What legal issues are addressed in this case?

The case addresses whether a promotional television commercial can constitute an offer, and whether it can do so when it refers to a catalog that lacks the item. It also addresses whether an objective, reasonable person would take the commercial as serious, whether the question may be decided on summary judgment instead of by a jury, and whether the Statute of Frauds bars enforcement. A final question is whether a fraud claim lies when the plaintiff alleges only that the defendant never intended to perform.

What rule did the court rely on in this case?

Advertisements are presumptively invitations to negotiate unless they are clear, definite, and explicit and leave nothing open for negotiation (Lefkowitz). Whether an offer was made is judged by the objective reasonableness of a listener's belief, so jokes do not create offers (Mesaros; Corbin). Contracts for goods of $500 or more also require a signed writing under N.Y.U.C.C. § 2-201(1).

Would the case have come out differently if certain facts were changed?

The outcome would likely differ if the commercial had been a clear, serious promise, such as a limited, first-come-first-served offer of a specific item that left nothing open for negotiation, as in Lefkowitz. Merely listing the Harrier Jet in the Catalog and order form would not change the result, because the court said the ad would still lack words of limitation like "first come, first served." The outcome could differ if PepsiCo had signaled sincerity as in Carbolic Smoke Ball (for example by depositing funds). Reasonable-person analysis would also change if the jet were plausibly priced and presented without the absurd teenage fantasy. The Statute of Frauds defense would fail if a signed writing by PepsiCo evidenced the sale.

Leonard v. Pepsico

District Court, S.D. New York - 88 F. Supp.2d 116 (2000)

Main Takeaway

An advertisement is ordinarily an invitation to negotiate, not an offer, and a commercial evidently made in jest creates no power of acceptance that a consumer can invoke. Promising a fighter jet for a few hundred thousand dollars' worth of soft-drink points, in a plainly humorous ad, formed no contract.

Issues

Does a television commercial that depicts a Harrier Jet as obtainable for 7,000,000 Pepsi Points constitute an enforceable offer that a consumer can accept to compel delivery of the jet?

Facts

PepsiCo (defendant) ran a "Pepsi Stuff" promotion in which consumers collected Pepsi Points from specially marked packages and redeemed them for merchandise bearing the Pepsi logo. A television commercial showed a teenager receiving merchandise (a T-shirt for 75 points, a leather jacket for 1450 points, and sunglasses for 175 points) and then landing a Harrier Jet at his high school, remarking "Sure beats the bus." The screen then displayed "HARRIER FIGHTER 7,000,000 PEPSI POINTS." The commercial directed viewers to the Pepsi Stuff catalog. The catalog and its order form listed fifty-three items ranging from 15 to 3300 points but did not list a Harrier Jet. The catalog also allowed consumers to purchase additional points at ten cents each, with at least fifteen original points required per order. John Leonard (plaintiff), a Seattle resident, raised about $700,000 and, on or about March 27, 1996, submitted an order form with "1 Harrier Jet" written in, fifteen original points, and a check for $700,008.50. PepsiCo's fulfillment house rejected the submission, returned the check, explained that the Harrier Jet was not part of the collection and was fanciful, and enclosed free product coupons. Leonard's counsel and later Leonard himself demanded delivery of the jet.

Procedural History

PepsiCo filed a declaratory judgment action in the Southern District of New York on July 18, 1996, seeking a declaration that it had no obligation to furnish a Harrier Jet. Leonard sued in Florida state court on August 6, 1996; the suit was removed to the Southern District of Florida and transferred to the Southern District of New York on December 2, 1996, because the Florida forum had no meaningful relationship to the controversy. Leonard then moved to dismiss the declaratory judgment action for lack of personal jurisdiction, which the court granted on November 24, 1997, and PepsiCo appealed. Leonard moved to voluntarily dismiss the Florida action, which the court granted without prejudice on condition that he pay attorneys' fees, later set at $88,162. When Leonard failed to pay but sought to appeal, the court ordered him on January 5, 1999, either to pay or to withdraw the voluntary dismissal and continue litigating. Leonard chose to proceed and retained new counsel. On February 22, 1999, the Second Circuit endorsed stipulations dismissing the appeals, with Leonard consenting to the district court's jurisdiction and PepsiCo agreeing not to enforce the fee award. PepsiCo then moved for summary judgment under Federal Rule of Civil Procedure 56.

Holding and Rationale

(Wood, J.)

No. The Harrier Jet commercial was not an offer that Leonard could accept, so PepsiCo's summary judgment motion is granted. Three independent grounds support this conclusion.

First, the commercial was an advertisement, not an offer. Advertisements are generally invitations to negotiate, not offers. Restatement (Second) of Contracts § 26 cmt. b; Mesaros v. United States, 845 F.2d 1576 (Fed. Cir. 1988); Lovett v. Frederick Loeser & Co., 207 N.Y.S. 753 (N.Y. Mun. Ct. 1924). The exception for advertisements that are clear, definite, and explicit and leave nothing open for negotiation, Lefkowitz v. Great Minneapolis Surplus Store, 86 N.W.2d 689 (Minn. 1957), does not apply. The commercial reserved the details of the offer to the Catalog, which did not list the jet, and it lacked any limiting language such as "first come, first served." Leonard's order form was therefore the offer, and PepsiCo never accepted it. The reward cases, such as Carlill v. Carbolic Smoke Ball Co., 1 Q.B. 256 (1892), do not help Leonard. The commercial did not promise a reward for performing a specified act. It invited consumers to use the Catalog and submit a reciprocal order.

Second, no objective, reasonable person would have understood the commercial as a serious offer. The test is objective, and an act done in jest creates no power of acceptance. Resolving this question on summary judgment is proper, and a jury is not required. The commercial's humor is evident in its exaggerated claims, the implausible teenage pilot who lacked even a helmet, the fantasy of a fighter jet landing at school, the Harrier's military function, and the absurdity of a roughly $28 million jet being available for about $700,000 in points. Additional discovery into PepsiCo's subjective intent, later changes to the commercial, or others' reactions would not change this result.

Third, the Statute of Frauds, N.Y.U.C.C. § 2-201(1), bars enforcement. No writing signed by PepsiCo evidences a contract for goods priced over $500, and Crabtree's confluence-of-memoranda doctrine does not apply because no signed writing establishes a contractual relationship.

The fraud claim fails because it alleges only that PepsiCo made an offer with no intention of performing it, with no collateral misrepresentation.