Buy one coffee and get US $640,000 free
Reported by: Violet Simbi, M984011056 Uyanga Purevjav, M984011053 Anh Le, M984011066

NSYSU
Department of Management

BRIEF CONTENTS

Abstract 3
1. Introduction and issue identification of the case 4
2. Analysis 7
2.1. Stakeholder analysis 7
2.1.1. Consumers 8
2.1.2. Owners, executives, employee 8
2.1.3. Other groups of stakeholders 9
2.2. CSR Analysis 9
3. Evaluations 10
3.1. Who is to blame? 10
3.2. Root cause analysis 11
3.3. Recommendations 11
4. Implication of the case for future product related complaints 12
Conclusion 15
References 16
Appendix (Case: “The coffee spill heard round the world”) 17

Abstract
The Stella Awards were inspired by the Stella Liebeck case in 1992. Stella purchases McDonald’s coffee from a drive through and later received US $ 640,000 for burning herself with this coffee. The lawsuit between Stella Liebeck and McDonald’s – a huge cooperation, was one of the most controversial court cases of its time. In this paper we defined the major ethical issues, analyzed who are the stakeholders and how the stakeholders influenced this case. Furthermore, we also mentioned other complain and lawsuits which McDonald’s had to face with before 2007, which means before and after Stella’s case. Finally, we have some references and comments form McDonalds in particularly. As well as general comments about how organizations and how they make final decisions in the future when they have business ethic problem, and how they protect themselves yet keep their customers happy. 1. Introduction and issue identification of the case
Let’s imagine that you are going out to buy a cup of coffee from Mc Donald’s drive - through for breakfast. When you are trying to open the lid of the coffee cup to add more sugar and cream, scalding coffee spills onto your lap. You suffer third-degree burns on six percent of your skin and lesser burns over sixteen percent. What are you going do in this situation?
That is the situation which Stella Liebeck had to experience in 1992. Then she decided to sue Mc Donald’s company about their hot coffee. Finally, Stella was awarded 640,000 US dollar by the jury. So what the major issue in this case?
In order to make an effective recommendation, we rewrote the case stating only the basic facts. This will allow us to come up with a sound recommendation.
The Basic facts
The woman was a passenger in a car at a McDonald's drive-thru. She received a cup of hot coffee, sealed by a lid, with an estimated temperature of 180 degrees. While attempting to remove the lid and add cream and sugar, she spilled the contents of the cup into her lap. She was wearing sweat pants that reportedly held the hot liquid against her skin for over 90 seconds. She suffered severe, third-degree burns on her thighs, hips, and groin that required extensive hospital treatment, including skin grafts.
McDonald's defended its policy of serving coffee at a temperature of 180 degrees or greater by arguing that both coffee experts and market research showed that coffee should be served at this temperature. However, McDonald's had received 700 complaints of coffee burns (of varying severity) over the past 10 years.
The ethics issue in this case is the conflict between the demand by the customers for healthier or safer product and the company’s benefit.
The reason behind the judge favoring Stella Liebeck’s claim is that 'the vendor did not particularly warning the customer about the hotness of the beverage'. During the case, Liebeck's attorneys discovered that McDonald's required franchises to serve coffee at 180–190 °F (82–88 °C). At that temperature, the coffee would cause a third-degree burn in two to seven seconds. Stella Liebeck's attorney argued that coffee should never be served hotter than 140 °F (60 °C), and that a number of other establishments served coffee at a substantially lower temperature than McDonald's.
Liebeck's lawyers presented the jury with evidence that 180 °F coffee like that McDonald’s served may produce third-degree burns ,where skin grafting is necessary, in about 12 to 15 seconds (as a reference, the boiling point of water is 212 °F or 100 °C). Lowering the temperature to 160 °F (71 °C) would increase the time for the coffee to produce such a burn to 20 seconds. A British court later rejected this argument as scientifically false. Liebeck's attorneys argued that these extra seconds could provide adequate time to remove the coffee from exposed skin, thereby preventing many burns. McDonald's reason for serving such hot coffee in its drive-through windows was that, it is serving coffee for customers the way they like it.
Therefore, the main reasons for Stella’s accident were the hotness of the Mc Donald’s coffee and the lack of notification on the coffee cup lid. The company should pay attention the safety of their customers and realize the fact that the hot water used for coffee could result in serious burns.
On the other hand, it is the fact that Stella Liebeck did not pay enough attention about the risk. When she stayed in the car, she put the 180 °F coffee cup between her knees and tried to get the lid off that way. For this reason and the fact that the coffee cup did not have enough warning on the lid would be the cause for this accident.
This case is only the tip of the iceberg, it opened the gates for customers to sue for what they thought to be dangerous products. It also uncovered the fact that many customers had been victims of McDonald’s coffee. However the Judges final ruling did not seem to change much. This case keeps going on with several other customers suffering the same fate as Stella.
 In 1988, Reed Morgan Stella’s attorney had won a $30,000 settlement against McDonald’s for a woman who also had the third – degree burns by spilling coffee.
 Over 10 years, it means from around 1982, Mc. Donald’s received 700 burn complaints from their customers. However, they did not make any improvement action for this beyond the tiny notification on the cup, like: “Caution: content hot!”.
 In August 2000, Karen Muth sued Mc Donald’s because her second – degree burns cause by one employee of the company.
 Also in August 2000, Mc Donald’s got sued by British solicitors. They have organized 26 spill complainants into a group suit against the company over the piping hot nature of its beverages.
 The Veronica Martin case is another related issue. Martin suffered a second – degree burn and was permanently scarred because of a Mc Donald’s hamburger.
 Finally, Maxine Villegas, the 70 years- old grandmother reminded the public about the Stella Leibeck case. She also stopped at the drive – through McDonald’s restaurant, where she suffered third – degree burns.
These sub issues and related issues put into a question: What should McDonald’s to do to stop the conflict between the safety of customers and the revenue they got from selling the hot coffee?
2. Analysis
2.1. Stakeholder analysis
This section is to determine who the stakeholders are in this case, and what their stakes are. We will also look at the challenges, threats and opportunities that are posed by these stakeholders.
Stakeholder map

