Starbucks Kraft Lawsuit

The three years’ battle between Starbucks Company and Kraft Foods since March 2011 to January 2014 finally ended in a defeat in favor of the latter. This happened after an arbitrator made a decision that Starbucks should pay Kraft a total sum of $2.7 billion for having terminated a contract pre-maturely. This dispute was based on the agreement which the two entered back in 1998 for the distribution and marketing of Starbucks brand coffee in the United States grocery stores. This was to be done by the Kraft. However, misunderstandings became evident when Starbucks raised complaints, claiming Kraft was underperforming in the stocking as well as promotion of its products. This saw Starbucks move to terminate their agreement in the year 2010. The battle actually flared up in January 2010 when Mr. Howard Schultz, the CEO Starbucks, sent an email to Irene Rosenfeld, the then Kraft’s CEO and currently heading Mondelez, complaining about the improperly kept stores that actually stocked coffee. Other claims included the selling of outdated packages as well as insufficient space for the product in the shelves. The readily optimal action was to terminate the contract pre-maturely. Starbucks demonstrated a strong determination to go their way. In 2010 October, it declared its stand for the termination set for 1st March 2011. This challenged Kraft and a month later, they had no better option than to launch arbitration process . The terms of basically $750 million payoff to Kraft was not by any viable consideration justifiable. They thus sought to reject. This however, never stopped Starbucks from their determined move. They thus went ahead to withdraw, an action which saw Kraft change their approach on the matter and began arbitration proceedings.

An argument by Kraft lawyer was that Starbucks owed a total of $2.9 billion, inclusive of attorney fees. He said that the contract was able to bring to his client a sum of $500 per year, and its termination meant somebody had to part with much. In his ruling however, the arbitrator declared that Starbucks should pay damage cost of $2.23 billion for the termination of the agreement plus a prejudgment interest of $527 million including attorneys’ fees. This never silenced Starbucks Chief Financial Officer who expressed the company’s strong disagreement with that conclusion. In a statement, Troy Alstead, the Chief Financial Officer, expressed their strong belief on the fact that the responsibilities of Kraft as stipulated in the agreement was not delivered, thus putting the performance of the business at stake.

Having received total revenue of $14.9 billion for the financial year ended 29th September, 2013, the Starbucks Company reported a cash of $2.6 billion and its equivalent on the balance sheet.

In one of the regulatory filings, Starbucks indicated that its earnings for the financial year were reduced to $8.3 million after taking care of the litigation charges. Earlier on, it had reported its annual earnings at $1.72 billion, equivalent to $2.26 per share. The fourth quarter results later ran to a loss of $1.23ough billion despite having reported a profit of $481.1 million.

Kraft on the other hand split into two in October 2012 to form Kraft Foods Company and Mondelez International. The latter was declared entitled to the recoveries from their arbitration with the Starbucks. This was so defined by the terms of their restructuring. The proceeds were therefore planned for use by the Mendelez to settle taxes and expenses then purchase stock with whatever remains.

Kraft later secured a partnership with the packaged coffee business, the McDonalds Company. Starbucks was in the meanwhile allowed to resume the control of its business even as the arbitration process was on’ allowing them to sell K-cups in the Green Mountain Coffee Roasters Companies. One of their achievements in this was a total of over one billion of the k-cups sold. This made a Starbucks spokesman declare that they would not have made a similar achievement if they never stopped the deal with Kraft. The spokesman further mentioned a 62% rise in the sales of packaged coffee two years after contract termination. This for sure, shows and justifies their decision. He said that the indisputable progress made is worth their move.

In a statement, he said and I quote, “While we disagree Kraft is entitled to damages, the amount awarded reflects the value of our at-home coffee business and the continued global growth opportunity that lies ahead for Starbucks.”

Word of Mouth and Actual Facts McDonalds Coffee Lawsuit

We all have heard some details of this case that happened in 1994. Stella Liebeck, a 79 year old woman was awarded $2.86 million when she was scalded with a cup of coffee ordered through a McDonald’s drive thru. Many people will immediately state that she should have known the coffee was hot, and that she should not have been driving when she had a cup of hot coffee in her lap. The fact is: Stella’s lawyer was able to show that McDonald’s was liable.

In taking a hard look back at this case, we have found many facts that are not mentioned when people claim this was a frivolous lawsuit. Stella’s lawyer was able to defeat a large team of McDonald’s attorneys just by providing many of these facts that do not come out in normal conversations and debates. Here are some of the actual facts:

1: Stella was not driving the car. Stella’s grandson was driving the car. He pulled the car to a parking area where Stella proceeded to gather cream and sugar to add to her morning coffee. As she attempted to pull the lid off the styro-foam cup, the entire contents spilled in her lap.

2: Stella had to have skin grafts because of 3rd degree burns. The surgical costs were astronomical. Stella originally offered to settle with the major fast-food franchise for $20,000, but McDonalds refused.

3: In the discovery phase of the trial, the lawyer showed where McDonalds was aware of over 700 claims of 3rd degree burns from their coffee between 1982 and 1992.

