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Changing the Rules: Hoopes Trial Could Upset Decades of Zoning & Winery Permits in Napa Valley

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The result of Napa Valley V. Lindsay Blair Hoopes Et al could have a significant and lasting impact on “small wineries” in the Napa Valley — and influence whether they can survive.

By Christopher Hanson

 

David  vs. Goliath, or simply the County of Napa attempting to ‘protect the public’ by bringing  a sharp dealing lawyer/winery owner to task for a host of alleged code violations? Each side, in trial briefs filed last week, spun their case differently. The result could have a significant and lasting impact on “small wineries” in the Napa Valley — and influence whether they can survive.

In its second amended complaint filed against Hoopes Family Winery Partners LLC and Hoopes Vineyard LLC, Napa County attorney Geoffery Spellberg (an aggressive trial lawyer known for his own sharp dealings and, some might say, dirty tricks) writes that the case is simply the county attempting to address “widespread nuisances” and “violations.”

Lindsay Hoopes and her father, Spencer, are the owners of the Hoopes LLCs and, in an effort to (apparently) intimidate Hoopes, Spellberg has named her, personally, as a defendant, claiming she (but not she and her father) is the sole person in “control” of the LLCs — and that the LLCs are merely a “sham.”

A bit of background

The vineyard and winery were started in 1984 by the Tede family. The zoning in place at the time allowed for “small wineries” to get an exemption certificate instead of a traditional use permit, and the Tedes did so. The exemption certificate let the “small wineries” do (and not do) certain things. The exemption certificate issued to the Tedes was amended slightly in 1987. 

What the small winery exemption certificate allows, or prohibits, is the key to the lawsuit and will impact each and every other “small winery” operating with an exemption certificate throughout Napa County.

In its complaint, Napa asserts that the exemption certificate allows only limited (20,000 gallon) wine production and restricts the sale of that wine by way of “limited distribution channels.” The winery could, according to the Napa complaint, ship wine by truck to customers, sell wine to people who came to the winery to buy unopened bottles and take them away to drink elsewhere. The exemption certificate, Napa asserts, states that no tours or “public tastings” are permitted.

Napa County asserts that, just two months before the Hoopes LLC bought the vineyard and winery in August 2017, the seller had been cited for a violation of the “wine tasting” restriction. The county further asserts that the Hoopes LLCs knew about the restriction before they bought the business and property.

Then, according to Spellberg’s complaint filed for the county, the Hoopes LLCs began upgrading the winery/vineyard. Initially, the Hoopes LLCs got permits for those improvements. 

Then, according to Spellberg, the Hoopes LLCs hired an engineer to outline what they’d have to do to go through the use permit process and do more improvements. In order to expand the vineyard/winery operations, the county asserts that the engineer told the LLCs, improvements would first need to be made to the pre-existing wastewater system, the freshwater system, fire protection systems, and the road into and driveway leading from the road to the winery buildings. When that engineer told the Hoopes LLCs the cost of those additional use permit improvements could be between $500,000 and $1,000,000, the Hoopes LLCs abandoned the plan to apply for a use permit.

That’s where things get interesting.

Drawing the lines

According to Spellberg and the county, Lindsay Hoopes decided to run amuck, ignore and violate the entire zoning permitting process, and do what she wanted anyway. 

Spellberg happily referenced the engineer and even attached emails from the engineer to the Hoopes LLCs in the complaint. Of course, months earlier a discovery referee in the case (a retired judge appointed to resolve many pre-trial disputes between the parties) had ruled the conversations with the engineer and his email irrelevant and inadmissible. The Hoopes LLCs have brought a motion to have those parts of the complaint stricken and, presumably, have Spellberg sanctioned for improper conduct.

When you read between the lines, it seems like attorney Lindsay Hoopes read the various codes and statutes carefully and concluded the Hoopes LLCs didn’t need to spend $1,000,000 for upgrades just to do the things they already had a legal right to do — because, she concluded, the exemption certificate already gave the Hoopes LLCs those rights.

And that is where decades of zoning laws and regulations come into play.

Splitting hairs

According to the Hoopes LLCs, when they bought the vineyard/winery, they inherited all the rights (and obligations) covered by the exemption certificate. The restrictions in the exemption certificate prohibit “public tastings,” and the Hoopes LLCs says it’s not offering public tastings at all. Instead, it claims, it’s offering “appointment only” “private tastings” — which, it also asserts, and even the county of Napa says, are a different thing from “public tastings.”

The Hoopes LLCs asserts it only offers “appointment only” “experiences” and not “tastings”

at all. It’s a distinction, the Hoopes LLCs says, that makes a difference. The county says it’s a distinction without a difference. The county asserts that unless the exemption certificate says you can do something, it means you can’t do it. The Hoopes LLCs says that position is hogwash — and points to case law they think rules the day on that question.

