By Jess Lander, Wine reporter | San Francisco Chronicle | Sep 5, 2024 |
Napa County’s longtime battle with small wineries is intensifying. Three Napa Valley wineries are suing the County in federal court over alleged overregulation, accusing the government body of roughly a dozen constitutional rights violations.
The 60-page complaint, filed Thursday in California’s Northern District Court on behalf of Hoopes Vineyard, Summit Lake Vineyards and Smith-Madrone Vineyards & Winery, denounced the county’s “vague,” “ambiguous” and expensive policies that the wineries say have cost them millions of dollars in lost profits and threatened their survival.
A Napa County spokesperson said they could not immediately comment on the lawsuit.
The lawsuit is the latest development in a contentious, five-year dispute between Hoopes and the County, which sued the winery in 2022 for alleged permit violations and claims Hoopes does not have the right to host tastings. Last month, owner Lindsay Hoopes filed a motion to dismiss the case after discovering new evidence that allegedly shows the County secretly changed the property entitlements of her winery and over 20 others.
“It was important to rally with other wineries to really address the scope,” Hoopes said of filing the federal lawsuit. “It’s not a ‘me’ issue. It’s a much bigger issue.”
A victory for the wineries could have a powerful ripple effect that goes beyond small Napa producers like the plaintiffs, they argue. “I think it’ll change the way the wine industry is run in Napa County,” said Stu Smith, co-owner of Smith-Madrone, who believes that if they prevail, the case could loosen the restrictions for all Napa Valley wineries, potentially opening them up to more visitors and enabling more of them to put on events and weddings, serve food and stay open later.
The wineries are represented by Joseph Infante, a longtime alcohol regulatory lawyer in Michigan who recently tried a similar case on behalf of 11 wineries in his home state. Infante helped the Michigan wineries sue their local government for overregulation, claiming it stifled their business operations and resulted in lost profits of $120 million. While the Michigan trial is nearing closing arguments, a judge has already ruled in the wineries’ favor on most of their counts.
Infante said he sees many similarities between the two cases and that the Michigan trial shows that the allegations in the Napa suit “are viable.”
Small wineries have long fought Napa County for a more level playing field to compete with the region’s larger entities. The County’s regulations typically require wineries to spend hundreds of thousands of dollars — sometimes millions — to obtain a use permit, and they usually must build a winery or tasting room to market and sell their wine. Many boutique wineries, often producing only a few thousand cases per year, say they can’t afford that, but that the ability to host visitors and sell wine is vital if they want to stay in business.
Critics of the movement have argued that Napa Valley should limit future winery and vineyard development, mainly due to environmental and traffic concerns. In 2022, the County passed a micro-winery ordinance designed to streamline the permitting process for small wineries, but thus far, only two such permits have been approved.
Hoopes said she made numerous attempts to resolve the County’s issues out of court, but that County officials did not respond to her requests or agree to meet in person. “There, unfortunately, has been no option but litigation,” she said. “We have been stonewalled at every angle and it seems like they’re much more interested in winning at all costs and putting us out of business than actually finding the best resolution.”
Last year, Summit Lake and Smith-Madrone attempted to join Hoopes’ cross-complaint against the County, but a judge denied them. Both wineries were established before Napa County’s 1990 Winery Definition Ordinance, which put the current winery regulations into place; they were granted a permit exemption, which allowed them to operate as they did before. (Hoopes purchased a property with an exemption, which transferred to her.) All three wineries have long thought the exemption includes the right to host tastings, but the County disagrees.
Summit Lake hosted tastings for nearly 40 years and never received a violation notice from Napa County until 2019, said Summit Lake co-owner Heather Griffin, when the winery pursued a use permit modification to increase its wine production. Napa County informed Summit Lake that it had been out of compliance for hosting tastings — and that a permit modification approval hinged on them paving the road outside their winery, a cost upwards of $1 million. Summit Lake pulled its application because they couldn’t afford it, Griffin said, and now can’t have visitors.
“We’ve tried to stay in the lines and do the right things, pull the permits we were supposed to get, and yet we have been harassed and bullied (by the County),” said Griffin, who started a GoFundMe to help cover the winery’s legal costs. ”I am fed up and feel like I’ve been pushed against a wall.”
Smith-Madrone has not been cited by the County for hosting tastings, but Smith said the vagueness of the rules and inconsistent enforcement has him “constantly looking over my shoulder.” The County’s actions against wineries like Summit Lake and Hoopes have discouraged him from pursuing endeavors that could grow his business. “The fear of being caught in the jaws of the County is enormous,” he said.
Free speech is one of many constitutional rights the lawsuit accuses the county of violating. Infante said governments cannot restrict businesses from what’s known as commercial speech — essentially marketing or advertising — unless those restrictions prove the government has a “substantial interest” in regulating it. “At its heart,” wine tasting is “a product demonstration,” Infante said. “Causing wineries to lose money,” he argued, “doesn’t further” Napa County’s interest in preserving agricultural land.
The complaint also alleges that the County’s policies are “void for vagueness,” a constitutional law principle that states a law is unenforceable if it’s too vague for the average person to understand. The lawsuit points to a lack of clarity with the County’s policies, as it’s cited and sued some wineries but not others.
Inconsistencies in the County’s winery database, a spreadsheet that lists the entitlements of every winery in the county, were the cornerstone of Hoopes’ defense at trial, and will likely be important in this case. Early versions of the database indicated that Hoopes, Summit Lake, Smith-Madrone and others were permitted to host tastings, but those permissions were removed in later versions. (Changing property rights without notification is another constitutional violation, Infante said.)
The lawsuit further claims that the County “was aware of constitutional issues” with its code. As proof, Infante submitted in discovery a 1989 internal memo from Napa County counsel, which outlines several ways that the forthcoming Winery Definition Ordinance was “likely to stimulate legal challenge” based upon constitutional or statutory issues. Another internal memo from 2009 raised similar concerns.
Infante also submitted a letter from Patrick Ryan, Napa County assistant director of Planning, Building and Environmental Services. Ryan’s letter alerted County personnel about a “loophole” in the ordinance that exempts all wineries from California fire safety regulations. That exemption would include the road improvements imposed on Summit Lake, Infante said.
While Hoopes believes most Napa Valley wineries are “unbelievably afraid of the government,” Infante said the door is open for others to inquire about joining the lawsuit in the coming weeks.
“It really struck me that there’s a winery in Napa that’s not allowed to have any visitors whatsoever, but the winery next door can have 300 visitors a day,” Infante said. “The government doesn’t tell your neighborhood coffee shop how many customers it can see a day, but for these wineries it does. It’s just not how business is done.”
Reach Jess Lander: [email protected]; Twitter: @jesslander
Sep 5, 2024