4: Household coffee is served at 135-140 degrees. McDonalds always maintained theirs from 180-190 degrees even knowing it could harm people. Experts have shown that this temperature is not only bad for spills, but also unsafe to drink, as it can burn the tissues in the mouth and esophagus. The expert we speak of is McDonalds own Quality Assurance Manager. The company would not heed the Manager’s advice and kept the coffee at a dangerous heat level.

5: Compensation damages were set at $200,000 by the jury. This figure was dropped to $160,000 when it was determined that Stella was 20% at fault in the accident. The $2.7 in punitive damages amounts to just 2 days of coffee sales for the franchise. In appeals, the courts dropped the punitive damages to $480,000, so when someone says that Stella received millions, you can state that is false.

6: In further appeals by Stella’s lawyer and the team of McDonald’s lawyers, the final settlement is a huge secret. No one actually knows the final outcome of the case. It is a known fact that the Albuquerque McDonalds this all happened at now keeps their coffee at approximately 160 degrees.

In Conclusion;

We all have heard the gossip about the multi-million dollar case over a hot cup of coffee from a New Mexico McDonalds. Now you know that Stella most likely never received millions of dollars. For all we know, her family just gets free coffee for life. If she were hurt while working than a workers’ compensation attorney would be representing her.

Should the final outcome be a secret? This is the debate that should be happening. Stella’s lawyer surely received a good amount of money, but did Stella? No one will ever know.

Big thanks to Basil Beck DUI Lawyer montgomery county PA  for helping me with this.

McDonald’s Coffee Case Injury Lawyers At Work

This is a famous product liability case which involves Stella liebeck as the complaint and McDonalds as the plaintiff.The case has many fictional details about the actual incident.The true account of the story is that Liebeck was in her grandson’s car in the passenger seat when hot coffee spilled on her thighs while in a McDonalds drive-through. The coffee was at 88 degrees and with this amount of temperature; one suffers a third degree burn, which happened to Liebeck. The hot coffee spilt on Liebeck’s sweatpants, made from cotton, which absorbed the coffee and held it right next to her skin. She underwent the following:

· Scald thighs, buttocks and groin

· 6% of her skin got burned

· Lost 20% of her weight when she was admitted to hospital

· Permanent disfigurement in her groin region

· Disabled for 2 years

With all this damage on Stella’s body, she sought for $20’000 as her actual medical expense but the company only offered a shocking $800 amount. This intrigued the complaint’s lawyer, Reed Morgan, to file a law suit on August 8, 1994 in New Mexico District Court and to be heard by Judge Robert H. Scott. Reed offered to settle for $300’000 and a mediator’s $225’000 but McDonalds refused these pre-trial attempts to solve the case seeing that it was the complaints fault that she got burned.

Liebeck’s lawyer accused McDonalds for selling coffee that is “unreasonably dangerous” and “defectively manufactured.” He argued that selling coffee at 88 degrees Celsius would cause third degree burns and that other similar companies serve coffee at a lower temperature of about 60 degrees Celsius. McDonald argued that they serve coffee at that temperature because many of their customers bought coffee to drink while driving and that would allow it to cool and not cause any harm. Mostly, customers wanted it hot and when served when its temperature is lower they complained.

The case attracted so much attention, even up to international level that caused the case to have many sides of the story. Both parties had supporters; some accused Liebeck of spilling coffee on herself while driving. Another story shows that Stella poured the hot coffee on herself while trying to add cream and sugar while the coffee was in between her knees.

Other documents that were obtained from McDonald showed that between 1982 and 1992, there were 700 complaints of customers burned by hot coffee. The company’s quality control manager, Christopher Appleton argued that the number of injuries was insufficient to make the company change its normal practices. He went ahead and argued that, all foods that are hotter than 54 degrees Celsius have a burn hazard and that restaurants have more pressing issues to worry about. Stella’s lawyer then accused Appleton conceded that McDonald’s coffee is then meant to burn the customer’s mouth and throat when served.

A twelve person jury finalized the case on August 18, 1994 and accused McDonalds for being responsible for the injury of Stella Liebeck. They offered $160’000 for compensatory damages and in addition, $1.7 million in punitive damages. This decision was appealed by both parties and they agreed to settle the case out of court. There is no information on how much they agreed to settle for.

Detractors argued that this kind of case was then considered to be frivolous and judges were asked to dismiss them before getting to the jury. They also argued that McDonald’s coffee was not defective as it is conformed to industry standards. They gave two other examples of restaurants that serve their coffee hotter than McDonalds; one of them being Starbucks. Now if Liebeck were under the influence of alcohol and poured the coffee on her self then she would sure need the help of a dui lawyer in this situation.

This case became popular and resulted in celebrities and other popular people commenting about it. Later on, a documentary was made known as the Hot Coffee Documentary and it included the celebrities’ comments, news coverage, talk shows and new short clips about the case. An offshoot from a weekly news column resulted in creation of a website which awarded people who filled for frivolous cases. They named it the “Stella Awards” in honor of Liebeck.

National coffee association spokesman said that McDonalds conforms to industry standard and he showed evidence of other companies that serve hotter coffee than that which burned Liebeck.

Today McDonalds continues to serve coffee hot or hotter because the hot coffee is not unreasonably dangerous and that will not make them stop just because their product can cause serious damage when poorly handled. Their cups have strongly worded warnings on the cups though they still continue facing coffee complaints.