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Kettler Int'l, Inc. v. Starbucks Corp.

United States District Court, E.D. Virginia, Norfolk Division

January 28, 2015

KETTLER INTERNATIONAL, INC., Plaintiff-Counterclaim Defendant,
v.
STARBUCKS CORPORATION, Defendant-Counterclaim Plaintiff

For Kettler International, Inc., Plaintiff, Counter Defendant: John C. Lynch, LEAD ATTORNEY, David Michael Gettings, Troutman Sanders LLP, Virginia Beach, VA.

For Starbucks Corporation, Defendant, Counter Claimant: Christopher E. Hassell, LEAD ATTORNEY, Craig Lawrence Sarner, Washington, DC; Danielle Christine Loss, Malcolm Donald Schick, Thomas Kelly Cox, LEAD ATTORNEYS, PRO HAC VICE, San Diego, CA.

Page 496

OPINION AND ORDER

HENRY COKE MORGAN, JR., SENIOR UNITED STATES DISTRICT JUDGE.

This matter is before the Court on Plaintiff Kettler Int'l, Inc.'s (" Plaintiff" or Kettler" ) Motion for Sanctions (" Motion" ). Doc. 35. A hearing was held on January

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20, 2015. Ruling from the bench, the Court GRANTED the Motion in Part, FINDING that Defendant Starbucks Corp.'s (" Defendant" or " Starbucks" ) conduct constituted spoliation, but WITHHELD the imposition of sanctions pending further briefing. The Court now issues this Opinion and Order explaining its reasoning.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This declaratory judgment action arises out of allegedly defective patio furniture sold by Kettler to Starbucks. Beginning in approximately 2009, Plaintiff began selling " Carlo" chairs to Starbucks, its agent, and/or its contractors. Compl. ¶ 1. Delivery continued until 2013. Id. ¶ 15. Starbucks never refused a delivery of Carlo chairs, Id. ¶ 16. This Motion centers on Defendant's destruction of approximately 7,300 of 7,500 chairs used in Starbucks stores.[1]

The origin of this dispute can be traced to January 1, 2011, when Starbucks customer Hae Jee was involved in an accident that occurred in a Los Angeles, CA Starbucks when the leg of a Carlo chair in which she was sitting broke. Doc. 43 at 3. " Between 2011 and 2013, Starbucks received complaints of four (4) alleged personal injuries involving the sudden collapse of a Carlo chair." Id. In a letter dated April 19, 2012, Defendant's third-party claim administrator notified Kettler of Ms. Jee's claim. Doc. 43-3 at 62. Moreover, the same administrator notified Kettler on August 20, 2012 of a second claim involving a Starbucks customer, Mr. Craig Roberts. Doc. 43-4 at 2. Starbucks also advised the Court that two other chairs failed while being used by patrons.

In December 2012, Starbucks was sued in California state court by Hae Jee for an injury that resulted from the alleged malfunctioning of one of the chairs. Kettler Intern., Inc. v. Starbucks Corp., 55 F.Supp.3d 839, 2014 WL 5461842, at *1 (E.D. Va. Oct. 21, 2014); see also Doc. 16-1 at 21. On September 23, 2013, Starbucks filed a third-party complaint against Kettler and Stanislaus Funding, Inc. for indemnity and failure to obtain insurance in accordance with the Starbucks' Supplier Handbook. Kettler, 2014 WL 5461842, at *1; see also Doc. 36-1 at 21. The California state court case pertained to one discrete chair.

Concerned about the Carlo chair, Starbucks commissioned SGS, a third-party, to test the Carlo Chair for defects. Doc. 43-3 at 32. SGS received the sample chair on October 18, 2013. Id. SGS prepared its report on November 11, 2013, indicating that the Carlo chair failed certain impact tests. Id. It appears that only one chair was tested by SGS. See id. (" Sample Description: Outdoor Chair." ). During discovery, Starbucks withheld production of this report on the basis of work product privilege.[2] Doc. 43-2 at 2.

On February 10, 2014, Starbucks and DAVACO, Inc. entered into an agreement for the removal and recycling of Carlo Chairs from Starbucks stores.[3] Doc. 36-5 at 2; Doc. 43-1 at 1. " Starbucks Legal" requested the services. Doc. 36-5 at 2. Mesa Logistics Group was the party tasked with recycling the chairs. Id. Star

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bucks asked DAVACO to set aside two hundred (200) of the removed chairs be set aside and stored, not recycled. Doc. 43-1 at 2. According to DAVACO's Director of Operations, " Starbucks did not ask DAVACO to select the two hundred (200) Carlo chairs to be set aside and stored on the basis of any physical criteria, including any observable defect, quality or characteristic." Id. Accordingly, DAVACO caused two hundred (200) of the Carlo chairs that had been removed from Starbucks Stores, but were now in a warehouse, to be pulled at random and set aside for storage. Id. The ...


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