LOS ANGELES (CN) - Invoking state and federal antitrust laws, the Southern California Institute of Law claims TCS Education Systems stole its "most guarded secrets" during failed acquisition negotiations, and is using the information to drive the small night school for "working-class adults" out of business.
The Southern California Institute of Law is a "small, State Bar-accredited evening law school with a 25-year history of serving working-class adults in the tri-county area of San Luis Obispo, Santa Barbara and Ventura Counties," according to the federal complaint. The school objects to "the blatantly anticompetitive conduct of TCS Education, a multimillion-dollar corporation engaged in the rapid acquisition of schools and colleges in California and elsewhere."
The school claims TCS violated both the Sherman Act and the Cartwright Act, California's antitrust law, in a conspiracy to monopolize, to compete unfairly, and misappropriate trade secrets.
"Lured by the prospect of increasing its outreach to an underserved population of future law students, the plaintiff provided defendants with unfettered access to its dean, faculty and confidential files in an effort to complete an acquisition transaction with the defendants," according to the complaint.
"Instead, the defendants misappropriated plaintiff's most guarded secrets and information in violation of a binding confidentially agreement and secretly used the information to affiliate with the plaintiff's sole competitor in the region. Armed with the stolen information, the defendants recently announced their 'deal' which is calculated to kill off competition in the region, destroy the plaintiff's business and increase the cost of tuition."
TCS Education Systems partnered in September with the Santa Barbara & Ventura Colleges of Law, the institute's nearest competitor, not long after it passed on an opportunity to acquire the plaintiff, according to the complaint.
"Defendants made a calculated decision to misuse the law school's information ... as a means for acquiring the law school's longtime rival, COL," the complaint states. "TCS, through its affiliation with COL, has now become the law school's sole competitor with full knowledge of the law school's most intimate and confidential information and trade secrets."
A spokesperson for TCS said Tuesday that the company had not been served with the lawsuit and therefore had no comment.
The Southern California Institute of Law claims that TCS signed a nondisclosure agreement, but since the deal fell apart it has not lived up to that agreement.
"The law school's documentary information was neither destroyed nor returned and no certification of its destruction has been provided," according to the complaint. "The law school made no request for the return of the documentary information given its belief (and hope) that further discussion with TCS might ensue. Most fundamentally, it had no idea of defendants' intentions to misuse the information and abuse the 'relationship' of trust and confidence created by the NDA and the parties' course of dealing." (Parentheses in complaint.)
The institute says it pays its professors "very modest compensation, perhaps the lowest of any State Bar accredited school in California" so it can keep its tuition affordable. "Tuition rates are currently $350 per unit, whereas many comparable law schools charge in the range of $800 or more per units," according to the complaint. The school has about 100 students, two campuses and 31 faculty members.
It says it could go out of business because it can't compete on an unfair playing field.
"Not only is TCS-COL wealthy and resource rich, they are armed with the law school's misappropriated information and best strategic thinking of its deans, faculty and board placing the law school at distinct competitive disadvantage," the complaint states.
"With its present resources, the law school cannot possibly offer the services promised by COL to current and prospective students or match TCS's likely administrative and technological innovations. In addition, TCS's affiliation with COL has reduced the likelihood to nil that the law school might be perceived as an attractive candidate to another large education organization. This is so because competition in the tri-county area will be much more expensive and challenging."
The institute seeks an injunction "prohibiting defendants from taking further steps to complete their unlawful scheme."
It adds that "in spite of defendants' betrayal and the harm inflicted on the law school, plaintiff is primarily seeking injunctive relief to prevent TCS from taking any further steps to pursue the affiliation with COL rather than monetary damages."
The institute sued TCS; David Figuli, of Evergreen, Colo., who "portrays himself as a leading lawyer in the 'American higher education industry,'" and Global Equities Ltd., also of Evergreen, which is "owned and controlled by Figuli and transacts business under the trade name 'Higher Education Group.'"
The institutes alleges breach of contract, bad faith, breach of fiduciary duty, aiding and abetting, negligent misrepresentation, misappropriation of trade secrets and attempted monopolization. It seeks an injunction, disgorgement, and compensatory and punitive damages.
It is represented by George Shohet of Venice, and Kreindler & Kreindler of Los Angeles.