COUNTY OF SAN MATEO, OFFICE OF COUNTY COUNSEL JOHN C. BEIERS, COUNTY COUNSEL (SBN 144282) By: E. MEOLA, Chief Deputy (SBN 172034) CRAIG N. BAUMGARTNER, Deputy (SBN 273 752) Hall of Justice and Records 400 County Center, 6th Floor 1 . I .- Redwood City, CA 94063 Sing 55% HLEQ Telephone: (650) 363-4250 - MATEQ CQUNTY Facsimile: ,(650) 363-4034 -, - we- A PR 1 2 2077 PILLSBURY WINTHROP SHAW PITTMAN LLP VERNON H. GRANNEMAN (SBN 83532); DIANNE L. SWEENEY (SBN 187198) 2550 Hanover Street Palo Alto, CA 943 04-1 1 15 Telephone: (650) 233-4500 Facsimile: (650) 233-4545 Attorneys for Plaintiff SAN MATEO COUNTY COMMUNITY COLLEGE DISTRICT Exempt ?om ?ling fees pursuant to Government Code 6103 SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN MATEO SAN MATEO COUNTY COMMUNITY CASE NO. 17 CIV01534 COLLEGE DISTRICT, FIRST AMENDED CIVIL COMPLAINT FOR: Plaintiff, . BREACH OF 2. BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR vs. 3. BREACH OF FIDUCIARY . 4. LOCUSPOINT NETWORKS, LLC, 5. DECLARATORY PRICEWATERHOUSECOOPERS 6. CONTRACTUAL ADVISORY SERVICES LLC, AND LOCUSPOINT II KCSM, LLC and DOES l- 7. BREACH OF 200, . FAILURE TO PERFORM POST-AUCTION OBLIGATIONS. Defendants. JURY TRIAL DEMANDED REDACTED PENDING HEARING ON CONFIDENTIALITY FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 The SAN MATEO COUNTY COMMUNITY COLLEGE DISTRICT (the. ??District?) is a community college district of the State of California, located in the'County of San Mateo (the ?County?), which operates three colleges Canada College, College of San Mateo, and Skyline College that provide educational services. The District 1s one of the largest community college districts 1n the State of California and offers both academic and vocational progiams, including more than 80 vocational degree and certifiCate programs, to approximately 40,000 community members each year. The District is governed by a-Board of Trustees with ?ve . voting members (the 2. Upon information and belief, defendant LocusPoint Networks, is a Delaware limited liability company authorized to transact business in the State of California, with its principal place of business in Pleasanton, California. 3. Upon information and belief, defendant LocusPoint II KCSM, LLC KC is a Delaware limited liability with its principal place of business in Pleasanton, California. Upon information and belief, LPN-KCSM 1s a Wholly owned subsidiary of LocusPoint and LocusPoint assigned certain rights and obligations related to the agreements set forth herein to LPN-KCSM. LocusPoint and will hereinafter be referred to collectively as 4. i Upon information and belief, defendant PricewaterhouseCoopers Advisory Services LLC is a Delaware limited liability company authorized to transact business in the State of California, with its principal place of business in New York, New York. 5. The District does not know the true names or capacities of defendants named herein as Doe One through Doe Two Hundred and, therefore, sues these defendants by their ?ctitious names. The District will ask leave to amend their true names and capacities when the same have been fully ascertained. 6. The District is informed and believes, and on that basis alleges, that each of the fictitiously named defendants is in some way legally responsible for the acts alleged in this Complaint. 1 The Board also includes a non-voting student member. 1 FIRST AMENDED CIVIL COMPLAINT OVERVIEW 7. As described herein, LPN and committed multiple negligent failures and/or breaches of contract when they failed to ensure that the District?s bids were properly submitted in the Federal Communications Commission?s reverse auction. 2 i 8. The written agreement between the District and LPN was clear: LPN was responsible to take all ?actions as-may be reasonably required . . . to achieve [the District?s] successful participation in the Auction.? At all relevant times, LPN, was responsible for the auction as the District?s ?exclusive bidding consultant and agent.? This included promise to ?timely submit all bids in the Auction.? _As to decision to hire and assign certain obligations to LPN promised that LPN would ?remain primarily responsible for satisfaction? of the obligations to the District. 9. On November 15, 2016, agent, PWC, failed to ensure that a bid was placed for the District in the auction. The consultant directly 'monitoring the bidding proCess admitted the failures in a contemporaneous writing. Speci?cally, the PWC consultant admitted that he simply ?assumed"? a bid had been placed and (ii) he failed to require a bid receipt from the FCC website (as he had done for all other auction rounds) which would have con?rmed that a bid had not been received by the FCC. 10. As a result of negligent failures and breaches of contract by LPN and/or PWC, a bid was not received by the FCC, the District was dropped out of the auction and the District was unable to realize the benefits of a sale of KCSM-TV through the auction. The District now seeks damages and other remedies as set forth herein. I, VENUE 11. Venue in this Court is proper because, among other things, the parties agreed to venue in this County, (ii) performance of the contracts at issue occurred, in part, in San Mateo County, California, and the breaches of the contracts at issue took place in San Mateo County, California. BACKGROUND 12. The District is the licensee and operator of station KCSM-TV, San Mateo, 2 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 10_ California, Facility No. 58912, FCC. Facility ID No. 58912 or the ?Station?). KCSM-TV operates on a frequency (or ?channel?) that is restricted by the FCC to non-commercial and educational uses. high power transmitter and its transmitting location at the Mount Sutro tower provide coverage to millions of people in one of the nation?s densest urban areas. 