Bergman Dacey Goldsmith


Los Angeles jury sides with pepper grower in heated business dispute

People who love spicy foods might not recognize their favorite Sriracha sauce by name, but they certainly recognize the green caps and rooster logo on bottles of the fiery sauce made from chili peppers, distilled vinegar, garlic, sugar and salt. What is less well-known is that the 30-year partnership between the sauce’s maker – Huy Fong Foods – and once exclusive supplier of the peppers used to make Sriracha – family-owned Underwood Ranches – has ended in a bitter legal dispute.

A Los Angeles County Superior Court jury recently awarded $23.3 million to Underwood after a month-long trial in the heated business lawsuit. The pepper-grower had claimed that Huy Fong breached its contract and committed fraud by misrepresenting and concealing information.

The farm’s manager said the jury’s decision sparked “a lot of celebrating. We celebrated at lunch. We celebrated at dinner. And then we celebrated the next day.”

The business relationship between Underwood and Huy Fong began to unravel nearly three years ago, when the Sriracha manufacturer demanded that the grower return more than $1 million that it claimed had been overpaid for growing costs. Huy Fong traditionally prepaid Underwood for estimated growing and harvesting costs in an agreement that was “partly oral, partly written and partly established by the parties’ practice,” according to court records.

The court’s ruling in favor of Underwood included $14.8 million for financial losses and $10 million in punitive damages. The $1.5 million overpayment sought by Huy Fong was deducted from the total.

A Huy Fong attorney said the manufacturer plans to challenge the decision in post-trial motions and appeal, but added that the company will continue to pump out the bottled heat as usual.

If you or your company are embroiled in a legal dispute, contact a Los Angeles law firm that can effectively protect you and your interests in business litigation.

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