Mediation for Wine Industry Disputes

How grapegrowers, wineries and suppliers can work together to avoid litigation

by Jane Firstenfeld
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Dick Keenan, a grapegrower, winery owner and lawyer, now provides mediation services to the North Coast wine industry.
Santa Rosa, Calif.—With reduced demand and prices for North Coast winegrapes—and a spreading rash of winery defaults, foreclosures and bankruptcies unsettling the business—”The last couple of years have been a challenging time for grapegrowers, wineries and other small businesses in the wine industry. In tough times, you end up with more disputes,” according to Richard Keenan of Keenan Mediation.

A grower/seller of premium winegrapes in Sonoma County, Keenan spent 32 years as a litigating attorney specializing in commercial business disputes. He’s also a trained mediator, and so at the Sonoma County Winegrape Commission’s Dollars and $ense seminar last month, Keenan discussed mediation for the wine industry. “I thought it could be beneficial, especially for those who are reluctant to go to court with their disputes,” he told Wines & Vines.

Litigation, Keenan pointed out, is both costly and time consuming; most often, one or more of the parties ends up dissatisfied with the final outcome. “I know from talking to others in the business that no one has a budget for legal expenses,” he noted. “I understand how expensive it can get.”

How mediation works
Typically, parties in a lawsuit will at some point consider a settlement before coming to court, Keenan explained. Experienced legal counsel will act as gatekeepers and seek a mediator, who will be retained and compensated by both parties. The mediator sits down with both parties and their lawyers, and encourages each side to explain its position. “When we actually listen to the other side,” he said, “we may hear something we haven’t considered and be more open to solutions. I am not there to be their advocate or judge. I am there to get them to find their own solution.”

Keenan cited studies revealing that “parties that reach a solution together are more committed to it and have more satisfaction” with the results. “I saw a study indicating that in most cases, where parties rejected an earlier settlement offer, they did not do better in court.”

Although he recommends that each party have its own counsel, within the wine industry, he noted, “Sometimes parties know each other well enough to settle without involving counsel.” Either way, mediation can provide a quicker resolution. “You can move on with your business,” he said. “When I explain the process to friends in the wine business, they get it right away. In my experience, vineyard owners, small winery owners and others in businesses that support the industry can be effective and decisive” when resolving disputes.

Keenan encourages colleagues in the wine industry to include a clause in any contract specifying that mediation will be the first recourse involved in any dispute. His personal experience supports the suggestion.

“I’ve gone to mediation myself as a grapegrower. I contract with wineries in Napa and Sonoma. A couple of years ago I had a dispute with a winery about whether they had the right to terminate my contract. We had a mediation clause, and in one day we had a decision. It was a multiple-year contract, and I ended up working with them for a couple more years. Our disagreement was resolved well before we had to go to court.”

When can mediation work?
Although grape contracts spring most readily to mind, Keenan cited numerous other situations in which mediation can help resolve wine industry disputes:

• Ownership/partnership disputes,
• Trademark rights and conflicts,
• Vineyard/winery construction or improvements, including replants, grafting, building additions or renovations,
• Changes of ownership: liabilities, personal guarantees,
• Evaluation of grapes,
• Compensation agreements,
• Wineries and brokers/distributors, including sales objectives, guarantees, accounting, overall marketing,
• Claims about loss of grapes or wine by contamination including vineyard sprays and winemaking processes,
• Crush services,
• Insurance settlements,
• Landlord/tenant disputes, including alternating proprietorships.

Mediation may not be appropriate for very small monetary disputes. “You should probably consider small claims” for disputes below the statutory limit, currently $7,500 in California. Mediation services can cost between $300 and $750 per hour, usually split between the parties.

It’s also not recommended for issues dealing with government agencies, such as regulatory and zoning disputes. “I’m not familiar with very many public agencies participating in mediation,” Keenan said.

“If one side feels it is in a much stronger position, they would not be as interested in mediation, because they think they’ve got the upper hand,” he observed. “But there has been a big change in recent years. Courts are coming out with different rules and processes to reduce the time involved, making the parties think about settlement earlier in a case. Since 95%-plus of cases eventually settle, as soon as you think you’ve got enough information to solve it, there should be discussions.”

Mediation is an entirely voluntary process, Keenan emphasized. You can’t force it. Still, if you can agree to sit down at the table and communicate with someone with whom at one time you agreed to do business, mediation may help you both the come up with a mutually satisfactory decision. You may even remain friends—or at least, colleagues.

Keenan was a founder of 1,000-case Carica Wines in San Francisco’s East Bay region; last year he sold his interest and founded an artisan operation, RKM Wines, near Santa Rosa. For more information on his services, go to keenanmediation.com.
Posted on 02.08.2011 - 14:00:27 PST
There's a California/state government agency that forces wineries to renew a yearly license to pay for the agency to go after wineries that don't pay. How they take care of wineries is not addressed. Not all growers know about the agency. Not all wineries are paying.
Santa Rosa, CA USA