Judge tosses most claims in unfair competition lawsuit vs Nestlé Waters North America, but allows some to proceed

By Elaine Watson contact

- Last updated on GMT

Judge tosses most claims in lawsuit vs Nestlé Waters North America

Related tags: Pleading

A New York federal judge has dismissed most claims in a lawsuit accusing Nestlé Waters North America of “deceptive, fraudulent and predatory behavior” in a bid to drive a small competitor out of business, but allowed two claims to proceed.

Forestport, New York-based Nirvana Inc – which bottles natural spring water at source from an Ordovician aquifer in the foothills of the Adirondack Mountains - alleges that Nestlé Waters NA offered retailers financial incentives to stop carrying Nirvana bottled water products and broke a non-disclosure agreement by sharing confidential information about the smaller firm with trading partners.

In a complaint*​ ​filed in August 2014, Nirvana Inc claimed that relations with Nestlé soured in 2011 after Nirvana switched its strategy from primarily co-packing other firms’ bottled water brands and launched its own branded products, which started taking market share from Nestlé brands such as Poland Spring and Deer Park.

Takeover approach a ‘ruse to get access to Nirvana's confidential information’, alleges NY-based bottled water co

Shortly afterwards, alleges Nirvana Inc, Nestlé approached it about a takeover, and in February 2012, signed a non-disclosure agreement (NDA) as the talks involved the exchange of sensitive information including financial records and projections.

But this was merely a “ruse to get access to Nirvana's confidential information​”, claims Nirvana, which alleges that Nestlé broke the NDA by telling wholesale purchasers that Nirvana was up for sale and in financial trouble.

Nestlé  - which is the largest distributor of bottled water in the US - then brought several supermarkets a letter showing that Nirvana was approaching Nestlé about selling out, and offered firms including Stew Leonard's and A&P financial incentives to stop carrying Nirvana products, alleges the lawsuit.

Judge dismisses most claims in the lawsuit

In an August 10, 2015 order responding to NWNA’s bid to dismiss the complaint, however, US district judge Mae A. D'Agostino dismissed most claims in the lawsuit, but said Nirvana could pursue claims under New York common law for unfair competition and breach of contract.

Nirvana bottled water
Nirvana Inc: 'Defendant [Nestlé Waters North America] pursued its anti-competition goal of restraining trade, and putting Nirvana out of business, by means of unfair and improper tactics, in order to substantially lessen competition in the relevant market'

D'Agostino added: “In this case, the financial data that was allegedly obtained pursuant to a non-disclosure agreement and then unlawfully disclosed by defendant for its commercial benefit plausibly states a claim for unfair competition.”

She added: “The plaintiff has plausibly alleged damage that was proximately cause by defendant's breach of the non-disclosure agreement. The court finds that plaintiff has sufficiently stated a claim for breach of contract.”

Nestlé Waters North America did not respond to requests for comment. However, speaking to us about this case last year, Jane Lazgin, director of media and corporate communications, said: “There is no merit to the claims, and we plan to defend ourselves vigorously.​"

The case has echoes of a lawsuit filed against Nestlé USA by ice cream maker Clemmy's, which accused Nestlé USA of leveraging its commercial clout and ‘category captain’ status with big retailers to shut rivals out of the market. The case fizzled out in February​ however, when a judge found that Clemmy's had failed to present sufficient evidence to try its case in front of a jury.

*The case is Nirvana Inc v Nestlé Waters North America Inc Case No: 6:14-cv-01181. The causes of action cited in the complaint include unfair competition, breach of contract, and tortious interference with contractual relations and prospective business relations. 

Related topics: Soft Drinks & Water, Nestlé

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