The Producer’s Lien: An Often Overlooked Legal Remedy in Grape Contract Disputes

04/06/11

In the wine industry, one of the most common legal disputes is breach of contract between grape growers and wineries. Often times, grape growers are surprised to learn that, upon the delivery of grapes to a winery, they automatically have a statutory lien against any wine made from those grapes. This lien, called a “producer’s lien,” means that the winery cannot lawfully sell the wine without paying the grower. The lien can be found in California Food and Agricultural Code § 55631 et seq. See following link for statute text:

http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fac&group=55001-56000&file=55631-55653

Additionally, this lien takes priority over many other security interests. (See Frazier Nuts, Inc. v. American Ag Credit (2006) 141 Cal. App. 4^th 1263)

http://www.lawlink.com/research/caselevel3/83570

The amount of the lien is the amount the winery contractually owes the grape grower for the grapes or, if an amount is not specified in a contract, the value of the grapes upon their delivery to the winery.

Sometimes, however, a grower inadvertently waives his or her right to this lien. Often times, a contract between a grape grower and a winery includes a clause whereby a grower warrants that the grapes are not subject to any lien or other encumbrance. The parties generally intend such a clause to ensure the winery that the grower has the legal right to sell the grapes. Courts, however, may interpret this clause as the grower’s waiver of the producer’s lien. If one wishes to avoid waiver of the right to the producer’s lien, such a clause should warrant that the grapes are not subject to any lien or encumbrance other than the producer’s lien.

Enforcing a producer’s lien can be time-consuming. If the winery has not paid the grower, the grower can initiate an action in court to foreclose on the lien. Because actual foreclosure can take months, the grower may also immediately seek a preliminary injunction from the court to prevent the winery from selling or destroying the wine pending foreclosure. Eventually, assuming the grower proves his or her case, the court will issue an order giving the grower the right to possess the wine. The grower must then work with the sheriff’s department to obtain physical possession of the wine. Even if the wine has been blended with other wine, a grower can still take possession of the wine.

One of the difficulties with a producer’s lien, however, is that a grower must then have the appropriate licenses to market and sell the foreclosed wine. If the grower lacks such license, then the grower must work with a license broker or other authorized person to sell the wine.

If you have any questions about contract disputes, including contracts between grape growers and wineries, please contact us.

The Wine Group Sues Marc Anthony Group, Seeks Declaratory Judgment Upholding Termination of Marc Anthony in Canada

02/23/11

In August of 2010, the California-based The Wine Group LLC broke off its nearly 23 year relationship with Vancouver-based Marc Anthony Group, Inc. The two corporations, however, are not parting ways quietly.

Marc Anthony Group made a great deal of money selling The Wine Group wines, including Big House, Cardinal Zin, Inglenook, and Corbett Canyon. In fact, some media reports indicate that sales of The Wine Group wine generated $9 million dollars of sales for Marc Anthony Group.

Apparently anticipating litigation, The Wine Group made the first move on February 2, 2011 and filed a Complaint for Damages and Declaratory Relief in the U.S. District Court for the Northern District of California. That complaint requests that the Court find that The Wine Group had the right to terminate its relationship with Marc Anthony Group based upon Marc Anthony Group’s alleged failure to promote The Wine Group’s brands. Marc Anthony Group responded on February 10, 2011 by filing a breach of contract action against The Wine Group in British Columbia, Canada.

Undoubtedly, The Wine Group will argue before the Canadian Court that it should defer jurisdiction to the U.S. Court, since that was the first-filed action. Marc Anthony Group will resist that, arguing that the case belongs in Canada. It will be interesting to watch how this international dispute proceeds.

For more information or assistance in litigation matters contact us.

Guest Blog: Clarification on Repudiation of Contracts in the UK

02/23/11

Our U.K. colleague, Andrew Park of APP Wine Law in Cheshire, England, recently posted a blog on his web site on a newly published case from the England and Wales Court of Appeal concerning the test for repudiation of contracts in the U.K. The case indicates in determining repudiation the test is: “looking at all the circumstances objectively, from the perspective of a reasonable person in the position of the innocent party, has the contract breaker clearly shown an intention to abandon and altogether refuse to perform the contact?”

For wineries with contracts with importers or distributors in the U.K., this is important because ending such a contract based on perceived non-performance and repudiation can be a risky proposition.

To read Andrew’s full post and learn more about wine law issues in the U.K. click here:

http://www.appwinelaw.com/newsdetail.php?NewsID=109

DP&F maintains a network of wine law colleagues throughout the world. Contact us for assistance on any matters of international wine law.