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.

But a case pending in Jefferson County may test the rigidity of the law, if for no other reason than because of the enormity of the stakes. After PepsiCo., Inc., failed to answer a complaint alleging breach of contract and trade secret misappropriation, Circuit Court Judge Jacqueline R. Erwin entered judgment against it in the amount of $1.26 billion.

According to the complaint filed by Charles A. Joyce and James R. Voigt on April 28, 2009, they entered into a confidentiality agreement in 1981 with Arnold E. Fobes, then the vice president and general manager of Wis-Pak, Inc. and Carolina Canners, Inc., regarding a product idea referred to as “U.P.”

“U.P.,” according to the complaint, is bottled water, and has since been marketed by Pepsi as Aquafina: “The Defendants have used the Plaintiffs’ U.P. trade secret for the benefit of themselves in the manufacture, distribution and sale of Aquafina and such use constitutes misappropriation of Plaintiffs’ trade secret.”

Wis-Pak and Carolina Canners answered the complaint, but Pepsi did not.

Accordingly, a Sept. 30 order of the court granted the plaintiffs’ motion for a default judgment in the amount of $1.26 billion.

On Oct. 13, Pepsi moved to vacate the judgment, and a hearing is currently scheduled for Nov. 6.

The memorandum in support of Pepsi’s motion to vacate asserts that the misappropriation of trade secrets claim is barred by the three-year statute of limitations in sec. 893.51(2), because Pepsi has been selling Aquafina in Wisconsin since April 1996.

But the plaintiffs’ lead attorney, David Van Dyke of Cassiday Schade in Chicago, said in an interview that the statute of limitations should be tolled because the plaintiffs did not discover the infringement until much later.

Pepsi’s memorandum further asserts that Pepsi was not properly served under sec. 801.11(5), because the plaintiffs should have served Pepsi’s registered agent for Wisconsin in Madison. However, Van Dyke said the complaint was served on the registered agent for the corporation as identified on Pepsi’s own web site.

Van Dyke said damages were based on Pepsi’s estimated operating margin for Aquafina for the last five years, and called them “conservative, if you can use the word ‘conservative’ with a number that large.” Van Dyke noted that Aquafina is the number one brand of bottled water in the world.

The memorandum in support of the motion to vacate also cites various “extraordinary circumstances” justifying relief. According to the memorandum, the failure to file an answer was the result of inadvertent oversight; Pepsi was unaware of the suit; there is a strong interest in resolving the merits of the claim; the size of the judgment is “unprecedented in size”; Pepsi has meritorious defenses and Pepsi was prompt in seeking to vacate the judgment.

The memorandum asserts, “Allowing the judgment of default to stand would be unjust and provides the plaintiffs with an unprecedented windfall judgment on their tenuous claims that have not yet been challenged on the merits.”

However, noted Van Dyke, “My understanding from the case law is that Wisconsin does not like to vacate default judgments.”

Robert W. Roth, of Niebler, Pyzyk, Roth & Carrig, LLP, in Menomonee Falls, who represents Pepsi, could not be reached for comment.