DISD V Delcom Second Amd. Petition

CAUSE NO. 11-9674-K DELCOM GROUP, LP, Plaintiff, v. DALLAS INDEPENDENT SCHOOL DISTRICT, R.L.S. INTERESTS, INC.
d/b/a PRIME SYSTEMS, INC. d/b/a DIRECTRON, HSIANGPIN MICHAEL CHANG, an individual, and CHANGSHENG, INC. d/b/a AXIONTECH.COM a/k/a PRIME, and RONALD J. PRICE, an individual, Defendants. PLAINTIFFS SECOND AMENDED VERIFIED ORIGINAL PETITION AND APPLICATION FOR TEMPORARY RESTRAINING ORDER AND TEMPORARY AND PERMANENT INJUNCTIVE RELIEF COMES NOW, Plaintiff Delcom Group, LP (Plaintiff or Delcom) and files this Plaintiffs Second Amended Verified Original Petition and Application for Temporary Restraining Order and Temporary and Permanent Injunctive Relief (the Petition and Application) against Defendants Dallas Independent School District (Dallas ISD, DISD or the District), R.L.S. Interests, Inc. d/b/a Prime Systems, Inc., d/b/a Directron (Prime), Hsiangpin Michael Chang (Chang), Chang-Sheng, Inc., d/b/a AxionTech.com (AxionTech), and Ronald J. Price (Price) (collectively, Defendants), and in support thereof respectfully shows the Court as follows: I. INTRODUCTION IN THE DISTRICT COURT OF
DALLAS COUNTY, TEXAS
192nd JUDICIAL DISTRICT
Delcom brings this lawsuit after diligent, non-litigious efforts to reason with DISD regarding a $40 Million Contract between the two parties failed. Because Delcoms repeated requests to discuss any potential issues with DISD were refused, Delcom now files suit in an
PLAINTIFFS SECOND AMENDED ORIGINALVERIFIED PETITION AND APPLICATION FOR TEMPORARY RESTRAINING ORDER AND TEMPORARY AND PERMANENT INJUNCTIVE RELIEF
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attempt to prevent DISD from breaching its Contract with Delcomor in the alternative to seek compensation for such breach by DISDand to protect Delcoms trade secrets from an unconstitutional taking by DISD, and from theft by DISD and Prime, a competing vendor with whom DISD now intends to perform the contract that was awarded to Delcom. Delcom seeks compensation from DISD for breach of contract and for unconstitutional taking of Delcoms trade secrets; from Prime, Chang, and Price for tortiously interfering with Delcoms contractual relationship and potential contractual relationship with DISD; and from both DISD and Prime for claims arising out of the Texas Penal Code for theft of services and theft of property. Among other acts, DISD has confirmed that Prime made multiple improper contacts to DISD, including attempts to negotiate, during the RFP process. Delcoms claims were apparently set in motion by Ron Price, Michael Chang, and Primes malicious undermining of Delcoms winning bid on a DISD Request for Proposal and Ron Price, Michael Chang and Primes repeated attempts to generally torpedo Delcoms business relationships through a pattern of spiteful behavior; DISDs resulting decision to wrongfully attempt to terminate its Contract with Delcom; and DISDs and Primes ensuing misappropriation of Delcoms trade secrets. Delcom brings claims against Defendant DISD for breach of contract, unconstitutional taking of Delcoms property, and for theft of services and theft of property. Delcom asserts claims against Defendants Price, Chang, and Prime for tortious interference with contract, tortious interference with prospective business relationships, and related conspiracy claims. Delcom asserts claims against Defendant Prime for misappropriation of trade secrets, theft of services, and theft of property. Plaintiff seeks general and special damages against Defendants,
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injunctive relief against DISD and against Primeincluding a temporary restraining order and temporary and permanent injunctive reliefand attorneys fees. II. 1. DISCOVERY CONTROL PLAN
Plaintiff submits that this matter should be conducted under Discovery Plan Level
Two, as set forth in Rule 190.3 of the Texas Rules of Civil Procedure. III. A. PLAINTIFF 2. Delcom Group, LP is a Texas limited partnership with its principal office located PARTIES
in Denton County at 2525B E. Highway 121, Suite 400, Lewisville, Texas 75056. B. DEFENDANTS 3. Defendant Dallas Independent School District is a school district organized under
the laws of the State of Texas, and has appeared herein. 4. Defendant R.L.S. Interests, Inc. d/b/a Prime Systems, Inc. d/b/a Directron is a
Texas corporation, and has appeared herein. 5. Defendant Hsiangpin Michael Chang, is an individual who resides in Harris
County, and may be served at 10402 Harwin Drive, Houston, Texas 77026, or wherever he may be found. 6. Defendant Chang-Sheng, Inc. d/b/a AxionTech.com a/k/a Prime is a Texas
corporation with its principal and home office located in Harris County at 10402 Harwin Drive, Houston, Texas 77036. It may be served through its registered agent, Hsiangpin Michael Chang, at 10402 Harwin Drive, Houston, Texas 77036, or wherever he may be found. 7. Defendant Ronald J. Price is an individual who resides in Dallas County, and may
be served at 3622 Jamaica Street, Dallas, Texas 75210 or wherever he may be found.
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IV. 8.
JURISDICTION AND VENUE
This Court has subject matter jurisdiction because the matter in controversy
exceeds this courts minimum jurisdictional limits. 9. The Court has general personal jurisdiction over Defendant DISD because its
principal place of business is located in Dallas, Texas. 10. The Court has general personal jurisdiction over Defendant Prime because it is a
Texas corporation and conducts business in Dallas County, Texas. 11. The Court has general personal jurisdiction over Defendant Hsiangpin Michael
Chang because he is a resident of Harris County, Texas. 12. The Court has general personal jurisdiction over Defendant Chang-Sheng, Inc.,
because it is a Texas Corporation and conducts business in Dallas County, Texas. 13. The Court has general personal jurisdiction over Defendant Ron Price because he
is a resident of Dallas County, Texas. 14. Venue is proper in Dallas County, Texas pursuant to Texas Civil Practice and
Remedies Code sections 65.023(a) and 15.002(a) because Defendant DISDs principal office is located in Dallas County and because all or a substantial part of the events or omissions giving rise to the claims occurred or are occurring in Dallas County, Texas. V. 15. CONDITIONS PRECEDENT
All conditions precedent to the filing of this action have been fulfilled.
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VI. A. PLAINTIFF 16.
FACTUAL BACKGROUND
Delcom is a Texas limited partnership, founded in January of 2000 and registered
in Texas. Christine Delph is President and Chief Financial Officer of Delcom. The General Partner of Delcom Group LP is Delcom Group GP, LLC. Christine Delph is 100% owner of Delcom Group GP, LLC. Delcom is an accredited Historically Underutilized Business: Delcom is owned and operated by an American woman, and is certified to that effect. Delcom employs nearly forty people in the DFW area. 17. Delcom specializes in lifecycle technology solutions for school districts and
other large-scale institutions; that is, Delcoms services span from creation through recycling of a school districts technology. Delcoms services begin with custom audio-visual design for
interactive, media-driven classroom environments. After design, Delcom provides technology installation, customized professional development trainingso teachers can fully utilize and integrate the new technology into their lessonsand warranty service. technologys lifecycle, Delcom provides salvage and recycling services. 18. School districts across Texas value Delcoms high quality and trusted service, as At the end of the
