Texts, emails, credibility produced $23.3M verdict in hot sauce trial, winning attorney says

A broken 30-year business relationship between a sriracha maker and its pepper grower, much of it based only on spoken agreements, ended in a $23.3 million unanimous jury verdict because of the defense team's extensive use of videotaped depositions and hours spent poring through texts and emails, said the victorious lead attorney.

The most difficult aspect of the case that ended July 3 in Ventura County Superior Court was proving the existence of a contract between the two companies, defense attorney James Q. McDermott of Ferguson Case Orr Paterson, said in an interview this week.

"It's not a legal difficulty, it's the factual difficulty of establishing what happened," McDermott said.

He said the relationship between his client, Underwood Ranches, and Los Angeles-based hot sauce maker Huy Fong Foods Inc. was proven to the jury by tying together years of digital communication between representatives of each company.

"We had extensive emails, texts. There's a tremendous amount of documentation. It just wasn't in a clean simple, fully integrated agreement," McDermott said, naming the video depositions of Huy Fong executives as key to proving the case against them.

McDermott said he hoped the case, tried from June 12 to June 27 and overseen by Judge Henry J. Walsh, would lead companies engaged in similar relationships to more clearly write out their contracts in order to avoid future litigation.

McDermott said the award was commensurate with the significant financial investment his client had poured into the decades-long relationship as the sole supplier to Huy Fong.

"As far as the amount, it's really a function of my client made a huge outlay for the benefit of Huy Fong, so the numbers are big because my client spent a tremendous amount of money to make sure they could perform their end of the bargain," McDermott said.

"I think the punitive award is a function of their client's lack of credibility," he added.

The jury, after two days of deliberation, awarded the Ventura County-based grower $14.8 million for two seasons' worth of losses it took after Huy Fong's CEO, David Tran, terminated the nearly 30-year relationship before the beginning of the 2017 growing season.

The jury deducted $1.5 million for an overpayment made by Huy Fong to Underwood Ranches and tacked on $10 million in punitive damages.

Boris Treyzon, a founding partner at ACTS Law, which specializes in contract litigation, commented that while the compensation for the missed growing seasons was standard, the award of punitive damages was unique.

"It's not in any way abnormal or large," said Treyzon, who was not involved in the case. He described Ventura County as "a good conservative jurisdiction" not prone to doling out excessive awards.

"The punitive damages are unusual in the sense that the jury found that one side was egregious. Otherwise you don't award punitive damages, which are designed to prevent this kind of conduct from occurring in the future," Treyzon said.

McDermott said he wasn't worried about the potential for an appeal.

"It's a unanimous jury verdict on a breach of contract and fraud, so I think we're on very solid ground," he said."I think my opponents were not credible."

Attorneys representing Huy Fong Foods, including Eric B. Feingold of Myers, Widders, Gibson, Jones & Feingold LLP, were not available to comment.

Filings document a seemingly mutually beneficial relationship in which Huy Fong was the main buyer, and primary benefactor for the pepper grower, a relationship it eventually tried to capitalize upon by demanding Underwood sell its hot peppers to a separate entity at a reduced rate. Huy Fong Foods Inc. v. Underwood Ranches LP, 56-00505141 (V.C. Super. Ct. filed Dec. 4, 2017).

Treyzon confirmed that even without a clearly spelled out, written contract, a jury would typically still be able to find out how a business relationship was structured.

"It's a pretty established rule of law that if a contract is not in the four corners of a piece of paper that the court will go outside of the writing ,or if there's no writing, the court is going to listen to both sides and then make a judgment call," Treyzon said.