13. Starting in or around 2011, the District began exploring plans to determine the future of KCSM-TV. This included considering selling the StatiOn and/or partnering with a third party to defer any sale and participate in the incentive auction. However, the cash value of the Station in a sale to a third party is limited by the NCE-only designation of the Station?s channel assignment, because a buyer would not be permitted to operate the Station for commercial purposes. I 14. In 2012, Congress, in Section 6403 of the Middle Class Tax Relief and Job Creation of 2012, Pub. L. No. 112-96, 6403, 126 Stat. 156, 225-30, authorized and required the FCC to conduct an ?incentive auction? of electromagnetic spectrum in order to clear television stations I from the spectrum their channels occupy. The auction would have two parts a ?reverse? auction to determine the price at which television stations would be willing to relinquish their spectrum usage rights, and a ?forward? auction in which the spectrum relinquished would be auctioned to the highest bidder, to be used for mobile wireless service. Auction proceeds from the sale of new wireless licenses in the forward auction would be used to pay the Winning bidders in the reverse auction. 15. The reverse auction the first ever conducted by the FCC presented a unique opportunity for the District to realize the market value for the spectrum used by the Station, rather than the lower value of a non-commercial and educational station.2 16. After soliciting proposals, in or around May 2013, the District entered into written contracts with LPN pursuant to which the District appointed. LPN ?to act as its exclusive consultant 2 Although Congress authorized the FCC to conduct additional incentive auctions, it is not required to do so, and it is unknown whether another reverse auction of television licenses will be conducted within the foreseeable future. FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 and agent to develop and implement any and all strategies appropriate to [the District?s] participation? in the auction. Through written and oral assurances that it possessed ?substantial expertise in the development of strategies for participating in sophisticated auctions such as the Auction,? LPN represented that it possessed unique and highlyivaluable expertise that the District did not have but needed in order to successfully sell its spectrum usage rights in the auction for the ?maximum value possible.?3 To that end, the District and LPN entered into a series of contracts that were duly passed and adopted by the Board. These contracts included: (1) a Bid Management Agreement executed on May 16, 2013; (2) a Funding Agreement executed on May 16, 2013; (3) a Security Agreement executed on May 16, 2013; and (4) a Put/ Call Option Agreement executed on May 16, T2013. LPN later proposed various amendments to the above agreements that LPN represented were necessary to comply with certain anti-collusion rules passed by the FCC after the - 2013 agreements were approved by the District. These amendments, which were'signed by a representative for the District, but not duly passed and adopted by the Board, included the ?Amendment to Funding Agreement? executed on December 17, 2015, ?Amendment to Bid Management Agreement? executed on December 8, 2015, and ?Amendment to Put/Call Option Agreement,? executed on December 17, 2015. These agreements are sometimes collectively referred to herein as the ?Funding Documents.? THE FUNDING DOCUMENTS 17. The Funding Documents make clear that LPN controlled all material aspects of the District?s participation in the auction, to the degree that LPN undertook to ?[t]imely submit all bids in the Auction for the District as may be required for continued participation in the Auction until successful relinquishment of the spectrum usage rights associated with the License.? 18. In reliance on express contractual commitments and assurances, including 3 As a material inducement to the District to enter into the foregoing agreements with LPN, LPN represented that it had ?substantial expertise in the development of strategies for participating in sophisticated auctions such as the Auction, ha[d] access to personnel who are familiar with prior auctions conducted by the FCC, and ha[d] access to signi?cant resources that can be employed [sic] brought to bear on the District?s participation in the Auction.? Bid Management Agreement, page 1, Recital No. 6. . FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 agreement to fund ongoing Station operations during the pendency of the auction,4 the District agreed to pay LPN 36.5% of any proceeds from participation in the auction plus a quarterly fee under the Bid Management Agreement. . 19. The May 16, 2013 Bid Management Agreement sets forth the parties? respective, obligations with regard to the FCC auction. Under Section 2.1, the District appointed to act as its exclusive consultant and agent to develop and implement any and all strategies appropriate to [the District?s] participation? in the auction. Section 2.2 sets forth express obligations of LPN including, without limitation, the following: 2.2 As the exclusive bidding consultant and agent for the District under this Agreement, LPN will have the obligation to: 2.2.1 Keep the District informed of material developments in the rulemaking and other proceedings designed to adopt rules that will apply to the Auction. LPN 'may, in its sole discretion, participate in any - such proceedings, either in its own name or as part of a group or association of participating parties, to advocate the adoption of provisions in the Rules that would allow the District to participate fully in the Auction with the opportunity to relinquish spectrum usage rights associated with the License at their desired value; . 