Column: A nasty fight erupts between a major grower and the giant Wonderful Pistachios firm

No one familiar with the works of John Steinbeck would think of California farming as a cool and clean enterprise.

Indeed, the author of “The Grapes of Wrath” and “East of Eden” would surely recognize the impulses and tensions underlying the nasty fight that has just broken out between Assemi Bros. of Fresno, a family of pistachio farmers and real estate investors, and Los Angeles-based Wonderful Pistachios, which is probably the largest pistachio distributor in the world.

At issue, of course, is money — as much as $50 million, based on the Assemis’ estimate of their pistachio crop’s value. But the fuel is the bad blood that has apparently erupted between the Assemis on one side and Stewart and Lynda Resnick, the owners of Wonderful Co., on the other. The immediate cause appears to be the Assemis’ decision to start processing pistachios in a plant of their own, rather than turning over their crop to Wonderful.

According to a lawsuit the Assemis filed earlier this month in Superior Court in Fresno, Stewart Resnick has threatened to torpedo the Assemis’ processing venture and even said at a growers’ meeting in March that he would “[F-word] them.”

Wonderful didn’t explicitly deny these statements when I asked the company to comment, but did email me a statement labeling the lawsuit “completely frivolous” and asserting that the Assemis filed it “for the sole purpose of defending their decision to breach the contract with Wonderful Pistachios, which requires them to fulfill the delivery of their 2019 crop to us.” The first hearing on the lawsuit won’t take place until next January.

Before we get into the details of the lawsuit, let’s take a look at the players.

First, the Resnicks. Residents of Beverly Hills, they’re a dominating force in California agriculture and Southern California high society.

Their Wonderful Co. markets mandarin oranges under the Halo brand, pistachios and almonds under the Wonderful brand and pomegranate juice as POM Wonderful. They control Fiji Water, Justin Vineyards and the florist delivery service Teleflora, among other enterprises.

Stewart and Lynda Resnick have hobnobbed with such Southern California fixtures as Barbra Streisand, and they’re prominent among local philanthropists, with their name on a sizable chunk of the Los Angeles County Museum of Art. They’ve been described as the biggest water users in Los Angeles and the biggest farmers in the country, although they’re not farmers in the sense of men and women who personally drive tractors or get down on their knees to harvest crops. They’re more like the “business” in “agribusiness.”

Indisputably, they’re master marketers. They’ve turned Fiji Water into a lifestyle brand, even though the water is shipped 5,500 miles from a Pacific island country with a history of repressive dictatorship and the lack of clean drinking water for much of its 900,000 population.

Sometimes, however, their marketing goes too far. That was the case with their pomegranate juice, for which they made health claims so extravagant, they drew a complaint from the Federal Trade Commission. POM positioned its product as almost a magic elixir — “health in a bottle” — and even put up billboards with the words “Cheat Death” next to a picture of the bottle. Its ads claimed Pom has beneficial effects on prostate cancer (“Drink to prostate health”), cardiovascular health and even erectile dysfunction.

The FTC said these health claims were not scientifically substantiated and that POM “routinely distorted the scientific record.” POM fiercely fought the FTC action, asserting that the agency was infringing on its right of free speech, but finally lost the fight in 2016 when the Supreme Court refused to hear a final appeal of a 2013 FTC ruling that had gone against them.

Wonderful Co.’s self-image as an avatar of corporate social responsibility and sustainable agriculture took a hit in 2016, when it was found to have bulldozed part of an oak forest near Paso Robles, in the heart of California’s Central Coast wine country, to make room for new grape plantings for Justin Vineyards, which Wonderful acquired in 2010. As I reported at the time, the clear-cutting, which was halted by San Luis Obispo County soon after its discovery, left hillsides bare and gray, denuded of vegetation and vulnerable to storm-fed erosion.

The Resnicks said they were “ashamed and very sorry” when they learned — belatedly, they said — of the bulldozing, and promised to restore the land and donate it for conservation. Local conservationists say that there are no indications that talks involving the winery and institutions such as Cal Poly San Luis Obispo over a transfer of the property or a full restoration have borne fruit. Wonderful said Monday that it has spent $5 million to “remediate” the property, including “stabilizing the site to prevent erosion” and “planting 400 trees and 3,500 acorns on site.”

