A California man won a $50 million USD lawsuit against Starbucks after being seriously burned when a Venti-sized (20oz) hot tea drink that was not firmly enough secured in the takeout tray fell onto the man's lap.
If you think this sounds a lot like the famous "McDonald's hot coffee" incident from the 1990s that most business students learn about in school, you'd be correct.
In the McDonald's case, there wasn't a tray involved; the coffee cup lid was determined not to be properly secured before being handed to the customer. The woman involved in that incident was initially awarded a $3 million settlement; a judge later reduced that to an undisclosed amount under $600,000. Some people thought even that was excessive.
But if you understood the facts of the McDonald's case, you'd know it wasn't a frivolous lawsuit; the woman was seriously burned from a coffee that the courts decided was unreasonably hot.
And this more recent case wasn't frivolous either: the man had to undergo skin grafts and other procedures on his genitals as a result of the burns, and "has suffered permanent and life-changing disfigurement, according to his attorneys."
There are no winners in situations like this.
In both cases, people were seriously hurt. And while some might cynically argue that $50 million would ease the man's pain, I'm not sure I would scald and permanently disfigure my nether regions for that amount of money... would you?
In both cases, a company will pay enormous settlements for incidents that, while unfortunate, were clearly accidents.
In both cases, most people won't read past the headlines on the stories, and will not understand these settlements are ultimately a victory for the US legal system, not a failure.
In retail, accidents are inevitable.
Sometimes, as in both the McDonald's and Starbucks cases, those accidents will be serious.
So, like it or not, companies need to have plans in place to deal with them when they do.
It was reported Starbucks offered the customer "$3 million before the trial began, then $30 million to settle the case." The customer initially agreed to $30 million, with the caveat that "Starbucks would apologize, change its policies and issue a memo to all Starbucks restaurants to double check hot drinks before turning them over to customers."
Starbucks would not agree to the terms.
That was a bad decision because the terms were entirely reasonable.
First, because an apology isn't necessarily an admission of guilt. And sometimes (although not in the case of serious burns to the nether regions), a sincere apology is enough.
And second, because Starbucks ensuring its partners (employees) are properly trained on the critical importance of firmly secure hot beverages in takeout trays (and told why this is so important, and what could happen if they fail to do this) shouldn't be seen as a burden, it should be seen as common sense.
Starbucks has a duty to its shareholders, and it's no surprise they plan to appeal the jury award.
But there's something to be said about a company willing to own its mistakes.
How hard should they fight this decision if doing so is seen as a company not caring for its customers or willing to be held accountable for an employee inadvertently causing harm?
Starbucks as a company is worth over $100 billion.
Is it worth further damaging the brand to avoid having to pay $50 million...
... or is it the smarter decision to admit fault, write a big cheque, and then take the necessary actions to reduce the risk of something like this happening again?
If I was leading a $100 billion company, I know what I'd do.
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