North Bay Business Journal Quotes Todd Friedman on Relative Strengths of Legal Arguments for Wineries to Reject Grapes

Stoel Rives’ Agribusiness, Food, Beverage, and Timber Industry Group co-leader Todd Friedman was quoted by the North Bay Business Journal in an article titled “California wine grower report alleges 2020 ‘predatory conduct’ in smoke rejections. Winery attorneys say there’s more to the story,” published July 19, 2021. The article discusses a report commissioned by two prominent California wine grape grower trade groups that delved into the reasons wine grapes were rejected by vintners during the state’s 2020 harvest.

In 2020, thousands of tons of grapes went unharvested due to concerns of “smoke taint” from the year’s wildfires, and crop insurance claims, which cover a portion of contract value for the fruit, totaled $187.9 million. The authors of the report asserted that some rejections of grapes by wineries were based “predatory conduct” or on inconsistent standards and test methods and that some of the fruit that was rejected was later offered for sale or sold to buyers who could overlook any smoke damage they noticed.

The report also calls for the wine industry to work to balance the interests of growers and wineries to ensure the long-term survival of both and advocates for “fair and transparent” contracts. It further suggests that the price of grapes should reflect wineries’ tolerance for smoke exposure impacts and that negotiated price and terms in agreements should include considerations of the impact of possible smoke exposure.

Stoel Rives also analyzed grape purchase agreements in connection with potential rejection of grapes due to smoke exposure during the 2020 growing season and found that they generally can be ranked in a spectrum of the strength of the legal argument that a winery could use to reject grapes.

On the strongest end is an agreement giving the buyer the “absolute right to reject” grapes, which need to be of highest quality and can be accepted at the winery’s discretion. According to Friedman, these agreements are “… some of the most difficult for a grower to defeat because of lack of specificity, and the winery has the right to accept or reject. Hopefully, the price (in the contract for the grapes) reflects that the winery might reject the fruit.”

On the other end of the spectrum is an agreement that includes general quality standards — if specific thresholds for acidity, sugars and flavor compounds are laid out but no threshold for smoke exposure is included, a grower could make the argument that smoke is not a quality standard to be satisfied for the grapes to be of acceptable quality.