Friday, May 6, 2016

Suing Starbucks, Seriously?

Apparently the reward for success in America is that everyone lines up to sue you for the most minor slights.  Case in point:  “a Starbucks customer in Chicago has filed a new class-action suit saying that the coffee company underfills its cold drinks by adding too much ice to them.”  Starbucks’ defense is that “ice is an essential component of any 'iced' beverage."  The class-action suit asks for five million dollars.

This news comes less than a month after Starbucks was sued for under-filling its lattes by 25%.  Their probable defense is that foam is part of the experience, but that isn’t really the point.  Suing big companies seems to be the new national pastime.

Remember, this is the same Starbucks that recently ranked 5th in Fortune’s most admired companies with high marks for social responsibility and quality of products and services.  In the same year Starbucks was described by another website as the “epitome of a company guided by its values, with the character, conviction and reputation equity.”  With over 22,000 stores, their biggest problem lately is that they are too popular to be considered upscale or hip, as they were in the early days.

It is also the same Starbucks that served as an example for every financial advisor in the country.  The standard answer to how someone can save money was to not spend $5 a day on fancy coffee.  I don’t hear this much any more.  Maybe the financial advisors have decided it was a losing battle.  People are not going to give up their fancy coffee even if it means paying off college loans sooner or having enough money set aside for a comfortable retirement.

Personally, I have never been in a Starbucks store.  When they went public in 1992, in a gross overestimation of the intelligence and consumer savvy of the American people, I assumed the business model was not sustainable.  How many people are going to spend that much on fancy coffee (plus the inconvenience of getting there and waiting in line), when most coffee drinkers already were set up to make their own coffee at home for far less?  I guess the answer was a lot!  I could have paid the equivalent of $0.27 per share, (adjusted for our six subsequent stock splits) and sold it today for nearly $60.

Well, that’s my loss.  I guessed wrong.  Little did I realize that the answer to the financial problems was to spend money on high-priced coffee all these years and then, when they got to be big and successful, sue them for adding too much ice.  It’s the new American way – have your cake (or coffee) and eat it, too!

Enough with the sarcasm…  The real problem here is economic understanding and perspective.  People assume that awards or settlements from these lawsuits come from some magical insurance fund.  It really comes from you and me as customers of these companies, and, where insurance is involved, from you and me as customers of insurance companies whose rates must go up every time their risks increase, regardless of our individual behavior. 

This person was not harmed by getting less beverage and more ice.  This was likely not a one-time encounter where they felt they got cheated out of maybe a dollar.  It was likely a pattern where they got cheated out of 10 or 20 dollars.  But if money was the issue, they shouldn’t have been patronizing Starbucks in the first place.  Fancy coffee is a luxury!  It’s a choice; we can live without it and did so for hundreds of years.  Anyone who is not satisfied with a product can easily take their business elsewhere.  A lawsuit for too much ice seems vindictive and much more trouble than it’s worth.

The problem is that lawyers know and most consumers are learning that big, successful companies will grudgingly part with a few million dollars to settle even a ridiculous grievance to avoid the expense and disruption of a trial with the very real risk of a sympathetic jury taking the opportunity to redistribute a little of the wealth.  The system is broken, and Americans both as consumers and jurors continue to exacerbate the problem.

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