The company that makes Sriracha hot sauce on Tuesday sued the company that supplies its chili peppers, alleging the firm is refusing to pay more than $1.4 million in overpayments and return some $7 million in equipment.
Irwindale, California-based Huy Fong Foods Inc. alleges breach of production agreement, breach of contract and civil theft in its Los Angeles Superior Court lawsuit against Camarillo-based Underwood Ranches LP.
An Underwood Ranches representative could not be immediately reached for comment on the suit, which states that Underwood has grown peppers used by Huy Fong in making its hot sauces for about 30 years.
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"In addition to the payment of costs associated with the harvesting of its chilis, Huy Fong agreed to pay ... Underwood a guaranteed fee," the suit states.
Some parts of the agreements each year were in writing and other portions were verbal or based on the parties' past practice, according to the complaint. Huy Fong bought all the production equipment Underwood Ranches needed to produce chili peppers for the plaintiff, the suit states.
From 2008 until 2016, Huy Fong paid more than $190 million to Underwood and made "substantial" annual pre-payments to Underwood Ranches beginning in February of each year, the suit states. The plaintiffs always paid any balance owed Underwood up until 2016, when Huy Fong overpaid the producers by $1.4 million, according to the suit.
The two sides were unable to reach an agreement this year, when Underwood was holding more than $7 million worth of equipment bought by Huy Fong, the suit says.
"Huy Fong has demanded that Underwood allow it to take possession of the equipment, but Underwood has refused to do so," the suit alleges. "Instead, Underwood is holding Huy Fong's equipment hostage, severely impacting Huy Fong's ability to complete the 2017 harvest and greatly increasing the expense associated with the harvest."
Huy Fong also has demanded return of its $1.4 million overpayment in 2016, but the defendants have refused to do so, according to the suit.