2.2.2 Timely prepare for review and submission by the District such ?lings and applications as may be required by the Rules for the District to participate fully in the Auction; 2.2.3 Advance to the District and pay to the FCC, any ?ling fees, deposits or other payment obligations that the Rules may require for the District to participate in the Auction; 2.2.4 Establish a general bidding strategy for maximizing the Value in the Auction of the spectrum usage rights associated with the License; 2.2.5 Appoint qualified personnel to act as the District?s authorized bidders in the Auction, and train and supervise such personnel to assure their satisfactory performance of the duties associated with authorized bidders in the Auction; 2.2.6 Provide training to the District to assure compliance with all requirements of the Rules applicable to ?applicants? in the Auction, including, to the extent appropriate, training for the of?cers, directors and agents of the District who may be individually subject to compliance with the Rules during the Auction; 4 LPN agreed to provide funding to the District?s ongoing operation of KCSM in the amount up to $3.6 million in quarterly installments of $225,000. 5 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 2.2.7 Timely submit all bids in the Auction for the District as may be required for continued participation in the Auction until successful relinquishment of the spectrum usage rights associated with the License; provided, however, that LPN shall not place any bid that would result in such relinquishment for less than the Minimum Bid Amount; 2.2.8 Throughout the Auction, keep the District informed concerning the bidding process, including, but not limited to, the results of each bidding round and expected bids in the next bidding round; 2.2.9 Comply with all regulatory requirements imposed on participants in the Auction, including, but not limited to, any restrictions on communications with other bidders during the Auction, as may be imposed under any so?called ?anti-collusion rules? adopted as part of the Rules; 2.2.10 Prepare, on behalf of the District, responses to any requests for information which the FCC may make prior to, during, or following completion of the Auction; 2.2.11 Participate with the District in any meetings or telephone conferences with the FCC as the FCC may request prior to, during, or following completion of the Auction; 2.2.12 Communicate with the FCC, on behalf of the District, regarding logistical matters relevant to participation in the Auction and the mechanics of obtaining any proceeds resulting from the District?s participation in the Auction; 2.2.13 If, at the conclusion of the Auction, the FCC accepts the bid for relinquishment of the spectrum usage rights associated with the License, prepare for the District all ?lings and applications as may be required to complete theprocess of relinquishment, including, but not limited to, advancing to the District, and paying to the FCC on their behalf, any ?ling or other fees associated with being a Winning bidder in the Auction; and 2.2.14 Take all such other actions as may be reasonably required by the District as its bidding consultant and agent to achieve its successful participation in the Auction at a price that is at or above the Minimum Bid Amount. 2.2.15 Consult with the District regarding all regulatory processes associated with the ?repacking? of KCSM to a new channel assignment if, at the conclusion of the Auction, the FCC has not accepted the District?s bid for relinquishment of the spectrum usage rights associated with the License. Such consultations will include involvement with the District in discussions with the FCC regarding the channel reassignment process, processes for obtaining the maximum reimbursement by the U.S. government of expenses associated with repacking, and preparing all ?lings and applications as may be required by the FCC timely to complete the repacking process. The Bid Management Agreement also provided, among Other things, that: FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 20. 2.4 The District expressly acknowledges that in performing its duties hereunder, LPN may engage independent consultants, agents and subcontractors at its own expense. LPN agrees that any such engagement shall be undertaken under direction and supervision, and LPN shall remain primarily responsible for satisfaction of its obligations hereunder notwithstanding such engagement. 