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Law360 (August 3, 2020, 6:49 PM EDT) -- A winery told a California federal court Friday that the new company managing its storage facility has jacked its rates by more than 1,000% on $7 million worth of wine, violating the state of emergency declared to prevent price-gouging during the COVID-19 pandemic.
Ruby Grapes LLC claims in its lawsuit that new owners who took over Intercoastal Wine Co. LLC quickly increased their prices after Ruby Grapes informed them they would be removing their supply in August, and that the move violates California's anti-price-gouging statute, Penal Code Section 396.
The statute prohibits raising the price of many consumer goods and services by more than 10% after an emergency has been declared. California Gov. Gavin Newsom declared a state of emergency in March due to the COVID-19 pandemic, and Ruby Grapes claims the sudden price hike is an illegal extortion attempt.
"Defendants agreed to and did conduct and participate in the enterprise's affairs through a pattern of racketeering activity and for the unlawful purpose of intentionally defrauding and extorting monies from plaintiff," Ruby Grapes said.
According to the complaint, defendants Mitch Spaletta and Erica Bettencourt bought Intercoastal Wine on May 1.
As a result of the governor's COVID-19 orders that began in March, which included the shuttering of bars, restaurants and wine tasting rooms, wineries and wine storage facilities "were greatly impacted with shortages in labor, shippers, and closures," Ruby Grapes said.
The complaint does not offer details on the havoc in the wine industry, but according to a report released June 30 by Sonoma State University, the estimated losses in 2020 for the California wine industry are nearly $4.22 billion.
According to the complaint, Ruby Grapes has used Intercoastal Wine in Lodi, California, since 2018 to store approximately 70,000 gallons of wine at a rate of 8 cents per gallon.
Ruby Grapes says that on or about June 15, Hakam Misson, its managing member, contacted Spaletta to introduce himself and to inform him that Ruby Grapes would be removing its supply from Intercoastal Wine by the end of August.
Ruby Grapes says that on July 10, Spaletta sent an email informing the plaintiffs that Intercoastal Wine would be increasing its fees within 72 hours to 50 cents per gallon, a 625% increase.
Ruby Grapes was told it would have to either remove their product within 72 hours or pay the increase, according to the complaint, which adds that the defendants "knew that it would be practically impossible for plaintiff to remove its wine within the 72-hour ultimatum. The notice further provided that plaintiff could not remove its wine until all invoices were paid."
According to the complaint, after Ruby Grapes objected to the price increase as unreasonable and price-gouging, Spaletta agreed not to seek the increase and allow Ruby Grapes to remove its product.
But on Friday, the defendants jacked the price up 1,250%, according to the complaint, which also says the price-gouging laws "include 'storage services' as a protected service during a declared state of emergency."
The complaint alleges the defendants violated various sections of the Racketeer Influenced and Corrupt Organizations Act and also includes causes of action for fraud and deceit, unfair completion under the California Business and Professions Code, unjust enrichment, civil conspiracy and conversion.
Ruby Grapes is also seeking unspecified damages and injunctive relief preventing the defendants from price-gouging and continuing to damage Ruby Grapes' wine supply.
The defendants and counsel for the plaintiffs did not immediately respond Monday to requests for comment.
Ruby Grapes is represented by Sunita Kapoor.
Counsel for the defendants was not immediately available.
The case is Ruby Grapes LLC v. Mitch Spaletta et al., case number 4:20-cv-05302, in the U.S. District Court for the Northern District of California.
--Editing by Orlando Lorenzo.
For a reprint of this article, please contact reprints@law360.com.
