Nestlé Waters has won an appeal court battle against Eureka Water Company, reversing an earlier damages award against the multinational for alleged licensing agreement breaches in Oklahoma.
Oklahoma-based Eureka claimed that, under the terms of a decades-old agreement, it was given exclusive license to sell Ozarka spring water in 60 Oxklahoma counties, under a 1975 deal with Arrowhead (acquired by Perrier Group of America in 1987).
But after Nestlé Waters North America bought Perrier in 1992, Eureka claimed the company (as trademark owner of the spring water) started selling Ozarka in PET bottles on its territory.
Steep ‘invasion fees’
After Eureka found that Nestlé (Perrier at the time) shipped Ozarka spring water to Sam’s Club and Wal-Mart stores in its territory, Nestlé agreed to pay ‘invasion fees’, the court heard.
These totaled $2.5m from 1997 to 2007, but in May 2007 William Pearson, VP and CFO of Nestlé, told Eureka CEO Steve Raupe that Nestlé was losing money doing business with Eureka, and that (in the court’s words) “something had to change”.
Three months later Pearson wrote to Raupe stating that, as of October 15 2007 Nestlé would stop paying royalties or offering Eureka cut price water, with this lawsuit the result.
After Eureka took legal action in Oklahoma, the firm won $9.2m against Nestlé in September 2007 on a breach of contract claim and $5m for tortious interference, in the District Court for the Western District of Oklahoma.
Court sides with Nestlé
But the Tenth Circuit appeal court sided with Nestlé in an August 3 2012 ruling, stating that although the 1975 agreement covered purified- and drinking water, it did not cover spring water under Oklahoma contract law, thus invalidating Eureka’s ‘unjust enrichment’ claim.
Eureka was also unable to support its claim that Nestlé had hurt its business (via tortious interference) when it began selling direct to Eureka’s customers – rather than offering the company PET bottled spring water at below-market prices – according to the court.
Judge Harris Hartz wrote on behalf of a three-person judging bench: “Eureka has failed to show why Nestlé did not have the same right as any other seller of goods to treat all similarly situated customers the same…”
Thus, the court agreed that Nestlé was entitled to (1) judgment as a matter of law on the contract and tort claims in the district court and remanded the district course with instruction to enter judgment in Nestlé’s favor on these two counts.