evidenced by the fact that Delcom has been contracting for more than five years with all but six of the top twenty-five largest school districts in Texas. B. DEFENDANTS Dallas ISD 19. Dallas ISD has enjoyed a mutually-beneficial and established relationship with
Delcom over the course of eight years. Delcom has provided vendor services to DISD on various types of projects, both as a direct and sub-contractor to the District. DISD has
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continually expressed to Delcom its satisfaction with the innovative and quality service Delcom provides to the District. 20. Dallas ISD selected Delcom as the winning bid on the forty million dollar Digital
Classrooms project, described below, because Delcoms design solution was head and shoulders above all other bids in regards to value to the District. No other vendors submission was as creative and fiscally-responsible as what Delcom proposed to the District. DISD recognized this fact in its award of the contract to Delcom, the vendor who could offer the most qualified engineering services to the District 21. Until the Districts recent shocking and disappointing course of action, described
below, DISD and Delcom had maintained a positive and productive relationship throughout their eight years of working together, and even longer with certain DISD personnel who previously worked for other of Delcoms client-school districts. Prime 22. Prime, a competing vendor based in Houston, offers IT products and services to
K-12 schools. Chang is the president of Prime. 23. After DISDs attempted termination and/or breach of its contract with Delcom,
DISD purported to re-award the Digital Classrooms contract to Prime. 24. Prime began incorporating Delcoms proprietary design solution immediately
upon the purported re-award, which will damage and has damaged Delcoms competitive advantage in the marketplace. Price 25. Ronald J. Price is a former Trustee of DISD and served as First Vice President of
the School District Board of Trustees.
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26.
In 2005, Price accepted $25,000.00 in campaign contributions and other gifts and
privileges from MSE Chairman Frankie Wong and two of Wongs associates. Price received no campaign contributions other than MSEs $25,000.00 check. 27. In July of 2008, Wong and Ruben Bohuchot, the former Chief Technology
Officer at DISD, were convicted on all counts of a federal indictment involving offenses related to their operation of a bribery and money-laundering scheme involving DISD technology contracts. 28. In May 2011, Price utilized his influence with the employees and Trustees of
DISD to intentionally interfere with the formation of the business relationship between DISD and Delcom. 29. In June 2011, Price utilized his influence with the employees and Trustees of
DISD to intentionally interfere with the existing contract between DISD and Delcom. Chang-Sheng 30. Chang-Sheng, d/b/a AxionTech.com a/k/a Prime is a competing vendor based in
Houston, and offers IT products and services to K-12 schools. Numerous Prime documents relevant to the Digital Classrooms project, which is the subject of this lawsuit, bear the AxionTech.com logo. Chang 31. Hsiangpin Michael Chang, the representative for Prime, Directron and
AxionTech.com vendors competing with Delcom, contacted Price to assert Prices influence with the employees and Trustees of DISD and to intentionally interfere with the formation of the relationship between DISD and Delcom.
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32.
Upon information and belief, Chang contacted employees of DISD and
intentionally interfered with Delcoms relationship with DISD. Chang and Price 33. Defendants Michael Chang and Ron Price acted to tear apart the long-standing
positive relationship between DISD and Delcom. 34. In mid-May,1 Michael Chang and Ron Price placed calculated and subversive
telephone calls to DISD Trustees and certain key DISD personnel. Those calls caused the destruction of eight years of good will developed between Delcom and DISD. The subject of Chang and Prices veiled calls, and subsequent documentary supplementation, was a single incident in the now long-past background of a Delcom employee (the Employee). 35. In 1995, a young outdoorsmanwho is now an employee of Delcommade a
single, cursory and regretful decision to accept some fishing equipment initially taken by UPSemployee friends off their truck. The equipment was worth less than $1000, but it had crossed state lines, and therefore resulted in a 1997 federal felony against the young man. Full restitution was made for the fishing equipment. The judge sentenced no incarceration; only three years probation, which was fully honored. 36. This is the Employees entire criminal history. But, thanks to Chang and Price, it
continues to not only haunt him, but also the company he works for and each of his fellow employees as well. 37. This is not the first time the Employees minor and dated conviction has been
anonymously reported to school districts contracting with Delcom. While the current episode has involved one or more phone calls to DISD Trustees and personnel and delivery of felony conviction documents to Trustees by Ron Price, a previous, similar incident involved an
1
Unless otherwise indicated, all dates in the Petition and Application are year 2011. PLAINTIFFS SECOND AMENDED ORIGINALVERIFIED PETITION AND APPLICATION FOR TEMPORARY RESTRAINING ORDER AND TEMPORARY AND PERMANENT INJUNCTIVE RELIEF
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informant sending a batch of anonymous letters to school districts across North Texas. The now defunct Micro System Engineering, Inc. (MSE), a competing vendor based in Houston, with offices in Dallas, later admitted in a retraction letter that the anonymous letter was sent by an MSE employee.2 C. MSE focused on computer sales to school districts.
THE DIGITAL CLASSROOMS PROJECT. 38. The DISD Digital Classrooms Project RFP requested a solution oriented design
from the most qualified technology integrator to meet the overall vision of the project. This Digital Classroom would be implemented in approximately half of the classrooms in the Districtroughly 6000 classroomsand set the standard for the remaining classrooms to be completed as part of RFPs to follow. 39. The RFP included four existing-classroom scenarios: a standard empty
classroom, a classroom with an existing projector, a classroom with an existing projector and a SmartBoard, and a portable classroom. The Digital Classroom design would include a document camera, classroom audio system including a wireless microphone, a short-throw interactive projector, a wireless interactive pen or controller, a student response system, a cart to hold the equipment and all associated cabling, system controls, and programming. Each of the
technologies would allow the District to move its classrooms into the 21st century and maximize the teachers instructional time in the classroom for todays digital-native learners. D. DISD BROKE PROMISE AFTER PROMISE AFTER PROMISE TO DELCOM. 40. From prior to DISDs award of the Digital Classrooms Contract to Delcom,
through the Contract award and early stages of the project, until the good faith attempts by Delcom to resolve DISDs attempted termination and/or breach, DISD has only acted to repeatedly break its promises to Delcom.
