Guarding the Family Name

By Ellen Hawkes

Ernest Gallo felt his brother's inexpensive cheese cheapened the wine family's name. He vowed to stop "Joseph Gallo Cheese" and forced a battle in court.

Ernest and Julio Gallo have built the world's largest wine empire. Poor when their parents died in 1933, they turned the family grape-growing business into a winery in Modesto, California, and raised their little brother, Joseph, from the age of 13.

As an adult, Joe worked for decades in the family winery but was not given a share of ownership or a voice in control of the business. Attempting to find an identity of his own, Joe started his own vineyard and dairy, launching a new product that he called “Joseph Gallo Cheese.” All appeared to accept Joe's venture until his cheese—with the Gallo name on it—appeared on supermarket shelves, whereupon Ernest blew up and he and Julio took their brother to court. On the witness stand, the three men, in their 70s and 80s, were forced to expose long-hidden family secrets, resentments, and arguments.

How the fight began is described by Ellen Hawkes in the excerpt below, from her book about the Gallos, Blood and Wine. It raises perplexing questions about ownership of a family name.

—The Editors.

Joe and his son Mike Gallo had sent invitations to their open house and barbecue to the entire Gallo family as well as to winery executives, friends, neighbors, and media representatives. On June 12, 1983, nearly a hundred people gathered at Joe's Cottonwood Ranch on Highway 140 in Atwater, California, for the festive occasion. Under a large tent set up in front of Joe's dairy, the guests enjoyed an abundance of food and wine—all the best Gallo varietals—to celebrate the official opening of the Joseph Gallo Cheese Company.

The cheese plant had been a year in the planning and construction. In 1982 Joe and Mike had decided that manufacturing cheese might solve their surplus milk and pricing problems. After touring cheese companies in Wisconsin and California, they felt encouraged to pursue the idea. They hired Gene Goetsch, an expert cheesemaker from Wisconsin, and built a modern plant with the most up-to-date equipment across from the dairy.

During that year Joe had often mentioned the progress of his cheese company at family get-togethers. Julio had been enthusiastic, but Ernest had shown little interest, or so it seemed. In the spring of 1983, Joe and his wife, Patricia, had accompanied Ernest and his wife, Amelia, to a dinner in San Francisco. They were chauffeured in Ernest's limousine, and on the way Joe was describing the final steps of completing the cheese plant and putting it into operation.

“What are you going to call your cheese?” Amelia asked.

“Joseph Gallo Cheese,” replied Joe without hesitation.

“Why are you going to call it that?”

“Because it's my name,” said Joe.

Amelia only nodded, as if this seemed as logical to her as it had seemed to Joe and Patricia. Ernest said nothing. In retrospect, Patricia would wonder if Ernest had told Amelia to ask the question. It was a technique that, she had noticed, the two had perfected over the years. Amelia would ask “in all innocence” for information that Ernest had a compelling need to know. But Ernest had made no comment—not then or even later when Joe sent him and Julio cheese from his plant's first production run in gift boxes labeled Joseph Gallo. Julio had not remarked on the name either.

Julio was away and unable to come to the cheese plant opening that June, but midafternoon Ernest and Amelia descended on the gathering in the winery's helicopter. Ernest said he could only stay for a few minutes—he was on his way to another appointment—so Joe first showed him around the cheese plant. As Joe recalled, he explained the process as he guided Ernest from the pasteurization area into the cheesemaking room with its gleaming stainless steel equipment and on into the small refrigerated storage room. This storage room was only temporary, until they built a larger warehouse, Joe remarked, as he ushered Ernest through the narrow passageway between the floor-to-ceiling shelves packed with boxes, all labeled Joseph Gallo Cheese. Although Ernest would later have a different version of their conversation, Joe remembered this as a quick tour before they returned to the tent to mingle briefly with the other guests before Ernest's departure.

Joining his father and uncle, Mike thought he'd never seen his father as happy and proud as he was that day. Here was something his father had built himself, and Mike was sure that after all the years of trying to prove himself to his brother, Joe had impressed Ernest with his enterprise and accomplishment. Ernest seemed to suggest as much when he offered his congratulations before he boarded the waiting helicopter.

