Thursday, October 29, 2009

Price to PepsiCo for Not Being in Court: $1.26 Billion

Soft drink giant Pepsi got slapped with a $1.26 Billion default judgment for failing to appear and answer a suit in a Wisconsin court. Shocking, but the excuse cited by Pepsi--a secretary didn't forward a letter properly.

I have been involved in similar case in recent months, where two junior level employees mismanaged a matter--not nearly on the scale we are talking about here, but the court had little sympathy for my explanation on behalf of my client, a fairly large company. Implicitly, the court was saying, you should have better procedures.

I don't think the default judgment is going to stand, generally courts are adverse to default judgments if there is a good reason. The question will be whether the court buys the excuse or not. It really is a toss up. In a corporation as big as Pepsi, they should have better procedures and better communications between their corporage agent in North Carolina and their legal department in New York (why the separation at all?).

Certainly Pepsi has a meritorious defense, i.e. a very lapsed statute of limitations. The Plaintiffs are going to have to prove that Pepsi stole the idea to bottle water from them and then prove that they had no idea that it was their idea that was stolen for 15 plus years. That is going to be a very hard burden to prove given that Aquafina has been on the shelves for over 15 years.

Still, here is the overall lesson for everyone. Clean your desk of all the paper on your desk every day. Had this secretary done this, she would have seen the letter the day she got it, or the next day at the latest. This would not have been a problem at all.

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