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Judge bars Starbucks from closing 77 failing Teavana stores

Posted by  $  AJAshinoff 1 month, 2 weeks ago to Business
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No fan of Starbucks, but a private business being told by government it can't prevent its losses? WTF??

"In a 55-page order, found that the very profitable Starbucks could absorb the financial hit — estimated by Starbucks to be $15 million over five months — better than Simon could. The mall operator did not provide an estimate of how much the closings of the Teavana stores would hurt them."

Atlas has Shrugged.
SOURCE URL: https://nypost.com/2017/12/01/judge-bars-starbucks-from-closing-77-failing-teavana-stores/


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    Posted by  $  CBJ 1 month, 2 weeks ago
    Before rushing to judgment, consider this paragraph:

    (Judge) Welch admitted that “no court has ever entered preliminary or permanent injunctive relief to specifically enforce a continuous operations covenant against a non-anchor tenant” — but she did so anyway.

    If there was a "continuous operations covenant" in the lease, that puts a somewhat different light on the issue. "Absorbing the financial hit" should have had nothing to do with the Judge's decision, but enforcing a lease covenant might be a legitimate exercise of judicial power.
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  • Posted by Lucky 1 month, 2 weeks ago
    View 1:
    An interventionist progressivist judge tells Starbucks how to run their business
    since they can afford it, and presumably 'for the common good'.
    Gross, but there is another view.

    View 2:
    A court rules that a contract agreed between two parties must be complied with
    even if compliance is unexpectedly unprofitable for one party.

    I go for View 2.

    The observance of freely agreed contracts is crucial for all business and private relations.

    I thank CBJ for mentioning that possibility.
    It is too easy to jump on a bandwagon.
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    • Posted by tdechaine 1 month, 2 weeks ago
      How can you consider a hypothetical possibility when that was not stated in the article?
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      • Posted by  $  CBJ 1 month, 2 weeks ago
        In areas where the article is unclear, hypothetical possibilities are all we have to go by. This issue makes for a good "thought experiment" that can be useful in clarifying and defending our principles.
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      • Posted by Domminigan 1 month, 2 weeks ago
        Because the article is probably incomplete and may be very misleading.
        Starbucks is a very "progressive" company. Simon is a toilet stain of a company. There is no telling what they agreed to and no way of knowing if the reporting in this article is complete or fully accurate.
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        • Posted by  $  1 month, 2 weeks ago


          http://www.businessinsider.com/judge-...
          NY Post as well https://nypost.com/2017/12/01/judge-b...
          "“I’m somewhat shocked by the ruling,” said real estate lawyer Joshua Stein. Welch “catalogues every possible detriment to Simon as a result of having vacant space,” Stein said, adding, “That’s part of a job description of owning real estate. You deal with it and don’t get injunctions to have your tenant continuing to operate.”
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          • Posted by Domminigan 1 month, 2 weeks ago
            The business insider article also does not contain enough information. I haven't found any articles directly referencing the contract under which the tea shop was being operated in Simon properties except this from the Seattle times:
            Starbucks declined to say what its obligations, or any possible penalties, would be for pulling out of its leases early. A company spokesperson said only that “we are responding to the lawsuit and are working to resolve this dispute.”

            Source:
            https://www.seattletimes.com/business...

            Without anyone directly referencing the contract both parties agreed to, I cannot agree that it is a bad judgement.

            On the surface with the limited info I have; it is a bad judgement and fouls the court the judgement was given in. I am quite certain that I don't have all the information needed for me to actually hold that as my opinion yet. I cannot know fact from fiction when I don't know who agreed to what.
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  • Posted by cranedragon 1 month, 2 weeks ago
    I checked out an article on the Wall Street Journal and it too was inconclusive on the basis for the judge's ruling. At this time I think it's too early to tell whether the judge was enforcing a valid agreement between the parties or engaging in social overreaching. Simon Properties isn't the kind of plaintiff that usually excites warm, protective feelings in the bosoms of judges.
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    • Posted by  $  1 month, 2 weeks ago
      It is highly suspect that a judge with ANY type of agreement COULD force a company to stay in business. The only logical thing that could occur for a violation of a contractual agreement is lost wages, fees, and a penalty. By what authority does a judge say "You must remain in business and continue taking losses to support the landlord's profitability." Its irrational.
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      • Posted by  $  CBJ 1 month, 1 week ago
        What you're saying is that a company cannot legally contractually agree to remain in business for a specified period of time in exchange for other considerations, and that a judge can overturn the contents of such a contract even though this contract did not violate the rights of either party. Neither argument makes sense from an Objectivist perspective.
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  • Posted by term2 1 month, 2 weeks ago
    Directive 10-289 is here.
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    • Posted by  $  CBJ 1 month, 1 week ago
      Directive 10-289 has nothing to do with enforcement of a contract that was freely entered into.
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      • Posted by term2 1 month, 1 week ago
        We dont know the details really. The media makes it sound like 10-289, but we will see if starbucks continues to operate or just pays off the lease contract (which is what they would do if it was a contractual issue). Staying open when you are losing money every day just isnt something that a company would do, however.

