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Thursday, Mar 28, 2024

Underwood Farms Wins Hot Dispute

Ventura County’s Underwood Farms was awarded $23.3 million earlier this month, ending a years-long court battle with Huy Fong Foods in Irwindale over the peppers that power popular hot sauce brand Sriracha. A civil jury determined that Huy Fong, which manufactures Sriracha, willingly broke verbal contracts with Moorpark-headquartered Underwood Farms and committed fraud by manipulating and concealing information. “We were very, very nervous waiting for the verdict. But the jury, they got it all, they were tuned in,” said Craig Underwood, calling from his 2,000-acre ranch in Kern County, where he grows black-eyed peas, watermelon and, of course, chili peppers. “It was very emotional. I had tears in my eyes.” After all, the suit was a long haul for Underwood and his business — “almost three years since the roof caved in,” he said. For more than 28 years, Huy Fong contracted Underwood to grow the peppers that go into its hot sauces. But what was once a happy partnership turned sour before the 2017 growing season, when Huy Fong filed a lawsuit demanding Underwood return an overpayment of $1.46 million. Underwood counterclaimed that Huy Fong broke contracts, attempted to drastically cut its payments and tried to steal top-level employees. “We’ve been struggling to keep the farm alive the whole time,” Underwood said. He posited that his relationship with Huy Fong accounted for some 80 percent of his farm’s income. When that vanished, Underwood Farms’ revenue dropped by $8.5 million within the year. The next year, the farm posted $6 million in losses, and $2 million the following year. Underwood said he projects his farm will finally break even again in 2020. “You can see why there was some question whether we were going to survive or not,” he said. Treading water at the beginning of the suit, Underwood sold one of his ranches and a lemon grove and let go about half of his employees. He tried filling the pepper gap with smaller fresh market vegetable operations like onions, tomatoes, carrots, cilantro and basil. He borrowed from Farm Credit and relied on help from suppliers and banks. “A lot of people supported us. Some of them won’t get back the money they lost, but at least in terms of feeling vindicated, everybody does,” said Underwood. “This is a victory not just for us, but for them.” The Ventura County Superior Court award includes $13.3 million to help account for the years of lost revenue, and another $10 million in punitive damages. Huy Fong has the right to appeal the jury’s decision and has been publicly vocal about its intention to do so. In the meantime, Underwood Farms is focusing on getting its own line of pepper-based sauces, including red and green hot sauces, barbeque sauce and an original sriracha recipe, into retail stores around the state.

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