Posted on: Friday, May 27, 2005
Maverick winemaker loses third bout in court
By Jerry Hirsch
Los Angeles Times
The maker of the popular $1.99 Charles Shaw wine, widely known as "Two Buck Chuck," might be winning on the store shelves, but it has lost again in the courts.
Associated Press library photo Maverick winemaker Fred Franzia, owner of Ceres, Calif.-based Bronco, now has lost three key decisions in his quest to market the Napa Ridge, Napa Creek Winery and Rutherford Vintners wine brands without putting grapes from those regions in the bottle.
"The whole issue is to reassure consumers that when they see Napa on the label, they know they are getting Napa wine in the bottle," said Linda Reiff, executive director of the Napa Valley Vintners, the region's trade group.
The dispute goes back to a 2000 state law requiring that the grapes from a county make up at least 75 percent of a wine if the place name is to be used on the label.
A 1986 federal law was more generous, allowing existing wine labels to keep their names, even if they didn't meet the requirement for grape content.
Much to the frustration of the Napa Valley Vintners, which aggressively protects the Napa name, Bronco took advantage of the exemption to link its wines to the internationally acclaimed wine region.
"This is an unqualified win," said Kathleen Sullivan, the attorney representing the vintners.
The 3rd District Court of Appeals rejected Bronco's claim that the federal law prohibits a state from establishing stricter labeling regulations than the federal government for wine destined for interstate distribution.
Moreover, the court rebuffed arguments that the labeling rule violated Bronco's right to free speech, saying that the California law "is a valid regulation of inherently misleading commercial speech."
The judges also didn't buy the claim that the regulation constituted a "taking" of Bronco's property by lessening the value of those wine brands.
Peter M. Brody, Bronco's attorney, said the wine company was studying the 75-page ruling "before we decide what to do." The company has continued to sell the wine brands while the issues surrounding the labels were decided by the courts.
Bronco has 90 days to appeal this decision to the California Supreme Court.
Last August, the California Supreme Court overturned a lower court decision and ruled against Bronco by deciding that the federal rules didn't trump the state wine-label law. Bronco appealed that decision to the U.S. Supreme Court, which in March refused to hear the case,
A nephew of industry pioneer Ernest Gallo, Franzia has roiled California's wine industry both in court and in the retail market. Three years ago, Franzia forced prices down and grabbed market share from his competitors by introducing Charles Shaw, a $1.99-a-bottle brand that is sold in Trader Joe's stores. Bronco now sells about 6 million cases a year of Charles Shaw, making it one of the most popular of all California wines.
If his appeals fail, Franzia will have to kill the three brands in question — they account for $17 million of his business — or make the wine from Napa fruit.
A California state appeals court in Sacramento yesterday rejected the arguments of Bronco Wine Co. in its fight to use the word "Napa" on wines that don't always contain grapes grown in California's Napa Valley wine region.
Napa Valley winemakers won another round in court with a ruling bolstering their contention that wine with the name "Napa" on the label, such as Napa Ridge, must be made from Napa grapes.