        We are so close to directive 10-289 in many ways already; I would not be surprised if it were here.
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  • Posted by SteveJay27 1 month ago
    Let’s be accurate. Starbucks agreed to leases with covenant requiring continued operation of stores. They agreed to that binding legal contract. This is NOT an anti-libertarian ruling.
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    • Posted by  $  1 month ago
      even with a binding legal contract for continual operation there would be a penalty clause with damages should they violate their agreement. A judge cannot FORCE them to stay open, continual suffering financial loss, maintaining employees. All a judge could do is rule that damages should be awarded.
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  • Posted by chad 1 month, 2 weeks ago
    There are many unknowns here, what is required by the lease? Is an option to abandon the lease in place i.e. penalties that the offending company could pay? That the judge made clear that it is a non-anchor tenant (usually less restrictive leases) and had has stated that it is for preliminary or permanent injunctive relief clearly indicates her ruling is outside the bounds of enforcing the contract but to maintain income for the offended party. I do agree that Starbucks is a socialist company and don't care if they get their comeuppance at the hands of those they have empowered. The legal precedent is dangerous for any who might try to follow a similar path.
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  • Posted by  $  Olduglycarl 1 month, 2 weeks ago
    A page right out of Atlas Shrugged. It's amazing to me that Rand saw this coming.
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    • Posted by  $  CBJ 1 month, 1 week ago
      Rand saw what coming? A judge that enforces the terms of a voluntary contract?
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      • Posted by  $  Olduglycarl 1 month, 1 week ago
        Just the general idea that a court or government could say, you cannot go out of business.
        Now, as for the "voluntary contract", I would be surprised if there wasn't an escape clause for these extenuating circumstances.

        I am not a fan of Starbucks, their coffee, their politics nor their cultural views but if I were them, I'd figure out, real quick, a new business model that would make me a profit. But maybe, they have lost that ability due to their leftest views.
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        • Posted by  $  CBJ 1 month, 1 week ago
          Looks like a voluntary contract to me:

          “Starbucks made a business decision to acquire Teavana in 2013,” the judge wrote. “Starbucks voluntarily entered into and assumed lease agreements — regardless of the financial success of Teavana — with Simon for each of the stores at issue and agreed to continuous operation covenants.”

          The judge also determined that Starbucks “unilaterally” decided to announce the closing of Teavana stores in 2017 and winding down operations without communicating with Simon.

          http://www.nrn.com/operations/court-b...
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  • Posted by  $  allosaur 1 month, 2 weeks ago
    Oh, some judge here or there in the USA can tell American free enterpise to not close stores it can't afford.
    Now me dino be waiting for some judge here or there to tell the public where it is mandatory shop so stores can stay open. Hey, even what restaurants we must eat at to support.
    Oh, and landlords, wait for some judge here or there to tell you that you can't have vacant space. Not ever. Or else!
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  • Posted by spicevalleyroad 1 month ago
    If judges are allowed to tell a business if it cannot close a facility, how low before judges are allowed to control private aspects of our daily lives? Businesses should be allowed to flourish/fail on their own unless a binding contract stating otherwise exists.
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  • Posted by  $  Susanne 1 month, 1 week ago
    We will stay open... hire one person to babysit the store, remove all inventory and fixtures owned by Teavana from the facility, set up a card table at the door of the otherwise empty store, and sell iced tea. At $60 a cup.

    Sorry, your honor, we're not closed... see, we even have product here to sell, a operating till, an employee, even a counter.

