shareholders of a small snack food company has filed a lawsuit in a contract dispute with the giant coffee store chain Starbucks. It claims that improper actions by Starbucks wound up destroying its business.
The company, Mellace Family Brands, had a contract to supply roasted cashews to Starbucks for sale in its coffee shops. Starbucks customers complained that something was wrong with the cashews, and Starbucks allegedly decided that the nuts were contaminated by Mellace. Starbucks canceled the contract, and the loss resulted in Mellace going out of business.
As it turns out, it may well have been Starbucks itself that contaminated the products. At least that is what an investigation by the federal Food and Drug Administration decided after looking into the issue. The FDA investigators believed that there was nothing wrong with the snack food company's cashews, but that, after they were provided to Starbucks, they came into contact with gas at a Starbucks facility.
The lawsuit points to this as proof that Starbucks' cancellation of the contract in 2010, under which it was to make blanket purchases of the company's cashews, was unjustified. The breach caused the company and the plaintiff shareholders extreme financial distress. Before entering into the agreement with Starbucks in 2007, Mellace had annual revenues of approximately $10 million.
The plaintiffs are asking for compensatory, consequential, general and special damages to make up for the approximately $20 million lost as a result of Starbucks' breach. They accuse Starbucks specifically of breach of contract, breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, intentional misrepresentation, negligent interference with contractual relations, intentional interference with prospective economic advantage and unfair business practices.