Jury says Walmart must pay $19.3M

This undated file photo shows Walmart's sign in front of its Bentonville headquarters.

Walmart Inc. must pay $19.3 million to K2 Distribution Co. for breach of contract and other claims, a jury ruled Friday in Washington County Circuit Court.

The award is reportedly the largest jury award for damages in the county's history. Washington County Circuit Judge John Threet presided over the trial that began May 1.

The jury awarded K2 a total of $14.5 million for two claims of breach of contract, according to court records.

On a claim of conversion, or illegally keeping someone else's property, the jury awarded $4.83 million.

The jury did find for Walmart in K2's claim of fraud by the Bentonville-based retailer.

Also, Walmart had filed a counterclaim, saying that K2 breached a standard agreement that it routinely requires its suppliers to sign. The jury disagreed and ruled for the distribution company.

K2, based in Pittsburgh, Calif., had sold cleaning products to Walmart under Walmart's private label. Early in the pandemic, Walmart turned to the company to provide large amounts of hand sanitizer and dispensers for Walmart employees and customers.

According to K2's complaint, it spent more than $35 million to fulfill its obligations of delivering thousands of custom-designed dispensers and cases of sanitizers, as well as contracting for hundreds of thousands of additional gallons of sanitizer.

"K2 Distribution upheld its end of the deal, but Walmart failed to honor its commitments and agreements," K2 said in its complaint.

"For reasons that had nothing to do with K2 Distribution's performance of its obligations, Walmart kept and refused to pay K2 Distribution anything for 44,000 dispensers, canceled all in-process orders in August 2020, and thereafter declined to purchase any additional sanitizer from K2 Distribution," the company said.

"Adding insult to injury, Walmart falsely asserted in bad faith that it had never made any agreement with K2 Distribution," the company said.

Walmart spokesman Randy Hargrove said in a statement that the retailer values its supplier relationships and disagrees with the verdict.

"We continue to believe our business dealings with K2 were appropriate, and we are reviewing our options, including the filing of post-trial motions," Hargrove said.

Drew Peel, one of the attorneys representing K2 in the lawsuit, said in a statement that K2 is "grateful for the care and diligence shown by the jurors of Washington County."

"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," Peel said.

Walmart shares fell $1.19, or 0.78%, to close Monday at $151.88.

The case is K2 Distribution Co., LP v. Walmart Inc.