Calif Growers Deserve Better From Proposed Protection Law

I got a news release today (below)  from the California Association of Winegrape Growers (CAWG) about a law that is supposed to help growers make sure they get paid for their grapes.

Despite all the gloss, sparkling smiles, glitter, and luxury European sedans that cost more than the GNP of most African nations, the wine industry is agriculture.

Dirt.

Mud.

Farming.

But those who grow the grapes, sweat the weather, get up in the middle of the night when frost threatens bud break, get mud on their boots and form the foundation for the “glamorous” wine industry are frequently short-changed when the high-profile end has cash flow problems.

This law is an honest beginning. But just barely.

The biggest issue are:

(1) the lack of  the California Market Enforcement Branch’s resources and ,
(2) administrative law judges who are clueless and excessively lenient on the wineries.

The Cosentino Winery meltdown was one of the worst examples of this. The administrative law judge in this case should be ashamed of laying down and having the winery walk all over him and the growers who needed — and did not get — protection.

I really hated to write the following articles:

• Judge Lets Cosentino Winery Dodge $1.2 Million In Grower Payment Demands

• Follow-Up On CDFA Cosentino Winery Hearing

NEW BILL FAILS TO ADDRESS BIG ISSUES

This new bill — if passed — may offer some help. But it fails to address the biggest issues.

Better would be some added enforcement personnel at MEB and others who can help growers file the necessary liens and to help them file proper documents in bankruptcy cases.

One can say that any improvement is good, but if a minor law takes the pressure off substantial protections for growers, then it will only be a symbolic “feel good” gesture.

TAKE WHAT YOU CAN GET, NOT WHAT YOU REALLY NEED

I do understand that when you deal with legislation, most of the time you take what you can get rather than what actually solves a problem. Having worked as an aide to a state governor and U.S. Senator, I totally understand the art of the do-able versus the real answer. Been there. Won some. Lost more.

Some education is also needed. I’ve spent a lot of time in the last couple of years printing lists of wineries that lacked processor licenses.But growers kept on selling to them…a buyer with money and no license? Dumb or desperate? Might be worth the risk to some who need the money. Could get be better as supplies tighten, but who knows?

FEDERAL BANKRUPTCY COURT COULD MAKE NEW LAW MOOT

And having covered a LOT of winery chapter 11 proceedings, I think that the average bankruptcy court judge may consider the surety bond in this new law an “asset” of the debtor.

And since federal bankruptcy law outranks  (stays) state law or any other local, state or federal proceeding, the good intent of the bond may be thwarted by the court’s supremacy.

State law or not, a chapter 11 winery cannot do anything –– go to the head or even comply with a state law — without a hearing and the approval of the federal bankruptcy court.

Never forget: the bankruptcy judge is God in her/his court and anything else is just commentary. If I was a slick debtor’s attorney, I could hang the surety bond sales provisions up for a very long time. But if I was a slick debtor’s attorney, I’d be able to afford having the dents knocked out of my 1994 Silverado 4×4 and repainted.

Don’t get me wrong. I’d like to see this law pass. I come from an ag family. Anything that helps people with dirt on their boots has my priority.

CAWG NEWS RELEASE

Bill Takes Aim at Wineries Who Fail to Pay for Winegrape Purchases

Sacramento, Calif. – Today, Assembly Speaker pro Tempore Fiona Ma (D-San Francisco) amended AB 907 with legislative language to better protect winegrape growers from the relatively small number of wineries that fail to pay for purchased grapes.

In California, winegrape growers enjoy the protections and benefits of the Processors Law. Administered by the California Department of Food and Agriculture’s (CDFA) Market Enforcement Branch (MEB), the Processors Law protects growers from nonpayment by processors, which includes wineries. The law requires wineries that buy winegrapes from growers to obtain a processors license.

“Nonpayment for delivered winegrapes is not a widespread problem, but when it occurs the amounts involved can be a very significant issue for the affected growers,” said John Aguirre, president of the California Association of Winegrape Growers (CAWG).

From 2009 – 2011, MEB received complaints against 68 wineries alleging more than $10 million in nonpayment to growers.  Currently, if MEB finds that a winery failed to pay a grower, or otherwise violated the Processors Law, then MEB can suspend or revoke that winery’s processors license.

“Suspension or license revocation is not the right solution for a violation under the law,” said Aguirre.  “License revocation could put a winery out of business, which is often the least attractive remedy, so it makes sense to provide MEB the opportunity to levy less severe penalties, such as administrative fines.”

CAWG is advocating for a legislative fix, through AB 907, that provides MEB useful tools to sanction wineries, short of license revocation, who fail to pay growers.

If passed, AB 907 would provide MEB limited authority to levy an administrative fine, not to exceed $10,000, if a winery fails to pay a grower for delivered winegrapes or obstructs an investigation by MEB. The bill would also allow for fines of up to $6,000 if a winery that is required to have a processors license knowingly fails to obtain such a license.

Finally, under AB 907, if MEB determines after an investigation and administrative hearing that a winery has failed to pay for delivered grapes, then a winery can be required to post a surety bond to ensure payment to those growers for the amounts owed. This surety bond provision expands upon existing authority which allows MEB to require a winery, with a history of failure to pay, to post a surety bond to ensure payment to growers for future purchases.

“We applaud Assemblywoman Ma for authoring AB 907,” said winegrape grower Brad Goehring.  “The bill takes careful aim at the few predatory operators who refuse to pay for delivered winegrapes. If we don’t fix the Processors Law, then an unscrupulous minority who don’t pay for their grapes gain a competitive advantage over compliant wineries, and distrust and uncertainty can creep into the marketplace, resulting in unnecessary costs and burdens for all parties. This is why we need AB 907.”