SAN DIEGO (CN) - The American Student Financial Group claims in court that a capital management firm stole its trade secrets, its biggest for-profit college client and its trademark.
American Student Financial Group Inc., or ASFG, a student loan clearinghouse, and its subsidiary TRD Consulting sued Aequitas Capital Management and ASFG LLC, in Federal Court.
ASFG claims the defendants pulled a fast one after it approached Aequitas in 2011 to fund the purchase of student loans from Corinthian Colleges, a much-sued chain college.
Corinthian is not a party to this complaint.
AFSG claims that Aequitas agreed to fund ASFG's purchase of Corinthian's $50 million student loan portfolio and provide up to $250 million for future Corinthian loan purchases.
As negotiations continued, ASFG says, Aequitas proposed that the two companies "jointly purchase and co-manage [Corinthian's] Existing Portfolio through a limited liability company to be organized for that purpose, with approximately $50,000,000 of funds to be provided by Aequitas to finance the purchase."
ASFG claims that in a noncircumvention agreement of June 8, 2011, Aequitas acknowledged that ASFG introduced the Corinthian deal to Aequitas and provided it with confidential and proprietary information. In exchange, Aequitas agreed that it would not enter into loan purchase transactions with Corinthian for 2 years, according to the complaint.
As the companies grew closer to inking a partnership agreement-and landing the lucrative Corinthian deal-ASFG president Timothy Duoos made a crucial decision that would eventually form the basis of the company's lawsuit:
"In order to leverage ASFG, Inc.'s excellent reputation in the student loan industry and Duoos's pre-existing relationships with Corinthian decision-makers, and to assure Corinthian of ASFG, Inc.'s involvement in the proposed transactions, ASFG, Inc. verbally, through Duoos, gave its permission for Aequitas to use ASFG, Inc.'s service mark and trade name 'ASFG' in the name of the entity [to] be formed for the purpose of consummating the Existing Portfolio purchase and implementing the Tuition Financing Program with Corinthian for the joint benefit of ASFG, Inc. and Aequitas. Such permission was limited to use in connection with Corinthian Loans only," ASFG says in its complaint.
As the June 30, 2011 deadline to sign the Corinthian deal approached, Aequitas told ASFG that it would be "unable to raise sufficient capital from its capital sources to provide the necessary funding to purchase Corinthian Loans unless it retained exclusive ownership of, and the exclusive rights to manage, the entity that would purchase and hold the Corinthian Loans," according to the complaint.
Faced with the prospect of losing the deal and no time to pursue other funding sources, ASFG claims it agreed it would have no ownership or management rights in the new entity-ASFG LLC-but would receive commissions on every Corinthian transaction, to be characterized as "consulting fees:"
