ANALYSIS : Smaller Wineries Create a Trade Group to Advance Premium Wines

Twenty months after a group of smaller California wineries asked for greater representation within Wine Institute, the industry’s trade organization, papers were filed last week for the incorporation of a new trade organization called Premium Winemakers of America, it was learned.

It was not immediately known which wineries are behind the new organization, an alternative trade group for wineries who feel they don’t now receive sufficient representation by Wine Institute. A source in the group who wished to remain anonymous “until we make a formal announcement of PWA soon” said the new group will be “strictly for the advancement of premium wine. But some members will retain membership in Wine Institute.” The source said the PWA also will have as members non-California wineries, which now are prohibited from joining Wine Institute.

In April 1988, 60 smaller wineries signed a petition to Wine Institute seeking more representation. Wine Institute responded by forming a Small Wineries Committee and increasing the number of seats on its executive committee from 22 to 26. The additional seats are now filled by Dan Duckhorn of Duckhorn Winery, Phil Woodward of Chalone, Dan Gehrs of Congress Springs, and Bill MacIver of Matanzas Creek.

John De Luca, president of Wine Institute, said he had heard of the Premium Winemakers group and that it sounded like something he heard when he joined the Institute in 1975.

“To paraphrase Yogi Berra, it’s like deja vu all over again,” said De Luca. “When I joined Wine Institute, there were a number of letters on my desk from dissatisfied wineries, and there was talk that some of them would form a small wineries institute, or organize by region.”

He noted that when some smaller wineries charged they weren’t being heard last year, “We met with many of the principals who signed that letter, and we restructured to serve their needs.”

“I’ve always felt the best interests of the industry were served when we didn’t vulcanize ourselves. We are really best served when we pull together rather than when we fragment. And everybody needs each other right now. For somebody to say that bulk wine is different from premium wine is different from fortified wine, well, it only splinters our strength.”

Another discordant note was sounded earlier last week when nine California wineries filed suit in federal court in Sacramento to challenge the constitutionality of the California Wine Commission’s renewal election. The suit also questioned the way the CWC assesses members and the fact that it pays out 78% of its revenues to Wine Institute for special projects.

The lawsuit challenges the constitutionality of a section in the state Agricultural Code that the plaintiffs say limits their representation. They said the commission refused to make public the list of eligible voters to members, limiting their ability to campaign.

The lawsuit seeks specifically to halt CWC from sending out ballots seeking a renewal of the marketing commission as well as seeking re-election of commissioners.

Visiting judge Dickran M. Tevrizian Jr. refused to issue a temporary restraining order and permitted ballots to go out. He set Jan. 29 as the date for a hearing on a preliminary injunction.

Jeff Chanin, an attorney with the San Francsico law firm Keker & Brockett, which filed the suit, said the suit “questions the constitutionality of a state statute that gives a commission a right to use a membership list for election purposes, but prohibits its disclosure to other members of the organization. We think that violates the First Amendment rights of eligible voters and equal protection rights under the 14th Amendment.”

Chanin noted that wine makers get multiple votes in the election of commissioners; “it’s not a one man, one vote system. You get additional votes for each $10,000 of assessment,” meaning that large wineries wield far more power than smaller ones in the vote for commissioners.

Jim Errecarte, a defendant in the lawsuit and the executive director of the CWC, said, “There’s nothing confidential about our membership list and I have no great qualms about divulging that list, but the law as it is written gives me no power to reveal that list. The law specifically says we may give out the list only under court order. And I’m just complying with the law.”

Errecarte, contacted at his office in Davis, said he could have gone to the Legislature to ask for a change in the law, “but the first request for this (membership) list came to us on Nov. 30, 1989, and I replied that we were not empowered to give it (out).

“The real issue is: do they (the plaintiffs) want the commission to continue or are they just interested in seeing the commission not continue? My perception is they want to eliminate the commission.”

Errecarte acknowledged that a major aspect of the suit was the CWC’s budget allocation to Wine Institute. “I will be the first to agree that some of the vintners have complained about this,” he said.

The CWC, voted into power by wineries in 1987, has been under fire recently after allegations of conflict of interest arose. Seventeen of CWC’s 18 commissioners were also directors of Wine Institute and more than $7 million of the $9 million CWC budget last year went to Wine Institute. CDFA has looked into the allegations and ruled there was no conflict.

Plaintiffs in the suit were wineries Sonoma-Cutrer, Clos du Bois, Callaway, Jordan, Dry Creek, Kendall-Jackson, Fisher, William Hill, and Franciscan. Defendants were Errecarte and Henry Voss, director of the California Department of Food and Agriculture.

The vote to reconfirm the existence of the Commission must be approved before June 30. To renew it for another five years, at least 40% of the eligible voters must vote. Then, at least 50% of the voters representing 65% of the volume of grapes crushed must approve it, or, alternatively, 65% of the voters representing 50% of the tonnage crushed must approve it.

Because tonnage figures are critical, the plaintiffs asked CWC for tonnage figures. Errecarte said the commission would not divulge them.

Said Chanin, “There’s very little law in this; there are few election statutes that have anything like this.”

There are 270 members in CWC. Any winery that crushes more than 100 tons of grapes must, by law, pay assessments to CWC. Wineries that don’t crush 100 tons are not required to pay such assessments. For the 1989 harvest, the assessment was 1.1% of the value of the crop.