Kraft loses second bid

Feb. 28, 2011

The U.S. Court of Appeals for the Second Circuit upheld a lower court's ruling denying a request from Kraft Food for a preliminary injunction against Starbucks Coffee Co., which would have stopped Starbucks from unilaterally ending its strategic partnership with Kraft (which distributes Starbucks coffee to grocery stores) before a mandatory arbitration proceeding decides the core issues in this dispute. The arbitration process is already underway and will continue over the next several months.

The U.S. Court of Appeals for the Second Circuit upheld a lower court's ruling denying a request from Kraft Food for a preliminary injunction against Starbucks Coffee Co., which would have stopped Starbucks from unilaterally ending its strategic partnership with Kraft (which distributes Starbucks coffee to grocery stores) before a mandatory arbitration proceeding decides the core issues in this dispute. The arbitration process is already underway and will continue over the next several months. Today's Court decision does not affect Kraft Foods' vigorous defense of its rights in arbitration.

After the ruling, Marc Firestone, executive vice president, corporate and legal Affairs and general counsel, stated: "While disappointed in the outcome, we respect the U.S. Court of Appeals' decision. The Second Circuit did not rule on the fundamental issue of whether Starbucks could exit our contract without paying the fair market value, plus a premium. That question will be decided in arbitration. Having now seen Starbucks inability to substantiate its claims of material breach, we certainly intend to press our case aggressively and look forward to a favorable decision. We also expect to prevail in the marketplace, given the strength of our $5 billion global coffee business. Kraft is committed to competing in all coffee segments, including premium and on-demand. Our future plans are as robust as our coffee products, and we look forward to sharing them at the appropriate time."

Alan Hilowitz, a spokesman for Starbucks, e-mailed the Chicago Tribune a statement. "We are pleased that the court of appeals has confirmed the district court's ruling," he wrote.

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