A jury on Friday awarded a California supplier $19.3 million in a lawsuit against Walmart Inc. after the Bentonville retailer abruptly canceled the supplier’s contract to deliver hand sanitizer to its stores across the country in the early stages of the pandemic.
After a two week trial in Washington County Circuit Court, the jury found Walmart liable for breach of contract and keeping hand sanitizer dispensers that belonged to K2 Distribution Co. LP of Pittsburg, California. The verdict is believed to be the largest award of damages in the history of Washington County Circuit Court.
“We value our supplier relationships and disagree with the verdict,” Walmart spokesman Randy Hargrove said in an email to Arkansas Business. “We continue to believe our business dealings with K2 were appropriate, and we are reviewing our options, including the filing of post-trial motions.”
The dispute dates back to the first wave of COVID-19, when hand sanitizers were in short supply.
Walmart asked K2 Distribution to provide the retailer with a long-term supply of hand sanitizer and dispensers for Walmart’s employees and customers, according to K2 Distribution’s 61-page amended complaint. K2 Distribution had sold bleach and other cleaning products to Walmart for years under Walmart’s private label.
“In the following months, Walmart entered into a contract with K2 whereby K2 would be Walmart’s exclusive supplier of hand sanitizer for at least one year and would supply the large volume of hand sanitizer Walmart needed for more than 5,000 Walmart facilities,” one of K2 Distributor’s attorneys, Tom Mars of Rogers, said in an email to Arkansas Business.
K2 Distribution said in its court filing that it spent more than $35 million delivering thousands of dispensers and cases of sanitizer to Walmart.
“Securing supplies of these goods was essential to the safe — and highly profitable — operation of Walmart and Sam’s Club stores … throughout the country,” the amended complaint said. “K2 Distribution upheld its end of the deal, but Walmart failed to honor its commitments and agreements.”
Mars said in an email that K2 Distribution did everything Walmart asked for, resulting in Walmart’s executives praising K2 during internal presentations and emails.
“However, a couple of months later, WMT [Walmart] Finance noticed that the contract between Walmart and K2 had caused Walmart Sourcing to be $16 million over budget,” Mars wrote. “After less than 48 hours of internal discussion, and with no notice to K2, Walmart abruptly stopped purchasing K2’s hand sanitizer.”
Walmart also kept and refused to pay K2 Distribution millions of dollars for the 44,000 dispensers it spent on producing, shipping and serving them, the filing said. Walmart canceled all in-process orders in August 2020 and declined to buy any additional sanitizer from K2 Distribution, according to the court filing.
Walmart denied the allegations of wrongdoing in court filings and filed a counterclaim. Walmart wanted a jury to find that K2 Distribution was bound by a Walmart realty supplier agreement. The jury rejected Walmart’s request.
“On behalf of my client, K2 Distribution Co. LP, we are grateful for the care and diligence shown by the jurors of Washington County,” another one of K2 Distribution’s attorneys, Drew Peel of Rachlis Duff & Peel of Chicago, said in a statement to Arkansas Business. “These jurors remained fully engaged over the course of a two-week trial, and, after approximately nine hours of deliberations, rendered a verdict in favor of K2 on its contract and conversion claims, and against Walmart on its Walmart Realty Supplier Agreement counterclaim.”
Washington Circuit Court Judge John Threet presided over the case, which started on May 1.
Other attorneys who represented K2 were Scott Hessell of Sperling & Slater of Chicago, Kirkman Dougherty and Kynda Almefty of Hardin Jesson & Terry of Fort Smith.
Walmart was represented by John Tull of Quattlebaum Grooms & Tull of Little Rock.