PepsiCo learns a $1.26 billion lesson over misplaced letter

NEW YORK Wed Oct 28, 2009 4:33pm EDT

NEW YORK (Reuters) - It's an expensive lesson on the importance of reading your mail.

A Wisconsin judge has ordered PepsiCo Inc to pay $1.26 billion to two men who said it stole their idea to sell purified water after a secretary mislaid a document alerting the world's No. 2 soft drink maker the lawsuit existed.

The case was reported earlier on Wednesday by The National Law Journal. The judgment amount is equal to more than 20 percent of PepsiCo's reported annual profits in recent years, regulatory filings show.

According to filings with the Jefferson County Circuit Court, Charles Joyce and James Voigt won the September 30 judgment five months after first suing PepsiCo and two distributors.

The Wisconsin men said they talked with the distributors in 1981 about their idea to bottle and sell purified water and that PepsiCo later stole the idea by creating Aquafina.

The complaint was filed on April 28, but PepsiCo said the legal department at its Purchase, New York headquarters was not alerted to the case until around September 18, when secretary Kathy Henry received a letter for her supervisor Tom Tamoney.

Henry, however, put the letter aside and did not tell anyone about it or enter it into her log "because she was so busy preparing for a board meeting," according to PepsiCo's October 13 motion asking the court not to enforce the judgment.

The company said that, when Henry on October 5 received a copy of the plaintiff's motion for the default judgment, she recalled the earlier letter and forwarded it, prompting the legal department to finally act. It called Henry's earlier failure to forward the letter "excusable neglect."

Henry said she has worked at PepsiCo for 20 years, another court filing shows.

Joe Jacuzzi, a PepsiCo spokesman, said the lawsuit was without merit. He said it is "completely dubious" to argue the plaintiffs gave other companies trade secrets in 1981 and that PepsiCo used them 15 years later to develop Aquafina.

"While we acknowledge there was an internal process issue, we have been denied due process as we do not believe the plaintiffs complied with the legal requirements to properly serve PepsiCo with their motion for default judgment," he added.

A lawyer for the plaintiffs did not return a call seeking comment.

PepsiCo shares closed down 1 cent at $60.99 on Wednesday on the New York Stock Exchange.

The case is Joyce v. PepsiCo Inc, Wisconsin Circuit Court, Jefferson County, No. 2009CV000391.

(Reporting by Jonathan Stempel; additional reporting by Martinne Geller; editing by Andre Grenon)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.