The Stakeholder map illustrates many stakeholders. From the business point of view the most obvious of them are McDonald’s owners, executives, employees, and customers.
2.1.1. Consumers
Consumers encompasses many different individuals (customers and their lawyers) and a group (British) that complain and claim alleging that McDonald’s coffee was too hot and unreasonably dangerous. Consumers’ stake is a legal claim about product safety and reducing the coffee temperature from 180C, customers were concerned that the coffee temperature was too high. Consumer’s threat: too hot coffee and they might hurt and damage themselves physically and mentally. They have opportunities to restore their violated rights because of consuming unsafe product – hot coffee and to require McDonald’s to sell them a safe products that would be free from danger of risk or secure from threat of danger of hot coffee. Therefore they file lawsuits in order to be protected.
In this situation attorney stake is securing their customer’s right and asking for compensation of damages from the guilty party. Lawyer and attorneys face the challenge of fighting with the big influential companies. This explained in the case saying that McDonald’s owner settled the case out of court when in 2000 Veronica Martin incident.
2.1.2. Owners, executives, employee
McDonald’s executive and employees stake is keeping the coffee temperature at 180C, arguing that the coffee is hot and that its coffee the way consumers like it and the temperature helps to explain why it sells a billion cups a year. In this case, since 1982 McDonalds has been facing a challenge – complaints from some customers about too high temperature of the coffee. Before the Stella Liebeck case the company had received 700 burn complaints over a 10 years period.
2.1.3. Other groups of stakeholders
From the point of view highly pluralistic society, stakeholders include not only the above mentioned groups of stakeholders, but other groups as well. In this case study these other groups such as the community and the government include The Specialty Coffee Association of America, National Coffee Association, a coffee connoisseur, a coffee machine maker called Mr. Coffee , the court and the jury .
After the court procedure of Stella Liebeck’s case coffee temperature suddenly became a hot topic in the industry. Community’s main stake was to supply the society with right standard information about McDonald’s coffee temperature. Various American coffee associations expressed their interest confirming that this company’s coffee conforms to industry temperature standards. Also a coffee connoisseur said that actually coffee aroma comes out at 175C.
Court and juries’ stake is deciding who is responsible for the consumers’ burns. The challenge the jury faced was that both sides the public and McDonald’s were satisfied with the verdict. The public prefer the hotter coffee and were in support of McDonald’s the judge later had to reduce the jury award from $2,7million to $640 thousand.
2.2. CSR Analysis
In this section we analyze the Corporate Social Responsibilities (CSR) and the ethical responsibilities that MacDonald’s has, and to what extent are these responsibilities.
Basically, in this case McDonald’s has ethical responsibilities. First of all it’s about safety issues. Through a series of legal developments as well as changing social values, McDonald’s has become significantly responsible for hot coffee safety for customers. The challenge to McDonald’s management, therefore, is to make coffee as safe as possible while at the same time maintaining customer satisfaction.
The second ethical responsibility is to take care of its customers. Actually the company can avoid spilling hot coffee by taking steps over time to build safety into the coffee cup buy improving the design and to make the waning signs about the cups contents more visible and clear. In addition during the trial evidence was provided that The McDonald’s engaged in willful, reckless, and malicious actions. It is the duty of the company to provide consumers with a safe product.

