U.S. Supreme Court Turns Down Bronco Appeal

California can now enforce law banning Napa name on non-Napa wines

It’s final. Bronco Wine Co. will no longer be able to use «Napa» in the brand names of wines made with few or no Napa grapes. Today, the U.S. Supreme Court denied without comment Bronco’s last-gasp effort to overturn a California labeling law, ending more than five years of litigation and handing a victory to California state authorities and the Napa Valley Vintners.

«We’re elated and grateful that the Supreme Court let the lower court’s decision stand,» said Linda Reiff, executive director of the NVV, a marketing organization of 270 wineries that spent about $1.5 million on the litigation. «It’s a concept that’s easy to understand and easy to support—that if a wine says ‘Napa’ on the label it should be Napa in the bottle.»

Today’s decision was expected, because the high court hears only about 1 percent of the cases submitted for appeal. Bronco’s Washington, D.C.-based attorney, Peter Brody, said, «We thought it was a bad law, clearly targeted [at Bronco], but it’s been upheld and you move on.»

The litigation was Bronco’s attempt to overturn a September 2000 California law that closes a loophole in federal wine-labeling regulations. Federal law dictates that at least 75 percent of the grapes in a wine with a geographic brand name must come from the referenced region, but a grandfather clause exempted brands established prior to July 7, 1986. California eliminated that exemption for brands that refer to Napa or any of its subappellations. Ceres, Calif.-based Bronco, a mass-market producer best known for its Charles Shaw (Two-Buck Chuck) label, owns three such brands—Napa Ridge, Napa Creek and Rutherford Vintners—which it has been making primarily, if not exclusively, with grapes from California’s Central Valley, where CEO Fred Franzia owns around 40,000 acres of vineyards.

While the company is disappointed with the Supreme Court’s decision, spokesman Harvey Posert said that Bronco «intends to maintain all its brands and will do so in full compliance with the law.»

The state law has not yet been enforced, due to a stay that was instituted when Bronco filed its suit. The California attorney general must first lift that stay, and state officials must also determine the fate of the Napa Ridge, Napa Creek and Rutherford Vintners wines that are in distribution but not yet sold. «It all depends on how much inventory is in the [distribution] system,» said Jerry Jolly, director of the California Department of Alcohol Beverage Control, which will be responsible for enforcement of the law. «We hope [Bronco] anticipated this and their inventories are low. But we’ll need to meet with them. It will take some time to work this out.»

After the initial passage of the California law, Bronco had three choices. It could discontinue the brands in question, from which, according to court documents, it earned $17 million a year. It could comply with the law and start making the brands with Napa grapes, which are substantially more expensive than Central Valley grapes. Or it could fight the law in court in an attempt to overturn it.

Bronco chose the final option and challenged the law on four separate constitutional grounds: that the federal grandfather clause preempts a California state law; that the state law curtailed Bronco’s First Amendment right to free speech; that it violated the Commerce Clause against unreasonable restrictions on interstate business; and that it violated due process by taking Bronco’s brand value without compensation.

Bronco won the first round in December 2002, when California’s Third District Court of Appeal in Sacramento struck down the law on the federal preemption issue. However, the court did not rule on the other three challenges.

That turned out to be Bronco’s only triumph in the litigation. The Supreme Court of California heard the case on appeal in May 2004, then issued its unanimous ruling against Bronco that August. Bronco filed a petition for appeal with the U.S. Supreme Court, which was denied in March 2005.

But the courts had only ruled on the federal preemption issue. Bronco pursued its other three constitutional challenges, which were denied in May 2005, as was a request for appeal of that decision with the Supreme Court of California.

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