Eureka Water Co. v. Nestle Waters North America

Eureka Water Company (Eureka) (plaintiff) was a regional franchisee of Ozarka Water Company (Ozarka), a predecessor in interest to Nestle Waters North America, Inc. (Nestle) (defendant). Ozarka was acquired by another predecessor in interest to Nestle, and in 1975, Ozarka and that entity entered into a distributorship agreement (1975 agreement) pursuant to which Eureka paid $9,000 for a royalty-free right and license to use the Ozarka mark in connection with the processing, bottling, sale, and distribution within Eureka’s territory of purified water or drinking water made from Ozarka drinking-water concentrates. The 1975 agreement also provided that Nestle’s predecessor in interest would furnish Ozarka with drinking-water concentrates for production of Ozarka drinking water; however, if a suitable supplier could be found, Nestle’s predecessor would provide the third-party supplier with the formula needed to produce the concentrates for Eureka. In 1992, Nestle began selling Ozarka-branded spring water to retailers in Eureka’s territory. Eureka argued that this action violated the 1975 agreement. To resolve the dispute, Nestle agreed to pay Eureka a royalty or invasion fee on products Nestle sold to retailers in Eureka’s territory. In 2003, Nestle unilaterally reduced the royalty rates and stopped paying the fees altogether by 2007. Nestle also stopped selling Ozarka spring water to Eureka at a lower price than Nestle offered to other purchasers. Eureka sued Nestle, arguing that the 1975 agreement granted Eureka an exclusive license to sell all Ozarka-branded water, including spring water, in Eureka’s territory. The jury returned a verdict in favor of Eureka, and the district court entered a declaratory judgment that the 1975 agreement applied to all Ozarka products, including Ozarka spring water. Nestle appealed.