SodexoMagic filed a federal lawsuit against Drexel University Sept. 29 accusing the University of misrepresenting its student body growth and fraudulently inducing the food service company to sign a 10-year vendor commitment, for which it paid $9.3 million in advance.
SodexoMagic claims that Drexel talked the business into signing a contract in May 2015 under the pretense that the university had robust plans for student body growth.
The complaint was filed in the U.S. District Court for the Eastern District of Pennsylvania. According to the document, it was only after SodexoMagic invested $9.3 million into Urban Eatery, a new dining facility on campus, that the university disclosed student enrollment would decrease for the 2015-2016 academic year. In total the contract committed SodexoMagic to invest $24 million into new campus dining facilities and provide $35.5 million in commissions to the University.
SodexoMagic alleges that Drexel University President John A. Fry approved of the reduced enrollment plan months before the university’s contract with SodexoMagic was signed.
“Drexel’s calculated omission of this known defect in the critical financial assumption of the entire agreement locked SodexoMagic into losing millions of dollars beginning in the very first year — and millions more in the years to follow,” the complaint reads.
Drexel University stated that the school lowered its expectations for growth before reaching out to vendors to sign contracts in 2014 and announced a new plan for student retention in 2015 that would strategically lower freshmen enrollment numbers in an attempt to attract “right fit” students and increase the University’s retention rate.
According to SodexoMagic’s lawsuit, the food service provider was under the impression that Drexel’s student body would be growing by about 60 freshmen per year. The company claims not to have been informed of the new enrollment plan and that the University was not willing to fairly renegotiate the contract.
“Unfortunately, SodexoMagic’s hope that its long-time partner, now advised by highly reputable outside counsel, would honor its contractual commitment to negotiate in good faith and not insist on holding its partner to money-losing terms, was misplaced,” the complaint states.
For the alleged breach of contract, fraudulent inducement and unjust enrichment, the company seeks monetary compensation and punitive damages.
On Sept. 19, Drexel University terminated its contract with SodexoMagic via email, giving the company a 60-day notice.
Although SodexoMagic has claimed it has a contractual right to cease service at Drexel immediately, the company will continue to provide food through Dec. 10, 2016.
“Drexel received the complaint and is reviewing it. Drexel is committed to ensuring a high standard of service for its students through the transition. As this matter is in litigation, we will have no further comment,” Drexel University’s Office of Communications stated.