Néstle Waters is the subject of a $50m class action, filed by a US customer who has accused the drinks giant of an 'oppressive and fraudulent scheme' regarding late payment fees, in a complaint filed with New Jersey Federal Court.
The action for damages and costs was filed in the New Jersey Federal Court on August 31 by Washington DC-based law firm Sanford, Wittels & Heisler, on behalf of its client and plaintiff Gary Ciser and his firm Ciser Computer Consulting.
It also seeks to prevent Connecticut-based Néstle Waters from, in the words of a press release issued by the law firm, “continuing to implement its unlawful trade practices and schemes”.
Ciser asserted that Néstle Waters - the largest bottled water firm in the US with a 41% market share - regularly breaches contracts with water delivery customers in the US, by adding late payment fees of up to 75% to accounts even when a so-called ‘grace period’ is in operation.
These fees are levied irrespective of whether customers have made timely payments, Ciser insisted, where his complaint relates to three $15 fees charged between 2007 and 2009.
However, the complaint maintains that Néstle Waters has collected money unlawfully from "tens of thousands of similar customers".
"Defendant Nestle Waters uses the punitive late fee to drain extra money from its customers, generate profits, and enrich itself at the expense of unsuspecting consumers," the complaint said.
Unreasonable late fee?
Sanford, Wittels & Heisler lead attorney in the case, Steven Wittels told BeverageDaily.com that his firm was currently serving papers on Néstle Waters and expected them to respond thereafter.
After the company is served, Wittels said the court would set a discovery schedule. "In pre-trial discovery we will learn how many customers Néstle [Waters] has victimised with its unlawful late fee practices," he said.
"While a low reasonable late fee is charged by many companies, what makes this case so extraordinary is that Nestle violates its own policy by charging customers for late fees when the payment is not late."
Wittels said the alleged wrongdoing was compounded by a "grossly excessive and unreasonable late fee".
The law firm is asking New Jersey Federal Court to certify its suit as a class action, arguing that the company’s actions constitute a breach of contract and violation of the Consumer Fraud Act in New Jersey and other US states.
Co-counsel Jeremy Heisler said that under state law late fees must be reasonable and that Néstle Waters’ flat fee of US $15-20 failed that test.
This is because the company charged the same amount irrespective of the amount overdue, or how many days late each payment was. “They charged our customer nearly 50% of the monthly payment due. The late fee is simply a penalty.”
Sanford, Wittels & Heisler argue that Néstle Waters’ billing practices are unfair by (A) promising clients a grace period that it then disregards. (B) imposing an “exorbitant” late fee sometimes exceeding 75% annually.
Néstle routinely added a $15 late fee to customers’ accounts on the first day of a 10-day grace period, the complaint alleged. This was despite the fact that the company's own policy stipulated that it "may" apply such a fee only after the period had elapsed.
Stating that the late fees were "unreasonable as a matter of law", the complaint said they had no reasonable relationship to the anticipated or actual costs Nestle Waters incurred as a result of a customers' untimely monthly payments.
"[It] is far beyond the boundaries of late charge rates customarily utilised by other bottled water and similar-type delivery companies in the nation," the complaint added.
Products subject to Néstle Waters’ billing scheme include its Poland Spring, Arrowhead, Deer Park and Perrier brands.
Asked about the action, Jane Lazgin, corporate communications director for Néstle Waters North America said: “We haven’t received service of any such filing, when we receive it we will review it thoroughly. At this stage, based on what we understand from the press release, we intend to defend ourselves vigorously and look forward to refuting these allegations through the legal process.”