disd v delcom second amd. petition

8/4/2019 DISD v Delcom Second Amd. Petition

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PLAINTIFFS SECOND AMENDED ORIGINALVERIFIED PETITION AND APPLICATION FORTEMPORARY

RESTRAINING ORDER AND TEMPORARY AND PERMANENT INJUNCTIVE RELIEF PAGE 169202

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 CHANG-

SHENG, INC. d/b/a AXIONTECH.COM

a/k/a PRIME, and RONALD J. PRICE, an

individual,

Defendants.

IN THE DISTRICT COURT OF

DALLAS COUNTY, TEXAS

192nd JUDICIAL DISTRICT

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

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


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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. DISCOVERY CONTROL PLAN

1. 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. PARTIES

A. PLAINTIFF

2. Delcom Group, LP is a Texas limited partnership with its principal office located

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. JURISDICTION AND VENUE

8. 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. CONDITIONS PRECEDENT

15. All conditions precedent to the filing of this action have been fulfilled.


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VI. FACTUAL BACKGROUND

A. PLAINTIFF

16. 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. At the end of the

technologys lifecycle, Delcom provides salvage and recycling services.

18. School districts across Texas value Delcoms high quality and trusted service, as

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 UPS-

employee 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.


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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 MSE focused on computer sales to school districts.

C. 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 AFTERPROMISE AFTERPROMISE 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.


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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

Classrooms project. At DISDs request, Delcom performed walks of several campuses,

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 fifteen-

day 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 contractually-

required 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. Notably, the


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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

completely dissimilar to Delcoms solution. Significantly, Delcoms design solution

incorporated approximately 90% of the installed product to be manufactured by Extron

Electronics, LLC (Extron). Delcom was the only vendorto 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. CAUSES OF ACTION

A. Count 1: Breach of Contract (Against DISD)

82. Delcom incorporates the above paragraphs by reference.

83. Defendant DISD and Plaintiff Delcom have a valid, enforceable contract

consisting of DISDs RFP, Delcoms responsive bid, and DISDs signed letter of acceptance.

84. Delcom tendered its contractual obligations under the Contract.

85. DISD breached its contractual obligations under the Contract.

86. As a result of DISDs breach, Delcom has suffered injury.

87. 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)


89. Delcom had a valid contract with DISD.

90. Defendants Price, Chang, and Prime willfully and intentionally interfered with the

Contract.

91. Price, Chang and Primes willful and intentional interference proximately caused

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. Defendants intentionally interfered with the relationship between Delcom and

DISD.

95. The Defendants conduct was independently tortious or unlawful.

96. The interference proximately caused the Plaintiffs injury.

97. The Plaintiff suffered actual damage or loss as a result of Defendants actions.

D. Count 4: Conspiracy to Tortiously Interfere with Contract (Against Price, Chang,

and Prime)



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99. Price, Chang, and/or Prime conspired with one or more DISD Trustees and/or

each other.

100. 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)


104. Price, Chang, and/or Prime conspired with one or more DISD Trustees and/or

each other.

105. The object of the conspiracy between Price, Chang, Prime, and/or the Trustee(s),

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)


109. 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)


114. Prime conspired with one or more DISD Trustees, and/or DISD.

115. 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. Prime and one or more DISD Trustees and/or DISD misappropriated Delcoms

trade secrets.


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

wrongful act.

H. 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. Defendants knew that Delcom provided its services for compensation.

125. 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. Delcom sustained damages as a result of Defendants theft of Delcoms property.

K. Application for Injunctive Relief against DISD.


133. 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. Canceling or otherwise terminating the Contract with Delcom; and

c. 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:




confidential and/or proprietary information, including but not limitedto: operations, vendor pricing, product lists, research and


renderings, schematics, scope of work documents, best practices,





Delcom.

136. Delcom further requests the Court to order DISD to, upon hearing:


137. Permanent Injunction. Additionally, pursuant to the Texas Rules of Civil

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:





to: operations, vendor pricing, product lists, research and


renderings, schematics, , scope of work documents, best practices,





Delcom.

138. Delcom further requests the Court to order DISD to, upon trial on the merits:


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.


143. 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



to: operation, vendor pricing, product lists, research and



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b. Offering, accepting, consummating, or otherwise moving forward on

the Digital Classrooms project with DISD.

144. Delcom further requests the Court to order Prime to immediately:

145. 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:


otherwise permitting the use, disclosure, or duplication, in any









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 e-

mails, 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.

147. Permanent Injunction. Additionally, pursuant to the Texas Rules of Civil

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:


otherwise permitting the use, disclosure, or duplication, in anymanner or for any purpose, Plaintiffs trade secrets and other




renderings, schematics, scope of work documents, best practices




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 e-

mails, 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. JURY DEMAND

153. 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 concertor participation with them who receive actual notice of the order by personalservice or otherwise, from engaging in the wrongful activities described above,and to immediately comply with all other Orders of this Court as described above;

b. Upon hearing, a temporary injunction restraining and enjoining Defendants, theiragents, servants, employees, attorneys, and all other persons or entities in activeconcert or participation with them who receive actual notice of the order bypersonal service or otherwise, from engaging in the wrongful activities describedabove, and to comply with all other Orders of this Court as described above;

c. Upon final trial, a permanent injunction restraining and enjoining Defendants,their agents, servants, employees, attorneys, and all other persons or entities inactive concert or participation with them who receive actual notice of the order bypersonal service or otherwise, from engaging in the wrongful activities describedabove, and to comply with all other Orders of this Court as described above;

d. Actual and consequential damages incurred by Plaintiff, as determined at a trialon the merits;

e. Judgment against Defendants for exemplary damages as determined at trial on the

merits;

f. Costs of suit, including reasonable legal expenses and attorneys fees;

g. Pre- and post-judgment interest at the maximum rate provided for by agreementof the parties or by law; and


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h. Such other and further relief, both at law and in equity, to which Plaintiff may bejustly entitled.


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Respectfully submitted,

GRUBERHURST JOHANSEN HAIL SHANK, LLP

By: _________________________________

Michael K. HurstState Bar No. [email protected]

Dena DeNooyer Stroh

State Bar No. [email protected]

Diana Cochrane

State Bar No. [email protected]

1445 Ross Avenue, Suite 2500Dallas, Texas 75202Telephone No. (214) 855-6800Facsimile 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 Tower1601 Elm Street, Suite 4100Dallas, Texas 75201-7274

Jerry M. YoungDirectorCoats|Rose3 East Greenway Plaza, Suite 2000Houston, Texas 77046

Diana Cochrane

disd v delcom second amd. petition

Documents