Compliance: Starbucks’ expensive exit: A wake-up call to inside counsel

These terms will always be challenging to inside counsel no matter how well-crafted the distribution agreement

On Nov. 12, 2013, Starbucks Corp. announced it would pay Mondelez International Inc., a successor to Kraft Foods Inc., $2.8 billion in damages, including interest and attorneys’ fees in settlement of a dispute over Starbucks’ termination of the supply and license agreement dated March 29, 2004 (the Distribution Agreement) between the two companies related to Starbuck’s packaged coffee business. The result is a wake-up call to inside counsel negotiating long-term ventures, supply and distribution agreements and other commercial and strategic alliances.

According to SEC filings, under the Distribution Agreement, Starbucks sold a selection of Starbucks and Seattle’s Best Coffee-branded packaged coffees in grocery and warehouse club stores throughout the United States, and to grocery stores in the United Kingdom, Canada and various other European countries. Kraft was responsible for the distribution, marketing, advertising and promotion of these products.

Contributing Author

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Robert J. Gavigan

Robert J. Gavigan is a partner in the Corporate group of Cohen & Gresser LLP.

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Contributing Author

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Andrew M. Por

Andrew M. Por is an associate in the Corporate group of Cohen & Gresser LLP.

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