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Originally published Tuesday, September 26, 2006 at 12:00 AM

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Starbucks sued over "unchecked ambition"

A small coffee retailer in Bellevue has sued Starbucks, claiming the world's largest coffee-shop chain exerts an "insatiable and unchecked...

Seattle Times business reporter

A small coffee retailer in Bellevue has sued Starbucks, claiming the world's largest coffee-shop chain exerts an "insatiable and unchecked ambition" that amounts to being a monopoly.

Starbucks is undoubtedly big, with more than 12,000 stores and a goal of operating 30,000 worldwide. Still, experts say it will be a difficult case to win.

Penny Stafford, who owns Belvi Coffee and Tea Exchange, says she was locked out of the best office space in Bellevue and Seattle by Starbucks' exclusive leasing agreements with landlords. She finally rented space to sell espresso inside a deli, but says her customers were inundated with free samples from Starbucks employees who worked nearby.

During one hour last summer, Starbucks baristas returned four times with samples for customers at the deli, according to the lawsuit filed Monday in U.S. District Court in Seattle.

The suit, which seeks class-action status, was filed by attorney Steve Berman, who has pursued a number of large class-action cases. It asks that Starbucks stop the alleged anticompetitive conduct and pay attorney fees and other plaintiffs' costs.

"The courts ultimately want to look at whether conduct is beneficial to consumers, and here it's not, because consumers want choice," Berman said. "Maybe they'll choose Starbucks, but ultimately anyone in any market wants to be able to choose other products. That's the competitive evil Starbucks is perpetuating here on consumers."

Starbucks declined to comment, saying in a written statement it was not aware of the lawsuit. It has about 100 stores in Seattle and about 35 in Bellevue.

Stafford went out of business at the deli location but continues to run her original store several blocks from downtown Bellevue.

"I didn't realize how difficult it was to make any money, no matter how high quality your product is, if you're not at the base of one of those buildings," she said of the downtown high-rises.

Stafford alleges Starbucks blocked her from the best downtown office space in Bellevue and Seattle through agreements with landlords to keep other coffee shops out.

The Seattle-based coffee retailer has "first dibs" on 78 percent of downtown Bellevue's Class A office buildings, the lawsuit claims.

In many cases, Starbucks has stores in those buildings and does not want competitors to move in next door. But, according to the lawsuit, property owner Equity Office Properties told Stafford in 2004 that it had entered into exclusive lease agreements with Starbucks for all its office buildings nationwide, a whopping 35 percent of the country's high-rises.

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Officials at Equity Office Properties did not return phone calls Monday.

Susie Detmer, senior director of retail services for real-estate broker and manager Cushman & Wakefield, has heard rumblings about widespread exclusive agreements between landlords and tenants but knows of none in effect.

Having exclusive agreements for single buildings is "incredibly common and makes good business sense," Detmer said. "If you have a restaurant that specializes in Mexican food, do you want the landlord to open another Mexican restaurant in the very same building? Wouldn't it be better to have a Greek restaurant offering customers more choices?"

Property managers also want tenants with the best track record and the strongest financial backing possible, Detmer said.

Howard Shelanski, an antitrust expert and professor of law at the University of California, Berkeley, said the suit would be a hard case to win.

"Starbucks will say, 'We don't even have a monopoly in the building where we're the only coffee shop, because we compete with coffee makers in offices and conference rooms upstairs,' " he said.

The Seattle area has a thriving community of independent coffee merchants.

Robert Wheaton, principal owner of a diner and coffee shop on Capitol Hill called Glo's, was miffed when Starbucks moved in across the street several years ago.

To express his discontent, Wheaton commissioned a sign above his store advertising $1 coffee. "Always the best," it says, although it is in storage temporarily to make way for campaign signs.

"I was in vendetta mode then," Wheaton said. Now, he sends customers to Starbucks while they wait for a table at Glo's, and he drops in almost daily to buy something for himself.

"Anything that improves the neighborhood you're in is a good thing, and I will grudgingly say I'm more and more impressed with them as an organization, even though they're really big," Wheaton said.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

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