A giant of the 3D printing industry, 3D Systems, said it would challenge an arbitrator’s decision that it must pay $11.2 million to a co-founder of a company it acquired.
Ronald Barranco, the co-founder of Print3D, had alleged that 3D Systems had failed to live up to a promise pay him a share of the revenue from the acquired technology over three years. Instead, he said he was fired after 20 months without being told the reason.
Barranco initiated the arbitration in connection with 3D Systems’ acquisition in 2011 of Print3D , which made software that would automatically show users the price to make products they had designed using 3D computer modeling. 3D Systems had promised to create a business unit to grow Print3D with Barranco as a co-manager, as well as share with Barranco “future revenues generated by the Print3D tool over a three-year ‘earnout period’ following the acquisition,” according to San Francisco-based law firm, Gaw Poe, which represented Barranco in arbitration hearings in North Carolina.
In the final arbitration award issued Oct. 16, the arbitrator held that 3D Systems had “materially breached” its contractual obligations to grow Print3D. According to the decision, 3D Systems owes Barranco damages of $7.3 million, and is also required to cover fees of $2.3 million and prejudgment interest of $1.7 million.
This news came amid a decline in 3D Systems’ share price (DDD) since April.
In a statement, 3D Systems said it “disagrees with the single arbitrator’s findings” and plans to challenge the decision in federal court. The South Carolina-based firm, which made Fortune’s fastest-growing companies list in 2013, designs and sells 3D printers and the accompanying software and materials.
“We were extremely disappointed with the decision of the arbitrator,” said Andrew Johnson, executive vice president and chief legal officer for 3D Systems. “We firmly believe the arbitrator’s ruling is not supported by the facts of this case or the agreement between the parties.”
In an email, Mark Poe, a partner with Gaw Poe, said his firm isn’t concerned about 3D Systems’ intentions to challenge the arbitration award. “Under the law … judicial review of an arbitration award is severely circumscribed and the court is only supposed to determine whether the arbitrator did his job—not whether he did it well, correctly, or reasonably. … We are confident the arbitration award easily meets this standard.”
Should 3D Systems’ appeal prove unsuccessful, the company said it will pay the full arbitration award with “cash on hand.”
“We do not believe the award will impact our ability to realize our existing business plans in the short or long term,” Johnson said.
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