DISK WARS : Consultant Sues 3M Over an Aborted Data-Storage Device

In June, 1985, computer specialist Donald C. Mann started a company called Ample Data in Newbury Park. His purpose: To team with giant 3M and bring an innovative data-storage device to the computer market.

Six months later, Ample was out of business and Mann, who invested his $50,000 savings in the company, was broke. The new product has yet to reach the market.

“I put everything I had into it, all my money and time,” Mann recalled.

Now Mann, 49, is suing 3M for a whopping $750 million, alleging the company ran Ample out of business by reneging on promises to help Ample develop the new product.

It’s another David and Goliath story, with Mann taking on 3M, formally Minnesota Mining & Manufacturing, a major producer of films, coatings and electronics products with 1986 sales of nearly $9 billion. In fact, Mann’s lawsuit, filed in Ventura County Superior Court, seeks damages that would nearly match 3M’s entire 1986 profit. Mann figures the data-storage device would have rung up $270 million in sales over five years.

Mann, a Thousand Oaks resident, will be fighting more than just 3M’s battery of lawyers. A key part of his lawsuit is his allegation that 3M broke an oral agreement to help Ample develop and produce the new technology.

‘I Trusted Them Completely’

Why didn’t Mann protect himself and his company by insisting on a written contract requiring 3M to produce the disks? “I was so certain of my relationship with 3M,” he said. “We had a lot of camaraderie between us. We knew each other’s families. I trusted them completely, and they trusted me completely.”

But winning a lawsuit in the absence of a written contract has been done. In 1984, a jury awarded $52 million in damages to the now-defunct Central Ice Cream Co. in Chicago, which claimed McDonald’s Corp. backed out of an oral agreement that McDonald’s founder, the late Ray Kroc, made in 1970 to distribute a Central ice cream cone in its restaurants for 20 years. McDonald’s later settled the case for $15.5 million.

Similarly, Pennzoil last year was able to convince a Texas jury that Texaco illegally induced Getty Oil to break an oral agreement to merge with Pennzoil, and Texaco now faces having to pay $10.5 billion in damages. Texaco is appealing.

The Universal City law firm of Knapp, Petersen & Clarke is handling Mann’s lawsuit on a contingency basis, the legal equivalent of all or nothing. The law firm will be paid a percentage of whatever Mann gets--a percentage attorney Gary L. Holmen declined to specify. Of course, if Mann loses the suit, Holmen’s firm gets nothing.

Holmen intends to argue that the oral agreement is enforceable because Mann and 3M “had a relationship of mutual cooperation and trust going back to 1969. If it was just an oral agreement and nothing more, no further contact, that would be different,” Holmen said.

Mann said he reached that oral agreement with a team of 3M managers that was replaced in early 1986, and it was the new team that canceled the agreement.

“The management team I was dealing with was sincere,” Mann said. “Had the management team remained intact, I suspect this problem would never have happened.”

3M Has Little to Say

As for 3M, it is saying little about Mann’s suit. John Lively, a spokesman at 3M’s headquarters in St. Paul, Minn., said the company does not comment on pending litigation. But he did say 3M has “no plans to introduce the technology that’s the subject of the suit.”

That technology involves a “stretched-surface recording” (SSR) data-storage disk, Mann said, that is intended to provide more computer storage capacity and protection against damage than any disk currently on the market.

Most computer disks used today are either so-called hard disks, which have substantial storage capacity, but are relatively expensive, and floppy disks, which are cheaper, but have limited storage capacity. The SSR disk, however, appeared able to store as much data as a hard disk and cost little more than a floppy, said Bob Gaskin, senior analyst for Dataquest, an industry research firm in Cupertino, Calif.

“We were definitely curious about it, although we weren’t sure what the problems might be” with the product, Gaskin said. “I’m not privy to why they (3M) decided to abandon it.”

Even if Mann wins his case, it could take nearly a decade before he sees a dime from 3M--assuming it isn’t settled before then. “We will go the distance if necessary,” Holmen said.

In the meantime, Mann is working as a storage disk technology consultant to various computer companies, including Cyberdisk in Anaheim. Mann said he makes between $750 and $1,500 a day, or up to three times what he earned as a consultant to 3M in the early 1980s.

According to the lawsuit, Mann had worked as a 3M consultant on various projects, including developing videotape and computer recording technology. In late 1981, Mann had a full-time engineering job at Texas Instruments, a maker of semiconductors and other electronic products, when 3M asked him to become a $100,000-a-year consultant to help work on the new SSR project.

Worked on Disk 3 Years

For the next three years, Mann and 3M worked on the storage disk. But for the SSR disk to be sold commercially, there would have to be lots of disk drives to operate them.

(A storage disk fits inside a disk drive, and the whole package fits inside the computer. It is the drive that actually retrieves data from the disk, or adds to it.)

In the summer of 1984, the suit says, 3M proposed that Mann start developing a disk-drive package that could operate the SSR disk, as well as setting up a marketing network to sell both products to computer makers. 3M would continue doing research and development on the disk, Mann would develop the drive, both products would hit the market simultaneously, and 3M and Mann would prosper.

Mann did get one commitment on paper. On June 21, 1985, 3M and Mann signed a licensing agreement whereby 3M gave Mann the right to use the SSR technology developed so far. That same month, Mann quit his 3M consulting job and started Ample Data.

Mann invested his own savings to get the new company going, hired nine employees, both full- and part-time. In June, 1985, the lawsuit said, “3M orally agreed” to start making large quantities of the SSR disk and provide those disks to Ample, which would sell the disks and drives as one package.

‘Received Repeated Assurances’

Over the next six months, the suit says, Ample Data “received repeated assurances from high-level 3M management officials” that 3M management had authorized production of the disk, and a manufacturing facility had been chosen. Ample, meanwhile, was busy lining up customers, manufacturing licensees and financial partners to get the disk-drive production going.

Then in January, 1986, a new 3M management team took charge and, “without any prior warning,” the suit says, told Mann the company would not start commercial production of the disk for at least a year, and might never do so.

In addition to suing 3M for damages, Mann’s lawyers also plan to seek a court injunction requiring 3M to uphold the agreements and start producing the SSR disks, which would give Ample new life.

But it seems highly unlikely that a court would force a company to start producing a product that it appears to have no interest in.

Mann says he would just as soon be in the middle of a burgeoning SSR market. But he said he’s effectively barred from getting back into the business. Why? The patent on the SSR disk is held by 3M.