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Grape insurance fraud allegations, smoke taint damages to oak tanks, and the perils of handshake deals play out in Lake County courtroom

June 18, 2021 | Filed under Featured Articles | Posted by

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Disclosure: The law firm of Dickenson, Peatman & Fogarty which represents Langtry is an advertiser in Wine Business Insight.

Accusations of a proposed smoke taint insurance fraud scheme have been raised in the Lake County lawsuit between Langtry Farms (“Langtry”) and Hugh Reimers/Torick Farms (“Torick”) over wine storage fees, and alleged taint damage to a Langtry’s oak tanks.

The legal action also raises caution flags against handshake deals — performing work without a signed, written contract. The legal dust-up also illustrates the lack of any firm regulatory standard for defining smoke taint (this as the 2021 fire season approaches).

The quick summary so far

The complicated set of court cases began May 3 in Lake County Superior Court when Langtry sued Torick in a complaint that alleges fraud, negligence, breach of contract, interference and other civil violations.

Langtry has asked the court to add Eric Stine — a former Langtry winemaker and executive — as a defendant. Court documents indicate that Stine was fired and had left the company by January 2021.

For his part, Stine has filed a claim with the California Labor Commissioner against Langtry Farms over $59,349 in unpaid commissions on wine revenues — some from Reimers — he brought into the company in the last half of 2020.

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Storage fees and tainted barrels alleged

The Langtry lawsuit charges that Torick failed to pay for the storage of smoke-tainted wine that Langtry says ruined expensive oak tanks and barrels. Langtry also asserts in its filings that Torick provided tainted grapes and wine despite multiple verbal orders from Langtry CEO Easton Manson who said he prohibited the delivery of smoke tainted materials.

As a result, Langtry’s documents say it prohibited Torick from accessing bulk wine it stored at Langtry charges for storage, including the costs to replace the tanks and barrels used in the storage.

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Torick Files Cross Complaint

On May 18, Torick filed a cross complaint disputing all of the storage charges and demanding the release of the wine and $3 million in damages.

Torick’s documents say that the wine was not tainted, they owe no damages, and that — since there is no signed contract — they are relying on a verbal commitment from Stine on a lower storage charge.

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Digging into the fraud allegations

The complaint filed by Langtry on May 3, alleged that Hugh Reimers — Torick owner and former top executive  at Jackson Family Wines and Foley Family Wines — had offered Langtry a proposal the company considered fraudulent:

Defendant Reimers, who has an extensive history in the wine industry, devised a scheme to profit from the widespread smoke-damage.

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Langtry President Manson sees Reimers’ “Salvage Scheme” as questionable

In his declaration, Langtry Farms President Easton Manson confirmed the questionable tainted fruit arrangement that Reimers had proposed.

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A confusing set of circumstances

It’s important to note that, until December 2020, Manson — in addition to being President of Langtry, and served as the President of Guenoc Winery, Inc. (“GWI”) which was partly owned by Foley Family Wines. GWI bought the winery operation in November 2012 then sold it back to Langtry in July, 2020.

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According to Manson’s Declaration:

During the 2020 harvest year, smoke from wildfires impacted the vineyards resulting in Langtry Farms’ grapes suffering from smoke exposure….

In September, 2020, Eric Stine asked me to meet with Hugh Reimers regarding his proposal to purchase the smoke impacted grapes from Langtry Farms and to use those smoke impacted grapes to produce wine at Langtry Farms’ winery facility.

I rejected Mr. Reimers’s offer to collaborate on producing wine from Langtry Farms’ smoke impacted grapes. I also rejected Mr. Reimers’s proposal to split the profits from the salvage scheme.

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Vague hints of fraud, but no smoking gun

Langtry’s filings so far have not produced a smoking gun on the fraud allegation.

What it has presented is a formidable set of filings, exhibits, lab tests, declarations and delivery receipts along with records of verbal “he said, he said” recitations of unfolding events.

Depending upon how those might be interpreted, they might point toward malfeasance, or could be circumstantial evidence of mismanagement, incompetence, misunderstandings.

For its part, Torick’s filings do little to disprove the malfeasance.

Both sides rely heavily on remembered verbal conversations rather than written evidence.

Continued in Article 2:

The rejected “maybe-tainted,” maybe-Duckhorn, maybe or not” Pinot Noir grapes

Full Court Document Links For Premium Subscribers

Key documents

These are the key documents (in chronological order filed) that Wine Industry Insight has, as of June 18, 2021.

This article, as well as the next two, are based on these.

If you want to “read ahead” or simply get more information about a very complicated and confusing case, this is where to go.

In addition, if you have relevant, credible, and verifiable information you would like to share (on- or off-the-record), please email Executive Editor Lewis Perdue.

Please do not call by phone. It’s simply too easy to misunderstand verbal communications.

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