2
MSEs retraction letter also states that the anonymous letter was sent without MSEs authorization. PLAINTIFFS SECOND AMENDED ORIGINALVERIFIED PETITION AND APPLICATION FOR TEMPORARY RESTRAINING ORDER AND TEMPORARY AND PERMANENT INJUNCTIVE RELIEF
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41.
Early in the RFP process, the District reminded all responding vendors that
certain contacts with the District, and especially with the RFP selection committee, were strictly prohibited. The District warned the vendors that possible consequences for such prohibited contacts included disqualification from the RFP. Nonetheless, Chang and Prime made multiple improper inquiries regarding the RFP with the purchasing department and at least one selection committee member. Chang and Primes improper communications included attempts to
negotiate price before the contract was awarded to any vendor, and to gain access to Delcoms confidential pricing. The Districts responses to Chang and Prime never included even a
reminder that these inquiries were improper and could result in disqualification, let alone the fully-justified disqualification of Prime. 42. Under the DISD Digital Classrooms Request for Proposal (the RFP, attached
hereto with addendum as Exhibit A), DISD and Delcom have an enforceable, written, and executed contract for goods and services valued at approximately forty million dollars ($40,000,000.00), to be performed over the course of four years (the Contract). Per the Digital Classrooms RFP, the Contract consists of three documents: the RFP, the vendors offer, and the signed letter of acceptance. (Exh. A, p. 9, para. 9.0) Delcom submitted its bid on February 28. Delcom received DISDs signed letter of acceptance on May 27. (Attached hereto as Exhibit B.) Under the terms of the RFP, this letter consummate[d] the contract. (Exh. A, p. 9, para. 9.0) Even in light of its fulfillment of the RFPs description of a consummated contract, DISD denies the existence of any contract with Delcom. 43. A statutory component of a vendors responsive offer to a school districts request
for proposal is a signed Felony Conviction Notice. If the company is not publicly-held, this notice declares to the school district that either the company is not owned or operated by anyone
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who has been convicted of a felony, or that the company is owned or operated by an individual who has been convicted of a felony, in which case details of the conviction are listed on the notice. While an employee of Delcom does hold the above-described minor and dated felony conviction, no owner or operator of Delcom has been convicted of any felony. The notice was thus completed and attached to Delcoms Bid, in full compliance with the statutory requirement. 44. DISD knew of the Delcom employees felony conviction in early May, before the
Digital Classrooms project was awarded to any vendor. 45. Specifically, then-CFO Alan King and Trustee Bernadette Nutall were aware of
the convictiondue to Ron Price and Michael Changs phone calls. King, as CFO, directed Gary Kerbow, Director of Purchasing, to inquire with Delcom about the matter. Additionally, the purchasing department made last-minute revisions to vendor recommendation documents that would be submitted to the board of trustees, in order to allow for an expeditious change-of-heart to another vendor. The selection committee was asked toand didconfirm that Delcom was indeed the winner of the Digital Classrooms RFP and was the vendor offering the best solution for the District. 46. Under Kings direction, and prior to DISDs consummation of the Contract with
Delcom, Kerbow and other personnel inquired with Delcom as to its organizational structure. Delcom promptly provided all information the District requested. To ensure its compliance with the Districts inquiries, Delcom even requested further clarification as to what specific information the District needed. 47. In these pre-award discussions, DISD was not forthcoming as to its motive for
questioning Delcoms employees about the companys ownership structure. The first indication as to DISDs true concernthe Employees convictionwas the fact that DISD personnel
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directly contacted the Employeenot a more appropriate staff memberasking for a list of officers and other operators of Delcom. Nonetheless, the Employee directed DISD to the appropriate individual, and the requested information was promptly provided. 48. This questioning from DISD, and Delcoms accommodating responses, occurred
over May 16, 17, and 18. In its questioning of Delcom, DISD never asked for a list of all Delcom employees or for a list of any felony convictions held by any person working for Delcom. DISD already knew what it now says it wanted to find out aboutthe fact of the Employees convictionit was just testing Delcom to see if Delcom would conjure DISDs true intentions and provide answers to questions that were never asked. Nonetheless, DISD was apparently satisfied by Delcoms answers to the questions it did ask. 49. With the information it had received from Price and Chang, and from its inquiries
to Delcom, DISD apparently intended to further discuss the board agenda item wherein Delcom would be presented to the board for approval for the Digital Classrooms project. 50. Whether or not this further consideration was made, on May 27, after ample time
for the District to internally discuss and make any necessary decisions regarding which Digital Classrooms bid and vendor it preferredand in knowing all this time about the Delcom Employees minor felony convictionDISD awarded the Contract to Delcom. (Exh. B) Even Bernadette Nutall voted in approval of the award to Delcom. 51. In late May and early June, DISD and Delcom were charging ahead on the Digital At DISDs request, Delcom performed walks of several campuses,
Classrooms project.
attended project meetings, customized the solution design accordingly, and put its design solution in DISDs hands.
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52.
On June 6, Michael Hinojosa resigned as DISD Superintendent, and Alan King
stepped in as Interim Superintendent. 53. One of Kings initial moves as Interim Superintendent was to again direct Kerbow
to investigate the Delcom employees felony, but this time without any input whatsoever from Delcom. Indeed, the District kept secret the fact that it was internally investigating Delcom even as the two parties were working together on an expedited basis in order to have as many classrooms outfitted with Delcoms plan, structure, and design of the Digital Classrooms project by the start of the 2011-2012 school year. The internal investigation consisted of felony
conviction documents provided by Ron Price to Bernadette Nutall and internet printouts from various websites purporting to outline Delcoms organizational structure. 54. King and Nutall in fact never intended Delcom to implement its own design, even
though DISD had in fact already awarded the contract to Delcom. 55. On June 14, Delcom submitted to DISD the final set of documents fully detailing