Later that afternoon, John Whiting, Joe's lawyer, was standing outside the tent. He was in an especially cheerful mood, having helped Joe with many of the legal arrangements that had to be made before the cheese plant went into production, from permits and state inspections to choosing the name for the cheese. He was talking to two of the winery's attorneys with whom Joe had been friends for several years. From above they heard the droning sound of a motor, then saw a small plane begin to circle the gathering, pulling a trail of letters.

A pilot who had cropdusted for Joe for nearly 30 years had decided to celebrate the cheese plant opening by flying over with the banner. He had attached the letters to spell out, “Good Luck, Joseph Gallo Cheese.” But on his first takeoff, the “J” had been torn; he had landed to fix the banner. Now Whiting stared up at the plane as it continued to circle, the letters fluttering behind. “Good Luck, Gallo Cheese,” the banner read.

Whiting turned back to the two other lawyers. “Well, there's a lawsuit, boys!” he said with a laugh. The lawyers thought that it was a good joke, too.

At the same time that Joe had begun to build his cheese plant and promote his product, Ernest and Julio again turned their attention to upgrading the Gallo image. Intensifying their efforts to move into cork-finished and vintage-dated varietals, they had completed an underground cellar and installed 650 imported oak casks for aging their Chardonnay. Julio and his son had bought the Frei Brothers Ranch and Winery in Sonoma in 1977 and were now developing the 2,000-acre site with varietal vineyards and planned to build a small winery there.

When “the New Gallo Program” didn't improve sales (now only one in four instead of one in three bottles of wine sold in the United States was a Gallo brand), Ernest blamed his advertising agency. Tired of Ernest's complaints, Young & Rubicam suddenly resigned the account (taking on United Vintners, Gallo's main competitor, as a client instead), and for over nine months Ernest looked for another agency. Noting that the winery had gone through 15 agencies in the past 25 years, Adweek called Gallo “the least desirable account in the advertising business” and commented that Ernest was “a one-man show who insisted on supervising every aspect of his company's advertising.” But finally, Needham, Harper & Steers Inc., a Chicago-based agency, took on the Gallo premium lines while Hal Riney, creative director and head of western operations for Ogilvy & Mather, designed a new campaign for Gallo varietals. He won Ernest's approval with his elegant television commercials accompanied by Vangelis's musical score (reminiscent of his Chariots of Fire theme) and the new winery slogan: “All the best from Ernest and Julio Gallo.” Ernest could brag that this was “classy”—one of his favorite adjectives—and he began to sign his letters, “All the Best.”

Despite the efforts, by 1984 winery sales remained stagnant, and neither new advertising programs nor new Gallo distributorships had changed the way the public thought about Gallo and its attempt to go upscale. Perhaps that was why Ernest seemed so defensive and irritable lately, employees speculated; perhaps his obsession with the Gallo name had intensified when, for all his efforts, consumers still considered Gallo and fine wines a contradiction in terms. And as Joe later wondered, perhaps Ernest was looking for another reason to explain the public's lack of enthusiasm for Gallo varietals when he seemed to blame Joseph Gallo Cheese as part of the problem.

In late august 1984, Ernest arrived at his office early one morning, even at 75 eager to begin a full schedule of meetings and telephone calls. But, as he later recalled, his plans were soon disrupted when one of his salesmen stopped by his office to announce that he had something important to show him.

He placed a package of cheese on Ernest's large mahogany desk, explaining that he had bought it the previous evening in a local grocery store.

Ernest still held the unshakable belief that the name Gallo belonged exclusively to him and that only he and the winery were entitled to use it.

But here was the name Gallo on a piece of cheese sold in a grocery store! Joseph Gallo Cheese, the label read. It was like waving a red flag in Ernest's face. No one was going to trade on his name, no one was going to “ride on his coattails,” as he put it, not even his brother. He would put a stop to it immediately.

