Courtwatch: Merryvale Vineyards Sues Marketing and Sales Partner after Losing "Thousands of Accounts"
January 07, 2020
A dispute between Merryvale Vineyards and a company hired to promote and sell its wine nationwide continues in Napa.
Merryvale, a family-owned winery based in St. Helena, has accused V2 Wine Group LLC of allegedly violating terms of its 2016 contract, according to the lawsuit filed last March in Napa County Superior Court. Delicato Family Wines which, according to court records, purchased 50 percent of V2 in 2017, is also named as a defendant. Both companies have denied Merryvale’s allegations.
The matter between the parties has not been resolved, representatives for Delicato and Merryvale said recently. “We are working with Merryvale to resolve this litigation and cannot comment further,” Delicato spokesman Brent Dodd said Thursday. James Vorhis, a San Francisco-based attorney who represents Merryvale on Monday declined to comment on the case, citing the ongoing litigation.
Under the five-year agreement signed in April 2016, V2 had the task to market Merryvale’s wines nationwide. However, V2 “could not, or would not perform its obligations,” according to Merryvale’s lawsuit. The situation worsened when Delicato purchased 50 percent of V2 in March 2017, according to the legal filing.
Merryvale lost “thousands of accounts” and suffered “significant harm and brands,” with the damage costing “many millions of dollars” to the winery, according to the lawsuit. Merryvale terminated the contract on May 1, 2019. One of Merryvale’s brands is Starmont.
V2 and Delicato allegedly “diluted Merryvale’s prestige” by selling wine to large warehouse retailers who required “heavy” discounts, according to the lawsuit.
Merryvale alleges in court papers that V2 and Delicato flooded distributors with wine to “inflate” the defendants’ sale figures and meet goals set under the agreement, according to court records.
Merryvale’s distributor for California no longer wanted to distribute its wine after the agreement ended in May 2019, according to the lawsuit. Merryvale was then forced to repurchase 6,132 cases of wine from that distributor for which it had already paid $148,167.16 in commissions plus “significant additional monies in pre-paid marketing expenses,” according to the second amended complaint filed against V2 and Delicato, a company based in Manteca.
“The same scenario” was developing in Arizona, Hawaii, Oregon and Washington state, according to the lawsuit, which alleges breach of contract, concealment, intentional misrepresentation and other allegations.
Merryvale alleges V2 and Delicato “intentionally” did not inform Merryvale of Delicato’s involvement into V2’s business, including moving V2’s warehouse to Delicato’s Manteca facilities, an allegation V2 has denied in court filings. Delicato, the sixth biggest winery in the United States in 2019, according to Wine Business Monthly, fully owns V2 Wine Group as of October, according to news reports.
Delicato announced in January 2019 the creation of Transcendent Wines, its new fine wine division. Merryvale’s brands were folded into that new division, according to court documents.
Merryvale also alleges V2 repeatedly changed distributors for its wines without consulting with Merryvale; when Merryvale objected, V2 and Delicato “ignored those objections because many of those distributors benefitted Delicato,” Merryvale alleged in its lawsuit.
In one instance, V2 and Delicato allegedly failed to provide a new Merryvale distributor in the state of New York with wine to fulfill orders, Merryvale alleged in its lawsuit.
V2 and Delicato have questioned Merryvale’s interpretation of its agreement signed with V2 in 2016. In a cross-complaint, V2 called Merryvale “a failing winery” that filed a “Festivus-like ‘Airing of Grievances’” as a “pretext” to avoid paying a $500,000 termination fee to end its contract with V2. The winery’s problem stemmed from having too much supply and too little demand for its wines, according to the court filing. V2 also questioned Merryvale’s interpretation of the contract with Merryvale, stating it had met all its obligations toward the winery, according to court records.
Merryvale’s allegations are “trumped up” charges, V2 stated in a court brief. It only wanted to avoid paying $500,000 in termination payment, V2 alleged in court papers. “It is clear that by August 2018, Merryvale had made the decision to seek other sales agency representation,” V2 alleged in court records. At some point, Merryvale floated the idea to sell its Starmont portfolio to Delicato, V2 said in court filings.
Merryvale “maintains an unwarranted self-regard for its wines,” V2 stated in court records. The St. Helena winery did not want its wines sold in “low-class” retail establishments such as Costco and Publix, according to court documents.
V2 alleged that Merryvale’s owners “erroneously believed that they could produce as much wine as they desired, charge whatever prices they want, and blame V2 if consumers disagreed,” V2 stated in a court filing. “However, Merryvale cannot repeal the law of supply and demand, whether by litigation or otherwise,” according to the document.
A settlmemnt conference is scheduled to start November 5, 2020 and a trial would start Deember 7.