Case: Leonard v. Pepsico, 88 F. Supp. 2d 116 (1999)
Background: This case was ruled in the United States Southern District Court in New York. This is a civil case where the plaintiff sought action against the defendant. The plaintiff filed suit for breach of contract and fraud. The action was for a specific performance. The court ruled in the defendant’s favor. The Judge who oversaw the case was Judge Kimba M. Wood. The case was decided in August 1999.
Issue: Did the defendant’s advertisement make a contractual offer for a Harrier Jet to the plaintiff?
Facts: The defendant, Pepsico, ran a new Pepsi promotional campaign. Pepsi introduced “Pepsi Points,” where customers could redeem the points for Pepsi merchandise. Customers could earn points by buying marked bottles of Pepsi, and additional points could be purchased for 10 cents a point. Pepsi released a brochure titled “Pepsi Stuff”, which was handed out at state fairs. These brochures revealed the merchandise that was redeemable and the cost respectively.
Pepsi aired an advertisement, which suggested that 7,000,000 Pepsi Points could be redeemed for a Harrier Jet. The jet was not included in the Pepsi Stuff brochure. The advertisement shows some of the redeemable merchandise, such as a shirt for 75 points and a jacket for 125 points. At the end of the commercial, a teen is shown landing the jet and large white letters reading, “Harrier Fighter – 7,000,000 Pepsi Points”. The plaintiff, John Leonard, saw the advertisement on television. Leonard submitted an order form containing 15 Pepsi Points, and a check for the amount of $700,008.50 to buy the remaining Pepsi Points on March 27th, 1996. In response, on May 7th, 1996, the defendant refused the plaintiff’s order. The defendant contacted the plaintiff stating that the jet was not an item that was redeemable with Pepsi Points.
The defendant states in a letter to the plaintiff,
“The Harrier Jet in the Pepsi commercial is fanciful and is simply included to create a humorous and entertaining ad.” (Nexis Uni)
The plaintiff sent notice to the defendant that if the offer was not committed by May 24th, 1996, they would file an action against them. The defendant contacted the advertising company responsible for creating the commercial, BBDO New York. The Vice President of BBDO, Raymond E. McGovern, believed that the commercial was humorous and that no reasonable person would agree that the commercial is a contractual offer. The plaintiff then mailed another demand for the jet to the defendant on June 17th, 1996.
Then on June 18th, Pepsico filed a declaration judgment action against the plaintiff in the United States District Court in New York. The defendant stated that they had no obligation to fulfill the order. Leonard then filed a suit in a Florida State court, where the case was moved to the Southern District of Florida. Judge James Lawrence King decided that the case had nothing to do with the state of Florida, and was then transferred to the United States District Court in New York on December 2nd, 1996.
After the case was transferred, the plaintiff motioned to dismiss the declaration judgment action on November 24th, 1997. The court allowed this on the terms that Leonard pay attorney fees for Pepsico. Leonard was ordered to pay $88,162 in fees, however, Leonard was not able to pay. Pepsico moved for a summary judgment, and they argued that they had no contractual agreement. Therefore, they did not have to fulfill the “offer” shown in the commercial.
Procedure: This case was in the court system from 1996 to 1999. Pepsico filed declaration judgment to protect itself from Leonard’s legal threats. Leonard filed suit against Pepsico for breach of contract in a Florida State court, but it was then moved to the Southern District court in Florida. Eventually, it was moved to the Southern District court in New York. This is the history of the case until the court declared their ruling in August 1999.
Decision of the Case: The court decided that the advertisement was not an offer under restatement of contracts §26 cmt.b. The court granted the defendant’s motion for summary judgment and ruled in Pepsico’s favor. The advertisement’s humorous nature would not cause a rational person to expect Pepsico to send out Harrier Jets.
