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Jalapeño farmer wins $23.3 million in heated dispute with Sriracha maker

Alexa Díaz, Los Angeles Times on

Published in Business News

LOS ANGELES -- After the collapse of a nearly 30-year partnership with the maker of the world-famous Sriracha sauce and a multimillion-dollar lawsuit with the company, Craig Underwood is still betting on his farm's peppers.

A jury recently awarded $23.3 million to Underwood Ranches after a bitter lawsuit with Huy Fong Foods Inc., the manufacturer of the wildly popular Sriracha in the signature green-capped bottle. The family-owned Underwood farm was once the exclusive supplier of the chili peppers at the core of Huy Fong's rooster-labeled sauces.

The trial, which began in early June, came to a close last week when a civil jury determined that Irwindale-based Huy Fong breached its contract with the chili grower and committed fraud by intentionally misrepresenting and concealing information.

"It certainly isn't our nature to give up. We felt we had been wronged, so we were hoping we could right that through the court," said Underwood, who manages the Camarillo farm. "When the verdict came down, there was a lot of celebrating. We celebrated at lunch. We celebrated at dinner. And then we celebrated the next day."

Underwood said it was an emotional moment because the dissolution of the relationship with Huy Fong had hit the grower's finances hard.

In 1968 -- when Underwood returned home to work on the farm with his father after studying agriculture at Cornell University and serving three years in the U.S. Navy -- Underwood Ranches was farming on 400 acres. At the peak of its production harvesting peppers for Huy Fong Foods in 2014, it had spread out to 4,000 acres.

 

The business partnership flourished until the fall of 2016, when Huy Fong demanded Underwood Ranches return more than $1 million the manufacturer said was overpaid to the farm for growing costs, according to court documents.

Historically, Huy Fong would prepay Underwood Ranches for the estimated costs associated with growing and harvesting the chilies. The agreement was "partly oral, partly written and partly established by the parties' practice," court records show.

By January 2017, the relationship had soured to the point the parties stopped working together.

The following month, Huy Fong Foods filed a lawsuit in Los Angeles County Superior Court, which later was moved to Ventura County, where Underwood's business is located. The grower filed a cross-complaint in February 2018, alleging Huy Fong caused the breach in the partnership and as a result, Underwood Ranches sustained more than $20 million in losses.

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