Starbucks was sued in the U.S. District Court, Western District of Washington, on Friday, October 21, 2022. The lawsuit alleges that Starbucks Corporation misappropriated trade secrets and breached an implied non-disclosure agreement related to coffee-flavored lip gloss after a meeting with Balmuccino, LLC.
The complaint alleges that Balmuccino began developing a line of coffee-flavored lip balms in 2016. After developing the concept and product, Balmuccino began seeking a joint venture partnership with other entities to manufacture and sell the lip balms. Samantha Lemole, a managing member of Balmuccino, reached out to her brother-in-law, Mehmet Cengiz Öz, known professionally as Dr. Oz, regarding Balmuccino’s search for a partner. Dr. Oz contacted Starbucks CEO Howard Schultz to set up a meeting. Balmuccino then met with Starbucks representatives for a pitch meeting. At that meeting, Balmuccino’s representatives requested that Starbucks Head of Product Development and Senior Vice President, Mesh Gelman, sign a non-disclosure agreement. According to the complaint, Gelman, however, deflected and stated “that the meeting and the items discussed therein were completely confidential and that the relationship between Mr. Schultz and Dr. Öz. . . should provide the necessary comfort and protections [Balmuccino] was seeking via the Non-Disclosure Agreement.”
During the meeting, Gelman inquired about the “concepts and products, the creation process of lip balms, the different flavor possibilities, and other detailed inquiries.” Balmuccino representatives “discussed details of the entire process, including the names and locations of the material suppliers and manufacturers that had been involved during the near two-year development process.” Gelman asked to keep the pitch deck in order to explore the possibility of a partnership. Two weeks after the meeting, Gelman left Starbucks to start his own consulting business.
In 2018, Balmuccino discovered that Starbucks reached out to a supplier that Balmuccino had been working with to inquire about coffee-flavored lip balms. At that time, Starbucks was “requesting the creation of prototypes for Starbucks-branded lip balm and lip balm cases.” Balmuccino also learned that “these prototypes were identical to those [Balmuccino] had given to Mr. Gelman during the October 19, 2017 meeting.” In April 2019, Starbucks announced the launch of four liquid lipsticks/glosses, called “The S’mores Frappuccino Sip Kit.” The complaint alleges that Starbucks “improperly misappropriated [the] confidential information it obtained [from Balmuccino].”
The complaint states causes of action for breach of implied-in-fact contract, breach of oral contract, breach of confidence, and trade secret misappropriation. The complaint seeks relief in the form of a judgment against Starbucks, general damages, special damages, damages for loss of past, present, and future economic losses, damages for other economic losses, a reasonable royalty and/or disgorgement of unjustly earned monies for trade secret misappropriation, punitive damages, interest, and costs. Balmuccino previously sued Starbucks over the same actions in California state court in 2019, but the lawsuit was dismissed for lack of jurisdiction.
Additional Reading
Starbucks sued again over Frappucino lip-gloss trade secrets, Reuters (October 25, 2022)
Balmuccino, LLC v. Starbucks Inc (Case No. 2:2022cv01501)
Complaint in Balmuccino LLC v. Starbucks Inc
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