The vast majority of business contracts don’t have billion-dollar figures attached, but regardless of their scale, contract disputes generally share a common theme: broken promises.
For example, consider the recently settled dispute between food-product giants Kraft Foods Group and Starbucks Corp. Kraft started marketing and distributing Starbucks coffee about 15 years ago, but in 2004 the companies renegotiated their contract, which was going to expire in 2014 until Starbucks decided to terminate the agreement four years early.
Starbucks accused Kraft of not fulfilling contract obligations by keeping Starbucks out of the loop with regard to marketing and customers. The coffee company said that terminating the arrangement was in accordance with the terms of the contract, but Kraft disagreed and started arbitration proceedings.
After the dispute started, Mondelez International Inc. separated from Kraft and became Stabucks’ legal adversary in 2012, and just recently an arbitrator decided that Mondelez should receive $2.76 billion from Starbucks. That amount includes $527 million in legal fees and damages of $2.23 billion.
Mondelez, which is an Illinois-based company that handles a number of brands, including Oreo and Cadbury, said the money after taxes will be used to re-purchase stock.
In a statement, Starbucks said the company was glad to move beyond the dispute, and that terminating the agreement with Kraft was still a good decision.
Unfortunately, locking horns in business litigation is a reality for companies large and small. It is important in these cases to minimize the dispute’s impact on profits and business operations. Avoiding litigation is ideal, but when that isn’t possible, business owners should have strong legal support to protect their business now and in the future.
Source: Huffington Post, “Starbucks Kraft Lawsuit: Coffee Chain Must Pay $2.76 Billion To Settle Dispute,” Annie D’Innocenzio, Nov. 12, 2013