    Too bad they can't use a coleman lantern for their light, and shut off the other lights and power in the store... tho I think the bare and abandoned looking store would look uglier, er, more stark, er, less attractive" er, well... Leave the lights on.

    Tell ME how I'm going to run MY private business? Think not.
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    • Posted by  $  CBJ 1 month, 1 week ago
      "All of the leases contain a “continuous operation covenant,” requiring Teavana to operate with a full staff and full stock of merchandise for the duration of the lease."
      http://www.nrn.com/operations/court-b...
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      • Posted by freedomforall 1 month, 1 week ago
        "Welch’s decision was based on her finding that Simon would suffer greater harm if the Teavana locations closed than Starbucks would if they remained open."
        The profit or loss of the parties is not relevant and if the statement is true, the judge's reasoning is flawed.
        If this statement is true and it is the basis for the decision, the ruling should be overturned. However, if the covenant exists as described, then the landlord should prevail under the contract assuming the judge cites the contract terms as the reason for the decision. Profit of the parties to the contract should not be relevant unless the contract covenant is stated in those terms.
        Agreeing to such a covenant was unwise.
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        • Posted by  $  CBJ 1 month, 1 week ago
          I agree. The covenant appears to exist as described:

          “Starbucks made a business decision to acquire Teavana in 2013,” the judge wrote. “Starbucks voluntarily entered into and assumed lease agreements — regardless of the financial success of Teavana — with Simon for each of the stores at issue and agreed to continuous operation covenants.”

          The judge also determined that Starbucks “unilaterally” decided to announce the closing of Teavana stores in 2017 and winding down operations without communicating with Simon.

          http://www.nrn.com/operations/court-b...
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          • Posted by freedomforall 1 month, 1 week ago
            Looking forward to hearing the details.
            I wonder if Starbucks could have come to an agreement with Simon if they communicated, or if they tried and Simon decided it was time to get a ruling on this type of clause to shore up their position for the future. Could be Simon is in confidential talks to sell the company and this issue is crucial to valuation. Wonder how the trial venue was selected. I suspect it wasn't accidental.
            We live in interesting times.
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    • Posted by  $  CBJ 1 month, 1 week ago
      The article indicated that the contract contained a "continuous operations covenant". Enforcement of a provision of a voluntary contract is not the same thing as telling one how to run his or her own private business.
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  • Posted by walkabout 1 month, 2 weeks ago
    Will her honor next order the employees to continue to work at the underperforming stores? Stores that do not generate enough income to pay them the wages they agreed to? Or will the judge reduce the minimum wage to put the income/outgo equation back into balance? I'm no fan of SB's -- I would put "do you patronize Starbucks" on an IQ test and if "yes," lower otherwise generated IQ by 10 points -- paying what they charge for coffee is nuts, but that's just a clinical opinion.
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  • Posted by NealS 1 month, 2 weeks ago
    Wow, I wish I would have know about that rule when I lost a tenant in my 4-plex (apartment). I had to actually go and put in an ad to find a new one. "Unfair".
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    • Posted by tdechaine 1 month, 2 weeks ago
      It's not a rule; it's a criminal exception. And shame on you for considering taking advantage of the same statist policy.
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      • Posted by jdg 1 month, 2 weeks ago
        Breaches of contract are a different area of law than crimes, and typically are governed by common law rather than statute. It's unusual that a judge will order a breaching party to perform as he said he would (specific performance), because it can be involuntary servitude; usually money damages are awarded instead. I'd like to hear the reasons the judge gave for not doing that, before I decide whether I agree with it or not.

        But closing a store that is losing money is something all retailers do, and it often involves breaking a lease. I see no major or unusual wrong here unless it's by the judge.

