Recent events at the former Kann's department store in Arlington have the makings of a corporate takeover: A new chief arrives, pushes out longtime employes, brings in high-paid replacements and proclaims a dramatic change of mission.

The building's current tenant is the George Mason University Law School, and the changes made by Dean Henry G. Manne have created an uproar. Manne, who arrived in July 1986, defends his actions as necessary to transform an ordinary institution into a nationally known center of the fashionable law and economics movement.

"The anxiety around here, both student and faculty, has run pretty high," Manne said in an interview. But he said his actions already are paying off: "We're probably the most gossiped-about law school in the country."

The velocity of change has been astonishing even to him, Manne said. This year alone, he hired 11 professors -- nearly half the 25-member full-time faculty. Some were replacements for six professors who left. Although not all the departures were attributable to Manne, they added to the turmoil.

After extensive negotiations with Manne, two professors agreed to give up their tenure -- a nearly unheard-of event in academia -- and a third has been asked to do the same. Also, he has blocked tenure for a professor recommended by a faculty committee.

Manne, who is paid $106,000 a year, promises a significantly revamped curriculum, including academic specialty tracks as an alternative to a general legal education, and he hopes to establish a Supreme Court legal journal at the school.

However, students complain that he has not replaced the school's placement director, who left in July, and that he has reduced academic credits for classes offering practical training, saying they represent a trade-school mentality.

Some professors charge that Manne broke a long university tradition of faculty governance by failing to consult them on the hirings or curriculum. And others wonder whether a law school whose primary purpose has been to educate state residents for local practice should be turned into an outpost of a particular academic philosophy, law and economics, that has such strong links to the political right.

Such turbulence is not unusual in the career of Manne, 59, an academic entrepreneur who describes himself as "somewhat disruptive." It also reflects the ambitious style of George Mason University, whose size and reputation are growing quickly at the expense of some on-campus morale.

The law school, at 3401 N. Fairfax Dr. in Arlington, several miles from the university's main campus south of Fairfax City, enrolls 700 students, split 50-50 between full-time day students and part-time evening students. It won designation from the Virginia legislature as a state law school in 1979, after the university purchased the privately run International School of Law and crushed objections by other state law schools and the state Council of Higher Education.

Applications are rising at George Mason, even though other law schools have seen a decline: 1,970 hopefuls applied for 200 places in this fall's first-year class, up from 1,100 two years ago. Some university officials credit the increase to Manne's changes.

Manne arrived last year from Emory University, replacing a dean who also was the subject of student protests for allegedly insensitive and authoritarian management. Manne was given a mandate to upgrade the little-known law school, which gained full American Bar Association accreditation only last year. "One thing Virginia did not need was another run-of-the-mill law school," said J. Wade Gilley, George Mason's senior vice president. "We wanted a distinct edge."

Manne proposed to turn the school into a prominent center of law and economics, a school of thought that applies economic principles to the analysis of legal issues. Manne said the emphasis will appeal to legal scholars who are frustrated that legal education has been so oriented to job training that it "really hasn't been as intellectual as it should be."

The combination of law and economics has strong links to conservative politics. Its leading advocate, 7th U.S. Circuit Court of Appeals Judge Richard Posner, proposes legalizing the sale of babies. And Manne favors getting rid of controls over insider trading, arguing that the market functions more efficiently when people are allowed to reap the rewards of selling information.

Several of Manne's hires have right-wing backgrounds, including Timothy J. Muris, a top-ranking political appointee at the U.S. Office of Management and Budget; former Reagan White House senior staff member Peter Ferrara, and Lee S. Liberman, a law clerk to Supreme Court Justice Antonin Scalia.

Manne insists that his professors span the ideological spectrum, and many agree that law and economics now has some role in most mainstream legal education. "It is one of the two or three most important intellectual trends in legal education in the last 10 years," said Robert Pitofsky, dean of the Georgetown University Law Center and a former Democratic member of the Federal Trade Commission. Pitofsky said Manne has made a "very impressive start."

Manne brought to George Mason the Law and Economics Center he founded in Florida in 1974, which has trained hundreds of American lawyers and judges in the movement's precepts. Much of the center's budget comes from corporate donations, and Manne said he plans a "significant private fund-raising campaign" for the law school itself.

Before Emory University, Manne taught law at the University of Miami, University of Rochester and, from 1962 to 1968, at George Washington University. He graduated from Vanderbilt University with a degree in economics, from the University of Chicago with a law degree, and from Yale University with a doctorate in law.

Manne has strong public support from George Mason's president and board of trustees. "Uncertainties unnerve some people," said trustee Randolph Church. "That's part of the price of progress."

However, opinions are divided among faculty, students and alumni.

"There is too much zealotry beginning to move this curriculum," said a professor, who requested that his name not be used out of fear of reprisal.

But Muris, the OMB official who will join the faculty in March, said, "It's exciting, the idea of bringing together a bunch of very good academics. It looks quite promising . . . . I think Henry has succeeded much sooner than he thought."

Two of the school's professors filed a complaint against Manne with the ABA, saying that he violated association rules by ignoring faculty in his hiring and curriculum decisions. Thirteen other faculty members, including some of Manne's new hires, signed a counter-letter accusing the pair of trying to "hold the law school hostage through a complaint designed to further your personal interest."

One of the professors who filed the complaint, John Ebiasah, said Manne is trying to "make it difficult so I will decide to leave." Also, he said he is bitter that his pay, $44,940 a year, is less than half the $103,000 will be paid to Muris, one of Manne's new employes.

Ebiasah said Manne offered him a cash payment to give up his tenure. When that failed, Ebiasah said, Manne assigned him to teach two courses in which he has no background and took away two courses in his specialties, international law and human rights. "It doesn't help the students in any way," Ebiasah said.

Manne has assigned other professors to teach classes that they have not taught before, provoking complaints from students about inadequate instruction. "I know you have a problem there," Manne told one student who complained during a tense meeting last month in which hundreds of students packed an auditorium to hear him outline his plans. Manne told those present that the issues involved were too complex to discuss in depth, but he complained that some professors had been paid in the past to "do nothing," and he said that all professors should be prepared to teach all basic law school courses.

The school alumni association passed a resolution joining students in protesting Manne's failure to hire a new placement director, especially during the current job hunting season. Manne promised to bring in a new director soon, and he blamed some of the slowness on "bureaucratic delays."

Some other students voice a concern that general legal education will be squeezed out by an emphasis on law and economics.

"We just don't know where we fit into the scheme," said third-year student Dorothy Isaacs. "I get the feeling that the current students at the school are not his concern."

Manne said that there still will be room for a general legal education at his law school and that he expects that half the students will choose that option. He said there has been less turmoil than he expected.

"A lot of them {students and faculty} realize there were real problems in the school and that we needed to make changes," he said.

Others disagree. "He was brought in to kick butt," said a former professor who requested anonymity. "In effect, what you have is a hostile takeover of the law school."