3. Evaluations
3.1. Who is to blame?
First we looked for what bears the responsibility for causing the problem. In other words, what is to blame? There are two ways to look at this from the customers perspective and MacDonald’s perspective:
1. When the customer sued McDonald's, the lawsuit claimed that McDonald's product was defective (unsafe) the coffee was the cause of her injuries.
2. McDonald on the other hand ,would argue that the high temperature of the coffee is required to give the coffee the flavor demanded by the customers, moreover the label on the coffee cup said the contents were hot so the real cause of the burns was spilling the coffee into Mrs. Stella’s the lap. Who is right? In order for the coffee to have burn the woman it had to be hot then spilt so both parties are fairly responsible for this incidence. Further analysis of the events that occurred will help understand the other factors that also led to this accident.
3.2. Root cause analysis
The analysis should explain exactly how the hot coffee came in contact with the skin, not so that the blame can be directed away from McDonald's policies, but in order to expand the analysis and reveal the most effective ways of preventing the injury in the future. In this case, the customer spilled the hot coffee on her skin because the coffee cup was in her lap (she was in a car) and she was attempting to remove the cup's lid.
3.3. Recommendations
There are more opportunities to reduce the risk that someone should be so severely burned in the future. Every cause presents the possibility of a new set of solutions that might mitigate the risk better, or more cheaply, or more easily, here are some of the solutions we propose:
1. Reducing the temperature of the coffee is one possible solution, but McDonald's customers may not like the taste of the cooler coffee.
2. The other causes we suggest to reducing the risk, some of which have been already implemented today is to improve the design of the cup and lid,
3. To have the server add the condiments in the shop before giving it to the customer.
4. Offer a second temperature of coffee for those that don't want it so hot.
4. Implication of the case for future product related complaints
I. MacDonald had received numerous complaints in the past about the temperature of their coffee they should have put measures in place to prevent future complaints of this nature. Over the last 10 years MacDonald had received 700 complaints out of the 24 million cups it had sold and considered this figure trivial. However the woman involved suffered very serious injuries - third degree burns on her groin, thighs and buttocks that required skin grafts, this indicates that the coffee was indeed too hot. In the future companies will certainly be liable for questioning for their inability to address customer complaints. Each customer will have to be treated as if they are the only one, if companies rely on statistical data analysis to address customer grievances this could lead to more cases such as the Stella Liebeck coffee case.
II. The woman, was an 81-year old former department store clerk who had never before filed suit against anyone, she said she wouldn't have brought the lawsuit against McDonald's had the Corporation not dismissed her request for compensation for medical bills. This is evidence that woman was not filing charges under frivolous circumstances or undeserved financial gains However since the Stella Liebeck case regular complaints have been filed against MacDonald’s. This has led to an award called the Stella award – this award is given to people who file outrageous and frivolous lawsuits. An example of this is a Knoxville Tennessee woman has even sued for burning her chin after a pickle fell out of her burger. She claimed US $110,000 for the physical and metal pain she endured. Her husband also sued for US $15,000 because he had been deprived of “the service and consortium of his wife”.
III. A McDonald's quality assurance manager testified in the case that the Corporation was aware of the risk of serving dangerously hot coffee and had no plans to either turn down the heat or to post warning about the possibility of severe burns, even though most customers wouldn't think it was possible. The consumer rights have to take precedence over company policy, because the customers make the organization. Managers should start to realize that they should produce products that suit the customer not their production process.
IV. When it came to the punitive damages, the jury found that McDonald's had engaged in willful, reckless, malicious, or wanton conduct, and rendered a punitive damage award of 2.7 million dollars. (The equivalent of just two days of coffee sales) On appeal, a judge lowered the award to $480,000, a fact not widely publicized in the media. The amount companies have to pay in punitive damages is usually insignificant as compared to the revenues they generate. Punitive damage should be steep enough for the company to actually make the change. Some companies will find it cheaper to pay punitive damages rather than change their production process.
V. The Specialty Coffee Association supports improved packaging methods rather than lowering the temperature at which coffee is served. The association has successfully aided McDonald’s defense of subsequent coffee burn cases. They say coffee ought to be brewed at between 85 C and 95 C. Furthermore, people generally like to allow a hot drink to cool to the temperature they prefer. MacDonald’s is obviously a major sponsor of the Specialty Coffee Association and may even be a customer of some of their subsidiaries, this is the classical case of large co-operations supporting each other, at the expense of the ‘little man’. The Specialty Coffee Association has aided McDonald’s in several cases and McDonald’s has in turn saved a lot of money
VI. A report in Liability Week, September 29, 1997, a short time after the Stella incidence indicated that Kathleen Gilliam, 73, suffered first degree burns when a cup of coffee spilled onto her lap. Reports also indicate that McDonald's had consistently keeps its coffee at 185 degrees after the Stella incident. This sends the message to the general public and other co-operations that the court ruling changes nothing. Macdonald went on and continued to do what it always did this ultimately leads to people having no faith in the justice system and fueling myths that the justice system favors only the rich and powerful co-operations and their action go unpunished.

