Pepsi Nailed With $1.26 Billion Judgment After Secretary's Mistake

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PepsiCo has been hit with a $1.26 billion judgment for failing to respond — at all — to a lawsuit.

If someone sues you and you fail to show up, the court can issue a default judgment.  These judgments usually come in small claims or where defendants have no intention of paying anyway, not in cases involving Fortune 100 companies.

So, how’d this happen?

Two Wisconsin men sued PepsiCo in April alleging it stole the idea to bottle and sell purified water by misappropriating trade secrets from confidential discussions that occurred in 1981, The National Law Journal reports.

In it’s filing to vacate the massive judgment, Pepsi says it was improperly served with the suit.

But, reports, PepsiCo is also asking the court to forgive the “corporate bureaucracy” that contributed to this debacle.  

A letter from a co-defendant was sent to a Pepsi deputy general counsel on September 15, but his secretary was “so busy preparing for a board meeting,” she just put it aside.

And that was all that happened until October 5, when the same secretary received a copy of the plaintiff’s motion for default judgment.  The secretary then sent the letter to the relevant legal assistant, remembering the other letter and sending it along the next day.  A company attorney “immediately” called for the complaint.  

The damage award, however, had been assessed the week before.

For its part, Pepsi notes the huge size of the judgment, saying it should be be given the opportunity to defend itself and arguing the case would be precluded by the statute of limitations.  (The claims are more than 20 years old).

The plaintiffs say Wisconsin courts are generally hesitant to overturn default judgments but that there is “a possibility” a judge may litigate the damages aspect.  

The parties head to court on the issue on November 6.

Despite what appear to be clear mistakes on Pepsi’s behalf, it would be harsh for the court will uphold a billion-plus judgment over a service company failing to pass along a complaint and a secretary putting a letter in a drawer.  Companies are charged with the actions of their employees, but usually not to this huge of a number.

But the Pepsi lawyers will no doubt have their hats firmly in the hands when they face the judge.  We’ll keep you updated.

Read the article here.

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