Billion Dollar Business Blunders
Billion Dollar Business Blunders
Outside of a defendant saying, "Sure, you're right," the easiest to win a civil lawsuit is by default judgment. When a defendant fails to respond to the claims made by the plaintiff, the court can find for the plaintiff and award them a monetary sum. Moreover, that sum can be large: $1.26 billion large.
That's what happened to PepsiCo on September 30, 2009. According to Law.com, a lawsuit was filed by Charles Joyce and James Voigt against the company claiming that the company stole their idea to sell bottled water. In 1981, allegedly the men had engaged in confidential conversations that resulted in trade secrets being used by PepsiCo to create and launch Aquafina bottled water. A series of very unfortunate events followed which resulted in the company failing to appear in court. See an article excerpt below.
"In court papers, PepsiCo claims it first received a legal document related to the case from the North Carolina agent on Sept. 15 when a copy of a co-defendant's letter was forwarded to Deputy General Counsel Tom Tamoney in PepsiCo's law department. Tamoney's secretary, Kathy Henry, put the letter aside and didn't tell anyone about it because she was "so busy preparing for a board meeting," PepsiCo said in its Oct. 13 motion to vacate."
Regardless of exactly what went wrong, a default judgment of over one billion dollars was entered against PepsiCo. Luckily for the company, they were given another chance, according to Law.com's follow-up article. On November 6, 2009, there was a hearing and PepsiCo was able to convince the judge that they did not properly receive notice. The default judgment was vacated and the lawsuit is going forward. According to online Wisconsin Court records, oral arguments will be heard on the merits of the case in April 2010.
The Catskill Litigation Trust
You wouldn't think that there would be too many default judgments over a billion dollars. Well, there is at least one more. The Catskill Litigation Trust is currently pursuing over $5 billion dollars in judgment and litigation claims against Harrah's Operating Company, Inc.
The underlying case involves the development of a Native American casino project. A default judgment of $1.787 billion (plus interest) was issued by the St. Regis Mohawk Tribal Court in March 2001. On September 28, 2009, the case was dismissed by U.S. District Judge McAvoy, granting defendant's Motion for Summary Judgment.
However, plaintiff's attorney Joseph Bernstein, has appealed the case to the Circuit Court of Appeals and briefs are due in February. He says, "US Courts have historically not favored claims brought by [Native American] tribes. Supreme Court's record in this regard is atrocious. Hence, the courts will generally favor big American corporations over [Native American] claims."
So far, neither of these companies has had to pay out billions of dollars, but they serve as a warning to other companies to make sure they do all they can to protect their business.
For more information, visit:
Law.com: "Price to PepsiCo for Not Being in Court: $1.26 Billion"
Law.com: "Jenner Partner Rescued PepsiCo From $1.26 Billion Mistake"
Wisconsin Circuit Court
United States District Court, Northern District of New York