A Wine Country Feuding Frenzy

The myth of wine making is that it’s an idyllic passion--a farmer growing vines around his house, picking the grapes himself, hauling them to a barn, treading them with bare feet.

Improvements in technique, in both vineyard and winery, have made wine better, but this requires money. And the demand for money brings with it the turmoil usually associated only with hostile takeovers.

Dozens of bitter feuds have recently disrupted winery ventures in California. Many winery partnerships have wound up with forced sales or acrimonious “divorces.” But the most bitter in recent memory is the one that occured at Culbertson Winery in Temecula in southern Riverside County.

John Thornton, who has owned 75% of the winery since January, 1989, assumed daily control last March, pushing founders and 25%-owners John and Martha Culbertson out. “Frankly, the winery had reached a point where you either fix it or fold it,” said Thornton. “The debt was very high, the losses were unbelievable.”

Culbertson said that more than $11 million of the $16 million in debt in the winery was owed to Thornton and that he and his wife were forced out in violation of their rights. The Culbertsons filed a lawsuit last week, challenging Thornton’s actions.

The Culbertson saga began in 1981, when the couple founded the sparkling-wine facility on their 27-acre avocado ranch in Fallbrook, in northern San Diego County. The winery, expanded in 1984 to 7,500 square feet, was set into a hillside, partially underground. And Culbertson vintage wines began to win gold medals at competitions.

With funding from Thornton, an executive with many high-technology companies, the Culbertson Winery in Temecula was built in 1986. One attraction was Cafe Champagne, an upscale restaurant that featured the recipes of Martha Culbertson, a nationally respected chef.

That year, Culbertson Winery stepped up production, almost doubling its capacity to 54,000 cases; the next year production rose to 80,000 cases. “Thornton wanted to make that much wine,” said Culbertson. “I was against it. It wasn’t in the game plan, but it was his money . . .”

Thornton says that despite increased production, sales rose only modestly, to 23,000 cases in 1990. He added that the winery would make just 35,000 cases of wine this year.

Thornton, who holds a controlling interest in eight companies, said he would not operate the winery himself. He said attorney John Byrne, of the San Diego law firm of Gray, Cary, Ames and Frye, has been appointed president and chief executive officer.

Thornton said he had no plans to sell the winery: “This is not a salable commodity. The debt is such that it would make it almost impossible to sell it at this time.”

Culbertson has hired an accounting firm to get a valuation on the winery and considers its worth in excess of $20 million. In the meanwhile, he retains an option to buy up to a 50% interest in the winery. This would give him and Thornton equal ownership. However, he says negotiations with Thornton over that and other issues have been fruitless.

These days the Culbertsons are back at the ranch where they first got into the business. Their property has been renamed Fallbrook Winery. “Now all I want to do is make a success out of the Fallbrook Winery,” says John Culbertson. “This is where we started with the Culbertson brand. We’re going to make only Chardonnay and Pinot Noir, the two grapes I have worked with in sparkling wine for 10 years.”

Fallbrook’s first wines--the Culbertsons started making them as a side venture in 1987--have been quite good. A 1989 Chardonnay ($10) has floral, grapefruit and tropical fruit notes and creamy texture; a 1988 Santa Maria Hills Pinot Noir ($13) has typical Santa Barbara herbal-cherry notes and smooth, supple fruit in the mouth.

Culbertson still frets over the fact that “a family winery that we founded and operated for 10 years was taken over by a venture capitalist,” but otherwise declines to be specific. He said he would pursue his rights in court.

Here are a few of the other recent winery flaps:

* Congress Springs: Vic Erickson, co-founder of this Saratoga winery with Dan and Robin Gehrs, sold his 75% interest back to the winery for funds advanced by Anglo-American Agriculture USA, a British company. When Anglo-American filed for bankruptcy in 1989, the company was acquired by a consortium of English and New York firms, which declined to buy Gehrs’ stock (Gehrs says it wound up being diluted to 2.5%). Gehrs was then squeezed out. Gehrs is now wine maker for Elliston Vineyards in Sunol.

* Cain Cellars: Joyce and Jerry Cain sold shares in their winery in 1986 to Floridians Jim and Nancy Meadlock, whose computer company, Intergraph, is based in Huntsville, Ala. Earlier this year, with sales of Cain wines slow, the Meadlocks bought out the Cains, who retired.

* Concannon: Former Sterling wine maker Sergio Traverso and the German wine firm Deinhard jointly bought Concannon from Glenmore Distillers. A year later, with wine sales slow, Traverso was forced out.

* Parducci: This family-run winery has been owned for two decades by Teachers Management Inc. of Newport Beach, with some 2,700 shares owned by 1,800 school teachers. The Parduccis own less than 100 shares. TMI reportedly reached agreement to sell the winery to Pernod Ricard of France last year, but the deal fell through. In the last few weeks, the Parduccis have offered to buy the marketing rights to their brand from TMI, but they must persuade shareholders to approve the plan. Says wine maker John Parducci: “We’re never informed about anything that goes on with this company.”

* Jekel Vineyards: Bill Jekel sold his Monterey winery to Vintech, a then-growing company of limited partnerships that already owned Lyeth, Mazzocco and Laurier. After Vintech filed for protection with the bankruptcy court on its four winery properties, Jekel filed suit to reclaim the winery. The winery remains under bankruptcy court protection, and Jekel has pending lawsuits to reclaim it.

* Even huge Joseph Seagram & Sons is embroiled in controversy. A division of Seagram agreed to market the wines of a number of small California wineries. When marketing plans fell short of projections, three of the firms sued. The cases of Keenan, Carneros Creek and Lambert Bridge, who are seeking $100 million in damages for breach of contract, go to trial July 15.