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JaM Cellars co-founder, former winemaker sues John Anthony Truchard
Litigation

JaM Cellars co-founder, former winemaker sues John Anthony Truchard

From the Napa Valley Wine Insider Digest: Jan. 10, 2020 series
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JaM Cellars tasting room

JaM Cellars' downtown tasting room. The company's former winemaker, a minority stakeholder in JaM, alleges he was not paid his fair share of the company's profits. 

A co-founder of JaM Cellars alleges the company’s CEO diverted millions in profits for personal benefit, according to a lawsuit filed in Napa Superior Court this week.

Robert Lloyd, former winemaker for and a minority stakeholder in JaM Cellars, alleges John Anthony Truchard denied him his share of the company’s profits, according to the suit, which estimates damages to be upwards of $2 million.

Lloyd since 2013 has owned 19.9% of the company’s stock; Truchard owns the remaining 80.1%, according to the complaint. Lloyd left the winemaking position and subsequently stepped down as a board member for JaM in 2015, according to the lawsuit, but retained his status as a shareholder.

Following Lloyd’s depature, the suit alleges, Truchard “actively concealed” transactions between JaM and himself or other companies owned by Truchard and his wife.

These transactions came in the form of millions of dollars’ worth of loans and advances, most of which were interest free, six-figure fees paid to Truchard and other management fees and compensation, the lawsuit says.

Michael Bradley, an attorney for Lloyd, said a specific figure for damages would be “determined with precision” as the case progressed. Lloyd had also filed a petition of writ, which would grant him the right to inspect the financial records of the company.

“They’ve previously not been forthcoming,” Bradley said. “This (lawsuit) is something Mr. Lloyd did with reluctance, because he felt he had no other choice.”

A spokesperson for JaM Cellars said the company would be filing a response to the lawsuit and would wait to comment until then.

Truchard is the founder and CEO of John Anthony Family of Wines and FARM Napa Valley vineyard management company. The complaint alleges that funds diverted from JaM were used to fund his “other business ventures”, and notes that some are “competitive to JaM”.

2020 marks JaM’s fifth year as a sponsor of the BottleRock music festival. Truchard and his wife, Michele, also own the Napa Valley Opera House, which they purchased in October of 2019, and the Beazley House, purchased in June of 2018.

The lawsuit alleges that the Truchards used funds diverted from JaM Cellars “in whole or in part” to make those purchases, as well as to buy the York House Mansion, vineyards, a day spa and to pay their tasting room lease.

Since its founding in 2009, JaM – and its Butter Chardonnay label, which Lloyd co-created, according to the suit – has seen explosive success. Butter sold 450,000 cases in 2015, up from just 1,000 cases six years earlier in 2009; it saw triple digit growth in each of its first seven years on the market, according to a press release, and was named an Impact “Hot Brand” for three years in a row.

Despite its success, according to the lawsuit, Lloyd in the second quarter of 2018 discovered that JaM’s operating expenses had increased more than 60 percent over the course of the last year. Those expenses “far exceeded revenues during the same reporting period” because of the “related party transactions” made by Truchard, the suit alleges.

The lawsuit also claims Truchard diverted funds by placing “grossly excessive trademark royalties” on the sale of JaM’s Candy Rose label to another company owned by Truchard.

Following a request for an explanation, Lloyd met with a member of JaM’s board and the company’s legal council, the lawsuit says. At the end of the meeting, Lloyd was asked if he was interested selling his shares in JaM, and though “interest was expressed,” the two parties were unable to reach agreeable terms regarding the sale, the suit alleges.

Lloyd, who owns Lloyd Cellars in Napa, then expressed interest in selling his shares to third party buyers, the suit says. Lloyd alleges he was not granted sufficient access to the company’s financial information, which prevented him from properly valuing his shares in JaM.

Lloyd is seeking 19.9 percent of the “illegally diverted money,” the lawsuit says. The report notes that the full amount is “currently unknown due to Truchard’s continued concealment” of his financial dealings.

You can reach Sarah Klearman at (707) 256-2213 or sklearman@napanews.com.

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Wine Industry Reporter

Wine industry reporter at the Napa Valley Register.

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