Then again, Mitchell's own behavior wasn't always simple to explain. Even when Wal-Mart's settlement offer reached $490,000, he held out. "My temper got hold of me," he says. In fact, Mitchell now says he would have accepted $450,000 with one condition: he wanted an apology in writing. "I don't recall him ever asking for an apology," responds Gill.
Mitchell had just arrived home at 7:30 p.m. the night the call came. It was Coppins and an associate. "You got $500,000," they told him. "I wasn't whooping and hollering like I had won the lottery," Mitchell says. "I got five minutes' worth of Wal-Mart's profits. I didn't have any impact on them whatsoever." His wife, Patty, made a toast out on their deck. "There was a sense of anticlimax," recounts Patty, who had glimpsed her husband rehearsing his testimony in the bathroom mirror. "I know he was relieved, and I know he was grateful. But it took a couple of days for him to adjust to the fact that this was how this was going to be resolved."
Some two weeks after the settlement, Mitchell was one of 150 people who celebrated GTO's triumph. Outside the company's offices, in a big school bus, folks were cooking up grouper, shrimp, and mullet. There were hush puppies, biscuits, and iced tea. The chefs, local restaurateurs, were friends of Mitchell's. He had also come up with the idea for the invitation: It showed Sam Walton's capped head on a baby's body, waving his arms in the air and mouthing the words "Wah! Wah! I surrender!" A caption said: "Find out why Sam got chafed by his own Pampers! Hint: There are a half million reasons why."
Joshua Hyatt is a senior editor at Inc.
Risk Factors
When Chuck Mitchell, president of tiny GTO, made up his mind to sue Wal-Mart Stores in 1996 and claim breach of contract, he wasn't merely risking being walloped in court by the world's largest retailer. By taking on his largest customer, he was putting much more on the line, including--
1. Sales growth. In 1996 Sam's Club, the membership-warehouse division of Wal-Mart, represented about 18% of GTO's revenues of $4.5 million. Scrambling to make up for the anticipated $800,000 shortfall, Mitchell had hired additional sales-rep companies in 1995, paying a 6% commission to get the company's automatic gate opener into more retail outlets. After what he describes as "a dicey six months," GTO had added enough business to compensate for a Sam's Club defection, should it occur. Not that anybody--even his banker--fretted about the company's survival. "Wal-Mart may have represented a sizable portion of GTO's sales. It didn't represent a sizable portion of profits," notes Tom Barron, president of Capital City Bank in Tallahassee, Fla. "And bank loans don't get repaid with sales."
2. Employee productivity. "Gosh, I don't want to go to court," controller Marie Payne told her colleagues. "I don't like the idea of sitting up there and being badgered." She wasn't the only GTO employee who felt that way, as Mitchell well knew. "I was worried about some of my people being on the stand," he says. "To sit up there and get grilled by a Wal-Mart attorney who accuses them of being an idiot or a liar, that's not what they get paid to do." Just preparing for the trial took up significant chunks of time. Payne gave up her four-day workweeks to help gather documentation. Harris Welch, an R&D technician, spent 12-hour stretches in a conference room analyzing data about the product returns from Sam's Club. And GTO's lawyer, Michael F. Coppins, spent about 90 minutes preparing each of the 10 employees who gave depositions.
3. Future prospects. Landing Sam's Club as a customer in 1989 had most certainly helped GTO get in the door to see buyers at chains like Home Depot. So Mitchell fully expected that his decision to take on his biggest customer would have repercussions. But Mitchell found that other retailers, especially anybody who saw Sam's Club as a direct competitor, responded by putting the product in more stores. Home Depot is now GTO's biggest customer, and Mitchell expects to get the gate opener onto the shelves of Sears, Roebuck & Co. this year. "We still have big vendors who push us around," Mitchell says, "but not like Wal-Mart."
Damage Done
GTO sued Wal-Mart for almost $515,000, claiming in documents filed in the lawsuit that the retail giant violated its vendor agreement in the following ways:
1. Invalid product returns: $344,000. Between 1994 and 1996, Sam's Club allegedly returned to GTO 821 gate openers that were not defective, taking credits for the costs of freight and handling and the purchase price. In 1995, Sam's Club refunded GTO about $36,000.
2. Inappropriate cash discounts: $100,850. Between 1990 and 1996, Sam's Club, which was entitled to a 2% discount on invoices it paid within 10 days, allegedly took discounts (as much as $22,000 in a single year) even when it paid as many as 12 days after the time limit.
3. Miscellaneous unauthorized credits: $105,660. Also between 1990 and 1996, Sam's Club allegedly took credits to which it wasn't entitled--including allowances for advertising and promotion and new-store discounts. Other credits, for which the company offered no explanation, totaled almost $32,000.
