Sriracha Must Pay $23.3 Million to Jalapeño Pepper Farmer

Huy Fong Foods, the maker of the widely popular Sriracha hot sauce, has been ordered by a California jury to pay its former jalapeño pepper supplier $23.3 million in relation to the abrupt dissolution of their working relationship.

On Wednesday, the Ventura County civil court jury penalized the Irwindale-based company for breaking its contract with local firm Underwood Ranches and committing fraud by “misrepresentation and concealing information,” reports the Los Angeles Times.

Huy Fong initially filed a lawsuit against Underwood back in August 2017, accusing the jalapeño supplier of not returning an overpayment of $1.4 million from the previous season. In response, Underwood filed a countersuit claiming that Huy Fong breached its contract. 

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Underwood Ranches, owned by farmer Craig Underwood, has been providing Huy Fong Foods with the ripe red jalapeño peppers for the previous 28 years until the relationship ended in 2017 for failing to reach an agreement for that year’s harvest. 

Underwood noted that the end of the business relationship resulted in his company laying off about half of his company’s employees.

“Those losses were real, so we’ve got a lot of ground to make up, but it was so emotionally rewarding to hear all of the jury members support us unanimously,”  Underwood was quoted as saying.

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To compensate for the two years of financial losses, Underwood Ranches was awarded $14.8 million, plus an additional $10 million in punitive damages. The jury deducted about $1.5 million for Huy Fong’s 2016 overpayment.

Last year, as the trial was still ongoing, Underwood Ranches began producing its own sriracha sauce and started selling and marketing the bottles locally.

Underwood Ranches even took a dig at Huy Fong Foods, with a tweet saying, “Without Underwood’s pepper, it’s just another condiment.”

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Huy Fong responded a few months later with a message posted in March:

“Underwood Ranches came out with their own Sriracha Sauce but is suing Hf for damages in excess of $20m,” Huy Fong Foods wrote. “Underwood expects HF to pay back the ‘golden goose’ that they themselves killed.”

David Tran, the creator and founder of Huy Fong, began making hot sauce in Vietnam in 1975. The name of Tran’s company comes from the Taiwanese freighter “Huey Fong,” registered in Panama, on which he escaped the war-torn country in 1979. When Tran became a refugee in the United States, he continued his hot sauce business in 1980 in a 5,000-square-foot building near Los Angeles’ Chinatown.

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