Did A Secretary Cause A Billion Dollar Default Judgment Against PepsiCo?

Imagine your company is so busy preparing for a board meeting that a secretary sets aside paperwork from a recently served lawsuit for a billion dollars over trade secrets.  Imagine further that your company bureaucracy fails to put it together that a lawsuit has been filed until such a time that your company becomes defaulted in the case, to the tune of $1.26 billion dollars.  Ouch. 

Well, that is exactly what happened at PepsiCo according to a report by Lynne Marek in the National Law Journal.  According to the story, PepsiCo for various reasons, failed to realize a lawsuit had been filed or a motion for default until it was too late.  The case involved allegations that PepsiCo stole trade secrets and ideas for Aqaufina from two Wisconsin men.  When the suit went unnoticed,  a Wisconsin state court judge granted a motion for default against PepsiCo.

Marek writes that PepsiCo is trying to undo the damage and vacate the default.  Perhaps PepsiCo can vacate the default, but if not, it is a devastating blow in litigation to lose your liability defenses. By all accounts PepsiCo indicates the lawsuit is questionable suggesting numerous defenses exist.  Unfortunately, it appears there is a chance they may never get to assert the defenses.

In Connecticut, if you are defaulted for failing to respond to a lawsuit and a default judgment enters against you, you also can lose the ability to defend against the allegations in the complaint.  If you further fail to appear in the case before the court determines the amount of damages (usually at a hearing), then you may also lose your ability to defend against damages claims. Of course, there are various ways to avoid a default judgment (such as filing an appearance before judgment enters), but if a lawsuit is ignored too long, you could face a similar fate as PepsiCo.

To avoid the PepsiCo disaster, Connecticut businesses should have a policy in place to handle all matters related to litigation or lawsuits.  A business should designate one person that all staff can refer litigation issues, lawsuit papers or any other documents.  Lawsuits should be given immediate attention so as to not miss any deadlines. 

In state court, deadlines can determined from civil summons or cover page of the lawsuit. 

  • A defendant has to file an appearance within 2 days of the return date listed on the civil summons
  • A defendant also has 30 days from the return date to file a responsive pleading to the complaint . 

These deadlines should not be ignored.  Although there are methods for vacating a default, even a frivolous lawsuit can end in a judgment if ignored for too long.