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Legal Secretary of the Day: Pepsi’s $1.26 Billion Mistake

Thursday, October 29, 2009 2:39 PM - By Kashmir Hill

aquafina hurt pepsi co billion.jpgFaithful Coca-Cola drinkers can laugh about this one. PepsiCo is having a rough month, reports the National Law Journal. PepsiCo’s purified water brand, Aquafina, has cost it a pretty penny.

Charles Joyce and James Voigt of Wisconsin sued PepsiCo earlier this year for stealing their idea of bottling and selling purified water. They claim that they had confidential discussions with distributors about the idea in 1981 and that the distributors passed those trade secrets along to Pepsi. It sounds like a bit of a ridiculous lawsuit; PepsiCo calls their accusations “dubious.”

But the Wisconsin men won. They won big. They won $1.26 billion dollars.

How did they win? By default judgment. PepsiCo’s lawyers never responded to the complaint, and the judge awarded the Wisconsin plaintiffs a default judgment.

Why did the Pepsi people never respond? Meet PepsiCo legal secretary, Kathy Henry.

Kathy Henry is secretary to Pepsi’s Deputy General Counsel, Tom Tamoney, in North Carolina. Tamoney was sent a letter in September about the lawsuit — but he never got the letter. From the Associated Press:

Stith & Stith forwards a letter about the case to Tom Tamoney in PepsiCo’s legal department, but his secretary, Kathy Henry, “was so busy preparing for a board meeting she did not deliver it to anyone” or tell anyone about it or enter it into a log that tracks such things, according to PepsiCo’s court filing.

Later that month, the plaintiffs asked for a default judgment for $1.26 billion, based on the revenue and profit PepsiCo has made on Aquafina, and they got it. The judge awarded damages on September 30.

When a letter about that arrived, Henry did take note:

When Henry receives that notice, she enters it in her log, and that triggers her memory of receiving the earlier letter.

PepsiCo lawyers learned about the case the next day, the company said.

Now Pepsi has filed a motion to vacate the order and dismiss the claims. Part of their defense is that they should have been served at company headquarters in New York rather than in North Carolina, where the company was incorporated. They are also puzzled by the fact that lawyers for their distributors, who did appear in court in June and July, never told them about the case.

In addition, in their motion, they say that the cause of action is too old and has gone flat. From the National Law Journal:

In seeking to dismiss the case, PepsiCo argues that the statute of limitations should preclude the lawsuit, brought 15 years after the company started selling Aquafina and more than two decades after the alleged confidential talks. Moreover, “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.

A hearing to resolve this is set for November 6. We hope that Kathy Henry has put that on everyone’s calendars.

UPDATE (11/6/09): The judgment has been vacated.

Price to PepsiCo for Not Being in Court: $1.26 Billion [National Law Journal via WSJ Law Blog]
No show in Wis. court could cost PepsiCo $1.26B [Associated Press]

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Posted in: In-House Counsel, Ridiculousness, Screw-Ups, Secretaries / Administrative Assistants

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