Starbucks’ Grande Mistake
By: Brenda F. Pagliaro
Florida Supreme Court Certified Circuit Civil Mediator
We all know what it is like to order a coffee at Starbucks, with its signature sizes ranging from Short to Grande to Venti. Every time I go there for a coffee, I get order anxiety. Starbucks was forced to perk up on June 12, 2023, when a New Jersey federal jury entered a Grande verdict in
favor of the Plaintiff. The story began when two African-American males went to meet a colleague at Starbucks. While waiting, they did not purchase anything and refused to leave when asked. Following the trespass policies of the store, the manager on duty called the police, and the two were removed from the store for trespassing. The event went viral, and the company felt tremendous pressure to act.
Ms. Phillips, a white Regional Director, was brought in to manage the situation and deploy corporate’s action plan. Following the events, it was alleged that the company “took steps to punish white employees who had not been involved in the arrests, but who worked in and around the city of Philadelphia, in an effort to convince the community that it had properly responded to the incident.” Shortly thereafter, Ms. Phillips was terminated after being told, “the situation is not recoverable.” Following her termination, she filed suit against Starbucks in federal court for wrongful termination and discriminatory practices in 2018.
The Plaintiff, Ms. Phillips, sued Starbucks for wrongful termination based on discriminatory practices “against white employees in response to the events.” Starbucks felt strongly about their defense position but in a twist of events, the jury found that the Plaintiff, the white Director, was wrongfully terminated shortly after the high-profile racial profiling incident took place at a Philadelphia Starbucks location. Plaintiff’s counsel indicated that the jury found that race played a role in her termination and that Starbucks engaged in discriminatory practices. As a result, the jury awarded $600,000.00 for compensatory damages and $25 million in punitive damages for an aggregate award of $25.6 million.
Starbucks previously settled with the two men shortly after the incident for a symbolic payment of $1.00 each plus the City’s agreement to fund a program for young entrepreneurs in the amount of $200,000.00. All in all, this event cost Starbucks almost 26 million dollars and a wealth of reputation damage. Of course, the defense is pursuing an appeal, and the resolution payout will stall pending the appellate court’s ruling.
As seen in the above-referenced case, “social verdicts” are on the rise and awards of seven figures are more common than they used to be; especially in today’s litigious environment. The Equal Employment Opportunity Commission’s recent statistics indicates an uptick in discrimination complaints of 20% over 2021, with the largest percentage filed in Florida. Florida accounts for 7.33% of the total claims filed in the United States. The EEOC indicates that over 42% of the claims result in resolution by settlement with only a small percentage of them effectuated through the conciliatory process offered directly through the EEOC.
As a neutral, an effective mediation could provide a” best of both worlds” resolution where the Plaintiff would not have to wait years for compensation and Starbucks could forgo the cost and risk of appeal. As a strong, experienced neutral, cases like this one are ripe for mediation. Weighing the options of a social verdict or a reasonable resolution, I believe a resolution is the best option. Thomas Sowell, the Economist, said, “there are no solutions, just compromise.” I am available to work with the parties to achieve an effective resolution.
Put the coffee on!