SodexoMAGIC LLC has filed a complaint of fraud against Drexel University with the U.S. District Court of Eastern Pennsylvania, charging that the university misrepresented enrollment figures on which the 10-year dining services contract was based. SodexoMAGIC and Drexel signed the deal in May 2015. Among other provisions, that contract required SodexoMAGIC to invest $24 million in new campus dining facilities, including an upfront payment of $9.3 million.
As the discrepancies between the stated and actual enrollment figures became more apparent over the subsequent year, efforts were made to resolve the issue but without success, and the contract company filed a notice of default this past July. In September, with the issue still unresolved, Drexel countered with a letter of termination, effective Dec. 10.
A Sodexo spokesperson says the company stands by the statement issued by Steve Cox, the company’s vice president of corporate communications, in conjunction with the announcement of the fraud filing earlier this month: “Drexel's RFP specifically called for vendors to assume hearty growth in student population and to tailor all bids accordingly. It expressly stated that 'The University's Strategic Plan calls for an enrollment increase from our current number of 26,132 to 30,470 students by 2017 and to 34,000 by 2021. Proposed programs, facilities and infrastructure of services should be aligned to this plan.' Such a blatant misrepresentation of the truth stood to cost SodexoMAGIC millions on top of an already generously negotiated package of investment incentives. Nevertheless, SodexoMAGIC, will honor its commitment to its employees, students, staff and faculty and continue service until December 10th."
Drexel Executive Director of Media Relations Niki Gianakaris issued the following statement: “Drexel received the complaint and is reviewing it. Drexel had previously terminated its contract with SodexoMagic effective at the end of the fall academic term and expects to announce a new foodservice provider in the near future. Drexel is committed to ensuring a high standard of service for its students through the transition.”
Formal legal actions by foodservice contract companies against clients are fairly rare, as disputes are generally resolved behind the scenes. In 2015, Sodexo, along with several other (nonfood-related) vendors, filed a public claim against South Carolina State (S.C. State) University over unpaid debts, but that issue has seemingly been resolved and Sodexo continues as the S.C. State’s dining service provider.
Earlier this year, Centerplate filed a defamation lawsuit against the Franklin County Convention Facilities Authority in Ohio over a terminated contract.
SodexoMAGIC is a joint venture between Sodexo and Magic Johnson Enterprises that operates contract foodservices at more than a hundred locations across North America. It and its predecessor companies have been Drexel’s dining services provider for the past 21 years.