Delcoms Digital Classrooms solution: the final price list for manufacturer-specific products, and the scope of work, which contain Delcoms trade secrets and proprietary information in the form of Delcoms custom-designed solution for DISD. Delcom submitted these documents to DISD with the good-faith understanding that only necessary DISD personnel would have access to them. Delcom certainly did not authorize or expect its trade secrets to be shared with anyone outside the District, especially a competing vendor. DISD never compensated Delcom for its services in preparation of its trade secrets, nor for the trade secrets themselves, even though the District fully intended to implement Delcoms design. After transmittal of these key Delcom documents to DISD, communication from DISD halted to an eerie quiet.
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56.
Fourteen days later, on June 20, Delcom received an emailed letter from DISD
purporting to end negotiationswhen of course the District was well-aware that it had already consummated the Contract more than three weeks earlier. (See Exh. B) 57. Also within the span of two weeks after Delcom shared its trade secret design
with key District personnel, and was never compensated for its services or property, these same DISD personnel handed over Delcoms trade secrets to Prime. Upon receipt of Delcoms scope of work, product list, and pricing information, Prime immediately began contacting product manufacturers in attempts to implement Delcoms design, at DISDs direction. DISD repeatedly did not follow its own contractual procedures. 58. At the outset, DISD mischaracterized its purported termination of the Contract as
an ending of negotiations when in reality DISD was a party to an enforceable contract with Delcom, under DISDs own specific and established procedures. As explained above, per the terms of the RFP, the consummated Contract consisted of three documents: the Digital
Classrooms RFP, Delcoms Bid, and DISDs signed letter of acceptance. (Exh. A, p. 9 para. 9.0) 59. Additionally, if DISD did terminate the Contract at all, it terminated for cause.
However, the District did not follow the required procedures for doing so. The termination letter stated that the District would not be moving forward on the Contract due to issues learned regarding Felony Conviction Notice requirements under the Texas Education Code 44.434. (See Exh. C) However, DISD refused to follow its own required procedures under the Digital Classrooms RFP to effectuate a termination for cause. 60. The RFP requires that, should the District terminate the Contract for cause, the
District must give fifteen days written notice of termination setting forth the nature of the failure. (See Exh. A, p. 72, para. 8.a.) The vendor then has that fifteen-day period to address and
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cure the Districts stated cause for termination. (Id.) If the vendor cures the defect in the fifteenday period, the termination shall not be effective. (Id.) 61. Delcom received no advance written notice of termination from DISD.
Nevertheless, Delcom made immediate and repeated efforts to meet with DISD, address its concerns, and cure any potential failures. DISD refused to give Delcom this contractuallyrequired opportunity. 62. Moreover, no need to cure even existed, as there was no substantial failure by
Delcom. Delcom fully, legally, and honestly complied with the statutory Felony Conviction Notice requirementsthe purported reason for DISDs termination. Beyond that, prior to being awarded the Contract, Delcom answered all of DISDs questions regarding Delcoms organizational structure. Delcom made repeated, good faith efforts to resolve the matter with DISD. 63. After the disappointing and surprising receipt of the June 20 emailed purported
termination letter, Delcom immediately began attempting to communicate with DISD to resolve any issues and move forward with the Contract. 64. Within hours of receipt of the letter, Howard Nirken, Delcoms corporate
counsel, contacted DISD to request clarification on the termination letter regarding the documents that were obtained from an independent source, and how the District defines operator. Nirkens efforts were to no avail. 65. On June 22, less than 48 hours after Delcoms receipt of DISDs purported
termination letter, the undersigned counsel for Delcom called DISDs legal department several times in an attempt to open up a line of communication between the two parties. These calls
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were also unanswered. Delcoms counsel therefore sent a letter via email and fax, also on June 22, requesting to meet with DISD regarding the issues outlined in the letter. 66. This very same day, June 22, DISD sent PrimeDelcoms competing vendora
Notice of Award Letter on the Digital Classrooms project. A retraction email was later sent to Prime, but clearly the District was prepared to move forward with another vendor, which was directly contradictory to what DISD was about to communicate to Delcom. 67. The following morning, June 23, Jack Elrod, General Counsel for DISD,
responded that DISD would be in contact with counsel for Delcom the week of July 11two weeks laterbecause the District was closing for summer break. Mr. Elrod gave his assurances that nothing will happen during the summer break in regards to other vendors. 68. Clearly that had not been the case, for on this very same day Prime was contacting
manufacturers in order to move forward with Delcoms design on the Digital Classrooms project. 69. On Delcoms end, two silent weeks passed, and July 11 came and went with no
word from DISD. After repeated calls and emails to Mr. Elrod, counsel for Delcom was finally informed on the afternoon of July 12 that Mr. Elrod was handing off the matter to DISDs outside counsel, and therefore Mr. Elrod would not be speaking to counsel for Delcom regarding this matter. 70. On July 14, outside counsel for DISD again assured counsel for Delcom that
DISD will not award the contract to anyone until further internal discussions occur. In fact, DISD personnel were having regular meetings and email communications with Prime regarding the Digital Classrooms project. Those communications included direction by DISD as to
specific prices Prime should be offering the District: Delcoms prices.
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71.
Counsel for Delcom repeatedly requested a face-to-face meeting with both parties
in order to work through any concerns the District may have been having. Requests for this meeting were continually sidestepped. 72. Finally, on July 25, after significant efforts by Delcom and Delcoms counsel to
speak with DISDto no availDISD confirmed by letter that it would not be entering into a contract with Delcom. 73. During this period, DISD admitted it had known since mid-May the identity of
the Employee and the facts regarding his minor felony conviction. Delcom learned that DISD had merely been testing Delcom to see if Delcom would disclose and explainwithout actually being askedthe wholly irrelevant circumstances regarding Employee, even though there was absolutely no legal duty for Delcom to disclose or explain the incident. Perhaps most
disappointingly, DISD eventually insinuated that this test was not pass/fail, but rather a fail/fail test: for in fact, there was no way for Delcom to pass. Even if Delcom had explained the Employees regretful fishing equipment incident from more than fifteen years ago, DISDs position would have been the samewhich, apparently, was to award Delcom the Contract, possess Delcoms innovative design solution, and then terminate, reverse course, and move on with Prime. 74. And all of this was done by DISD, not reflecting its positive eight-year
