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Nestle's $12 Mln Poland Spring Settlement Challenged

Oct. 20 (Bloomberg) -- Nestle SA, the world's largest food company, faced objections in an Illinois court to a proposed $12 million settlement of class-action claims that its Poland Spring water isn't naturally pure spring water from the Maine woods.

The class-action lawsuit is among 12 pending in the U.S. that make similar claims about Poland Spring. Lawyers for consumers urged Kane County Circuit Judge Michael Colwell to reject as inadequate the agreement to provide customers with discounts and coupons, donate almost $3 million to charity and perform various water-quality tests. Arguments resume tomorrow.

Bottled water is the fastest growing major beverage category and 158-year-old Poland Spring is one of the best-known brands, industry analysts say. The allegations, which highlight an debate within the industry about the definition of "spring water," haven't dented profits for either Poland Spring or the bottled water in general, analysts say.

"Poland Spring is a powerhouse, well-respected brand," said John Sicher, editor of the trade publication Beverage Digest. 'I don't think it has had one drop of impact on sales."

Bottled water is the second-biggest "ready to drink" beverage category in the United States after soft drinks and makes $8.6 billion a year, Sicher said.

Poland Spring admits to no wrongdoing as part of the proposed settlement and agreed to the settlement to put the litigation behind it, said Jane Lazgin, a spokeswoman for Nestle.

Objections to Accord

Attorney Thomas Sobol of the Hagens Berman law firm in Boston, who represents consumers in a similar lawsuit, was among the objectors. If the settlement is approved and upheld on appeal, it may block the other class-action suits across the U.S. from proceeding, he said. Class-action suits allow cases to be brought on behalf of large groups of individuals with similar claims.

Attorneys representing consumers objected that the agreement provides inadequate compensation to purchasers of Poland Spring water and that customers didn't receive proper notice of the proposed accord. Sobol also objected that the named plaintiff in the suit, Kenneth Ramsey, is sheriff of Kane County, where the hearing is being held.

The lawsuit says Poland Spring isn't what it claims to be because it's not naturally pure and doesn't come from deep in the Maine woods, protected sources or even a spring. The suit claims Poland Spring is pumping water out of wells.

Poland Spring has countered that the water is from four springs, even though it may be collected from wells. Under FDA guidelines, spring water has to flow from a natural orifice but can be collected for bottling through borehole wells that tap into the underground source of the spring, according to Poland Spring's Web site.

'Borehole Loophole'

"We call it the borehole loophole," said Bill Miller, president of the Natural Spring Water Association, a coalition of spring water sellers. The group had unsuccessfully pushed the FDA to have a tighter "dictionary" definition of spring water, without the boreholes.

"When you pump a well you run the risk of changing the chemical composition of the water," said Miller, who runs a spring in North Carolina. Miller said rust or other particles can get into the water. He said he is not involved in the lawsuits.

On its Web site, Poland Spring says its water is pure and scrupulously tested.

"As a company with a product that is in great demand, we've become a target for lawyers who make their living suing people," the Web site says.

Illinois Settlement

Under the proposed settlement of the Illinois case, Poland Spring would provide consumers with $8.05 million in discounts and coupons over five years.

The settlement also calls for Poland Spring to make charitable donations of $2.75 million over five years. Certain kinds of testing, such as the use of rain gauges and microscopic particulate analyses, would be required by the settlement.

Attorneys Robert M. Foote would receive $810,000, and Kathleen C. Chavez would receive $540,000, while Ramsey would collect $12,000.

Gary Hemphill, senior vice president of the New York-based Beverage Marketing Corp., said that despite the lawsuits, the water industry is expected to maintain its rapid growth. Bottled water serves both as a replacement for tap water and as a single- serve beverage alternative to soda or tea. Hemphill said most of the growth is being driven now by the latter category.

"Convenience is a key factor in the growth of the category -- people can't carry the kitchen sink on their backs," Hemphill said. --Mary Wisniewski in Geneva, Illinois at (1) (312) 420-7154, or at mwisniewski1bloomberg.net, through the Washington newsroom. Editor: Hendrie. -0- (BN ) Oct/20/2003 22:34 GMT

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