Conclusion
The manufacturer has more knowledge of a product than the consumer. Furthermore, the manufacturer can see a more complete picture. In this case McDonalds' was aware that the temperature of its coffee was sufficiently high to cause scalding and that a considerable number of people had already been injured.
Ethical behavior requires that consumers be warned about the dangers of a product. Moreover, the product could have been sold at a temperature which a scalding a problem would not exist. Accordingly, tea and coffee served at between 55 C and 60 C would not have been acceptable to McDonald's customers. So McDonalds needs to find a middle ground, but possibly implementing some actions listed in the recommendations section.
Ethical behavior also demands that customer also take full responsibility of their own shortcomings. Mrs. Stella was clearing putting herself at risk by putting a hot beverage between her thighs.
In future MacDonald’s and its customers need to work together as partners to create the most value for both parties. MacDonald should listen to it customers not consider the statistical frequency before putting in place corrective measures. Customers should also be responsible for their own safety by not exposing themselves to unnecessary risk. References

1. Name of the book
2. http://www.search.com/reference/McDonald's
3. http://www.vanosteen.com/mcdonalds-coffee-lawsuit.htm
4. http://www.utahjusticelaw.com/personal-injury-myths.html
5. http://en.wikipedia.org/wiki/Stella_Award
6. http://www.knowledgerush.com/kr/encyclopedia/Stella_Liebeck/
7. http://coffeegeek.com/forums/espresso/general/343586
8. http://www.stellaawards.com/ Appendix (Case: “The coffee spill heard round the world”)