against licensees[.]”) As such, in comparison to litigation, the CDFA procedure is bound to be a less expensive and more streamlined option for grape growers – and possibly also more likely to result in an agreed resolution of the debt.
DP&F Senior Counsel Ory Sandel is a member of DP&F’s Litigation group.
[1] See https://www.cdfa.ca.gov/mkt/meb/
[2] Note that if a complaint involves fruit moving in interstate commerce, it must first be filed with the U.S. Department of Agriculture. In such cases, the MEB requires a letter of denial from the federal agency before the MEB will take any action. See https://www.cdfa.ca.gov/mkt/meb/
[3] “Verified”, in this case, means that the person signing the Complaint certifies that the statement of factual allegations and description of events, as well as and any attachments to the Complaint, are true and correct.
[4] The nine-month period does not include the length of time it takes to secure a written letter of denial from a federal agency. See id.; see footnote 2, supra.
[5] The following is by way of general summary only, and should not be relied on in any MEB proceeding. Specific regulations applicable to MEB investigations and procedure may be found in Chapter 2.2 of Division 3 in Title 3 of the California Code of Regulations, Cal. Code Regs. tit. 3, §§ 1702 et seq. As with all posts on DP&F’s blog, this post does not constitute legal advice.
[6]See Cal. Code Regs. tit. 3, § 1703.3; see also https://www.cdfa.ca.gov/mkt/meb/Forms/New%20forms/Expediated%20Arbitration%20Pamphlet%20_5-07_.pdf
