Court No Show Could Cost PepsiCo $1.26B

MILWAUKEE (AP) -- Two men who claim PepsiCo stole their idea to sell bottled water sued the snack and drink maker in Wisconsin and won a $1.26 billion judgment last month after the company didn't respond.

PepsiCo, which calls the accusations "dubious," says it didn't know about the lawsuit until almost a week after the court granted the award without a trial.

The company wants the court to toss out the ruling, known as a default judgment, or at least give PepsiCo a chance to fight the accusations.

PepsiCo said part of the problem was it was served the lawsuit in North Carolina, where it is incorporated, instead of Purchase, N.Y., where it is based. Later, a secretary who received letters relating to the case failed to act on them.

Spokesman Joe Jacuzzi said PepsiCo wants to fight the claims but acknowledges it failed to respond because of "an internal process issue."

It's likely PepsiCo will get to make its case and won't have to pay the $1.26 billion because judges tend to be lenient about enforcing default judgments, said Myron Moskovitz, a law professor at Golden Gate University in San Francisco. Judges don't want to deprive anyone of their right to be heard in court, he said.

"I'd be surprised if they didn't set it aside," he said of the judgment. "But there's going to be some red faces in court."

Charles Joyce, of Juneau, Wis., and James Voigt, of Cleveland, Wis., sued PepsiCo in April, asking for a jury trial and damages of more than $75,000. Their lawyer, David Van Dyke, told The Associated Press the two had worked together and came up with the idea to bottle purified water in individual servings.

Joyce's and Voigt's lawsuit accuses PepsiCo of misusing trade secrets. It also names Wis-Pak Inc. and Carolina Canners Inc., companies that make and distribute PepsiCo products, and Thomas M. Hiles, then the executive vice president of Carolina Canners.

The pair claim they entered written confidentiality agreements about a new beverage they were calling "U.P." with executives of Wis-Pak and Carolina Canners in 1981. The executives violated the agreements and gave the information to PepsiCo, which eventually rolled out a bottled water brand -- Aquafina -- about a dozen years later, Joyce and Voigt claim.

PepsiCo says it never knew anything about the case. Here's what it told the court on Oct. 13 when it asked the court to abandon the judgment.

-- June 11: Stith & Stith, PepsiCo's law firm in North Carolina, is "allegedly" served with the complaint but the company gets no word.

-- Sept. 15: 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.

-- Sept. 29: The plaintiffs ask for a default judgment -- a ruling that they won because PepsiCo failed to make a case against them -- and the court complies the following day.

-- Oct. 5: 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.

"The plaintiffs' claim -- that in 1981, they gave someone other than PepsiCo an idea for a 'soft drink' and that somehow, 15 years later, PepsiCo used that alleged information to develop the Aquafina Water products -- is completely dubious and without merit," Jacuzzi said.

Van Dyke, with the Chicago law firm Cassiday Schade, said he is drafting a response to PepsiCo's motion. He said he asked for $1.26 billion based on the revenue and profit PepsiCo has made from the Aquafina brand.

If the agreements were enforceable contracts, the plaintiffs may have a case, said Mark Leonard, a partner at Davis and Leonard LLP, in Sacramento, Calif., who focuses on intellectual property. Typically, patents are the best way to protect ideas, he said, but not everything can be patented.

"In the event it was not patentable, which would not surprise me, then the only way to protect that idea would be contractually," he said.

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Trolls and Lawyers 10/29/2009 12:02:00 PM Bottling water. What a novel idea. Maybe they should have patented such a novel idea. I hope Pepsi counter-sues for legal costs. What a ridiculous case. I'll bet these two were just trolling to see if they could get an out-of-court settlement, and surprise, they "won" the lottery when Pepsi failed to respond. I'm surprised the judge even allowed the case to continue under the circumstances.
Slow lawyers 10/29/2009 12:48:00 PM This is a completely ridiculous laywsuit, since Evian was bottling water for years before this "brilliant idea" to bottle water came to these two rocket scientists. With that said, however, according to PepsiCo's own list of events, the North Carloina lawyers received the complaint on June 11, but didn't alert PepsiCo until Sept. 15. (What kind of crappy lawyers are these guys that they sat on a lawsuit for three months before letting their clients know about it?) And when the lawyers finally did tell the company about it, the secratary was too busy preparing for a board meeting to enter the lawsuit into the log?! It sounds to me like the lawyers and the executives blew this lawsuit off, dropped the ball on the respnse, and are now trying to blame the secratary for their stupidity.
Secretary 10/29/2009 1:28:00 PM Nixon had a heavy foot Secretary. 18 minutes of erased tape. Lawyers blow it off. Should have been thrown out of court to begin with.
Bottle This! 10/29/2009 1:43:00 PM Bottled water is the biggest scam ever perpetrated upon man! These two are the next biggest scam, or scammers. They are looking for their winning from Litigation Lottery. The judge should throw this case out and jail those two for being idiots so they can't mess up the gene pool. As for Pepsi, great lawyers they've got. Three months before they look at the lawsuit. Not that it has merit but if someone were trying to sue me, I'd sure as heck check it out. Maybe the lawyers should sue the secretary for negligence, that'd be some justice!
Pepsi or GM 10/29/2009 2:04:00 PM This sounds like the "Shockingly poor financial management" Steven Rattner found at General Motors. Don't these realize lawsuits=money?
Buying bottled water since 1975 10/29/2009 2:46:00 PM I frequently purchased bottled water during military service in Germany circa 1975. It was usually pure mineral water from famous springs and sometime sparkling. The point is these rocket scientists that sued Pepsico never had an original, nor American, idea. The courts should fine them for filing a frivolous lawsuit and wasting taxpayer monies that establish and maintain the courts.
In the words of Bobby D. 10/29/2009 3:00:00 PM Clowns to the left of me! Jokers to the right! Here I am stuck in the middle with you.
Stealers Wheel 10/29/2009 4:36:00 PM The song was written by by Joe Egan and Gerry Rafferty and performed by their band Stealers Wheel
The idea was to sell tap water! 10/29/2009 4:40:00 PM The idea was to sell filtered tap water. It's a multi-billion dollar idea. Pepsi may have violated a contract and they may be due damages. Don't be haters simple ideas sometimes make the most money.
North Carolina, incorporated, Purchase, N.Y, main office 10/29/2009 7:27:00 PM This isn't the first time corporations got into legal problems because the corporate office is not in the state that the company is incorporated. PepsiCo has a fleet of lawyers ready to jump, the lawyers in NC are only there for the tax benefit. I say here now, I came up with the first idea to sell air in a can! Where's the money???
RE: Tap Water 10/29/2009 10:28:00 PM I had to go back and re-read the article after most of the responses, to make sure I wasn't missing something. Yep, sure enough, the pair envisioned bottled ultra pure water, hence the name "U.P.". This was an original idea, I believe because at that time, all of the known brands of bottled water were from mountain streams, springs and so on that were presented as having desirable qualities. It is also a natural fit for a soft drink bottler because the big boys at least filter and purify the water that makes up the bulk of their product, so carefully as to give the finished product the same taste anywhere it is packaged. I hope these guys have their paperwork right, because I think the Pepsico brass simply blew it off as something they could steam roll over.

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