Ninth Circuit sides with Starbucks in lawsuit over idea of coffee-flavored lip balm

(CN) — The Ninth Circuit on Monday rejected a California company’s claim that Starbucks stole its idea for coffee-flavored lip products, citing an expired statute of limitations.

Balmuccino LLC, a company with leadership that includes the relative of TV’s famed Dr. Oz, lost its bid to reignite its breach of contract and misappropriation of trade secrets complaint against Starbucks after a lower court sided with the coffee chain and dismissed the case in July 2023.

The company’s original complaint involved the genesis of Starbucks’ S’mores Frappuccino liquid lip shade kit, launched in 2019. But the appeal came down to a technical analysis of applicable state laws and jurisdiction.

Balmuccino argued California equitable tolling laws should apply to its case, not Washington state’s.

A three-member panel of the Ninth Circuit affirmed U.S. District Court Judge John Chun’s decision, writing in an unpublished memorandum that the President Joe Biden appointee correctly applied the Evergreen State’s equitable tolling laws, which are more restrictive than California’s.

Since Starbucks is based in Washington state, the court was right to apply Washington state law over California law, the panel determined. Washington state courts are directed to consider the principal location of the defendant’s conduct in cases dealing with misappropriation of trade secrets claims.

Balmuccino originally filed a complaint against the coffee chain in Los Angeles County Superior Court in 2019. A judge there agreed with Starbucks that the court lacked jurisdiction over the Washington-based corporation and dismissed the lawsuit in 2020. Balmuccino appealed, but the Second Appellate District affirmed the dismissal in 2022.

Balmuccino then filed suit in federal court, but after the three-year statute of limitations ran out.

The Ninth Circuit panel — composed of U.S. Circuit Judges Ronald Gould and Patrick Bumatay, a Bill Clinton and Donald Trump appointees, respectively, and U.S. District Court Judge Raner Collins, a Clinton appointee sitting by designation from the District of Arizona — took a technical approach in analyzing whether the company’s claims could be reignited on appeal and whether the lower court was wrong to apply Washington state laws over those of California.

The panel found Balmuccino’s claims “fail to establish significant contract-related contacts in California” and the tort contract analysis favored the application of Washington state law.

The company claimed four of its representatives pitched an idea for coffee-flavored lip balms to Starbucks leadership in New York in 2017. The following year, Balmuccino said it discovered that Starbucks had started to create prototypes for coffee-flavored lip balms similar to those the LLC had pitched at the meeting.

Balmuccino did not argue that Starbucks created its lip kit in California, or had other contractual obligations in the state.

However, the panel noted even if the factors considered in the tort contact analysis didn’t favor Washington state law, the interests of Washington would outweigh those of California.

“California has little interest in applying its equitable tolling regime to an out-of-state claim for which it has already determined it lacks jurisdiction,” the panel wrote.

Balmuccino accused the lower court of abusing its discretion by dismissing the complaint with prejudice, but the Ninth Circuit backed the lower court’s decision.

“Here, no set of facts would render the complaint timely because Balmuccino concedes equitable tolling would not apply under Washington law,” the panel wrote.

As to Balmuccino’s argument that additional discovery was needed to settle the choice of law issue, the Ninth Circuit determined additional discovery would not affect the determination since the complaint didn’t clearly link the case to California.