        David Friedman, in Law's Order, discusses breach of contract (and why it should often be allowed) at great depth.
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        • Posted by  $  CBJ 1 month, 1 week ago
          Re: "It's unusual that a judge will order a breaching party to perform as he said he would (specific performance), because it can be involuntary servitude . . . " Since when is performing an action that one agreed to perform "involuntary servitude"? That may be the prevailing legal interpretation, but it makes no sense from an Objectivist perspective. Morally, one cannot unilaterally break a contract whenever one feels like it, on the grounds that adhering to its terms would amount to "involuntary servitude".
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  • Posted by wiggys 1 month, 2 weeks ago
    this judge wants to get her(?) 15 minutes of fame.
    if starbucks is in any other malls owned by this company they should close them.
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  • Posted by freedomforall 1 month, 2 weeks ago
    Amerika is doomed.
    I can't even express how angry this makes me (unless there is something really weird in the lease contract and the media has misrepresented the ruling.)
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    • Posted by Dobrien 1 month, 2 weeks ago
      With a continuous operations clause , Starbucks agreed when signing with Simon . To me it is kind of like consigning on a loan .Don't be shocked when your on the hook for a payment expected.

      Simon argues that if Starbucks is allowed to “prematurely” break its lease, it could be forced to fill the vacancies with “less creditworthy tenant(s)” or less desirable tenants “who will only agree to less desirable lease terms, and/or a shorter-term lease,” according to the court filings.
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      • Posted by  $  1 month, 2 weeks ago
        Even so, paying a penalty for breaking the lease would save Starbucks money. Forcing them to stay open violates their rights. Starbucks is in no way responsible for the solvency of the malls/buildings they lease, only paying their rent for the space they use or the penalty for breaking the agreement.
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        • Posted by freedomforall 1 month, 2 weeks ago
          We must examine the 55 page ruling to discern the facts. The news story does not provide enough detail on the contract or if the judge is ruling within the terms of the contract.
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          • Posted by Domminigan 1 month, 2 weeks ago
            Absolutely true.
            We can not trust media to give us unbiased fact. We never should have in the first place.
            If Starbucks has signed an agreement that states it keeps up the locations for it's tea stores by keeping those stores open and operational for the duration of the lease; then the ruling was appropriate and the media is electing to leave out that fact.
            If the lease agreement only states that it will pay the lease throughout the contract, AND the judge ordered them to keep the stores open; then the judge has overreached significantly, and the media has mostly fairly reported the situation.
            I would imagine the language of the contract falls somewhere in the middle of these. Unfortunately we cannot know what is going on without the lease, the ruling and probably all other associated paperwork in the case.
            Even my local reporters are being called out nearly daily for twisting facts to create sensational headlines or misleading articles.
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        • Posted by Dobrien 1 month, 2 weeks ago
          That's why a judge has ruled on the issue . 2 entities entered into an agreement. One wants out. I suppose paying for the commitment you make might avoid a judgement.
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        • Posted by  $  CBJ 1 month, 2 weeks ago
          But did the lease contract actually spell out a penalty for early termination of the lease? In my view, the answer to this question is key to deciding whether Starbucks has the unrestricted right to walk away.
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          • Posted by  $  1 month, 2 weeks ago
            While I cannot say with certainty, I'd be very surprised if any lease (I've paid for a few commercial leases over the years) didn't have a penalty clause for early termination.
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            • Posted by  $  Susanne 1 month, 1 week ago
              I'd expect an early termination penalty... all part of doing business. I would NOT expect a judge to force me to lose money... then again, this IS the brave new world.

              Anyway, if I HAVE to stay open, well... I'm sure we could do that. I put my solution below.

              I wonder if the same judge will order Studebaker back in business, because I want to buy a Stude Pick-up, and it's my RIGHT to force someone to sell me something I want, because I'm just that entitled and special. No money? Not my problem. No factory? Not my problem.. I'm sure the judge will force -someone- to sink billions into it so I can have my pickup truck.
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    • Posted by term2 1 month, 2 weeks ago
      It sounds like Starbucks wanted to prematurely break the lease. It wasnt stated whether this was allowed in the lease document. But in any event, if I were starbucks, I would certainly not staff the store and I would clear it out of inventory during this forced "opening".
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      • Posted by  $  CBJ 1 month, 2 weeks ago
        I don't think this would be a good move from a PR point of view.
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        • Posted by term2 1 month, 2 weeks ago
          If its seriously losing money, I would think they would get better PR by being smart business people and admitting a mistake and correcting it. I dont want to pay more for my starbucks stuff (which I dont buy anyway actually) than I had to.

          When the NFL offered 100 million to the black players (who make millions each) to help their "cause"- all I thought of was how much my ticket prices would go up as a result. It made me upset and even less likely to go to an NFL game
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