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Case Over Napa Brand Names Returns to Court

Napa Ridge producer Bronco Wine Co. and the Napa Valley Vintners duke it out over three more legal challenges to a California law

Daniel Sogg
Posted: April 22, 2005

Mass-market producer Bronco Wine Co. had another day in court on Wednesday, as the California Court of Appeal in Sacramento continues to examine the constitutionality of a state law restricting the use of "Napa" in brand names of wines made with few or no Napa grapes. A ruling is anticipated within 90 days.

Now in its fifth year of litigation, the case pits Ceres, Calif.-based Bronco against California authorities and the Napa Valley Vintners, a marketing organization representing 263 wineries, which sought the brand-name restrictions.

Bronco owns more than two-dozen inexpensive brands--including Napa Ridge and Napa Creek--which are made primarily with grapes from the vast California Central Valley, where Bronco CEO Fred Franzia owns around 40,000 acres of vineyards, according to a wine-industry executive not involved in the lawsuit. The Napa Valley Vintners argue that such brands mislead consumers and damage Napa's prestigious reputation.

Unlike the previous hearings, when the tone of the judges' questions hinted at the subsequent decision, Wednesday's proceedings offered little preview of the likely result. "When we walked out of the [Court of Appeal in 2002] we knew we'd lost, said Linda Reiff, executive director of the Napa Valley Vintners. "When we walked out of [California's] Supreme Court last year, we knew we'd won. This time we're not sure."

Until today, the hearings have focused mainly on the discrepancy between the California law and federal labeling regulations. The latter require that 75 percent of the grapes in a wine with a geographic brand name come from the referenced region, but a federal grandfather clause exempts brands, such as Napa Ridge, introduced prior to July 7, 1986.

California's law, passed in September 2000, ended that exemption for any wines that bore the name of Napa or any of its subappellations. The law never went into effect, though, because Bronco immediately challenged it on four grounds: that the federal grandfather clause preempts California law; that the law curtails Bronco's First Amendment rights; that it violates the Commerce Clause of the U.S. Constitution; and that it takes away Bronco's brand value without due process or just compensation.

Wednesday's hearing was the second time the case has been before the state's Third Appellate District court. In December 2002, the Court of Appeal ruled in Bronco's favor, overturning the law on the grounds of federal preemption, but not ruling on the other three issues. In August 2004, the Supreme Court of California reversed that decision. Bronco petitioned the U.S. Supreme Court to hear the case, but this March, the justices declined it without explanation, and the case returned to Sacramento for adjudication on the remaining challenges.

The hearing took about one hour, with most of that time devoted to discussion of the First Amendment challenge to commercial speech. "Total prohibition is [permitted] only just where the speech is totally misleading," said Bronco attorney Peter Brody, of Washington, D.C.-based law firm Ropes & Gray. He argued that Napa Ridge is not misleading because the grape source, Lodi, is clearly indicated on the label.

Brody questioned the motives behind the California law. Franzia bought Napa Ridge in January 2000 for $40 million from Napa-based Beringer Wine Estates, which also made the brand with non-Napa grapes. At peak output, Beringer sold more than 1 million cases a year of Napa Ridge, far more than Bronco currently makes. But, Brody said, "Bronco was the only producer referenced in the legislative history, and referenced repeatedly, shall we say, in a very unflattering way."

Napa Valley Vintners attorney Kathleen Sullivan, head of the Stanford Constitutional Law Center, countered that the Beringer connection has no bearing on the merits of Bronco's claims. "That might make good wine-industry gossip," she said. "It makes the case colorful, but it doesn't make it unconstitutional."

What's relevant, Sullivan argued, is the state's interest in preventing consumer deception. "The brand name is the single most salient thing the consumer sees," she said. "Simply putting the [Lodi] appellation of origin in small letters on the label is not sufficient to dispel the impression created by a mis-descriptive geographic brand name."

"What if you put bigger letters? Or really big letters?" asked Justice Coleman Blease, eliciting a laugh from the gallery.

Failure to enact the law brings potentially serious consequences for Napa vintners and wine consumers, Sullivan added, because there are 33 other grandfathered geographic brand names in the market. "Someone as enterprising as Mr. Franzia could purchase these brands," she warned. "A new threat could grow exponentially into a sea of non-Napa wines sold under Napa labels."

At the end of the hearing, California deputy attorney general Terry Senne requested that the court expedite the case--and, he hoped, enactment of the law--by deciding all three of the remaining constitutional challenges. Yet whatever the verdict, the litigants can appeal the decision to California's Supreme Court. And since both parties have resolved to exhaust all legal options, that outcome, at present, is the only safe bet.

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