3D Printing

3D Systems Hit with $11M Arbitration Decision

The 3D printing industry is not looking great for the largest 3D printer manufacturers.  As I’m reminded by readers regularly, smaller companies are doing quite well, with backlogs of orders to fill, but the stock prices of Stratasys and 3D Systems have plummeted since they’re exorbitant highs, in part due to a drop in stock markets in general and due to issues faced by the two industry leaders.  The latest to hit 3D Systems is an $11.28 million arbitration award that the company is delivering to one of its former employees.

Today, the law firm of Gaw | Poe LLP announced that it had obtained an arbitration award of $11,281,681.46 on behalf of its client, Ronald Barranco.  In 2011, 3D Systems had acquired Barranco’s startup Print3D, an instant quotation plug-in that could be installed into a CAD software to generate production costs for printing a given CAD design.  According to the law firm, Barranco was to be hired on as a co-manager of the new business unit, as per the terms of the acquisition, where he would share in revenues generated by Print3D during a three-year “earn-out period”.  The firm states, however, that, instead, Barranco was fired twenty months in, without taking home any earn-out funds.

Deelip Menezes with Ronald Barranco 3D Systems and Print3D
Print3D Founders Deelip Menezes and Ronald Barranco. Image via Deelip.com.

From the court documents (available here as a .pdf), it sounds as though 3D Systems had, instead of launching Print3D as its own entity, instead devoted its resources to another recently acquired subsidiary, which many readers will recognize: Quickparts, the company’s industrial manufacturing service, with instant price quotation.  Meanwhile, Barranco seems to have been neglected, with the arbitrator saying, “An overall assessment of the record indicates that Mr. Barranco was rarely, if ever, treated as a manager and poorly managed as an employee.”

Meanwhile, his former co-founder, Deelip Menezes, seems to suggest that Print3D was deliberately forgotten.  Without receiving his own earnouts, Menezes tells Barranco, “They don’t want you anywhere close to them. They want you out of all this so that they can drive Print3D the way they want or just let it rot there, which is what they have been doing all this time.”

In turn, Barranco sought legal action, with arbitration hearings occurring from June 22-26, 2015 in Charlotte, North Carolina.  The arbitrator issued a modified final award on October 16, as a result of 3D Systems’ breach of its obligation to Print3D, which had been neglected over another similar company that also been acquired.  In its decision, the arbitrator explained, “The record clearly, and by a preponderance of the evidence, demonstrates that Respondents’ actions and inactions… materially breached [its obligations]”, before going on to say, “The list of actions and inactions of Respondents evidencing bad faith relative to Mr. Barranco and Print3D is a long one.” 

The funds will be used to cover Barranco’s attorney’s fees, the cost of the legal process, and Barranco’s damages.  Gaw | Poe partner Mark Poe commented, “3D Systems is a billion dollar behemoth that had gobbled up dozens of small companies in the 3-D printing space. It apparently thought it could do whatever it wanted with those companies, that it could abuse Ron, and that he wouldn’t be able to fight back.”  Randolph Gaw, another partner with the firm, contributed, “It’s not uncommon to hear about entrepreneurs who sold their company in exchange for an earnout or other deferred compensation, and were then cheated out of what they were promised. We’re glad that we were able to get justice for Mr. Barranco.”

3D Systems has, since Print3D and Quickparts, acquired numerous other firms.  And, last year at CES, many of those new subsidiaries displayed their wares on the showroom floor, but never saw those products made commercial by the year’s end or up until today, leading investors to establish a class-action suit against the company.  This makes me wonder if the practices that may have been pursued during Barranco’s time at the company are still in practice now and whether or not we’ll see those acquisitions face the same fates as Print3D.