Mendocino Wine Co. sues Truett-Hurst winery over work with Paul Dolan

This story originally was published in The Press Democrat on Feb. 10, 2016.

The parent company of Mendocino Wine Co. has filed suit against vintner Phil Hurst and the subsidiary of Truett-Hurst Inc., alleging it helped winemaker Paul Dolan breach his fiduciary duties with the Ukiah winery.

The suit revives a contentious battle between the Thornhill family, which owns Mendocino Wine Co., and Dolan, who was fired from the winery in 2012 in a dispute in which Mendocino County sheriff's deputies were called to intervene.

In that case, the Thornhills filed suit alleging that Dolan spent much of his time as president of Mendocino Wine Co. actually helping Hurst and Dolan's son, Heath, with a competing wine company, H.D.D. LLC, a subsidiary of Truett-Hurst. Dolan filed a countersuit alleging the Thornhills undervalued his share of Mendocino Wine Group, the parent company of the business, likely by millions of dollars.

The two sides dropped their respective lawsuits in 2014 in a settlement in which Dolan gave up the rights to his Paul Dolan wine label to the Thornhills.

But Mendocino Wine Group filed a new suit on Feb. 1 in Sonoma County Superior Court, alleging that Hurst and H.D.D. aided and abetted Dolan in his breach of fiduciary duty, interfered with Dolan's contract and Mendocino Wine's business relationships.

The suit was revealed in an investor conference call Tuesday in which Truett-Hurst announced its second-quarter earnings. Paul Forge, chief financial officer for Truett-Hurst, said the claims in the suit are “without merit.”

The company reported that net sales increased 73 percent in the second quarter compared to the same three months in 2014, to an overall total of $8.5 million.

The Healdsburg vintner said net sales increased both in its wholesale market (93 percent) and direct-to-consumer market (20 percent) compared to the same quarter in the previous year.

The company is coming off a tremendously difficult year after discontinuing its Paper Boy brand and eliminating its wine spritzer business due to a poor rollout of that product with Kroger Co. supermarkets.

Last month, it announced it sold its 50-percent stake of the online retailer, The Wine Spies, for $25,000.

One bright spot is that Truett-Hurst reported a more robust balance sheet. It had $5 million in cash and cash equivalents at the end of the 2015, up from $2.9 million at the end of 2014.

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