Lawsuit Against Operator of Trade School Dropped

United Education & Software, the embattled Encino trade school operator that filed for Chapter 11 bankruptcy protection in December, said a shareholder class-action lawsuit against it has been dismissed by a federal district court in Los Angeles. UES said the shareholders indicated that the Chapter 11 filing was a factor in their decision to drop the case.

The lawsuit was filed in September, 1988, after a foul-up at UES’ former student loan processing subsidiary was uncovered by a government probe. The problems at the unit, which included failure to notify delinquent borrowers, led to a collapse in UES’ stock price.

UES also got into trouble last year after a federal audit found widespread problems at its National Technical Schools, a Los Angeles-based home study computer program. The company filed for bankruptcy protection after the California Student Aid Commission, the state agency that administers the federal student loan program, said National Technical Schools should be banned from the program.

The company is still a defendant in suits filed by several banks, which stand to lose up to $650 million because of the loan-serving errors, and a $24-million suit filed by the state of California in connection with National Technical Schools’ problems.