Small Business David Slays Corporate Goliath
A year ago, small business owner Dick Staton faced financial ruin and a protracted legal battle against an international corporation that he claimed stole his customers and deliberately tried to put him out of business.
Staton’s tiny Simi Valley saw blade exporting company was dying, and he was flat out of money to continue his legal fight against Vermont American Corp., a Kentucky-based tool-making company with more than $450 million in annual sales. To make matters worse, Vermont American was demanding immediate payment of a $113,700 bill.
Now it’s Vermont American that owes Staton money.
In a rare victory for small businesses who go up against corporate giants, attorneys say, Staton now stands to collect $3 million from Vermont American. A Superior Court judge earlier this month upheld the award by a Ventura County jury, who found in Staton’s favor in October.
“Ninety-five percent of small businesses never get to court” in legal disputes with large corporations, said Los Angeles attorney Lorraine Loder, who has represented small businesses for 18 years.
They are lucky to get out-of-court settlements, she said. A $3-million jury verdict is “not common or typical.”
Staton attributes his victory to attorneys who stuck by him and to a legal twist. Vermont American unwittingly saved him thousands of dollars in legal fees by initiating the lawsuit against him and filing in Ventura County. Otherwise, Staton said, he never could have afforded to battle the corporation via long-distance phone calls and flights to Kentucky.
“I didn’t have the money to sue them,” Staton said. “For them to sue me was actually a blessing in disguise.”
Vermont American executives declined to comment on the case except to say the verdict is inconsistent with the facts and with the law.
In court, Vermont American attorneys argued that the corporation was under no obligation to honor a previous oral agreement for blades between Staton and a small company that Vermont American later acquired. They also argued that Vermont American had every right to compete against Staton and manufacture blades of similar design.
Staton’s business was based, he said, on unique blades that he developed after years of working in the power-tool manufacturing industry.
Before he went into business for himself, Staton, 49, spent more than a decade with the 3-I Corp., a Van Nuys power-tool maker. As assistant to the company president, he traveled to Asia more than 30 times, built trust with Taiwanese manufacturers and developed products for manufacture there.
Staton’s rambling Simi Valley home, with its elaborate waterfall, a pond filled with orange and black koi fish, and ornate Chinese screens, is testament to the pride he says he took in entertaining visiting Taiwanese businessmen.
When 3-I went out of business in 1983, Staton started his own company, spending $10,000 and working out of his garage. He developed a saw blade specially designed for the lightweight, home power saws being made in Taiwan. He found a small Oregon company to make the blades and sold them overseas. By 1993, Staton said his company, Consolidated Purchasing, was selling half a million blades at 40 cents each, for gross sales of $200,000.
That same year, his troubles began.
Vermont American, which six years earlier had acquired the small Oregon company making Staton’s blades, told Staton’s Taiwanese manufacturers that the blades would come to them through someone else, Staton said. The big corporation then developed what Staton claims was a “copycat blade” to replace his. In court, Vermont American attorneys said that the Taiwanese distributor’s job was to develop new markets.
Stunned, Staton hired attorneys to negotiate. But before the dispute could be resolved, he said, Vermont American demanded payment of $113,700 for blades shipped to Staton, which he could not sell.
Vermont American sued to collect the money and Staton counter-sued, alleging breach of contract, misappropriation of trade secrets and business interference.
Ten months later, Staton had spent $13,000, was out of money and was ready to quit.
But attorneys Andrew Giacomini and Jim Holden said they didn’t want to abandon Staton and took the case on a contingency basis, agreeing to pick up legal costs and travel expenses to Kentucky in return for 40% of the final award.
“I believe in small business and entrepreneurs, and we believed in Dick Staton,” Giacomini said.
The trial began in September. According to court documents, attorneys for Vermont American argued that Staton’s business foundered because of normal business competition, not from underhanded practices by the corporation. Vermont American contended that Staton had not patented the blade and that Vermont American had every right to develop a similar blade and sell it.
But bolstered by internal documents from Vermont American, that showed preferential blade pricing for Vermont American’s new distributor, references to bribing manufacturers and delays on shipments to Staton, the attorneys persuaded the jury that Staton had been deliberately harmed. The jury awarded him $3 million, minus the money Staton owed for the unpaid blades and in December a judge upheld the verdict.
The obstacles to a legal victory like Staton’s are myriad, say attorneys and others who represent small businesses. Staton was lucky to be represented by a large firm--Hanson, Bridgett, Marcus, Vlahos & Rudy of San Francisco.
Large corporations “know if you’re small, you don’t have the money to fight,” said Betty Jo Toccoli, president of the California Small Business Assn.
Small businesses that do go to court can find themselves astonishingly outgunned, Parker said, often armed with only one attorney from a one-person office, while the big corporations employ teams of lawyers who generate a storm of legal motions and paperwork that can exhaust the opposition.
Even in Staton’s case, Vermont American says it will appeal the ruling, so the battle continues.
