Tassimo Starbucks Class Action Lawsuit Denied Certification

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Fans of Starbucks Corp. were disappointed to discover their Tassimo brewers couldn’t be filled with Starbucks-branded coffee, but a potential class action lawsuit filed against Tassimo’s manufacturer, Kraft Foods Global Inc., failed to be granted certification Friday. A Michigan federal judge said a putative class of at-home brewers lack materiality, as the filing had not demonstrated that the majority of the purchasers of Tassimo brewers had expected to be able to use them to brew Starbucks-brand coffee.

In the $5 million potential Tassimo Starbucks class action lawsuit, plaintiff Pamela Montgomery had alleged that Kraft had misled consumers into believing their Tassimo coffeemakers would be able to brew Starbucks-brand coffee when that was not the case. Tassimo is a so-called “closed brewing system,” a specialized coffeemaker that can only use pre-packaged beverage discs manufactured by Kraft specifically for the Tassimo. The “T-Discs,” which include a variety of brands and flavors of coffee, tea and other hot beverages, are licensed with the intellectual property owners in question.

Kraft had enjoyed a 12-year partnership with Starbucks, under which the consumer goods giant manufactured and distributed a number of Starbucks- and Seattle’s Best Coffee-brand products, including whole and ground beans, VIA instant coffee, bottled Frappuccinos, and other single-serve products. In 2010, when the pod-style closed brewing system market was booming, Starbucks and Kraft began to argue over the marketing of the coffeehouse giant’s beans and VIA products. VIA was an integral part of Starbucks’ growth strategy, and the coffee company was said to be unhappy with Kraft’s lack of aggressive focus on promoting these products with grocery stores and other outlets.

When the multi-year licensing deal began to fall apart, Kraft and Starbucks had recently begun marketing Starbucks and Seattle’s Best Coffee pods exclusively through the Tassimo brewing systems, competing with the market saturation of the Keurig system’s Green Mountain Coffee-branded pods. But when Starbucks ended the agreement, citing breach of contract, it abruptly pulled its brands from Tassimo. At the time, Kraft sued, arguing that Starbucks’ move undermined sales of its Tassimo coffeemakers before the 2010 holiday season. By March 2011, most of the Starbucks-branded products were off the market. The lawsuit was settled with arbitration in 2013; Starbucks paid Kraft $2.75 billion.

U.S. District Judge Gordon J. Quist let Kraft have it both ways in his May 9 decision to deny certification of the Tassimo Starbucks class action lawsuit. He cited a March 2011 Kraft corporate report with “market research indicating that consumers purchased Tassimo brewers for a variety of reasons, and that most consumers did not associate the Tassimo with Starbucks.” In fact, says the decision, “[m]ost consumers identified factors other than the availability of certain coffee brands—such as the ability to make specialty coffee drinks and ease of use—as the primary reason for purchasing a Tassimo.”

Judge Quist found that the materiality of Montgomery’s claim was lacking. He wrote she “cannot demonstrate the materiality of any alleged misrepresentation using common evidence. A material fact… is ‘one that is important to the transaction or affects the consumer’s decision to enter into the transaction.'” Although she asserts that members of the proposed class were influenced by Kraft’s representations that Starbucks-branded products would be brewed on Tassimo systems, “that assertion alone is insufficient to meet her burden… The Court finds that Plaintiff has failed to produce any evidence demonstrating that the issue of materiality may be demonstrated by common evidence.”

Quist said that Montgomery’s damages from Kraft’s actions were too individualized to meet the standard for class action lawsuit certification. He wrote, “[t]he Tassimo continues to fulfill its essential functions—it brews coffee, including premium coffee, and specialty beverages. It simply does not brew Starbucks coffee. For Plaintiff and other Starbucks loyalists, that fact may make the machine useless. For purchasers that never intended to brew Starbucks coffee, however, the machine has not diminished in value. Those consumers received exactly what they expected. Moreover, although Plaintiff argues that the loss of the ability to brew Starbucks coffee has some objective value, she has provided no evidence to support this contention.”

For these reasons, Judge Quist dismissed the Tassimo Starbucks class action lawsuit.

Montgomery is represented by Peter W. Macuga II of Macuga Liddle & Dubin PC and Timothy H. McCarthy Jr. of the McCarthy Law Group PC.

The Kraft Tassimo ‘No Starbucks’ Class Action Lawsuit is Montgomery v. Kraft Foods Global Inc. et al., Case No. 1:12-cv-00149, in the U.S. District Court for the Western District of Michigan.

UPDATE: On May 16, 2016, the 6th U.S. Circuit Court of Appeals affirmed the dismissal of a class action lawsuit filed by consumers who accused Kraft Foods Global Inc. of duping them into thinking they could use Starbucks coffee pods in their Tassimo coffeemakers.