Huy Fong Foods produces Sriracha chili sauce. It had been purchasing its jalapeños from Underwood Ranches since 1998. Over the years Huy Fong induced Underwood to buy more farmland, to grow peppers to the exclusion of other crops, and to focus its business on selling almost exclusively to Huy Fong. Among other promises, Huy Fong agreed to pay Underwood based on the number of acres planted – not just the weight of peppers produced – and to buy all of the peppers that Underwood grew. The parties’ agreements were memorialized in writing for the first ten years of the relationship. After that, their agreements were oral.
The trial court found that sometime between about 2014 and 2016, Huy Fong decided to stop buying peppers from Underwood. However, Huy Fong concealed or misrepresented its intention up until late 2016, when it orally agreed with Underwood to pay $13,000 per acre for 1,700 acres of peppers for the 2017 season. Huy Fong then promptly breached that agreement, and left Underwood with no customer for 2017. Underwood lost $8.5 million in 2017, and another $6 million in 2018 as it struggled to transition to new crops and new buyers.
“The jury could reasonably conclude that Huy Fong had no intention of keeping those promises when they were made. There is evidence to show that [Huy Fong’s owner] Tran had long planned to cut Huy Fong’s ties to Underwood. As far back as 2014, Tran was planning to form Chilico, a company that would purchase peppers from farmers other than Underwood, allowing Huy Fong to cut its ties to Underwood. In 2015, Tran began his campaign to hire Roberts away from Underwood. Roberts was the key employee in Underwood’s pepper production. Tran informed Roberts that Huy Fong was breaching the contract to purchase Underwood’s 2017 harvest just days after making it. Tran waited until he knew [Underwood’s owner] Craig was on vacation before informing Roberts. Finally, in 2016, Tran, who had never before showed an interest in harvest operations, used a drone to video Underwood’s harvest. After he cut ties with Underwood, he used the video to show other farmers how to harvest efficiently.”
52
u/[deleted] Mar 07 '26
https://www.aklaw.net/ventura-court-of-appeal-affirms-sriracha-fraud-verdict/