Rationale of the Court: The court ruled in favor of the defendant, because the plaintiff was not able to prove his case as a matter of law. The plaintiff claimed that the advertising was an offer because it was shown in a commercial, and believes that a motion for summary judgment is wrong. The plaintiff believed that only a jury could decide if the advertisement expresses an offer, however, this was refused. The court had three main problems with the plaintiff’s claim. The reasons include advertisements are not offers, reasonable people would not expect Pepsico to offer Harrier Jets, and that the alleged contractual offer does not satisfy a claim of fraud.
The court found that the restatement of contracts §26 cmt.b explains that advertisements are not exclusively an offer. However, an offer may be the result of an advertisement, but commercials were not offers to sell products. Furthermore, an advertisement could be used to show off a product and then enter a binding offer. The case Mesaros v. United States, 845 F.2d 1576 (Fed. Cir. 1988), found that advertisements are not offers solely based on the advertiser’s willingness to create or accept an offer.
There is, however, an exception. Lefkowitz v. Great Minneapolis Surplus Store, 251 Minn. 188, 86 N. W. 2d 689, 691 (Minn. 1957) states that for an advertisement to be an offer it must be clear and explicit in detail (Nexis Uni, 2018). In that case, the advertisement stated specific inventory, price, and the statement “first come first serve.” The Pepsi commercial does not fit into the exception, and separates itself from the Lefkowitz case. The Pepsico advertisement is not explicit, nor does it clearly state that it has an inventory of jets for people to redeem. Instead, the defendant holds its offers in the Pepsi Stuff brochure. As mentioned earlier, the Harrier Jet is not in the brochure.
The court found that the plaintiff’s opinion about the intent of the advertisement does not match that of a reasonable person. The opinion of Judge Kimba Wood states, “Corrbin on Contracts, § 1.11 at 30 (emphasis added). An obvious joke, of course, would not give rise to a contract” (Nexis Uni). As a response, the plaintiff asked the court to prove that the advertisement was funny. Humour is objective and can be difficult to prove. However, the court found that due to the exaggerated situation in the commercial, a reasonable person could not expect a serious contractual offer.
The final rationale of the court is that the “contract” does not violate the statute of fraud. The New York statute of fraud states that transactions larger that $500 is not enforceable. Unless both parties create a contract of sale including the party whom enforcement will be sought (Nexis Uni). In this case, there is no writing between the parties. Therefore the transaction is not enforceable. The plaintiff argued that the order form that he submitted was sufficient to violate the statute of fraud. The court decided that it was not sufficient because it did not bear the defendant’s signature, and the commercial was not a contract in writing.
Pepsico then filed motion for summary judgment against the fraud claim. They requested this action because the plaintiff was not able to prove misrepresentation of the defendant’s written contract. In this case he would need to prove that the misrepresentation was collateral. The court used the example of Stewart v. Jackson & Nash. In that case, the defendant claimed that they had a large environmental law department that the plaintiff would lead if the plaintiff came to work for them, however, this was false. Stewart was able to prove that their potential employers made false claims. The court ruled in favor of the plaintiff because there was intentional misrepresentation of facts by the defendant. However, in Leonard v. Pepsico, Leonard did not argue that he entered a contract under collateral misrepresentation. If he did, he would not be able to argue this because Pepsico never intended to make offers for the Harrier Jets.
This was the rationale of the court. All the claims against the defendant were refuted using case law, the restatement of contracts, and other examples. The court granted Pepsico’s action of summary judgment in August 1999, over three years after the case went to court.
Opinion: After hearing the facts, the claims, and the rebuttals, I believe that the court made the right decision in ruling this case. I watched the commercial and found the advertisement humorous but could understand why someone would want to buy the Harrier Jet. The the advertisement was not a contract or an offer as stated by the restatement of contracts, and the plaintiff was not able to create a strong argument for why he believed that it was.
We also know that the order form that he sent was not a contract because the defendant did not sign the order form. The defendant never intended to offer the Jets and it was clear that the advertisement was just satirical puffery. I also believe that the plaintiff wanted a jury trial because he was aware that the judge would rule in favor of the defendant. I believe the court ruled this case justly.