Starbucks shareholders have filed a $US2.8 billion lawsuit against the company following its alleged breach of contract with Kraft Foods.
The class action lawsuit claims that Starbucks’ board of directors and executive officers breached their fiduciary duties and “grossly understated the impact of the contract breach in the company’s financial filings with the SEC,” Courthouse News Service reports.
Starbucks was ordered to pay Kraft $US2.75 billion in November after an arbitrator determined that the coffee chain had breached its contract with Kraft regarding the distribution of its packaged coffee in grocery stores.
The shareholder lawsuit calls the award a “crushing blow which severely harmed the company.”
“Significantly, this award represented more than the $US2.6 billion in cash and cash equivalents defendants had reported on Starbucks’ balance sheet on September 29, 2013,” the lawsuit claims, according to CNS. The award “eviscerated” the company’s positive financial results that had recently been announced and dropped the 2013 profit to “a dismal” penny a share, the lawsuit adds.
We have reached out to Starbucks for comment and will update when we hear back.
Lead plaintiff Mary Davis is seeking $US2.8 billion in damages from the company’s officers and directors. She is also asking Starbucks to amend its bylaws to strengthen oversight and allow for greater shareholder input. We have contacted Davis’s attorney and are waiting to hear back.
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