New Legislation to Help California Grapegrowers Collect

To be a winegrape buyer you have to get a processors license from the California Department of Food and Agriculture’s market Enforcement Branch (the “MEB”).  When a buyer doesn’t pay for the grapes though, the seller can resort to a lawsuit or the seller can file a complaint with the MEB under the Processors Law. (Cal. Food & Ag. Code Sections 55521 et seq.)  Under the Processors Law the MEB’s hammer has been the suspension or revocation of a winery’s processors license.  Pay the grower what is owed or MEB may shut down your processors license, rendering a defaulting buyer technically unable to make or sell wine.

That may sound simple enough, and the hammer is very real, but the punishment exacted may not be proportionate to the harm done.  Suspending or revoking a processors’ license, even temporarily, may not actually get the grower paid quickly, and has actually had the result of some defaulting buyers simply ignoring the MEB’s decision unless and until they can afford to pay.  A few wineries have just shut down instead of paying, the MEB’s suspension being the last straw.   

Through AB 907, Assembly Speaker pro Tempore Fiona Ma has proposed changes to the Processors Law that would give the MEB greater latitude to fashion remedies through fines and assessments of administrative costs against wineries that don’t pay their growers.  The fines would be up to $10,000, and the recovery of administrative costs would be assessable up to $6,000. Another key amendment proposed by AB 907 is allowing the MEB to require a winery that has had problems paying its growers to put up a surety bond in order to keep its license.  Currently, the MEB can only require a guaranty of payment from a processors’ license applicant, with the recession teaching too many creditors the hard lesson that guaranties are not always worth the paper they are written on.  Posting a surety bond is a pretty simple arrow, and a cost-effective one, to add to the MEB’s quiver, and one that is common in many other industries. 

While grower organizations are in favor of AB 907, winery organizations are tepid toward it.  But, there really hasn’t been a hue and cry about AB 907, which may be because winery organizations don’t want to waste capital at the Capitol on something that really will only affect a relative handful of grape buyers anyway. 

AB 907 is currently referred to the Senate Agriculture Committee for further deliberation.  We’ll keep apprised as AB 907 goes through volatizing.

For further information on business law matters, including grape purchase contracts, contact Scott Greenwood-Meinert at [email protected]
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