Although Joe was planning to move his headquarters soon, the office from which he still ran his various businesses was set on a knoll overlooking his Livingston vineyards. Constructed after his brothers had terminated him, it was a one-room, adobe-block building in which were placed two oak desks, one for himself and one for his son Mike, who was now 34 and a full partner in Joe's vineyard, cattle, dairy, and cheese operations.

Mike was out doing his rounds of the ranches; Joe sat at his desk studying reports of this year's grape harvest. Just turned 65, he was healthy and robust, his tanned face serene as he looked across his nearby vineyard. Its heavy clusters of French Colombard grapes were almost ready to be picked and hauled to Ernest and Julio's Fresno winery. Joe generally sold about 20,000 tons of wine grapes to his brothers each year. Now the air was sweet with the aroma of their ripeness, and Joe was sure that this would be a bountiful harvest, coming in with excellent sugar content.

Adding to his satisfaction were the reports from the cheese plant—sales of bulk cheese in 40-pound blocks to supermarkets had been steady for the previous year and a half, and after the spring of 1984, when he had begun to market packaged cheese for consumers under his own label, retail and bulk sales had risen every month and in total were approaching $30 million for the year.

The ringing of the telephone interrupted his paperwork. While he employed a secretary at the cheese plant, he was not a man who stood on ceremony or enjoyed status symbols, and he took the call himself.

“Joe, I'm shocked,” came Ernest's gravelly voice over the line. “One of my people just brought in a package of your cheese that he saw in the grocery.”

“Yes?” Joe replied, uncertain why his brother was agitated. After all, cheese with the Joseph Gallo label had been sold in grocery stores and supermarkets in Modesto and Turlock since the previous March.

“We have a real problem with your label,” Ernest continued. “Because of that agreement we made with Gallo Salame.” [Ernest had sued the Gallo Salame company for infringement; they settled with a license and trademark agreement.]

“What do you mean?” Joe said, his voice slow and measured as if to counteract Ernest's staccato of righteous indignation. “What does that have to do with me? It's my own name.”

“But our agreement with Gallo Salame means we have to protect the trademark.”

“I don't know what kind of deals you made with them. We've been making this cheese for a long time, and you must have known about it.”

“Well, it's a problem. We need to meet. You and Mike come up here, and we'll discuss it.”

As Joe later recalled, he agreed to see Ernest the next day, and they ended the conversation. Because his lawyer John Whiting was out of town, Joe couldn't contact him. But when Mike returned to his desk, Joe related Ernest's message—”something about a problem with Gallo Salame”—and told him about Ernest's demand that they appear at the winery for a meeting.

According to Ernest's recollection, however, the telephone conversation had continued for several minutes. In Ernest's version, he had reminded Joe of statements that Ernest said he had made to Joe at the cheese plant opening in June of 1983.

“Don't you remember when we finished the tour, I asked you then if you were going to sell cheese with your name on it,” Ernest recalled asking Joe. “And you promised you were only going to sell in bulk, not to consumers with your label on it. I told you it was all right to use your name as long as you were just selling bulk cheese. But otherwise we would have a problem with Gallo Salame because of the settlement we'd just worked out. I also said that if it was just bulk cheese, all you had to do was write me a letter. But you never did, and now you've broken your word.”

Ernest also insisted that he had made a second phone call, in which he repeated his statement of the problem and Joe's supposed promises. When Joe later heard his brother's version of these speeches, he claimed that Ernest had made none of these comments. According to Joe's recollection, during the cheese plant tour Ernest had said nothing about the Gallo Salame settlement's implications for his label, nor had he, Joe, ever agreed not to sell consumer cheese. He suspected that what Ernest called his “promise” was created in retrospect. Joe claimed that if Ernest had asked him, he would have said quite the opposite, that it was natural to go from selling in bulk to consumer packages, just as Ernest and Julio had moved from bulk wine in the 1930s to winery-bottled and -labeled products in the late 1940s.

Mike Gallo, too, later doubted that his uncle had made such statements, since he was sure that his father would have mentioned them to him, both at the time of the cheese plant opening and when telling him about Ernest's phone call and request for a meeting.