relationship with the people of Delcom, but unlawfully and unethically on Ron Price and Michael Changs secretive phone calls. DISDs post-breach activities with Prime. 75. As described above, Prime began moving forward on the Digital Classrooms
project within days of Delcoms receipt of DISDs June 20 purported termination letter, including communicating with product manufacturers regarding the project.
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manufacturers Prime contacted regarding the Digital Classrooms project were not even included in Primes response to the RFP. Moreover, Prime directly communicated with the manufacturers that the products about which Prime was inquiring were from the other vendor, and that personnel from the DISD purchasing department were both specifically asking for those products and keying Prime into what the pricing on those products should be. 76. The technology solution that Prime bid on the Digital Classrooms RFP was Significantly, Delcoms design solution
completely dissimilar to Delcoms solution.
incorporated approximately 90% of the installed product to be manufactured by Extron Electronics, LLC (Extron). Delcom was the only vendor to include Extron products in its bid. Per Delcoms pre-award conversations with DISD, the inclusion of these high-quality Extron products in Delcoms design solution was a contributing factor in the Districts decision to award the Contract to Delcom. 77. A vendor must be a certified reseller of Extron products in order to incorporate
Extron products as a component of an installation, such as the Digital Classrooms project. After Prime was purportedly re-awarded the Digital Classrooms contract, it immediately began contacting Extron in an attempt to become an Extron certified reseller. 78. DISD has shared Delcoms proprietary design solution with Prime, and Prime is
using Delcoms design and incorporating Delcoms trade secrets into its own corporate knowledge and identity. These wrongful activities have damaged and, if not ceased, will
continue to damage, Delcoms competitive advantage in the marketplace. Conclusion 79. In DISDs purported termination letter, the District offered to reimburse Delcom
for its costs of equipment installed as a demonstration classroom showcasing Delcoms design
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solution. DISDs offer is wholly inadequate, as it does not recognize or even purport to cover the actual value of services and materials incurred and rendered as a result of DISDs ongoing promises to Delcom. 80. Delcom has suffered and continues to suffer injury as a result of Price and
Changs tipster phone calls, the ensuing disappointing breach by DISD, and Primes unlawful and unauthorized use of Delcoms trade secrets at the direction of DISD. 81. Delcom won the Digital Classroom bid because DISD deemed Delcom to be the
best. The best value, the best product, the best service. The people of Delcom were thrilled to win the Digital Classroom Contract and be able to do what they do bestprovide innovative and long-lasting audio-visual solutions for a media-rich classroom. DISD has chosen to breach its Contract with Delcom, and in doing so, throw away the best value for the taxpayers, andmost cruciallythe best product for the public school teachers and students. VII. A. CAUSES OF ACTION
Count 1: Breach of Contract (Against DISD) 82. 83. Delcom incorporates the above paragraphs by reference. Defendant DISD and Plaintiff Delcom have a valid, enforceable contract
consisting of DISDs RFP, Delcoms responsive bid, and DISDs signed letter of acceptance. 84. 85. 86. 87. Delcom tendered its contractual obligations under the Contract. DISD breached its contractual obligations under the Contract. As a result of DISDs breach, Delcom has suffered injury. Delcom was required to retain the law firm of Gruber Hurst Johansen Hail Shank,
LLP to pursue its claims, including its breach of contract claim and application for injunctive relief. Delcom is entitled to recover its reasonable attorneys fees in connection with the
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prosecution of this matter through trial and appeal, if any, pursuant to Texas Civil Practice and Remedies Code section 38.001. B. Count 2: Tortious Interference with Contract (Against Price, Chang and Prime) 88. 89. 90. Contract. 91. Price, Chang and Primes willful and intentional interference proximately caused Delcom incorporates the above paragraphs by reference. Delcom had a valid contract with DISD. Defendants Price, Chang, and Prime willfully and intentionally interfered with the
Delcom injury. 92. Delcom incurred actual damages and loss as a result of Price, Chang and Primes
interference with Delcoms contract with DISD. C. Count 3: Tortious Interference with Prospective Relations. (Against Prime, Price and Chang) 93. There was a reasonable probability that the plaintiff would have entered into a
business relationship with DISD. 94. DISD. 95. 96. 97. D. The Defendants conduct was independently tortious or unlawful. The interference proximately caused the Plaintiffs injury. The Plaintiff suffered actual damage or loss as a result of Defendants actions. Defendants intentionally interfered with the relationship between Delcom and
Count 4: Conspiracy to Tortiously Interfere with Contract (Against Price, Chang, and Prime) 98. Delcom incorporates the above paragraphs by reference.
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99. each other. 100.
Price, Chang, and/or Prime conspired with one or more DISD Trustees and/or
The object of the conspiracy between Price, Chang, Prime, and/or the Trustee(s),
was to accomplish the unlawful purpose of tortious interference with Delcoms contract with DISD. 101. Price, Chang, Prime, and/or the Trustee(s) had a meeting of the minds to interfere
with the Contract. 102. Delcom suffered injury as a result of the conspiracy between Price, Chang, Prime,
and/or the Trustee(s). E. Count 5: Conspiracy to Tortiously Interfere with Prospective Relations (Against Price, Chang, and Prime) 103. 104. each other. 105. The object of the conspiracy between Price, Chang, Prime, and/or the Trustee(s), Delcom incorporates the above paragraphs by reference. Price, Chang, and/or Prime conspired with one or more DISD Trustees and/or
was to accomplish the unlawful purpose of tortious interference with the prospective business relationship between Delcom and DISD. 106. Price, Chang, Prime, and/or the Trustee(s) had a meeting of the minds to interfere
with the prospective business relationship between Delcom and DISD. 107. Delcom suffered injury as a result of the conspiracy between Price, Chang, Prime,
and/or the Trustee(s). F. Count 5: Misappropriation of Trade Secrets (Against DISD and Prime) 108. 109. Delcom incorporates the above paragraphs by reference. Delcom owns trade secrets.
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110.
DISD and Prime have used and/or are using Delcoms trade secrets without
authorization from Delcom. 111. DISD has disclosed and/or is continuing to disclose, and Prime used and/or is
using, Delcoms trade secrets with notice that the disclosure and use of Delcoms trade secrets was improper. Delcoms trade secrets and proprietary information comprising its customized solution for DISDs Digital Classrooms project was not generally known to the public or in the industry, and was not publicly available. Delcoms proprietary information is designed at
