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Starbucks sues former exec hired by Dunkin’

SEATTLE Coffeehouse giant Starbucks is suing a former executive, saying he violated a non-compete agreement when he accepted a job at rival Dunkin’ Donuts.

Attorneys for Starbucks filed a lawsuit Oct. 5 in U.S. District Court in Seattle seeking to block Paul Twohig, a former senior vice president, from going to work for Dunkin’ Brands Inc. for the remainder of an 18-month non-competition agreement he allegedly signed when hired by the company in November 2004.

Seattle-based Starbucks also asked the court to prohibit Twohig from disclosing to Dunkin’ sensitive Starbucks’ information and to order him to return to Starbucks severance pay and other remuneration provided when he left the company on March 2 and pay the coffee company other damages and attorneys’ fees.

Amessage seeking comment from Twohig left at his home in Hilton Head, S.C., was not returned as of press time.

Dunkin’ Donuts parent Dunkin’ Brands Inc. announced Oct. 5 that it had hired Twohig to be the new brand operating officer for its doughnuts chain. That news came on the heels of the resignation of William Kussell, who earlier this month stepped down as president and chief brand officer of Dunkin’ Donuts, which franchises more than 8,800 locations worldwide, including about 6,400 in North America, and saw its systemwide average unit volume dip in 2008. It is unclear how the privately held chain’s average unit volumes are trending in 2009.

Andrew Mastrangelo, manager of public relations for Canton, Mass.-based Dunkin’ Brands, said his company “certainly is aware of the situation, but we do not feel it is appropriate to comment.” He pointed out that neither Dunkin’ Donuts nor Dunkin’ Brands is named as a defendant in the Starbucks lawsuit.

Asked if the lawsuit had resulted in any change to Twohig’s employment status or role at Dunkin’ Donuts, Mastrangelo said the new brand operating officer remains “actively employed at Dunkin' Brands” and is undergoing a four-week introductory program in which all new executives participate.

In a statement about the lawsuit, Starbucks officials said, “While at Starbucks, Paul [Twohig] was a senior executive privy to confidential and sensitive business information. He was also responsible for formulating business strategies to grow the Starbucks business and respond to existing and potential competitors, including Dunkin’ Donuts, a company that has been clear about its intention to move into the premium coffee business.”

Representatives of the company with more than 16,000 coffee bars worldwide, which also has been fighting eroding unit volumes in the downturn, added, “We are hopeful that Dunkin’ Donuts and Mr. Twohig will unwind this situation” and noted that “we are open to hearing from them to resolve the situation in a way that protects Starbucks’ interests.”

In its lawsuit, Starbucks alleges that Twohig, in a separation agreement he signed in March and which resulted in “substantial severance pay and other consideration” to him, “expressly and repeatedly acknowledged and promised to honor his obligations to Starbucks under the Non-Competition Agreement.” The company said in its complaint that it told Twohig it would not release him from his non-competition agreement, as he had asked in August, and that it had told a representative of Dunkin’ Brands’ human resources department Sept. 14 that Twohig was “not in a position to accept a position with Dunkin Donuts.”


Twohig had been employed by Starbucks from 1996 until 2002, when he left to become chief operating officer for the Panera Bread Co. bakery-cafe chain. But he returned to Starbucks in late 2004 and, after signing the non-competition agreement, was named zone senior vice president and later was promoted to division senior vice president for the Southeast and was “responsible for leading the development of the Starbucks brand for thousands of retail stores,” the Starbucks lawsuit says.

Starbucks’ attorneys say in their complaint that as a result of Twohig’s knowledge of that company’s strategies and operations, in his new role with Dunkin’ Donuts, Starbucks has “a well-grounded fear of the immediate invasion of its rights” that, if not checked, “has or will result in substantial harm to Starbucks” and “and may well be irreparable.”

Contact Alan J. Liddle at [email protected].

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