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California company alleges breach of contract by Starbucks

An interesting breach of contract dispute is brewing between coffee powerhouse Starbucks and a family-owned food company who alleges that the larger corporation has basically put them out of business. Starbucks reportedly decided to stop honoring its contract with Mellace Family Brands, who provided them roasted nut snacks, once customers started complaining about the quality of the nut products. Mellace views that decision to discontinue its products as a breach of contract; one which resulted in the California-based food company going bankrupt.

In an interesting twist to the story, an FDA investigation revealed that the roasted nut snacks were apparently contaminated due to gas leaks in a facility that actually belonged to Starbucks, not Mellace. If true, that would seem to support Mellace’s side of the issue, rather than the coffee giant’s version. Mellace has sued Starbucks for approximately $20 million in damages over the discontinuation of their roasted nut snacks.

A Starbucks representative, on the other hand, stated that the coffee company has experienced quality issues related to Mellace’s products in the past. The two companies started working together back in 2007, when Starbucks approached Mellace about providing their snack products in its coffee stores. That came to an end sometime after May 2010, when Starbucks reported receiving multiple customer complaints related to the nut snacks. Starbucks called a halt to their contract with Mellace and refused to honor any further orders. Mellace claims this eventually led to their company skidding into bankruptcy.

Mellace decided to do some digging into what went wrong with their products, and sent some of the snacks returned by Starbucks to the FDA. In their legal complaint, Mellace claims that the FDA documented that the tainted products were due to issues on Starbucks’ part, so the other company’s decision to pull out of their deal is claimed to have been an unjustified breach of contract. California business owners who have dealt with any similar contract dispute issues may want to follow along as the case between the “David and Goliath” companies makes its way through the courts.

Source: The Huffington Post, “Mellace Family Brands: Starbucks Killed Our Family-Run Food Company,” Nate C. Hindman, Sept. 12, 2012