A Washington state appeals court has ruled in favor of Starbucks and its top leadership, tossing a shareholder lawsuit that accused the company of harming its reputation through alleged union-busting practices.
In an unpublished decision issued Monday, a three-judge panel said the investors behind the proposed class action failed to meet basic procedural requirements before taking the company to court. The judges concluded the case should be dismissed because the plaintiffs did not show that Starbucks’ board knowingly or intentionally engaged in misconduct.
The lawsuit was brought by shareholders Joe W. Trimm and Andre Rodney, who argued that Starbucks’ stock suffered after company leaders allegedly failed to curb anti-union efforts at stores nationwide between 2019 and 2023. Trimm first filed the case in 2023.
Writing for the panel, Court of Appeals Judge J. Michael Diaz said the investors never made a formal demand that Starbucks’ board take corrective action before suing, nor did they adequately explain why such a demand would have been pointless.
“Because the complaint did not raise particularized factual allegations of knowing or intentional misconduct by a majority of directors, they did not show it would have been futile to make a pre-suit demand on the board,” Diaz wrote.
As a result, the panel said the lower court should have dismissed the case on procedural grounds. The appeals court reversed the trial judge’s earlier decision and ordered the lawsuit dismissed without prejudice, leaving the door open for the investors to refile if they comply with state law requirements.
The shareholders had accused Starbucks executives and board members of breaching their fiduciary duties by failing to properly oversee labor relations and ensure compliance with the National Labor Relations Act. Defendants named in the case included Starbucks itself, former CEOs Howard Schultz and Kevin Johnson, along with current and former board members.
Starbucks and the individual defendants argued that the lawsuit could not proceed because the investors failed to satisfy Washington’s demand requirement for shareholder derivative actions. Under state law, shareholders must first ask a company’s board to address alleged wrongdoing unless they can show that doing so would be futile.
The appeals court agreed, noting that because no demand was made, the investors were required to plead detailed facts showing that a majority of directors faced a substantial likelihood of liability due to intentional or knowing violations of the law.
“As petitioners rightly argue, the complaint nowhere pleads such intention or knowing wrongdoing at all,” the panel said.
The court also pointed out that the complaint itself undermined the investors’ claims by describing steps the board had taken to stay informed about labor issues. According to the opinion, Starbucks’ directors received updates on unionization concerns at multiple board and committee meetings in 2022 and consulted with legal counsel on labor relations.
“To the contrary, the complaint actually details facts which reflect that the directors did attempt to be informed of labor management issues,” the judges wrote.
King County Superior Court Judge William Dixon V had previously allowed the case to move forward in brief orders issued in May 2024, but the appeals court found that decision legally flawed.
Judges Bill Bowman, J. Michael Diaz, and David S. Mann sat on the appellate panel.
Representatives for both sides did not respond to requests for comment.
The case is Trimm et al. v. Starbucks Corp. et al., before the Washington Court of Appeals, Division I.