It’s a critical issue in this case.

The winery/vineyard is in an Agricultural Zone (AgZone). “Wineries” are allowed in AgZones. To operate a “winery” in 1980, one needed to get a use permit. As an exception to the onerous process of getting a use permit, the County created a “small winery exemption.” If you qualified as a “small winery,” you could apply, over the counter, and get an exemption certificate. No use permit process was needed to get the exemption certificate.

The (now) Hoopes LLC vineyard/winery got its exemption certificate in 1984. That exemption certificate followed the land, which the Hoopes LLC’s bought in 2017. But, that’s not all the Hoopes LLCs bought.

Changing definitions

In 1990, Napa County amended the AgZone rules and created a thing called the Winery Definition Ordinance (WDO). The WDO did away with the categories of “winery” and “small winery” and just had one class: “winery.” That change, according to the Hoopes LLCs, made the “small winery” a conforming “winery” and not an “exception” to a “winery” use in the AgZone. If you had a winery with a use permit or a small winery with an exemption certificate, as of 1990’s WDO, you were a “winery,” — and you had all the rights and benefits that being a “winery” gave under the zoning code. Those rights and benefits included things not previously included in the “small winery” classification, things like the right to “marketing” and “sales” and “accessory uses.”

In a second argument in favor of “private tastings” the Hoopes LLCs point to the Napa County WDO ordinances, which states “tastings by appointment” are a lawful “accessory use” to a “winery.” With regard to “tastings” the county says “verboten!

Tastings aren’t allowed at “small wineries” under an exemption certificate — period. — “private” or “public” be damned. The county similarly does not recognize the argument that “small wineries” were absorbed into “wineries” by the WDO.

The WDO was not intended, according to the county, to effect a global change in “winery” classifications. Indeed, the county says, it is careful with its zoning and codes. After all, if not for the restrictions in those ordinances, Napa Valley might have turned into Silicon Valley and be nothing but houses and office buildings. Yet, in an apparent acknowledgment of the “blending” of the two classifications, Napa County added “small wineries” back into the Code in 2012. The Hoopes LLCs claim that the add-back doesn’t impact them, because they got all those additional rights in 1990, and the county can’t take them away. The add back, according to the Hopes LLCs only impacted new “small wineries” after 2012.

Another problem with the county’s position as to “tastings,” according to the Hoopes LLCs, is California state law. The Hoopes LLCs say that state law trumps the county ordinance, and that one particular state law (the “Evans Bill” Business & Professions Code §23385) says that certain “wineries” with a “winegrowers 02 license” (which the Hoopes LLCs have) have the right to sell wine to consumers onsite. In addition, the Evans Bill states that local governments can not eliminate the rights granted under the bill.

The county asserts that it has the right to control when and how alcoholic beverages are sold in Napa County. The Hoopes LLCs point out that the county is telling them that they can not sell wine at the winery at all, and that that prohibition is itself prohibited by state law.

Watching closely

Another argument in the case relates to “upgrades” at the property. 

The county asserts that any “updating” at the property will require updating any use permits (or, in this case, the exemption certificate). The Hoopes LLCs say that’s a broad overreach by the county, which, they assert, is looking for any reason to shut them down — because the code itself says that “any expansion in production capacity of a small winery shall be prohibited unless a use permit is obtained.” Since the Hoopes LLCs are not looking to upgrade “production” they assert they need not seek an updated use permit.

How this all shakes out will be a thing to watch. The judge has decided to split the case in two, taking the “legal” parts first for the judge alone, and then, if needed, the “factual” parts second, for a jury.

There are other issues, to be sure. Can the Hoopes LLCs sell food not produced on the property, wine from one of their other wineries, or soaps or towels or other trinkets not “wine related”? The Hoopes LLCs say that stuff is merely advertising. The county disagrees and calls it “commercial purpose” sales unrelated to wineries. The arguments go back and forth in the trial briefs.

In the meantime, the lawyers sharpen their pens and get their objections ready.

If the Hoopes LLCs win, small wineries throughout the Napa Valley (and in all other parts of the county) will begin re-thinking how they approach selling wine to existing and potential customers. They may find that they can improve their income without the extraordinarily burdensome costs of the “permitting process.” It’s a process the county says is there to protect the public — even if it damns the smaller wineries to closure of their businesses.

If Napa County wins, it will sigh a big sigh of relief, and sleep the sleep of the righteously indignant who have been proven right.

Trial starts today (January 29). I’ll be there to watch.

___________________________________________________________

Christopher Hanson

Christopher Hanson

Christopher Hanson is a retired real estate broker and attorney and, now, a some-time harvest hand or cellar worker or real estate dispute mediator/expert witness, who finds himself in Napa when not in Portugal, sipping wine and marveling at the difficulty people have with just getting along with each other.

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