CDFA’s Market Enforcement Branch: In The Grower’s Corner

The current recession has created a rash of late and non-payments to winegrape growers by financially stressed wineries.Not surprisingly, every winery bankruptcy filing lists growers as unsecured creditors.

An increasing number of winery sanctions by the Market Enforcement Branch (MEB) of the California Department of Food and Agriculture have highlighted the MEB’s growing significance to growers.

While enforcing grower’s liens and private legal action are alternatives, they can be expensive and time consuming. A large number of winegrape growers do not know that the  MEB can — among other things — help them get paid for their fruit when wineries fail to abide by contracts and payment agreements.

WINEGRAPE PURCHASES ILLEGAL WITHOUT A PROCESSOR LICENSE

Established in 1932, the MEB licenses dealers, brokers, commission merchants, cash buyers, and processors that handle California farm products for the purpose of resale or processing.

California law provides that no winery can legally buy or contract for grapes unless it has a valid processor’s license.

According to its web site, MEB “actions may range from Notices of Violation, Probation, Suspension, or Revocation of a license, to the Denial of an application for a license. [It] can also refer flagrant violators to local law enforcement agencies for civil and/or criminal prosecutions.

GROWERS SHOULD MAKE SURE WINERIES ARE LICENSED BEFORE SIGNING CONTRACTS

“It is best that a grower ask the winery or vintner for a copy of the license or license number to verify with our office,” said d’Esterhazy. “It’s the easiest way to follow up.”

Since obtaining a processor license requires meeting a number of standards that  include Weighmaster licenses and certification for scales, growers should be leery of unlicensed wineries.

California Law allows the MEB to take action against even unlicensed wineries.

COMPLAINT PROCESS IS STRAIGHT FORWARD

The MEB complaint process requires written complaints that must be submitted within nine months from the date a complete account of sales (payment) was due.

Once complaints are verified, it can lead to an Alternate Dispute Resolution process or disciplinary action if the Market Enforcement Branch can prove a violation of the Food and Agriculture Code within its jurisdiction.

SCOFFLAWS, LOW FEES HAMPER ENFORCEMENT

MEB’s enforcement efforts on behalf of growers is hampered by the large number of wineries who have not paid license fees and by the low fees themselves.

License fees depend on the annual dollar volume of purchases made by the licensee. Under $20,000, the fee is $100; between $20,000 and $50,000, the fee is $200; between $50,000 and $2,000,000, the fee is $300; and anything over $2,000,000 is $400.

According to d’Esterhazy, these fees are at the same level as they were in 1980. Assembly Bill AB 2240 was introduced on Feb. 18 and is currently scheduled for a hearing before the Committee on Agriculture on March 23 to consider raising the fees..

Without the increase in fees, budget estimates indicate that the MEB could run out of funds by the end of 2012. If that happens, observers say that some services more than likely may be eliminated or severely curtailed.