Delcoms facilities by highly-skilled Delcom employees, and is kept on a limited-access secure server at Delcoms home office. Delcom only made its trade secrets and proprietary information available to DISD under the good-faith understanding that only pertinent DISD personnel would have access to it as necessary for Delcoms performance of the Contract. 112. As a result of Primes misappropriation of Delcoms trade secrets, Delcom
suffered injury, including but not limited to a loss of competitive advantage in the marketplace. G. Count 6: Conspiracy to Misappropriate Trade Secrets (Against Prime) 113. 114. 115. Delcom incorporates the above paragraphs by reference. Prime conspired with one or more DISD Trustees, and/or DISD. The object of the conspiracy was to accomplish the unlawful purpose of
misappropriating Delcoms trade secrets. 116. Prime and one or more DISD Trustees and/or DISD had a meeting of the minds to
misappropriate Delcoms trade secrets. 117. trade secrets. Prime and one or more DISD Trustees and/or DISD misappropriated Delcoms
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118. wrongful act. H.
Delcom suffered and continues to suffer injury as a proximate result of this
Count 7: Unconstitutional Taking/Inverse Condemnation (Against DISD) 119. DISD intentionally performed certain acts, and/or intentionally did not perform
certain acts, in the exercise of its lawful authority in moving forward on the contract with Delcom to the point of taking Delcoms trade secrets, even when the District did not intend to continue performance of the contract with Delcom. 120. DISDs acts and/or omissions were the proximate cause of the taking of Delcoms
private property, of which Delcom had ownership. 121. Delcom did not consent to the taking of its property. Delcoms only intent in
sharing its trade secrets with key DISD personnel was for its trade secrets to be implemented by Delcom for DISD under the Digital Classrooms contract. 122. Delcom did not receive anymuch less adequatecompensation for the taking
of its property, which property was then put to use for the public benefit by DISD. I. Count 8: Theft of Services under the Texas Theft Liability Act and section 31.04 of the Texas Penal Code (Against DISD and Prime) 123. Delcom provided services to DISD in preparation of a design solution to digitally
outfit and upgrade thousands of DISD classrooms. 124. 125. Defendants knew that Delcom provided its services for compensation. DISD intended to avoid payment for Delcoms service by intentionally and/or
knowingly securing Delcoms performance of its services by deception. 126. Prime intentionally and/or knowingly diverted Delcoms services, to which it was
not entitled, to Primes own benefit. 127. Delcom sustained damages as a result of Defendants theft of Delcoms services.
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J.
Count 9: Theft of Property under the Texas Theft Liability Act and section 31.05 of the Texas Penal Code (Against DISD and Prime) 128. Delcom had a possessory right to its trade secrets, consisting of its scope of work,
product list, and pricing information. 129. Defendants unlawfully appropriated and exercised control over Delcoms
property by taking it without Delcoms effective consent. 130. Defendants appropriated Delcoms trade secrets with the intent to deprive Delcom
of the property. 131. K. Delcom sustained damages as a result of Defendants theft of Delcoms property.
Application for Injunctive Relief against DISD. 132. 133. Delcom incorporates the above paragraphs by reference. Temporary Restraining Order. Because DISD has attempted to re-award the
Contract to another vendor, who upon information and belief is immediately moving forward with the project, immediate and irreparable harm will result to Delcom before notice to defendants can be served and a hearing had on Plaintiffs application for injunctive relief. The only adequate, effective, and complete relief to Delcom is to enjoin and restrain DISD immediately from engaging in the proscribed activities set forth below. Accordingly, pursuant to Texas Rules of Civil Procedure 680, 682, and 683-84, and in order to preserve the status quo, Delcom requests the Court to enter a temporary restraining order immediately to enjoin and restrain DISD, including all others acting in concert with it who receive actual notice of the order by personal service or otherwise, from the following: a. Directly or indirectly disclosing, utilizing, copying, duplicating, or otherwise permitting the disclosure, use, or duplication, in any manner or for any purpose, Plaintiffs trade secrets and other confidential and/or proprietary information, including but not limited to: operations, vendor pricing, product lists, research and
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development, fee schedules, forms and documents, drawings, renderings, schematics, , scope of work documents, best practices, meeting notes, and correspondence; b. c. Canceling or otherwise terminating the Contract with Delcom; and Offering, accepting, awarding, re-awarding, or otherwise moving forward on the Digital Classrooms project with any vendor other than Delcom.
134.
Delcom further requests the Court to order DISD to immediately: a. Reinstate or otherwise move forward on the Contract with Delcom.
135.
Temporary Injunction. In addition, pursuant to Texas Rules of Civil Procedure
683-684, Delcom requests that DISD be cited to appear, and following such hearing, for the Court to enter a temporary injunction decreeing that DISD, including all others acting in concert with it who receive actual notice of the order by personal service or otherwise, be restrained and enjoined from the following: a. Directly or indirectly disclosing, utilizing, copying, duplicating, or otherwise permitting the disclosure, use, or duplication, in any manner or for any purpose, Plaintiffs trade secrets and other confidential and/or proprietary information, including but not limited to: operations, vendor pricing, product lists, research and development, fee schedules, forms and documents, drawings, renderings, schematics, scope of work documents, best practices, meeting notes, and correspondence; Canceling or otherwise terminating the Contract with Delcom; and Offering, accepting, awarding, re-awarding, or otherwise moving forward on the Digital Classrooms project with any vendor other than Delcom.
b. c.
136.
Delcom further requests the Court to order DISD to, upon hearing: a. Reinstate or otherwise move forward on the Contract with Delcom. Additionally, pursuant to the Texas Rules of Civil
137.
Permanent Injunction.
Procedure and Texas law, Delcom requests that at the conclusion of trial, the Court enter a
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permanent injunction decreeing that DISD, including all others acting in concert with it who receive actual notice of the order by personal service or otherwise, be restrained and enjoined from the following: a. Directly or indirectly disclosing, utilizing, copying, duplicating, or otherwise permitting the disclosure, use, or duplication, in any manner or for any purpose, Plaintiffs trade secrets and other confidential and/or proprietary information, including but not limited to: operations, vendor pricing, product lists, research and development, fee schedules, forms and documents, drawings, renderings, schematics, , scope of work documents, best practices, meeting notes, and correspondence; Canceling or otherwise terminating the Contract with Delcom; and Offering, accepting, awarding, re-awarding, or otherwise moving forward on the Digital Classrooms project with any vendor other than Delcom.
