Jury Awards $10.3 Million to Former WD-40 Agents

Eight of WD-40’s former sales agents have been awarded a total of $10.3 million in damages by a Sonoma County Superior Court jury, which determined that the San Diego-based company had illegally terminated their sales contracts in 1988.

The company plans to appeal Wednesday’s jury’s decision, WD-40 President Gerald C. Schleif said. WD-40’s insurance policies would not cover the award, but the company will tap $24.8 million in cash reserves if the appeal fails, Schleif said. WD-40 shares held steady at $32, unchanged for the day, in over-the-counter trading Thursday.

The case involved disputed contracts that WD-40 had forged with eight companies, according to Timothy Shimko, a Cleveland-based attorney who represented the plaintiffs. At issue was whether WD-40 executives augmented written contracts with oral promises made in 1983, when the eight firms agreed to drop other product lines and act as sole representatives for WD-40, Shimko said.

Executives at the eight small, family-owned businesses maintained during the trial that, in exchange for the companies dropping other product lines, WD-40 executives orally agreed to strengthen their relationship with the sales agencies.

“They were promised continuity in exchange for exclusivity,” Shimko said.

WD-40 maintained during the trial that it was bound solely by written contracts that gave either party the right to terminate the agreements.

“Our contracts clearly stated that either side could terminate without cause in 90 days, or with cause in 30 days,” Schleif said.

The sales companies filed suit in 1988 after WD-40 “unilaterally eliminated contracts” with the outside sales agencies and replaced them with its own, internal sales force, Shimko said. “The (sales) companies were ruined,” Shimko said.

WD-40, which manufactures a popular lubricant, reported a $15.3-million net profit and $89.8 million in revenue during its most recent fiscal year.