Law Office of Henry B. LaTorraca Civil Trial Attorney

Major chain claims contract break was worth the price

Many Los Angeles residents are fans of Starbucks coffee, but may not be aware that they have recently been involved in a court battle. Area businesses may wish to learn lessons from this case, which has resolved after a three-year court battle. Starbucks will be paying $2.76 billion to Kraft as a penalty for ending their deal with the company early. The contract dispute took place in order to Starbucks to end their partnership with Kraft in regards to their grocery coffee.

Starbucks alleged that Kraft had breached the contract numerous times throughout their business relationship, dating from 1998. This included mismanagement of the brand. In 2010, this came to light and Starbucks sought $750 million and an end to their partnership. Kraft rejected the offer, and instead, demanded that if Starbucks wanted to break their partnership, Kraft would need to receive their fair share of the business venture. With this recent decision, it is clear that Starbucks was willing to pay out the nearly $3 billion in order to protect their company in the future.

There are few companies that operate on the same scale as Starbucks, but there are lessons to be learned from this contract dispute. Any type of mismanagement of a brand, as Starbucks alleged, should be taken seriously. It is a company's name and reputation at stake, and any damage can be severe. Additionally, any alleged breaches of contract should be investigated thoroughly.

In this case, Starbucks was willing to settle and take the hit. For most companies, however, this is not an option. By pursuing contract disputes aggressively, businesses and individuals are able to retain the integrity of their company.


Source: 
Reuters, "Update 4- Starbucks says $2.76 billion Kraft split was necessary" Lisa Baertlein, Nov. 13, 2013

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