Western Digital Sued for Fraud : Courts: Data Exchange Corp. alleges the O.C. firm breached agreement on repairs to disk drives. It seeks at least $15 million.

By DEAN TAKAHASHI

Sept. 30, 1993 12 AM PT

TIMES STAFF WRITER

IRVINE —

Western Digital Corp. has been sued for at least $15 million by a Ventura County company hired to repair Western Digital’s line of computer disk-drive products.

Data Exchange Corp., a 250-employee repair company based in Camarillo, alleges fraud and breach of contract in a suit filed Tuesday in Ventura County Superior Court.

Leo Young, vice president of intellectual property for Western Digital, said the company will defend itself vigorously against Data Exchange’s allegations.

Western Digital had sued Data Exchange in Orange County Superior Court in May, alleging breach of contract, fraud and negligence. Western Digital’s suit alleged that Data Exchange failed to repair products properly and failed to return some products.

Data Exchange, in its countersuit, alleges that Western Digital failed to live up to a contract signed in August, 1991. Under the deal, Data Exchange received rights to repair all of Western Digital’s disk drives in North America for three years.

Sheldon Malchicoff, president of Data Exchange, said his company incurred big costs in training employees and buying equipment and technology to repair Western Digital’s disk drives.

During the early months of the contract, Data Exchange said, it repaired as many as 8,000 drives a month. The suit alleges that Western Digital breached the contract in May, 1992, by sorting through its drives and sending to Data Exchange only the most seriously damaged machines--those costing the most to repair.

Shortly thereafter, the suit alleges, Western Digital began sending its disk drives to other repair shops, including Western Digital’s Singapore subsidiary.

In addition to $15 million in compensatory damages for actual losses, Data Exchange is seeking punitive damages.

Western Digital manufactured about 4.4 million hard disk drives last year. On Tuesday, it announced that an IBM plant in England will make as many as 100,000 disk drives a quarter for Western Digital’s European customers.