First Court Hearing in Starbucks Rental Fee Lawsuit
Court: "An Issue That Should Be Resolved Through Settlement"
The trial for the lawsuit filed by Starbucks store landlords against the headquarters, demanding payment of unpaid rent and proper settlement, has officially begun.
According to legal sources on December 12, the Civil Settlement Division 29 of the Seoul Central District Court (Presiding Judge Ko Seungil) held the first hearing the previous morning for the lawsuit filed by 37 Starbucks store landlords, including an individual surnamed Shin, against Starbucks operator SCK Company, seeking payment of commissions (rent).
Previously, at the end of April, the plaintiffs filed a lawsuit with the Seoul Central District Court against SCK Company, each claiming 14 million won, representing a portion of unpaid commissions. (Reported by The Asia Business Daily on May 12: [Exclusive] Starbucks Store Landlords File Lawsuit Against Headquarters: "Losses Due to Omitted Sales")
The plaintiffs argue that the discount amounts and free coupons from the prepaid paid subscription service "Buddy Pass," which Starbucks has operated since October 2024, or from promotions conducted in partnership with credit card companies, should be included in the store sales figures used to calculate rent. They claim that by excluding these amounts, they have suffered losses.
For example, if a customer who subscribed to the Buddy Pass receives a 30% discount and purchases coffee and food worth 10,000 won for 7,000 won at a store, the sales should be recorded as the pre-discount amount of 10,000 won. The plaintiffs question why the sales are recorded as 7,000 won, thus omitting 3,000 won from the sales and ultimately resulting in lower rent payments.
The Key Issue: Whether Buddy Pass and Partner Card Discounts Should Be Included in Gross Sales
On this day, the court organized the lists of evidence, including the preparatory documents submitted by both parties before the first hearing, summarized the main issues of the case, and listened to the positions of both parties' legal representatives.
First, the court stated, "The plaintiffs are seeking unpaid commissions, and the reason for the difference in commissions is how to calculate net sales-specifically, whether the pre-discount amounts from prepaid subscription services and coupons issued under partnership agreements should be included in gross sales. The defendant is refuting the plaintiffs' claims, considering the nature of the fees for prepaid subscription services."
The court then asked, "If the subscription fee is the price for the headquarters' promotional activities, wouldn't the upper limit of the related costs be the subscription fee itself?"
The Starbucks side responded, "In fact, the subscription service fees are not higher than the costs. Since we run standardized promotions nationwide, our internal assessment is that the headquarters bears much higher costs."
Plaintiffs: "Discounts Are Not Deductible Under Contract" vs. Defendant: "Issue Is the Concept of Net Sales"
At this, Hyun Minseok, attorney at Law Firm YK representing the plaintiffs, requested the opportunity to explain this point to the court.
Attorney Hyun stated, "The lease agreement in this case specifies which discounts are deductible. However, the subscription services and card company partnership discounts provided by the defendant after the contract was signed are not listed and therefore are not subject to deduction. Thus, our position is that commissions should be paid based on the pre-discount price."
He continued, "Moreover, not only does the defendant fail to calculate commissions based on the pre-discount price, but they also do not distribute to the plaintiffs the subscription fees they receive, nor the partnership commissions received from partner companies."
Attorney Hyun further explained, "The legal relationship between general buyers and the defendant can be viewed as a sales contract for purchasing coffee. Therefore, the subscription fee paid by the customer is a form of advance payment for part of the purchase price, and the partnership commission paid by the partner company can be seen as a third party paying part of the purchase price on behalf of its member. Thus, all these amounts constitute part of the sales revenue and purchase price. Labeling them simply as 'promotional fees' is, in our view, legally indefensible. Therefore, under the lease agreement, these amounts should be distributed to the landlords and not be exclusively retained by the tenant, the defendant."
The court stated, "Primarily, as the plaintiffs' counsel mentioned, there seems to be an issue of contract interpretation. Additionally, even by example, there is a question of whether the items mentioned by the plaintiffs' counsel should be included in gross sales or considered as deductible free coupons."
The court asked, "Will you continue to debate this?" Starbucks' attorney Jang Cheolik from Kim & Jang Law Offices replied, "Yes, our consistent position is that the issue is how to interpret the concept of net sales."
The court asked the defendant whether all plaintiffs used the same contract language. Upon receiving the answer "No," the court inquired further and checked whether the exemplary language in the defendant's contract was also included in the contracts with the plaintiffs. Attorney Hyun for the plaintiffs stated, "We do not consider that language to be exemplary."
When the Court Raised the Issue of 'Settlement'... Starbucks: "Actively Considering" vs. Plaintiffs: "Negative"
During the proceedings, both parties' positions on the possibility of a settlement were also confirmed.
The court said, "Please continue your arguments in court... However, this seems like an issue that should ideally be resolved through mutual settlement."
Attorney Jang for Starbucks responded positively, saying, "If the presiding judge suggests it during the trial, we will actively consider it."
In contrast, attorney Hyun for the plaintiffs stated, "There are many landlords, not just us. Since this could set a precedent..." expressing a preference for a court ruling rather than a settlement during the lawsuit.
The court asked, "Then, wouldn't it be better to properly renegotiate the contracts and reasonably settle the costs and commissions incurred so far?"
Plaintiffs: "No Access to Sales Data"... Request for Explanation and PPT Presentation to the Court
At this point, Park Jaewan, another attorney from YK representing the plaintiffs, asked for the court's permission to comment on procedural matters and spoke regarding the "request for explanation" submitted just before the hearing.
Attorney Park stated, "The unique aspect of this case is that, as landlords, the plaintiffs have no way to access the defendant's sales data. Since the defendant has full control over POS systems and all other management, we cannot verify the total sales. At the very least, regarding the request for explanation we submitted, the defendant, who has all the data, should provide specific details so that we can engage in a concrete argument. Therefore, we request the court to order an explanation."
Attorney Park also requested that, while it may not be necessary to schedule a formal presentation, the court allow them at least 10 minutes during the next hearing to explain, via PowerPoint presentation (PPT), the actual payment process at a Starbucks store.
Regarding the plaintiffs' request for an explanation, the court stated it would decide after hearing the defendant's opinion. As for the PPT presentation request, the court said it would consider the necessity if the materials were submitted as preparatory documents or evidence.
The next hearing is scheduled for March 5 at 11:20 a.m.
*Buddy Pass
Starbucks' first paid subscription service, introduced in October 2024. Initially operated as a pilot program with a monthly prepaid subscription fee of 9,900 won, it was officially launched as a regular program on December 2, 2024, with the prepaid subscription fee reduced to 7,900 won. The service provides a 30% discount coupon for handcrafted beverages available daily from 2 p.m., one 30% discount coupon for food, one free Delivers delivery coupon, and two free online store shipping coupons.
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