PepsiCo prevails over FCB

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PepsiCo on Nov. 2 won the latest round against archrival Coca-Cola Co. in the corporate boxing match that has put advertising agencies at the center of the battle.

A Cook County, Ill., circuit court judge granted PepsiCo's request for a temporary restraining order against Foote, Cone & Belding Worldwide, Chicago, barring four agency employees from working on Coca-Cola's Dasani water brand. The team previously worked on PepsiCo's Aquafina bottled water before PepsiCo pulled Aquafina, Gatorade sports drink and Tropicana juice from FCB Sept. 19 as part of a shift of $350 million in accounts to Omnicom Group.

Coca-Cola Oct. 12 confirmed it was shifting some rival brands-including Dasani, Powerade sports drink and Minute Maid orange juice-effective Jan. 1 to FCB, whose parent, Interpublic Group of Cos., has longstanding ties to Coca-Cola. Coca-Cola late Nov. 2 reaffirmed that plan.

It's not unusual for agencies to switch to a rival account. It is unusual for a marketer to take its ex-agency to court over such a matter-and particularly unusual for a marketer to pull an account and then take its ex-shop to court when the ex-partner strikes a deal with a rival. But hyper-competitive PepsiCo and Coca-Cola don't have a standard rivalry.

In fact, PepsiCo's Quaker Oats Co. Oct. 31 filed another suit against FCB to bar employees from working on Powerade. Today, a federal district court judge in Chicago will decide whether to hear arguments in that case.

PepsiCo filed the Aquafina suit Oct. 26 after it learned that four FCB employees were scheduled to meet with Coca-Cola's Dasani team that day. With the temporary restraining order PepsiCo won Nov. 2, Dasani will be off limits to four FCB employees pending the outcome of a hearing on PepsiCo's request for a permanent injunction against FCB and Interpublic. A preliminary injunction hearing is scheduled for Dec. 13 and 14.

The suits came after Interpublic dropped a lawsuit against Omnicom to block Omnicom from poaching FCB Chicago's clients and employees.

The four barred employees are Mary Beth Reed and Kurt Fries, both creative directors on the Aquafina account; Bob Dreveny, exec VP-executive creative director in charge of creative development; and Paula Ausick, director of brand equity, who helped pitch the Aquafina account.

While Coca-Cola said it has assigned brands to FCB effective Jan. 1, FCB executives insist they haven't formally won the business. Dana Anderson, president-CEO of FCB's Chicago office, said she didn't know which brands would eventually land at the agency.

FCB's attorney told the court Nov. 2 that FCB is merely "pitching" Dasani. While the foursome is barred, other employees will tackle FCB's Dasani effort and Jonathan Harries, worldwide creative director-chairman of the FCB Chicago office, will approve creative.


Meanwhile, 52 FCB employees who have resigned and are expected to work for Omnicom moved Nov. 2 into new offices outside of FCB's main building. The move was designed to create a literal protective wall to prevent information passing between the outgoing PepsiCo teams, on the payroll through Dec. 21 as part of the 90-day termination agreement, and teams expected to work on inbound Coca-Cola brands.

FCB lawyer Lewis Clayton of Paul, Weiss, Rifkind, Wharton & Garrison, New York, argued against the Dasani restraining order, saying that the four employees were critical to FCB's winning the Dasani business. "It is wrong and unfair to take people off of this account when we are wounded," he said. He later minimized the depth of the employees' knowledge about Aquafina.

PepsiCo attorney Roger Pascal of Schiff, Harden & Waite, Chicago, said the four employees had information that could be used to harm PepsiCo's competitive position.

A marketer suing an agency to prevent the agency from working for a rival marketer is unusual. In 1984, Godfather's Pizza filed suit against Chiat/Day when the agency removed itself from a pitch for Godfather's and jumped into one for Pizza Hut, which it eventually won. Godfather's claimed Chiat had learned of inside information during the review. A judge didn't agree, but did rule that whoever worked on the Godfather's pitch couldn't work on the Pizza Hut account, which basically amounted to one executive, a person familiar with the case recalled.

An attorney who represents advertising agencies said PepsiCo's case is rare. "If the client pulls out, as PepsiCo has done here, the agency should be free to do whatever they want," said the attorney, who asked not to be identified. "But agencies do not, as a routine, use confidential information. They wouldn't survive very long if they did."

Contributing: Rich Thomaselli

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