A Series of Unfortunate Events Leads to $1.26 Billion Judgment

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We know that more than a few legal secretaries read the Law Blog. Let this post serve as a cautionary tale to all those hard-working men and women who type up time sheets, remind lawyers of appointments, prepare pleadings, and help keep track of important dates and deadlines.

The strange and sympathy-inducing story goes like this:

According to this story in the National Law Journal, two men, Charles Joyce and James Voigt, sued PepsiCo and two of its distributors in Wisconsin state court, claiming PepsiCo had stolen trade secrets from confidential discussions the plaintiffs had in 1981 about selling bottled water. PepsiCo later used the information to develop and market Aquafina.

Notice of the lawsuit was delivered to an agent for PepsiCo in North Carolina, where the company is incorporated. But — yipes! — PepsiCo says its law department at the company’s Purchase, N.Y.-based headquarters was not notified until September.

So, in other words, the lawsuit sat in North Carolina for months and months. Finally, in the face of PepsiCo’s silence, a default judgment was entered, and a damages award tallying $1.26 billion (yes, $1.26 billion) was entered on Sept. 30. PepsiCo filed motions to vacate the order and dismiss the claims on Oct. 13, saying it wasn’t even aware of the lawsuit until Oct. 6.

“The bottom line is there was a defect in the process for us, but also for” the plaintiffs, said PepsiCo spokesman Joe Jacuzzi, who called the case “highly dubious.”

In court papers, PepsiCo claims it first received paperwork from North Carolina agent on Sept. 15 when a copy of a co-defendant’s letter was forwarded to Deputy General Counsel Tom Tamoney in PepsiCo’s law department. Tamoney’s secretary put the letter aside and didn’t tell anyone about it because she was “so busy preparing for a board meeting,” PepsiCo said in its Oct. 13 motion to vacate.

Another breakdown, according to the AmLaw story: Lawyers for PepsiCo distributors Wis-Pak Inc. and Carolina Canners Inc. made court appearances in June and July. PepsiCo was at a loss to explain why it hadn’t heard about the case from them. “It’s just another unfortunate thing that didn’t come together,” Jacuzzi said.

In seeking to dismiss the case, PepsiCo argues that the statute of limitations should preclude the lawsuit. Furthermore, “the $1.26 billion judgment that has been entered is unprecedented in size and justice requires that PepsiCo have a chance to defend itself,” the company said.

The lead plaintiffs lawyer, David Van Dyke of Chicago-based Cassiday Schade, told the National Law Journal that Wisconsin courts have been “pretty clear that they don’t like” vacating default judgments. “There is a possibly that a judge may say we’re going to litigate the damages aspect of it,” Van Dyke said.