b. c.
138.
Delcom further requests the Court to order DISD to, upon trial on the merits: a. Reinstate or otherwise move forward on the Contract with Delcom.
139.
Delcom is entitled to the requested injunctive relief under Texas law. Delcom has
alleged causes of action against DISD, including breach of contract, quantum meruit, and promissory estoppel; has shown a probable right of recovery and likelihood of success on the merits; has shown that it will suffer imminent, irreparable harm without Court intervention; and has shown that there is no adequate remedy at law without the protections of injunctive relief. 140. As a proximate result of DISDs wrongful actions as alleged in this Petition and
Application, Delcom has suffered and will continue to suffer imminent injury that will be irreparable and for which no remedy at law exists without the protections of a temporary restraining order and the requested injunctive relief. Unless enjoined, it is probable that DISD will be in a position to use, and likely will use and disclose, confidential information and trade secret information, and will potentially damage relationships between Plaintiff, its clients and
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prospective clients. Moreover, unless DISD is enjoined to proceed with the Contract, Plaintiff will likely be unable to recover its lost profits on the Contract due to statutory limitations on damages against a school district for breach of contract. 141. Delcom is likely to prevail on the merits of this case and to receive judgment from
the relief requested herein. This is, in part, because DISD has wrongfully attempted to breach its Contract with Delcom and has disclosed Delcoms trade secrets and proprietary information to a competing vendor. Therefore, Delcom is entitled to a temporary restraining order, and upon hearing, a temporary injunction pending a trial of this case on the merits. L. Application for Injunctive Relief against Prime. 142. 143. Delcom incorporates the above paragraphs by reference. Temporary Restraining Order. Because Prime is immediately moving forward
with the Digital Classrooms project, immediate and irreparable harm will result to Delcom before notice to defendants can be served and a hearing had on Plaintiffs application for injunctive relief. The only adequate, effective, and complete relief to Delcom is to enjoin and restrain Prime immediately from engaging in the proscribed activities set forth below. Accordingly, pursuant to Texas Rules of Civil Procedure 680, 682, and 683-84, and in order to preserve the status quo, Delcom requests the Court to enter a temporary restraining order immediately to enjoin and restrain Prime, including all others acting in concert with it who receive actual notice of the order by personal service or otherwise, from the following: a. Directly or indirectly utilizing, disclosing, copying, duplicating, or otherwise permitting the use, disclosure, or duplication, in any manner or for any purpose, Plaintiffs trade secrets and other confidential and/or proprietary information, including but not limited to: operation, vendor pricing, product lists, research and development, fee schedules, forms and documents, drawings,
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renderings, schematics, scope of work documents, best practices, meeting notes, and correspondence; b. 144. 145. Offering, accepting, consummating, or otherwise moving forward on the Digital Classrooms project with DISD.
Delcom further requests the Court to order Prime to immediately: Temporary Injunction. In addition, pursuant to Texas Rules of Civil Procedure
683-684, Delcom requests that Prime be cited to appear, and following such hearing, for the Court to enter a temporary injunction decreeing that Prime, including all others acting in concert with it who receive actual notice of the order by personal service or otherwise, be restrained and enjoined from the following: a. Directly or indirectly utilizing, disclosing, copying, duplicating, or otherwise permitting the use, disclosure, or duplication, in any manner or for any purpose, Plaintiffs trade secrets and other confidential and/or proprietary information, including but not limited to: operation, vendor pricing, product lists, research and development, fee schedules, forms and documents, drawings, renderings, schematics, scope of work documents, best practices, meeting notes, and correspondence; Offering, accepting, consummating, or otherwise moving forward on the Digital Classrooms project with DISD.
b. 146.
Delcom further requests the Court to order Prime to, upon hearing: a. Destroy any and all of Plaintiffs trade secrets and other confidential and/or proprietary information, as described above, including any emails, documents, or other correspondence incorporating Plaintiffs trade secrets and other confidential and/or proprietary information, or certify that any and all copies of Plaintiffs trade secrets and other confidential and/or proprietary information in Primes possession, custody, or control have been destroyed. Additionally, pursuant to the Texas Rules of Civil
147.
Permanent Injunction.
Procedure and Texas law, Delcom requests that at the conclusion of trial, the Court enter a permanent injunction decreeing that Prime, including all others acting in concert with it who
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receive actual notice of the order by personal service or otherwise, be restrained and enjoined from the following: a. Directly or indirectly utilizing, disclosing, copying, duplicating, or otherwise permitting the use, disclosure, or duplication, in any manner or for any purpose, Plaintiffs trade secrets and other confidential and/or proprietary information, including but not limited to: operation, vendor pricing, product lists, research and development, fee schedules, forms and documents, drawings, renderings, schematics, scope of work documents, best practices meeting notes, and correspondence; Offering, accepting, consummating, or otherwise moving forward on the Digital Classrooms project with DISD.
b. 148.
Delcom further requests the Court to order Prime to, upon trial on the merits: a. Destroy any and all of Plaintiffs trade secrets and other confidential and/or proprietary information, as described above, including any emails, documents, or other correspondence incorporating Plaintiffs trade secrets and other confidential and/or proprietary information, or certify that any and all copies of Plaintiffs trade secrets and other confidential and/or proprietary information in Primes possession, custody, or control have been destroyed.
149.
Delcom is entitled to the requested injunctive relief under Texas law. Delcom has
alleged causes of action against Prime, including misappropriation of trade secrets and conspiracy to misappropriate trade secrets; has shown a probable right of recovery and likelihood of success on the merits; has shown that it will suffer imminent, irreparable harm without Court intervention; and has shown that there is no adequate remedy at law without the protections of injunctive relief. 150. As a proximate result of Primes wrongful actions as alleged in this Petition and
