See feature article below: Starbucks Corporation (NASDAQ: SBUX)
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Report For: Starbucks Corporation (NASDAQ: SBUX)
Starbucks is being sued for giving me drinks smaller than advertised? They are putting too much ice in their cold drinks? I don’t really want to hear this; it’s like finding out my parents had sex to conceive me. I know it happened, I just don’t want to hear about it. I don’t want anything to interfere with my ability to get a Triple Tall Latte! SBUX shares are up marginally at $55.69 per share.
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A federal judge has allowed a lawsuit to move forward alleging that the coffee chain has been underfilling its lattes. In the suit, plaintiffs Siera Strumlauf and Benjamin Robles charge that Starbucks advertises 12-ounce, 16-ounce, and 20-ounce serving sizes, but trains its staff to make the drinks in a way that leaves them 25% short of the advertised amount.
U.S. District Judge Thelton Henderson in San Francisco dismissed Starbucks’ efforts to have the case thrown out. That’s a blow to the coffee chain, which noted in its motion to dismiss that “Plaintiffs lack standing to assert any of their claims for relief because they have not alleged actual injury.”
In the motion, Starbucks said that its drinks meet the standards of “reasonable consumers,” though it did not directly address how it makes its lattes or exactly how much liquid they contain.
What is being charged?
The proposed class action lawsuit, which was first reported by Consumerist, claims that Starbucks baristas use pitchers for heating milk with “fill to” lines that are not high enough. It also claims that they are taught to leave 1/4 inch of free space in each cup for foamed milk. The plaintiffs charge that foamed milk should not count toward the total amount of liquid in the drink.
“Plaintiffs allege that Starbucks lattes are uniformly underfilled using three different theories,” the judge wrote. “First, Plaintiffs assert that the milk foam, which makes up the top layer of the latte, should not be counted toward the total volume of the latte, because according to the ‘food science community’ and the ‘weights and measures community,’ the industry standard is to let the foam dissipate, or to measure the drink without the foam.”
The judge did deny the plaintiffs request for injunctive relief, which could have forced Starbucks to immediately change how it makes or advertises its lattes. In denying that request, he noted that in order to grant an injunction, the lawsuit would have to show that the people involved were likely to be wronged again in a similar way or that they are “threatened with a concrete and particularized legal harm.”
What does this mean for Starbucks?
While the idea of this case may seem silly, the reality is that it could be quite expensive for Starbucks. If the chain loses, in theory it could not only owe damages for customers served underfilled lattes in the past, it could also have to change how it makes the drinks going forward.
In addition to having to change its equipment and train its staff to make lattes in a new way (or modify the advertising of its sizes) Starbucks would also have to actually use more liquid. If the drinks are truly underfilled by 25%, that’s a significant amount of added milk, water, and coffee, which would add to its costs.
Starbucks has continually denied that its drinks are underfilled and made a statement to Consumerist after the judge’s ruling was released.
“We were pleased with the court’s decision to limit the scope of the claims and believe that this lawsuit and the recently filed similar actions are without merit,” a Starbucks spokesperson told the website. “All of our handcrafted beverages are made in accordance with our customers’ preferences. If a customer is not satisfied with their beverage preparation, we will gladly remake it. We will be prepared to defend our case in court.”
The chain is also facing a similar lawsuit which alleges that its cold drinks contain too much ice.
Source – Motley Fool / Daniel Kline
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