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(Not) for sale 

A frustrating tangle of lawsuits and tension surrounds the Laureate School in San Luis Obispo

Don’t be confused by the sign outside—the Laureate School is not for sale. However, the building is for sale. Confused yet?

Just wait.

Leading up to the placement of a “for-sale” sign in front of the private school on the outskirts of San Luis Obispo is a trail of tension, disagreements, and legal action. That’s all in the past, though. Lately, the major problems have been a loss of students and teachers because of a dispute between the school and its landlord, and an ongoing civil case in which school officials are claiming damages of $2.5 million for emotional distress and harassment, among other charges.

“Welcome to the Wild West,” former school headmaster Uwe Gemba said.

An outside observer, though, probably wouldn’t notice the turmoil.

On a recent, bright Thursday morning, the campus was quiet and relaxed. Children in classrooms squeaked markers over dry-erase boards. Outside, they scurried through the school garden, playing tag. A few parents sat at a picnic table planning the upcoming carnival-style Oktoberfest.

“If a caramel apple doesn’t tempt you, Colin, nothing will,” one man said to me with a cheeky grin.

But the Laureate School isn’t all smiles and caramel apples. In fact, as recently as Sept. 22, a SLO County Superior Court judge ordered school officials to stop removing the “for sale” sign that’s been a major source of contention and fear among parents.

Before the economy cratered, the Laureate School was packed with about 250 students in 2007, roughly 40 more students than the year before. This year, however, it’s down to about 165 students.

Originally owned by a pair of teachers who worked in child development at Cal Poly, the school was sold to Eucasia Schools Worldwide in 2007. That company formed in 2006, with the Laureate School being its first purchase in what was expected to be an international system of programs in Europe, California, and Asia.

Eucasia wasn’t able to raise the capital to buy the real estate and could only afford the business. The real estate was chopped out and sold to DW August Company which, in turn, rented back to Eucasia beginning Aug. 27, 2007, under a 10-year lease.

Relations between school administrators and their new landlord quickly turned sour, preceding to an exodus of students.

According to school officials, DW August manager Duane Heil, who used to have his children enrolled, began pressuring Gemba, the former administrator, telling him how to run the school. Tension rose and tempers flared.

Since then, things have only gotten worse. DW August sued the school claiming it was behind on rent, and after Gemba’s departure in mid-2009, there was no designated guarantor on the lease. The company sent several letters to school officials asking them to name a guarantor before it filed a lawsuit.

In one letter, DW August informed Eucasia the company was “entitled to terminate the lease and obtain immediate possession” of the property.

In court, DW August members said rent checks were coming in late, with school officials citing the declining enrollment.

The court found that the school had never failed to pay rent, as DW August had claimed, but did breach its lease by lacking a guarantor. Rather than throwing the school and its students further into the hellstorm, Judge Charles Crandall denied DW August “possession of the premises” and granted Eucasia relief based on “assertion of hardship.”

But Eucasia didn’t get out unscathed, having to pay more than $16,000 for DW August’s legal fees.

In April, DW August put the real estate up for sale, after rejecting a Eucasia offer for purchase. As of press time, the property was listed at $3.2 million. The SLO County Assessor originally listed the land value and improvements at about $2.1 million after the initial purchase.

Enter lawsuit No. 2, when DW August went after the school again, this time because its “for sale” sign kept disappearing. The school fought and lost.

“Defendant shall be permanently enjoined from interfering with plaintiff’s attempts to sell the premises,” the court found.

“It is crazy,” DW August attorney Roy Ogden said.

The company is now seeking more than $25,000 in additional legal fees after the case.

“It’s almost like they’re beating themselves over their own head with their own checkbook,” Ogden added.

And now, lawsuit No. 3. DW August sent an inspection team to the school on July 18, a weekend morning. A chain blocking the entrance was cut, and the crew triggered an alarm in the process of its inspection. The school sued, claiming the inspectors had no business being there, left doors unlocked, and tampered with computer equipment. The case, which carries 11 charges totaling $2.5 million in claimed damages, still awaits a final judgment.

“We are all scared,” Eucasia CEO Ruthjean Kennedy said in a deposition. “I feel violated.”

She claimed more parents pulled their kids following the incident, causing a $500,000 to $600,000 hit to the school’s finances.

Furthermore, Eucasia’s corporate status (the company filed in Nevada) was forfeited by the California Franchise Tax Board in the same year the company was founded. Kennedy blamed the problem on misplaced paperwork, and assured that the company is solvent and up to date with its tax payments, but said the state hasn’t u pdated its records.

“The best thing that could happen for my clients is someone else buys that school,” said Eucasia attorney Dennis Balsamo.

Kennedy said she now has investors lined up and is looking for a new location. There are  still seven years left on the current lease, so for the foreseeable future, the school will remain under the ownership of DW August—whatever that means.

News Editor Colin Rigley can be reached at crigley@newtimesslo.com.

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