Starbucks Defeats Kraft’s Bid to Stop It From Ending Deal

Starbucks Defeats Kraft’s Bid to Stop It From Ending Deal : Starbucks Corp. can’t be stopped from ending a distribution agreement with Kraft Inc. in favor of a plan by the world’s largest coffee-shop operator to buy companies to build up its grocery business, a judge ruled.

In December, Kraft sued to prevent Starbucks from terminating the deal before the companies resolved their dispute. Seattle-based Starbucks plans to purchase businesses to expand its supermarket distribution, Chief Executive Officer Howard Schultz said Dec. 1.

Kraft, which said in a statement that it will appeal yesterday’s ruling, has denied Starbucks’s claim that it lost market share under the distribution deal, according to court filings. Kraft said that it increased Starbucks share of total coffee sales by more than 10-fold from 0.9 percent in 1998 to 10.6 percent in 2010, according to court papers.

U.S. District Judge Cathy Seibel disagreed with the contention by Northfield, Illinois-based Kraft that it faces “irreparable harm” if Starbucks was allowed to terminate the agreement, which is required for a preliminary injunction. Yesterday’s ruling, at a hearing in federal court in White Plains, New York, was confirmed by Seibel’s chambers.

Seibel’s ruling doesn’t block Kraft from pursuing a claim for damages against Starbucks if the company goes ahead with its plan.

‘We Are Hopeful’

“Kraft failed to demonstrate the need for a preliminary injunction,” said Alan Hilowitz, a spokesman for Starbucks. “We are hopeful this will bring an end to Kraft’s efforts to further confuse our mutual customers.”

Starbucks said Dec. 23 that there would be no irreparable harm to Kraft “given that this is fundamentally a commercial dispute that can be resolved through the arbitration procedures the parties agreed to in their contract.”

Starbucks claimed Kraft’s performance as a distributor of its coffee has been “unacceptably poor” and that it is legally justified in ending its participation in the agreement.

The “decision is not a ruling on the core question of whether Starbucks can terminate our contract without compensating us as the contract requires,” Marc Firestone, Kraft’s general counsel, said in yesterday’s statement. “That question will be decided in arbitration. Without proof of material breach, Starbucks’ only legitimate termination mechanism is to pay Kraft fair market value for the business, plus a premium.” For the latest updates PRESS CTR + D or visit Stock Market news Today

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