Law360 (July 29, 2021, 2:34 PM EDT) — The Eighth Circuit has refused to scrap a nearly $3 million contract verdict against PepsiCo, ruling that dramatic closing arguments from the company’s former bottling partner walked “right up to the line of impropriety” but did not cross it.
In a unanimous opinion authored by U.S. Circuit Judge Ralph R. Erickson on Wednesday, a three- judge panel rejected PepsiCo Inc.’s request for a new trial. The beverage giant had sought to undo an Iowa federal jury’s November 2019 finding that it owes millions for breaking a promise to reimburse Midwest distribution conglomerate Mahaska Bottling Co. after undercutting its prices through deals with national customers like Dollar General.
PepsiCo argued on appeal that U.S. District Judge James E. Gritzner was wrong to deny its new trial bid protesting Mahaska’s allegedly inflammatory closing arguments. PepsiCo said the jury was prejudiced by statements calling it a “10,000-pound gorilla” and asking to “send a signal” to the corporation.
But the Eighth Circuit panel was unpersuaded. It said that while hyperbolic, these portions of Mahaska’s closing arguments did not unduly influence the jury.
“Sometimes [a] trial reflects an aggressiveness and hurly-burly that walks right up to the line of impropriety but does not cross it,” Judge Erickson wrote. “We conclude that the comments Pepsi now challenges, either alone or together, did not so infect the trial with the type of impropriety that would make a new trial appropriate.”
The panel said references to PepsiCo’s size and revenue were kosher, given the fact that most jurors were already aware that it is one of the world’s largest corporations.
And while the beverage giant said it was improper for Mahaska to ask the jury to punish PepsiCo with its verdict, the appellate judges said those arguments were appropriate in the context of the disputed bottling contract.
“While Pepsi has cherry-picked phrases from Mahaska’s closing argument, a closer reading in context reveals [that] Mahaska’s statements were much more closely tied to the circumstances and evidence in this case than Pepsi acknowledges,” Judge Erickson wrote. “In context, Mahaska was not seeking broad punishment but arguing about Mahaska’s treatment under the very contracts at issue in the litigation”
The panel was similarly unmoved by PepsiCo’s other concerns, including claims that Mahaska wrongly appealed to local biases by referencing the company’s New York headquarters.
The Oskaloosa, Iowa-based multistate bottler alleged in a 2016 lawsuit that PepsiCo had upset their decades-old partnership by increasingly seeking to control pricing itself, often through direct deals with national retailers.
Under a 2003 contract, PepsiCo guaranteed that Mahaska wouldn’t be liable for PepsiCo-brokered prices that fell below Mahaska’s wholesale rates, according to the complaint.
While PepsiCo made these promised reimbursements for more than a decade, Mahaska said, the
company didn’t adequately fulfill the price-difference reimbursements for sales of PepsiCo products at
Dollar General stores.
The jury largely sided with Mahaska, awarding it $2.65 million for the Dollar General sales and
$307,000 for withheld reimbursements linked to a promotional program called “Big Bets.”
The jury did award PepsiCo $24,000 on its counterclaims, agreeing that Mahaska wrongly interfered in a deal with Arby’s.
In a comment to Law360 on Thursday, Mahaska’s counsel said they’re glad the Eighth Circuit upheld the jury’s verdict.
“The jury resolved any doubts about Mahaska’s contract rights, and the Court of Appeals has affirmed,” said Jason H. Friedman of Friedman & Feiger LLP. “Mahaska is looking forward to continuing to work with Pepsi and move forward.”
Counsel for PepsiCo declined to comment on the ruling Thursday. A representative for Dollar General did not respond to a request for comment.
Judges Lavenski R. Smith, Steven Colloton and Ralph R. Erickson sat on the panel for the Eighth Circuit.
PepsiCo is represented by Umer Ali, Thomas Ensign, Elena Hadjimichael, Lauren Beverly Kaplin, Linda
- Martin, Robert John McCallum and Laura Cielle Onken of Freshfields Bruckhaus Deringer LLP and Spencer S. Cady and Debra Lynne Hulett of Nyemaster Goode PC.
Mahaska is represented by Jason H. Friedman, Lawrence J. Friedman, James Robert Krause, Ernest
- Leonard and F. Colby Roberts of Friedman & Feiger LLP, Angela Belle Kennedy, Jonathan Ryan Shulan and Thomas Blumeyer Weaver of Armstrong Teasdale LLP, Shauna Izadi of Izadi Law Group PLLC and Johannes Moorlach of Whitfield & Eddy PLC.
The case is Mahaska Bottling Co. et al. v. PepsiCo Inc., case number 20-1783, in the U.S. Court of Appeals for the Eighth Circuit.
–Additional reporting by Cara Salvatore. Editing by Orlando Lorenzo.