Joe and Mike arrived in Ernest's office the next day for their scheduled appointment. Julio was there as well, and after the usual pleasantries, Ernest busied himself carrying chairs to the entrance area of his office. He positioned two chairs side by side next to the door; facing them, and a yard away, he placed two other chairs side by side.

“You and Mike sit there,” he said, pointing to the two on the right. “Julio”—he beckoned to his brother, who had been hanging back by the window—“you sit here next to me and opposite Mike. Joe, across from me.”

“Here he goes again,” Mike recalled thinking to himself as he took his assigned seat. His father had told him that when Ernest had demanded that he sell his Gallo Glass Company stock back to the winery, Ernest had pulled up a chair directly in front of him, placing it so close that Ernest's knee was positioned between Joe's. Joe had remarked to Mike at the time that this seemed to be Ernest's method of intimidation. Today he was doing the same thing with the seating arrangement—it wasn't just a face-to-face meeting, it was an in-your-face meeting.

Julio had moved slowly to his chair, his shoulders slumped, his head down. He gave Joe and Mike a quick tentative smile as he took his seat, but then stared at his lap. Ernest sat down, folded his hands on his knees, and leaned forward.

“You know, Joe, if it were up to me, I wouldn't be worrying about the name,” he said. “It's all Gallo Salame—that's the real problem.”

“I don't see how that should concern me,” Joe repeated once more. “That was your doing . . .” He glanced at Julio, hoping that his brother would agree. Julio would not meet his eyes and Ernest interrupted.

“But I explained to you about the license. We have to protect the trademark. If you use the name, you have to ask our permission. If you don't, Gallo Salame might force us to sue.”

“Then why wasn't I consulted?” Joe asked. “Why did you agree to that in your settlement with them when you knew I had already started the cheese company?”

Ernest shrugged aside the question, then adopted a conciliatory tone: “Look, the thing for us to do this morning is to try to figure out a way of solving the problem with Gallo Salame.”

Mike hadn't said a word as he watched his father and his uncles. He found it hard to believe that the real conflict was with Gallo Salame. After all, during the past year, well after Ernest had acquired the Gallo Salame trademark, he and his father had bought salami wholesale from the company as they experimented with adding bits of salami to one of their cheeses. If Gallo Salame hadn't liked the Joseph Gallo name, why hadn't the company complained directly?”

As Ernest continued to lecture Joe on the Gallo Salame license, the long and expensive lawsuit they had undertaken to acquire the trademark, Julio became increasingly upset. He must realize that Ernest is trying to pull something here, Mike thought. Mike was already convinced that for all the talk about Gallo Salame, it was Ernest who wanted exclusive control of the name and didn't want Gallo on anything but wine. Ernest wasn't admitting that today, however; instead he was insisting that Joe had to satisfy the terms of the Gallo Salame license.

“I still don't think that's my problem,” Joe said flatly. “The license doesn't change the fact that Joseph Gallo is my name, and I can use it on my own products. I'm sorry you have a problem,” he added, softening his tone.

“I'll have Jack Owen call Whiting,” Ernest snapped. “We have to work out a solution.”

Julio now began to weep, at first quietly, then openly sobbing. Ernest glanced at him, pulled back his chair, and abruptly left the room.

Julio now looked up at Joe, his lips trembling. “You know the last thing our mother said to me before she died? She said ‘All I want is for you boys to work together...to get along...' ”

He shook his head, weeping again.

“I know, I know,” said Joe as he and Mike left the room.

Why this conversation had resurrected Julio's memories of their parents' death, including their mother's last words, Joe didn't understand. Nor could he explain Julio's tears when Mike asked about them on the drive home. Julio's reaction to the label dispute seemed excessive to both father and son at the time. But two years later they would speculate that the emotional outburst had been prompted by thoughts of the brothers' inheritance.

 

From Blood and Wine, by Ellen Hawkes. Copyright © 1993 by Ellen Hawkes. Reprinted with permission of Simon & Schuster.

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Summer 1993

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