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February 2014
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Starbucks Shareholders Sue Company for Financial Losses


Starbucks’ shareholders are suing the company for a loss in earnings.

February 12, 2014 /24-7PressRelease/ — Starbucks’ shareholders have filed a lawsuit for $2.8 billion against the coffee shop after the conclusion of its breach of contract action with Kraft Foods. The lawsuit alleges that Starbucks’ executive officers and board of directors did not meet their fiduciary duties and misrepresented the result of the Kraft lawsuit in Starbucks’ filings with the Securities and Exchange Commission.

It all began when the coffee shop was required to pay $2.75 billion to Kraft in November 2013. At that time, an arbitrator determined that the company had breached its contract with Kraft. The breached agreement detailed the circulation of packaged coffee products in supermarkets. The shareholders’ lawsuit notes that the award from this case severely affected the company’s finances.

Moreover, the new suit suggests that the award made up greater than $2.6 billion in money and equivalents, which the defendants had documented on the September 2013 balance sheet. The consequence of the initial Kraft suit significantly harmed the company’s financial results. In fact, the award dropped Starbucks’ 2013 earnings to a mere cent per share.

A spokesperson from the coffee store has made a statement regarding the shareholders’ suit: “We take our responsibility to our shareholders seriously.” He adds, “We are aware of the complaint and we’ll respond in due course.”

The lead shareholder in the suit is pursuing $2.8 billion from Starbucks’ directors and officers. She also requests that Starbucks alter its bylaws to increase supervision and allow greater shareholder input.

Breach of contract

The shareholders’ suit stemmed from the initial breach of contract matter. A breach of contract lawsuit evolves when a party fails to fulfill the obligations under an agreement. A breach of contract can occur in the following ways:
– A party does not perform the duties of the agreement as expected or promised
– A party does something that makes it difficult or impossible for the other party to fulfill the obligations under the contract or frustrates the purpose of the other party’s contract
– A party demonstrates his or her intent to not perform its obligations under the contract

In the Starbucks matter, the company’s breach led to the hefty award for Kraft. This, in turn, resulted in the shareholders’ lawsuit.

Undoubtedly, shareholders will struggle with losses over time. They will often look for recourse when the company’s earnings suffer. However, this does not necessarily mean that the company or its directors are liable for all financial failures. If your business is forced to defend itself in a shareholders’ suit, the first step is to meet with a legal professional. A lawyer can aid you in protecting your company.

Article provided by Vukmanovic Law Group, APC
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