AOL Money & Finance

Starbucks loses lawsuit -- as it should have

More

Starbucks (NYSE: SBUX) lost a class-action lawsuit, according to this article, centering on the sharing of tips between baristas and shift supervisors. Erstwhile barista Jou Chou filed the legal complaint in 2004. Class-action status was eventually granted, a move which then involved up to 100,000 employees in the company's California coffehouses. San Diego Superior Court Judge Patricia Cowett doesn't believe that employees in managerial positions should share in tips given to the baristas, and she paved the way for $100 million in back gratuities to be distributed to those so affected.

Naturally, Starbucks disagrees with this ruling and will appeal. A spokeswoman for the company, Valerie O'Neil, says this is nothing more than an example of "abuse of the class-action procedures in California's courts." This is a confusing issue, to say the least; shift supervisors do find themselves sometimes serving coffee to patrons. However, it seems, in my opinion at least, that the judge is correct in her interpretation of California law -- tip pooling cannot benefit those in managerial positions. We all know why it is done -- tips essentially subsidize the pay of supervisors/managers, and this is a beneficial thing for Starbucks.

However, I believe Starbucks is on the wrong end of this argument. It's too bad; Starbucks right now is fighting to regain the regal java status it once took for granted. Nowadays, joints like McDonald's (NYSE: MCD), Burger King (NYSE: BKC), and, of course, Dunkin' Donuts, are vigorously competing for their share of the coffee spoils. I don't drink coffee, but I know that there is money in the stuff, and that's why I think that, with all of its current troubles, Starbucks should work to put this legal action behind it so that it can concentrate on the bigger issue of significant sustainable growth. The negative publicity is a concern, and although this distraction won't, by itself, derail Starbucks, it is still nevertheless a distraction.

Disclosure: I don't own any shares of any company mentioned here; positions can change at any time.

Reader Comments (Page 1 of 1)

Symbol Lookup
IndexesChangePrice
DJIA+132.7910,450.95
NASDAQ+29.972,176.01
S&P 500+14.861,106.24

Last updated: November 24, 2009: 04:17 AM

BloggingStocks Exclusives

Hot Stocks

DailyFinance Headlines

Latest from BloggingBuyouts

TheFlyOnTheWall.com Headlines

    BioHealth Investor Headlines

    WalletPop Headlines

    My Portfolios

    Track your stocks here!

    Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

    BloggingStocks Partners

    More from AOL Money & Finance

    WalletPop Headlines