A California appeals court in Sacramento has dealt a major setback to mass-market producer Bronco Wine Co. with a ruling that upholds a state law that restricts the use of "Napa" in brand names of wines made with few or no Napa grapes. Bronco will likely appeal to the Supreme Court of California.
The case, Bronco v. Jolly, pits Ceres, Calif.-based Bronco, the owner of more than two dozen inexpensive brands, against California state authorities and the Napa Valley Vintners, a marketing organization representing 263 wineries. At issue are three of Bronco's brands—Napa Ridge, Rutherford Vintners and Napa Creek—made primarily, if not exclusively, with non-Napa grapes.
Under normal circumstances, that would be illegal. Federal labeling regulations require that 75 percent of the grapes in a wine with a geographic brand name—such as Napa Ridge—come from the referenced region. However, a federal grandfather clause exempts geographic brands like those owned by Bronco that were established prior to July 7, 1986.
In September 2000, the California State Legislature passed a law to end the grandfather clause and force Bronco to either stop production of those labels or start making them with Napa grapes. Currently the brands in question are made with less-expensive grapes from California's Central Valley, where Bronco CEO Fred Franzia owns about 40,000 acres.
Bronco challenged the law on four separate grounds: that California state law cannot ban a practice specifically allowed by federal authorities; that the law violates the Commerce Clause of the U.S. Constitution; that it curtails Bronco's First Amendment right to free speech; and that it violates due process by taking brand value without just compensation.
The case has been winding its way through courts for five years now, with most of the litigation devoted to the issue of federal versus state authority. In August 2004, the California Supreme Court ruled unanimously that the federal grandfather clause does not preempt California state law. That decision reversed a California Third District Court of Appeal December 2002 ruling in Bronco's favor. It is the same court that issued yesterday's 75-page decision, which dismissed the three remaining challenges. A ruling was not expected so soon. The court heard the case April 20 and usually takes about 90 days to issue an opinion. "What stands out is the quick turnaround as well as the fact that this is a 75-page, very thorough, very detailed and well-reasoned decision on each issue," said attorney Richard Mendelson, who represents the Napa Valley Vintners.
Bronco claims that its brands are not misleading because the actual appellation of origin, such as Lodi, is also indicated on the label. But the court in its decision dismissed that, writing, "The clear implication from such brand names is that the wine is made from Napa Valley grapes and is of premium quality. If it were otherwise, Bronco would not have spent $40 million dollars [to purchase] the brand name Napa Ridge. ... Bronco's actions belie its claim that using its brands on wine produced with non-Napa Valley wine is not misleading."
Bronco officials could not be reached for comment.
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