Bad news for Clemmy's in 'David vs Goliath' unfair competition lawsuit against Nestlé USA

By Elaine Watson contact

- Last updated on GMT

Evidence lacking in David v Goliath anti-competitive battle vs Nestlé
Ice cream maker Clemmy’s – which hit the headlines in 2013 after filing a lawsuit* accusing Nestlé USA of leveraging its commercial clout and ‘category captain’ status with big retailers to shut rivals out of the market – has not presented sufficient evidence to try its case in front of a jury, a court has concluded. 

In a May 27 hearing on a motion for summary judgement in the case requested by Nestlé USA, Richard Fruin, a judge at the Superior Court of Los Angeles County, said Clemmy’s had not submitted “triable​” evidence to substantiate allegations that Nestlé had unlawfully conspired with retailers or distributors to thwart Clemmy’s progress.

Nestlé attorney: ‘There’s simply no evidence that supports any of these allegations’

Quinn Emanuel founding partner John B Quinn, the attorney at the hearing representing Nestlé (which owns the Dreyer's, Edy's and Skinny Cow ice cream brands) told the court: “After two-plus years of discovery, your honor, there’s simply no evidence that supports any of these allegations.

“In fact… all the evidence is to the contrary; that Nestlé does not control, does not make those decisions about what products go in the freezers at the supermarkets.”

He added: “There is nothing in these category captain relationships itself which is unlawful or even problematical.”

Referring to an internal memo sent by Nestlé Dreyer’s general manager in late 2007 about the arrival of Clemmy’s on the market in which he said: “We need to shut this one down​,” Quinn said this was standard “fighting talk​” by a sales exec, and not evidence of anti-competitive behavior.

Quinn added: “He’s a sales guy and there’s a new product he hears that’s entering the market and he’s basically saying, let’s kill them.”

Jon Gordon: ‘It’s a David and Goliath battle’

In the lawsuit​*, originally filed in early 2013, Clemmy’s alleged that Nestlé embarked on a coordinated campaign to block a national roll-out of Clemmy’s products at Kroger that had been scheduled for 2012.

Nestlé – the suit alleged - told Kroger’s lead frozen food manager it should drop plans to roll out Clemmy’s, reduce the number of Clemmy’s skus it carried, and significantly increase the unit price [thereby pricing the product out of the market] “or Nestlé would not contract with Kroger to distribute Arctic Zero and other Nestlé ice cream products at Kroger stores”.

In return, alleged the lawsuit, Nestlé provided the manager in question with “monetary bonuses, vacations and entertainment events”. ​The lawsuit also outlined a similar scenario relating to Safeway that allegedly took place a year later.

‘I just felt that enough was enough’

In both cases, Nestlé DSD (direct store delivery) personnel also placed marketing materials for Nestlé products on freezer doors directly in front of Clemmy’s products, alleged the suit.

As a result of these actions, Clemmy’s​ (which makes sugar-free and lactose-free ice cream) suffered from “substantial lost profits”, ​Clemmy’s CEO Jon Gordon told FoodNavigator-USA last year.

Large food manufacturers like Nestlé control everything from where and how products are shelved in supermarkets to how much of a product the supermarket should buy to whether a competitor’s product should see the light of day at all.

“[The lawsuit] is a David and Goliath battle and some people think I’m crazy or that it’s just a publicity stunt, but I just felt that enough was enough.”

Nestlé: Lawsuit ignores the realities of the marketplace

However, in court papers, Nestlé argued that Clemmy’s problems were caused by its own “misconduct, poor business acumen, noncompetitive practices, disappointing customer service and poor product quality, or by the conduct of third parties".

It also filed counterclaims accusing Clemmy's of copying the design of its carton lids.

A Nestlé spokeswoman told FoodNavigator-USA: “We are pleased with the court’s ruling agreeing with our position. Clemmy’s allegations were baseless from the outset, and the case never should have been brought. We operate fairly and legally, in a highly competitive industry, in full compliance with applicable laws.”

 She added: “We are considering our options with respect to our cross claim for unfair competition”

Clemmy's CEO Jon Gordon told us he was unable to comment at this stage of the proceedings.

A final hearing is scheduled for Wednesday (June 3).

A separate case​** filed by in New York by bottled water firm Nirvana Inc accusing Nestlé Waters North America (NWNA) of engaging in anti-competitive behavior to drive a small competitor out of business, is still proceeding through the courts.

The lawsuit alleges that NWNA 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.

However, in court papers filed in March, Nestlé said: “Far from pleading a claim under the antitrust laws, the allegations that Nirvana relies on in its opposition concern NWNA offering discounted prices to customers—conduct well-recognized as the "very essence of competition."

*The case is Clemmy's LLC v. Nestle USA Inc. and Nestle Dreyer's Ice Cream Co. Inc., case number BC500811, filed in the Superior Court, Los Angeles County, California, in February, 2013.

***The case is Nirvana Inc v Nestlé Waters North America Inc (6:14-cv-01181), filed in New York in June 2014.

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