Feud Shines Spotlight on Joseph Gallo

The names of Ernest and Julio Gallo, owners of the world’s largest winery and producers of the best-selling wines in the United States, have appeared for decades on the bottles produced by their E. & J. Gallo Winery. Little else is known about the publicity-shy brothers; the two have been able to escape personal attention for most of their lives.

But even less is known about the third Gallo--younger brother, Joseph E. Gallo Jr.--although his name also has appeared on products he makes.

Now, however, Joseph Gallo and his two brothers face the kind of public scrutiny that they have so diligently sought to avoid. A legal dispute over the use of the name “Joseph Gallo” on cheeses has escalated into a family conflict involving hundreds of millions of dollars, furnishing press and public with a drama that is hardly as steamy as television’s “Falcon Crest” but with characters, despite their indrawn manner, nearly as contentious.

Still Wants Privacy

The intensity of the dispute recalls the upheaval early this year within another, if much more visible, family enterprise--Sonoma County’s Sebastiani Vineyards. In that episode, the Sebastiani matriarch, Sylvia, abruptly replaced her elder son, Sam, as head of the business with his brother, Don, a Republican assemblyman.

Despite the bitter lawsuit pitting Joseph Gallo against his decade-older brothers--who served as his legal guardians after the death of their parents when he was 13--Joseph, now 66, is determined to retain as much privacy as possible. He agreed only reluctantly to receive a visitor last week to the century-old landmark farmhouse here that serves as headquarters of Gallo Cattle Co., a partnership he directs with his 35-year-old son, Michael.

Seated behind his desk in a spacious, second-floor office, in which nothing challenges the view of surrounding farmland, Joseph Gallo quietly but firmly declined to allow his comments, however mundane, to be quoted directly. Attentive and unfailingly polite, but seemingly perplexed at the public interest in his business, he nonetheless agreed to sketch, in general terms, the agricultural enterprise he has built in Merced County since 1955.

Like his wine-making brothers, he would volunteer no family or business commentary.

But as the Gallo brothers fight, with Ernest and Julio charging that Joseph’s use of “Joseph Gallo” on his cheese violates the winery’s Gallo trademark, some details about both the family and the business are inevitably emerging.

Court records reveal, for example, the extraordinary degree of trust that the younger brother had placed in his brothers and one-time guardians. On entering the Army Air Corps in World War II, Joseph Gallo gave his brothers power of attorney to act in his behalf. He rescinded that authorization only last month as a result of legal research prompted by the litigation.

Managed Vineyards

On Joseph Gallo’s discharge from the Army in 1946, he took over management of E. & J. Gallo Vineyards while accumulating holdings of his own, which now cover an estimated 20,000 to 25,000 acres of Merced County. In 1955, he struck out entirely on his own, establishing the Joseph Gallo Vineyards and the Gallo Cattle Co. as limited partnerships. Michael, who has worked for his father since age 11, now is general partner, raising grapes, hogs, dairy cattle and feed grains, along with general farming and making cheese.

Six years ago, the partners built a dairy behind the headquarters by Bear Creek, a tributary of the San Joaquin River, and began producing bulk cheese. Like many market-oriented producers, the partners soon realized that they needed more control over distribution and sales to increase profits in an era of rising costs and falling prices for farm commodities.

Their answer was to produce cheese for the retail market under the name they had used for years in the vineyard business and the cattle company--Joseph Gallo.

But the brothrs’ winery, meanwhile, was seeking to establish a proprietary stake in the name “Gallo.” After a year’s negotiations between the two businesses failed to persuade Joseph Gallo to cease using his name as a brand on cheese, the winery last April filed a trademark-infringement lawsuit--and in terms that particularly stung the younger brother. The lawsuit portrays Joseph as an unknown cheese maker. And it referred to recent cases of deadly bacterial contamination of cheese before concluding that the Gallo Winery’s reputation would be at risk should Joseph Gallo brand cheese face such problems in the future.

“There was nothing that rubbed his nose in it” like those statements, said John Whiting, a Merced attorney associated with Gallo Cattle Co. for more than 20 years. Ironically, he noted, contamination of Italian and Austrian wines--and not cheese--was in the news at the time.

Couldn’t Understand Objection

“Joe just could not understand why they would object and oppose his use of his own personal name,” Whiting said. More than that, he added, Joseph Gallo bears the name of the father, to whom he was very close at the time of his parents death in 1933.

An angry Joseph Gallo complained in April to reporter Becky McClure of the Modesto Bee of a tendency by his brothers to seek control, “whether it’s wine or cheese. That’s the way they are,” she quoted him as saying. “They are difficult to do business with.”

Despite the litigation now separating them, however, the Gallo brothers appear to share more traits than just their public reticence, their individuality and their obvious entrepreneurial success. They are also intelligent, hard-working and exacting bosses, unafraid to try anything that might improve their output, observed Whiting.

But the lawsuit, he added, has “opened a can of worms” for the intensely private and apparently closely knit family. Had it not been filed, he explained, Gallo Cattle would not have undertaken the legal research that led to last month’s filing of a multimillion-dollar counterclaim in U.S. District Court in Fresno.

The counterclaim alleges, among other things, that Ernest Gallo, as administrator of the estate of the parents, Joseph Gallo Sr. and Susie Gallo, had “commingled” Joseph Jr.’s one-third, undivided share of the estate in launching the present winery. In addition, the complaint charges, Ernest violated the administrator’s fiduciary trust in not making a clear accounting to the younger brother of his inheritance.

In a statement issued in response to the counterclaim, winery spokesman Dan Solomondismissed the assertions as “ridiculous” and “unbelievable.” The present winery, he said, was created in 1933 with the older brothers’ personal savings.

New Evidence Uncovered

Both sides had been trying to reach a settlement this summer until the legal research uncovered evidence not yet brought before the court in the current litigation, Whiting said. He estimated that a trial--if it comes to that--is not likely to take place for about a year.

In the trademark case, Joseph Jr.’s cattle company maintains that Joseph Sr. had used the family name on the wine grapes he grew and sold during Prohibition, that at the time of his death he had planned to begin commercial production of wine as soon as the dry period ended in California, and that the family name and commercial good will attached to it constituted an integral part of the estate to be divided equally among the three brothers, then 13, 23 and 24 years of age.

Similarly, according to Whiting, Joseph Jr.’s use of his own name on his holdings goes back 31 years and met with no objection until after the winery a few years ago bought the name on Gallo Salami from Consolidated Foods and licensed its use back to Consolidated (now known as Sara Lee Corp.). Until then, he said, “the winery never, ever objected to Joseph’s use of his name.”

Solomon, the winery spokesman, noted in his statement that Joseph had been offered--and refused--a “royalty-free license” to continue using his name on Joseph Gallo cheese. The offer was refused, Whiting explained, because whoever issues a license retains authority to revoke it later.

Despite the litigation, Whiting said, Joseph Gallo continues to sell wine grapes produced by his Joseph Gallo Vineyards to E. & J. Gallo Winery.

The lawsuit aside, little would be known about the older brothers, except that they were born “within 100 miles of Modesto” and attended local schools. A schoolmate recalled recently that Ernest, at a class reunion, acknowledged a debt of gratitude to a Modesto High School counselor named Y. G. Barnell for enabling him to graduate.

But beyond that homely scrap, Ernest and Julio have volunteered little information about themselves and their families. Their identical entries in Who’s Who in America, 1984-85 edition: “Vintner. Co-owner E. & J. Gallo Winery, Modesto, Calif. Office: E. & J. Gallo Winery, 600 Yosemite Blvd., Modesto CA 95354.”