Judge dismisses lawsuit against Healdsburg's Ascentia

Healdsburg wine company Ascentia Wine Estates has prevailed in a nasty legal spat with its former sales and marketing company, but the war of words between the estranged partners continues.

The maker of signature Sonoma County wine brands like Geyser Peak and Gary Farrell convinced a Delaware court to throw out a suit by New York-based W.J. Deutsch & Sons.

The lawsuit filed in May claimed the wine company was insolvent and accused Ascentia CEO Jim DeBonis of fraud, claiming he made "fantastical" revenue projections for the brands.

"This case was nothing more than sour grapes by W.J. Deutsch & Sons after their contract was terminated," Jim DeBonis, CEO of Ascentia, said in a statement Friday.

The suit was noteworthy because Deutsch was not only a vendor for Ascentia, it also was and remains a major shareholder in the company.

Deutsch invested $16 million as part of the complex $209 million deal that formed Ascentia in 2008, bringing together eight wine brands from California, Washington and Idaho.

DeBonis had said from the beginning that Deutsch's allegations had no merit, calling the case "phony."

"When we removed them as our sales team, they made up a series of false allegations," DeBonis said. "We are pleased that the court has vindicated Ascentia and thrown Deutsch's case out."

The swift ruling by the Court of the Chancery of the State of Delaware shows the case had no merit, and Deutsch's various other allegations about the company are equally baseless, Ascentia spokesman Sam Singer said.

The company is not insolvent and is "doing well," he said. "Sales are trending upward and the company is very happy with its direction."

Deutsch hopes that is true, but as someone who continues to have a large investment in the company, he is skeptical, said his attorney, Howard Graff.

"If that were so, it would be music to Mr. Deutsch's ears," Graff said.

However, Deutsch is aware of reports that contradict that claim, Graff said.

"Those public reports do not reflect healthy sales," Graff said. "Mr. Deutsch is very concerned about his investment."

Sales of the wine brands suffered under Deutsch, but have since recovered since Ascentia "dumped Deutsch as its sales force," Singer said.

"The bottom line is Bill Deutsch and his company did a great deal of damage to these brands when they managed them, and it has taken time and effort to correct the damage that they did," Singer said.

Deutsch markets a portfolio of domestic and imported wines including Kunde Family Estate in Kenwood and Yellow Tail from Australia, which sells more than 8 million cases in the United States.

"They claimed to be good sales people, but they couldn't do it with these premium brands," Singer said.

In 2008, Ascentia purchased eight wineries and brands from the world's largest wine company, Constellation Brands, which was brimming with surplus wine brands following its $885 million purchase of Beam Wine Estates the prior year.

The sale included Geyser Peak in Geyserville, Buena Vista Carneros in Sonoma and Gary Farrell in Healdsburg, plus XYZin, a Sonoma County zinfandel, and Atlas Peak, a Napa cabernet sauvignon. Also included in the deal were three Northwest wineries, Covey Run and Columbia wineries in Washington and Ste. Chapelle in Idaho.

In its suit, Deutsch claimed sales didn't live up to expectations because projections were based on sales made while several of the wines were owned by Fortune Brands, which was able to leverage its Jim Beam bourbon brand to drive wine sales.

The ruling was handed down Thursday by the Court of the Chancery of the State of Delaware. The judge in the case, Vice Chancellor John Noble, noted that the partnership agreement contains no rosy sales projections, and clearly states that no statements made outside the agreement will "have any force or effect whatsoever." Noble ruled the Deutsch is "bound by that obligation."

Singer initially said he hoped the ruling would be the end of the litigation and that everyone would "march forward for the sake of the eight wine brands."

But in response to Graff's remarks, he said, "it's unfortunate that Mr. Deutsch would disparage in any manner a company he is a shareholder in, particularly when he just got his behind kicked in court in Delaware."

Graff said Deutsch is considering his options. He continues to enjoy various rights as a partner in the company.

"Mr. Deutsch still has a $16 million investment in Ascentia, and I'm sure he's going to do what is necessary and appropriate to protect that investment."