$527 Million of the Award Was Prejudgment Interest/Attorney’s Fees.
In March 2011, Starbucks prematurely ended a contract with Kraft Foods which was allowing the food company to sell bagged Starbucks coffee in grocery stores. Earlier, Kraft rejected Starbucks’ $750 million offer to end the arrangement. The matter went to arbitration, with Starbucks countering that Kraft improperly managed the brand. Kraft denied these allegations and demanded a fair market price for the terminated business.
On November 12, 2013, an arbitrator in Chicago issued a decision favorable to Kraft, ruling that Starbucks was liable to Kraft for $2.23 billion in damages plus $572 million in prejudgment interest and attorney’s fees (we assume the contract between the parties had a fees clause).
Deerfield, Illinois-based Mondelez International, Inc., which spun off Kraft in October 2012, will get the benefit of the award, with the company announcing that the the proceeds of the award after taxes and expenses would be used to repurchase Class A common stock.
This “coffee war” resulted in a big arbitration award, with a good size chunk being attributed to Kraft’s legal expenses for obtaining the favorable result.
Espresso Simpatico Coffee Shop, Seward, Alaska. Carol M. Highsmith Collection. Library of Congress. 2008.