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One of the characters in the late Douglas Adams' “Hitch Hiker's Guide to the Galaxy” was the Ravenous Bugblatter Beast of Traal — a mindbogglingly stupid animal that assumed that if you can't see it, it can't see you. One could avoid its gaze by covering one's head with a towel.
A lawsuit is nothing like the Bugblatter Beast. If you are served with a complaint, and you respond by putting a towel over your head or otherwise ignoring the lawsuit, bad things can happen — very bad, as PepsiCo, Inc. has learned.
Two individuals, Charles Joyce and James Voigt, sued PepsiCo and two Pepsi distributors in a Wisconsin state court, claiming that nearly 20 years earlier, they had spoken confidentially with the distributors about the idea of bottling purified water; and that PepsiCo misappropriated Joyce and Voigt's trade secrets in order to bottle and sell Aquafina water.
The distributors answered Joyce and Voigt's complaint, but Pepsi did not. As a result, the court has entered a default judgment against Pepsi in the mindbogglingly large sum of $1.26 billion.
Pepsi has filed a motion to set aside the judgment on various grounds. First, Pepsi says the complaint was improperly served on its agent in North Carolina, but should have been served through Pepsi's registered agent for service of process in Wisconsin. However, the plaintiffs' attorneys assert that the complaint was properly served on the registered agent identified on PepsiCo's own web site.
Pepsi also claims that although it did receive notice of the case from its North Carolina agent through a letter sent to Pepsi's law department, a secretary put the letter aside and failed to tell anyone about it because she was “so busy preparing for a board meeting”.
Pepsi also contends that a $1.26 billion judgment should not be imposed against it because there are legitimate defenses to the lawsuit – including the fact that Wisconsin's statute of limitations for misappropriation of trade secrets may have expired long before the lawsuit was filed.
It is uncertain whether Pepsi's motion will succeed. If Pepsi was properly served and is deemed to lack a reasonable excuse for not responding, the merits of Pepsi's substantive defenses may be irrelevant. According to the Wisconsin Law Journal, “Wisconsin case law is notoriously hostile to defendants who fail to timely answer a complaint and then seek to vacate the default judgment against them.”
Like most stories, this one has a moral: If you are served with a lawsuit, do not ignore it. Take it seriously and contact an attorney. Even a meritorious defense may be unavailing if you allow the deadline for answering the complaint to pass.
In California, a defendant has six months to move to set aside a default, but must show that it was entered “through his or her mistake, inadvertence, surprise, or excusable neglect”. But there is no guarantee that a court will grant such a motion. Like the ravenous Bugblatter Beast of Traal, a plaintiff may be able to devour a careless defendant who does not take the right steps to protect himself.
Peter C. Bronson, of Nevada County, practices in the areas of creditors' rights, insolvency, business litigation and mediation. Write him at pbronson@pbronsonlaw.com. This column is not intended as legal advice in any specific business situation or dispute; specific strategic decisions always depend upon the specific facts.
A lawsuit is nothing like the Bugblatter Beast. If you are served with a complaint, and you respond by putting a towel over your head or otherwise ignoring the lawsuit, bad things can happen — very bad, as PepsiCo, Inc. has learned.
Two individuals, Charles Joyce and James Voigt, sued PepsiCo and two Pepsi distributors in a Wisconsin state court, claiming that nearly 20 years earlier, they had spoken confidentially with the distributors about the idea of bottling purified water; and that PepsiCo misappropriated Joyce and Voigt's trade secrets in order to bottle and sell Aquafina water.
The distributors answered Joyce and Voigt's complaint, but Pepsi did not. As a result, the court has entered a default judgment against Pepsi in the mindbogglingly large sum of $1.26 billion.
Pepsi has filed a motion to set aside the judgment on various grounds. First, Pepsi says the complaint was improperly served on its agent in North Carolina, but should have been served through Pepsi's registered agent for service of process in Wisconsin. However, the plaintiffs' attorneys assert that the complaint was properly served on the registered agent identified on PepsiCo's own web site.
Pepsi also claims that although it did receive notice of the case from its North Carolina agent through a letter sent to Pepsi's law department, a secretary put the letter aside and failed to tell anyone about it because she was “so busy preparing for a board meeting”.
Pepsi also contends that a $1.26 billion judgment should not be imposed against it because there are legitimate defenses to the lawsuit – including the fact that Wisconsin's statute of limitations for misappropriation of trade secrets may have expired long before the lawsuit was filed.
It is uncertain whether Pepsi's motion will succeed. If Pepsi was properly served and is deemed to lack a reasonable excuse for not responding, the merits of Pepsi's substantive defenses may be irrelevant. According to the Wisconsin Law Journal, “Wisconsin case law is notoriously hostile to defendants who fail to timely answer a complaint and then seek to vacate the default judgment against them.”
Like most stories, this one has a moral: If you are served with a lawsuit, do not ignore it. Take it seriously and contact an attorney. Even a meritorious defense may be unavailing if you allow the deadline for answering the complaint to pass.
In California, a defendant has six months to move to set aside a default, but must show that it was entered “through his or her mistake, inadvertence, surprise, or excusable neglect”. But there is no guarantee that a court will grant such a motion. Like the ravenous Bugblatter Beast of Traal, a plaintiff may be able to devour a careless defendant who does not take the right steps to protect himself.
Peter C. Bronson, of Nevada County, practices in the areas of creditors' rights, insolvency, business litigation and mediation. Write him at pbronson@pbronsonlaw.com. This column is not intended as legal advice in any specific business situation or dispute; specific strategic decisions always depend upon the specific facts.
