Starbucks has Secrets

Massachusetts authorities fined Starbucks (NASDAQ:SBUX) $1575 for charging customers a $1.50 fee when they bought coffee in quantities less than a pound and did not disclose the fee on customers’ receipts.

The action has opened a Pandora’s Box for Starbucks, possibly rendering it liable in a class action suit. After the Massachusetts action, a woman from California went to court against Starbucks for charging the fee and hiding it from customers. Her attorneys said in court, “Customers were not given notice of such a fee prior to purchasing such bags of coffee, nor were they given notice after their purchase on their receipt. It was a completely undisclosed fee that unsuspecting customers were paying at stores around the country.”

The attorneys have requested the suit be classified as a class action – this could mean big bucks for the law firms and settlements for the customers who made those small purchases.

Before the suit was filed, Starbucks (NASDAQ:SBUX) clarified the fee was levied to cover labor costs that arose because a pre-sealed bag had to be broken open to provide a portion to the customer. However, the charge was discontinued on Nov 7.

Starbucks’ attorneys have not responded to the suit.

Here’s how Starbucks is trading on the news:

Starbucks Corp. (NASDAQ:SBUX): SBUX shares recently traded at $43.88, up $0.29, or 0.67%. They have traded in a 52-week range of $30.75 to $44.70. Volume today was 2,405,421 shares versus a 3-month average volume of 7,373,140 shares. The company’s trailing P/E is 27.09, while trailing earnings are $1.62 per share.