On the other side, the Assemis are no slouches when it comes to political heft, though their influence is more limited, focusing around Fresno. The Iranian immigrant family is known there as major home builders, downtown redevelopers, philanthropists and entrepreneurs, as well as growers.

That brings us back to the lawsuit, which has its genesis in the Assemis’ decision to break away from the Wonderful pistachio growers cooperative and build their own pistachio processing plant. This would be an issue for Wonderful, the lawsuit explains, because it has sewn up an enormous share of independently grown pistachios in the Central Valley through a growers cooperative. The Assemis’ 14 pistachio farms are either members of the cooperative or have independently contracted to deliver their crops to Wonderful — 30 million pounds in 2018.

The Assemis and Resnicks have a history dating back at least to 2014, and in the past it appears to have been close. The family received several loans from the Resnicks’ charitable foundation apparently at low interest rates starting as early as 2014, according to foundation records. In 2016, the latest year reported by the foundation, the Assemis owed about $35 million on a $45-million loan originated in August 2016. (Their names don’t appear in connection with the loan in the foundation’s tax return for 2016-17, but do appear in connection with a loan of the same specifications in the return for 2015-16.)

The loan’s current status couldn’t be learned, but Farid Assemi, the family firm’s president, told the Wall Street Journal last year that he had asked for the loan as a way for the foundation to use idle cash. The foundation agreed “because they’re making good returns and they trust us.” He added that the relationship was based on “pretty deep respect and friendship.”

Beyond the Assemis’ decision to build their own processing plant, the cause of a breach between the families isn’t clear. Neither the Assemi family nor its lawyers responded to my request for comment, but the lawsuit states that the family made the decision to process nuts on their own in 2018. They say Keven Assemi, the CEO of their farming operations, had a face-to-face discussion about the plan with Stewart Resnick on Jan. 22 this year.

The meeting didn’t go well, according to the lawsuit. The family alleges that Resnick said, “I am going to war with you and I am going to do stuff to you that I would not do to other competitors because I have to make sure you are not successful with your plant.” Resnick allegedly added: “I am going to destroy you and make sure you fail so that no grower ever leaves and tries to make it on their own processing and marketing.”

At a growers meeting on March 15, the lawsuit alleges, “Stewart Resnick announced to hundreds of persons” that the Assemis were going to leave the cooperative and that “he was going to ‘[F-word] them.’”

The Assemis imply that Wonderful effectively delivered on that promise in August, when the firm informed the family that it would not pay them a 30% “bonus” for their 2019 crop unless they agreed in advance to provide their 2020 crop to Wonderful.

The lawsuit says Wonderful described the bonus as a “discretionary” payment due only to growers who committed to delivering pistachios the following year — in other words, it would be paid on the 2019 crop if the growers promised to deliver the 2020 crop. The Assemis say there’s nothing discretionary about it under their contracts, and withholding the money would amount to “a retroactive reduction in the price to be paid for pistachios already delivered ... the year before.” They say they intend to supply Wonderful with nuts this year, but may or may not do the same in 2020.

Kevin Assemi demanded by email that Wonderful commit to paying the full bonus for 2019, and gave Wonderful until Sept. 4 to reply. When no reply arrived, the family filed the lawsuit the next day.

It’s unclear how much money is actually at stake. But the Assemi family says its pistachio crop is worth $50 million. The lawsuit says that the health of the crop is threatened by Wonderful’s delaying tactics: Wonderful knows that “time is of the essence” because the crop “must be harvested now” — each day of delay raises the prospect of a condition known as shell staining, which reduces the crop’s value.

That’s where things apparently stand at the moment. The Assemis told Wonderful on Sept. 4 that they were prepared to deliver their 2019 pistachios “in the coming days,” but also suggested that if they didn’t receive written assurance that Wonderful would pay the full price, including the bonus, they’d sell the nuts elsewhere. It’s unclear what eventually happened with the crop.