Sriracha is an iconic red hot sauce with a green cap that is—according to its label—good on pretty much everything. According to recent legal troubles, however, it appears that it may not be good everywhere. Several months ago, the city of Irwindale, California, where the plant is based, threatened the company with a possible shutdown. However, as the suit progressed, the city looked like the one that could wind up getting burned. Last week, the city chose to drop the suit altogether.
The legal dispute began when residents of Irwindale started complaining about headaches, burning eyes, and various respiratory problems, all of which they believed were associated with fumes from the Sriracha factory.
In an effort to protect the health and safety of their residents, the city filed suit, alleging the plant was a public nuisance. Put simply, public nuisance requires an unreasonable interference with a common right available to the general public. By polluting air quality and interfering with some residents to breathe peacefully, Sriracha found themselves in hot water.
More dramatically, the city was asking for a temporary restraining order to essentially shut down the plant. A restraining order of that caliber is incredibly difficult to obtain, and unsurprisingly, it was denied, but with a catch – Sriracha had to either stop conducting activity that could have been making Irwindale residents sick, or attempt to mitigate them.
To the city, this meant the plant must install a $600,000 filtration system to reduce fumes. That order was too hot for Sriracha to handle, the lawsuit pressed forward, and negotiations with the city began.
On May 28th, 2014, Mayor Mark Breceda and David Tran, the CEO of Huy Fung Foods, the company behind Sriracha, along two of the Governor’s representatives, came to a verbal agreement that the mayor would encourage the city council not to continue with the lawsuit. The next day, city council dropped the lawsuit. Ultimately, Sriracha brass modified their ventilation system, and agreed to follow up with complaining residents.
Was This Lawsuit Frivolous?
While settlement is good news for both parties, it still amounts to about 6 months of Irwindale attorney’s time, a bill that is footed by taxpayers. The quick settlement gives off a sensation that this suit was for little to no purpose. After all, encouraging a higher-level filtration system or the like could have been accomplished without any court intervention.
Although the suit was certainly not frivolous, the city’s actions could expose them to liability. The most tangible type of damage to the company occurred when Tran felt compelled to take out a new loan to pay off a loan the city of Irwindale gave the company. The terms of this new loan are not as favorable as the loan from the city of Irwindale, costing the company money. Tran felt that due to how the city had been acting towards his company, he had to do this to protect the brand. While it is unlikely Sriracha will stir up any trouble, this type of exposure would not have occurred without such aggressive moves by the city.