Stone Brewing has abruptly shuttered its taproom in Napa, California, following a legal battle with its landlord over rent payments during the pandemic.
“We’re incredibly disappointed to leave Napa,” Stone wrote in a statement. “We poured so much passion into the renovation of the beautiful 1877 Borreo Building. We’d hoped to be a part of Napa’s vibrant downtown for many more years.”
The location’s 40 employees are now out of work, but Stone “will be offering the opportunity for some team members to relocate to Southern California and will do all we can to support those we leave behind in Napa, including providing severance and benefits coverage,” the company said.
The Escondido, California-headquartered craft brewery and its Napa landlord, West Pueblo Partners, have been embroiled in a legal dispute over non-payment of its $40,000 monthly rent bill for much of 2021, according to the Napa Valley Register.
California enacted some of the most stringent and longest lasting restrictions on breweries, bars and restaurants during the COVID-19 pandemic. Onsite service was restricted and at times prohibited from March 2020 through the end of last year.
Court documents show that Stone did not pay rent in December 2020 and January-March 2021, and West Pueblo Partners served its tenant with a “5 Day Pay or Surrender Possession” notice on March 23. The brewery countered with a civil action against its landlord arguing that the force majeure provision in its lease “excused its failure to pay.”
“The dispute is about rent we deferred during the hardest months of COVID, but which we always intended to pay over the remainder of the lease,” a Stone spokesperson told Brewbound. “We paid full rent during the pandemic through November 2020 based on West Pueblo’s promise to help with rent relief.
“Beginning in December 2020, when COVID cases surged and government restrictions shut-down our Napa restaurant and brewery, we began deferring rent payments,” the spokesperson continued. “Beginning in May 2021, as restrictions eased, we started paying the deferred rent and have timely paid full rent since June 15. West Pueblo Partners refused to cash any of these payments and insisted on terminating our lease even though we have always told them we would and always intended to pay the full amount of rent over the life of what was supposed to be a 20 year lease.”
Stone and West Pueblo Partners’ lease agreement contains the following force majeure provision:
“If either party is delayed, interrupted or prevented from performing any of its obligations under this lease, and such delay, interruption or prevention is due to fire, act of god, governmental act or failure to act, labor dispute, unavailability of materials or any cause outside the reasonable control of that party, then the time for performance of the affected obligations of the party shall be extended for a period equivalent to the period of such delay, interruption or prevention.”
However, in her tentative ruling granting West Pueblo Partners’ motion for summary judgement, Judge Victoria Wood explained that the force majeure did not preclude Stone from paying rent, citing prior case law that the provision “does not contain language that excuses performance on the basis of poor economic conditions, lower than expected attendance.”
Although Stone pointed to its use of the force majeure provision to not pay rent for eight days in 2018 when construction of the Napa taproom was halted due to smoky conditions from the Camp Fire, Wood noted that the situations are different.
“While [West Pueblo Partners] was unable to fulfill its obligation due to the fire, i.e., the [force majeure] event, it was relieved of that obligation, which relieved Stone of its obligation to pay rent during that period,” she wrote. “Conversely, there is no evidence showing that Stone ever lost the ability, temporarily or otherwise, to fulfill its obligation to pay rent due to COVID.”
In court documents, Stone detailed that the Napa location accounted for one-third of its hospitality division’s losses. The Napa location losses were “so substantial they jeopardized the brewpub operations,” according to court filings. Wood noted that Stone’s operating income in the first quarter of 2021 increased 53% over the same period in 2020, and the company had $9 million in credit in 2020 and secured a $2 million letter of credit in January 2021 for a lease for a new headquarters and an expansion to its distribution center.
In a statement to Brewbound, West Pueblo Partners argued that “Stone Brewing, one of the top 10 largest craft brewing companies, chose to stop making its rent payments even though it had the money to pay rent.”
“It makes us incredibly sad that Stone Brewing chose to spend money on litigation rather than on making rent payments and supporting its Napa workforce,” co-owner Kevin Teague told Brewbound.
Before it was renovated into Stone’s Napa brewpub, the Borreo building was vacant for 15 years, according to Stone’s press release announcing the outpost in May 2016. The 10-barrel brewhouse and 9,500 sq. ft. taproom and restaurant opened its doors under the Stone flag in May 2018.
“Completing the redevelopment of the historic Borreo building made us four West Pueblo Partners incredibly proud,” Teague said. “We think it is the best building in Napa. Despite Stone’s business decisions, we are committed to our hometown and to our building. We will bring the Borreo building back to life and believe it will be even more exciting than before.”
Stone operates seven taprooms in Southern California and one in Richmond, Virginia.