The chili peppers that for 30 years have been mashed into Sriracha, the famous hot sauce manufactured in Irwindale and sold worldwide, can no longer be found in the iconic bottles with the rooster logo and bright green caps.
After working together since 1988, Huy Fong Foods and Underwood Ranches, which exclusively grew the sauce’s specialty jalapeño peppers in Ventura County, ended its relationship and are now embroiled in contentious, multimillion-dollar litigation.
The trial in Ventura County Superior Court is expected to begin this week. Attorneys for both companies did not respond to requests for comment.
In 2017, the hot sauce manufacturer, founded by David Tran, filed a lawsuit against Underwood Ranches, claiming the ranch owed Huy Fong Foods $1.46 million plus interest for not refunding an overpayment. Underwood countersued, saying the Sriracha maker owes it $20 million.
Underwood Ranches, operated by Craig Underwood, now manufactures its own hot sauce. He declined to comment on the new sauce, citing the upcoming trial.
Under an agreement that was “partly oral, partly written and partly established by the parties’ practice,” according to court documents, Underwood would estimate the costs to produce the chilies ahead of the harvest season and Huy Fong would pay in installments. After the harvest season, Underwood would detail the actual costs of production and Huy Fong would make Underwood whole.
In 2016, the actual costs were $1.46 million less than Underwood estimated, court documents show.
Underwood Ranches said after the 2016 harvest season ended, Huy Fong requested that the ranch produce peppers for the next three years and construct a specialty pepper-washing system that would cost an estimated $2 million.
Shortly after, Huy Fong asked Underwood to reduce costs and contract with a newly formed company, Chilico, which would be overseen by Donna Lam, Huy Fong’s executive operations officer, according to Underwood’s countersuit.
In 2017, the partnership ended and Underwood did not plant chilies for Huy Fong.
Underwood said it incurred costs preparing for the 2017 crop and beyond. It said Tran had agreed the 2016 overpayment would be applied to the 2017 crop.
“Huy Fong made these representations with the intention to deceive and defraud Underwood,” the countersuit states.
Tran is no stranger to controversy.
In 2014, the city of Irwindale sued Huy Fong Foods, declaring the factory a public nuisance after neighbors complained the spicy fumes emanating from the chilies as they were ground were a health risk. People complained their eyes burned and the fumes caused them to choke, forcing them to stay indoors during the fall chili grinding season. Data obtained by this news organization found the majority of complaints originated from four households.
The dispute made international news as it was unclear if production would continue at the 650,000-square-foot Azusa Canyon Road factory.
Tran hoisted a sign outside the building that read, “No Tear Gas Here.” He threatened to relocate and was even courted by a Texas state lawmaker.
After California state leaders intervened, the city eventually dropped its suit.
Tran fled Vietnam during communist rule and came to Los Angeles where he formed his company, first in Chinatown before moving to Rosemead and finally Irwindale as production grew.
The Underwood family, which also operates Underwood Family Farms in Moorpark, has been farming for four generations. The company was in the red in 2017 and had to lay off 44 people, according to its lawsuit. The chilies that Underwood grew for Huy Fong were specifically made for Sriracha and are different than peppers sought by the market.
The farm produced 100 million pounds of peppers each year on 1,750 acres of Ventura County farmlands. Huy Fong paid Underwood $13,000 per acre, according to court documents. From 2008 through 2016, Huy Fong paid Underwood about $190 million.
Truckloads of the deep-red chilies could frequently be seen making their way east on the 210 Freeway to the Irwindale plant. Workers harvested the jalapeños by hand until 2003, when Underwood developed special machines constructed to the hot sauce maker’s specifications.
Huy Fong said in its lawsuit those machines should be returned because it covered the costs associated with them. The machinery is worth $7 million.
Huy Fong estimated its damages total $8.5 million.
“Underwood seeks to punish Huy Fong for ending the parties’ relationship and to use its wrongful detention of Huy Fong’s equipment as leverage in negotiations,” Huy Fong’s lawsuit states.
In January, to celebrate National Hot Sauce Day, Underwood Ranches posted a photo on social media of its own Sriracha hot sauce. The product is sold at area farmers markets.
https://twitter.com/URanches/status/1087770182846697474
Huy Fong swung back on social media when it posted photo of Underwood’s hot sauce in the forefront with bottles of Sriracha in the background. The post accused Underwood of halting production of its jalapeño peppers without warning.
https://www.instagram.com/p/BvkGCH8Hh0t/?
“Underwood expects HF (Huy Fong) to pay back the ‘golden goose’ that they themselves killed,” the post read.