Application, Delcom has suffered and will continue to suffer imminent injury that will be irreparable and for which no remedy at law exists without the protections of a temporary restraining order and the requested injunctive relief. Unless enjoined, it is probable that Prime
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will be in a position to use, and likely will use and disclose, confidential information and trade secret information, and will potentially damage relationships between Plaintiff, its clients and prospective clients. 151. Delcom is likely to prevail on the merits of this case and to receive judgment from
the relief requested herein. This is, in part, because Prime is using and likely will continue to use Delcoms trade secrets and proprietary information, in violation of the common law. Therefore, Delcom is entitled to a temporary restraining order, and upon hearing, a temporary injunction pending a trial of this case on the merits. VIII. ACTUAL, CONSEQUENTIAL, AND EXEMPLARY DAMAGES 152. As a consequence of Defendants wrongful acts described above, Delcom has
suffered actual and consequential damages exceeding the minimum jurisdictional limits of this Court. Plaintiff pleads both general and specific damages on all causes of action. Delcom requests its reasonable attorneys fees in accordance with Texas Civil Practice and Remedies Code section 38.001. Moreover, Plaintiff pleads exemplary damages on its tortious interference causes of action against Prime, Directron, Price, Chang and AxionTech, and on its causes of action under the Texas Theft Liability Act against DISD and Prime. Defendants committed the aforementioned acts with the kind of willfulness, wantonness, fraud and/or malice for which the law allows the imposition of exemplary damages, for which Plaintiff sues. IX. 153. JURY DEMAND
Plaintiff hereby makes a jury demand and will tender the appropriate fee. X. REQUEST FOR DISCLOSURE
154.
In its original verified petition and application for injunctive relief, Plaintiff
requested that Defendants disclose, within 50 days of service of that request, all categories of
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information, documents, and other materials required by Texas Rules of Civil Procedure 194.2(a)-(l). 155. Plaintiff requests that Defendants Hsiangpin Michael Chang, Chang-Sheng, Inc.,
d/b/a AxionTech.com, and Ronald J. Price disclose, within 50 days of service, all categories of information, documents, and other materials required by Texas Rules of Civil Procedure 194.2(a)-(l). XI. PRAYER
Plaintiff prays that the Court grant it the following relief: a. A temporary restraining order restraining and enjoining Defendants, their agents, servants, employees, attorneys, and all other persons or entities in active concert or participation with them who receive actual notice of the order by personal service or otherwise, from engaging in the wrongful activities described above, and to immediately comply with all other Orders of this Court as described above; Upon hearing, a temporary injunction restraining and enjoining Defendants, their agents, servants, employees, attorneys, and all other persons or entities in active concert or participation with them who receive actual notice of the order by personal service or otherwise, from engaging in the wrongful activities described above, and to comply with all other Orders of this Court as described above; Upon final trial, a permanent injunction restraining and enjoining Defendants, their agents, servants, employees, attorneys, and all other persons or entities in active concert or participation with them who receive actual notice of the order by personal service or otherwise, from engaging in the wrongful activities described above, and to comply with all other Orders of this Court as described above; Actual and consequential damages incurred by Plaintiff, as determined at a trial on the merits; Judgment against Defendants for exemplary damages as determined at trial on the merits; Costs of suit, including reasonable legal expenses and attorneys fees; Pre- and post-judgment interest at the maximum rate provided for by agreement of the parties or by law; and
b.
c.
d. e. f. g.
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h.
Such other and further relief, both at law and in equity, to which Plaintiff may be justly entitled.
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Respectfully submitted, GRUBER HURST JOHANSEN HAIL SHANK, LLP
By:
_________________________________ Michael K. Hurst State Bar No. 10316310 mhurst@ghjhlaw.com Dena DeNooyer Stroh State Bar No. 24012522 dstroh@ghjhlaw.com Diana Cochrane State Bar No. 24063991 dcochrane@ghjhlaw.com
1445 Ross Avenue, Suite 2500 Dallas, Texas 75202 Telephone No. (214) 855-6800 Facsimile No. (214) 855-6808 Attorneys for Plaintiff Delcom Group, LP
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VERIFICATION STATE OF TEXAS COUNTY OF ____________ ) )
Before me, the undersigned Notary Public, on this day personally appeared Christine Delph, who, after being duly sworn, stated under oath that she is the duly authorized agent for Delcom Group, LP, Plaintiff in this action; that she has read the above Second Amended Verified Original Petition and Application for Temporary Restraining Order and Temporary and Permanent Injunctive Relief; and that every factual statement contained in the Petition and Application is within her personal knowledge and is true and correct and that any statement made on information and belief is, to the best of her knowledge, true and correct.
___________________________________ Christine Delph SUBSCRIBED AND SWORN TO BEFORE ME on this _____ day of August 2011, to certify which witness my hand and official seal.
____________________________________ Notary Public My Commission Expires: ______________
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CERTIFICATE OF SERVICE The undersigned hereby certifies that on the 29th day of August, 2011, a true and correct copy of the foregoing document was served via email and certified mail on the following counsel of record: Carlos G. Lopez, Esq. Vincent Lopez Serafino Jenevein, P.C. Thanksgiving Tower 1601 Elm Street, Suite 4100 Dallas, Texas 75201-7274 Jerry M. Young Director Coats|Rose 3 East Greenway Plaza, Suite 2000 Houston, Texas 77046
Diana Cochrane
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DISD V Delcom Second Amd. Petition

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DISD V Delcom Second Amd. Petition

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CAUSE NO. 11-9674-K DELCOM GROUP, LP, Plaintiff, v. DALLAS INDEPENDENT SCHOOL DISTRICT, R.L.S. INTERESTS, INC.

DALLAS COUNTY, TEXAS

192nd JUDICIAL DISTRICT

JURISDICTION AND VENUE

VI. A. PLAINTIFF 16.

Delcom is a Texas limited partnership, founded in January of 2000 and registered

the School District Board of Trustees.

Upon information and belief, Chang contacted employees of DISD and

On June 6, Michael Hinojosa resigned as DISD Superintendent, and Alan King

specific prices Prime should be offering the District: Delcoms prices.

completely dissimilar to Delcoms solution.

99. each other. 100.

118. wrongful act. H.

Delcom suffered and continues to suffer injury as a proximate result of this

Temporary Injunction. In addition, pursuant to Texas Rules of Civil Procedure

Respectfully submitted, GRUBER HURST JOHANSEN HAIL SHANK, LLP

VERIFICATION STATE OF TEXAS COUNTY OF ____________ ) )

______________________ Notary Public My Commission Expires:

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