2.7 During the Term hereof, without express written consent, the District may not directly or indirectly solicit, engage or contract with any other person or entity for the purpose of consulting with, acting as an agent for, advising, or managing the activities of, the District with regard to participation in the Auction or in any proceeding before the FCC relating to the FCC Rules applicable to the Auction or any related matter arising out of the Auction, or with regard to the sale, assignment or transfer of the License, except that the District may consult with District counsel and its established communications counsel. - 2.8 The Parties acknowledge that the FCC has not adopted ?nal rules for the conduct of the Auction and that the adoption of those rules could affect their respective obligations as set f01th herein or any other terms of this Agreement. If that should occur, the Parties agree to negotiate in good faith to modify this Agreement to the extent required for the intent of the Parties in this Agreement and in the Funding Documents i.e. that the District will participate fully in the Auction so as to relinquish its spectrum usage rights at a bid amount at or above the Minimum Bid Amount, and that LPN will be the District?s exclusive consultant (except as set forth above) and agent with respect to the District?s participation in the Auction as contemplated in this Agreement to be preserved to the maximum extent reasonably possible under the Rules for the Auction as adopted from time to time. The Parties expressly agree that, if they are unable to reach an agreement on any modi?cations to this Agreement necessary to comply with the Rules, then this Agreement shall remain binding and control each Party participation in the Auction to the maximum extent then permitted under the Rules. THE QUIET PERIOD RULE TO PROHIBIT COLLUSION On June 2, 2014, the FCCadopted a rule (the ?Quiet Period Rule?) prohibiting all covered television licensees from communicating directly or indirectly about any incentive auction bids or bidding strategies to any other covered television licensee during the auction. 21. By Virtue of its ownership of KCSM-TV, the District was a ?covered licensee? under the Quiet Period Rule. On information and belief, LPN was also a covered television licensee and subject to the Quiet Period Rule because LPN acquired ownership of several FCC- licensed television stations both before and after June 2, 2014 for the purpose of selling those 7 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 stations in the FCC incentive auction. LPN therefore knew or should have known at least by the summer of 2014 (after the FCC adopted the Quiet Period Rule on June 2, 2014) that it could not provide the bidding services described in the Bid Management Agreement to the District during the auction while also actively bidding for its own stations in that auction. FCC rules did not prohibit non-licensee third parties, including PWC, from serving as authorized bidders for licensees participating in the auction. 22. On October 6, 2015, the staff of the FCC issued guidance Guidance?) . regarding the applicability of the Quiet Period Rule but did not modify the rule in any way. On October 15, 2015, the FCC announced that the Quiet Period would begin on December 18, 2015. On November 12, 2015, the FCC postponed the start of the Quiet Period to January 12, 2016. Ultimately, the covered quiet period began on January 12, 2016 and ended on February 5, 2017 (the ?Quiet Period?). 23. Yet in spite of having known for well over a year that it would be unable to perform its duties under the Bid Management Agreement," LPN waited until mid-November 2015 to inform the District that it needed to amend the Bid Management Agreement and bring in a third party to provide the services LPN had agreed to provide to the District during the auction. 24. On November 17, 201.5, LPN informed the District that it had ?contracted with to manage the process? of bidding in the auction. Later, on or about November 27, 2015, Bill deKay of LPN told the District that LPN needed to amend certain agreements to comply with FCC rules. Speci?cally, deKay wrote: I I I have attached two documents that need to be executed as part of this process. he ?rst is an amendment to our agreement that addresses the FCC requirements that have been placed on bidders after we signed our deal. This will allow us to use to provide services in the auction that are needed to keep things on track and easy for you folks, and also compliant with FCC rules. The second document is simply a letter of authorization from you to PWC that allows them to do this work. In our meeting on Monday at 2, we will cover the process for applying to participate in the auction as well as our game plan for managing things along the way. As a heads up, we will need Larry Miller to prepare the application, with our support as needed. We are asking everyone we work with to prepare the FCC 8 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 \Imm application around the lO?thAOf December, we will take a couple days to review, and then all applications are ready to file before the holidays. - (The deadline is 1/12 but no one wants to work over Christmas or play chicken with the deadlines. Risk is we are out.) We stand ready to help make this painless and efficient for as both. I know that Larry and our FCC folks work well together, so we should be ?ne. We look forward to catching up and getting CSM ready for the auction. (emphasis added). 25. LPN further assured the District that it had retained as a consultant to perform obligations under the Bid Management Agreement and claimed that the changes to the parties? Bid Management Agreement were required ?to accommodate prohibited communications rules.? LPN also presented amendments to the Put/ Call Option Agreement and the Funding Agreement. LPN assured the District that would simply ?sit[] in? for LPN and that the amendments did not make material changes to the agreements. . 26. LPN alsoxtold the District that FCC rules required the District to place the bid directly because it was the owner of KCSM-TV. While the District understood that it would now have a clerical task (that at least according to LPN was required by the FCC), LPN further assured the District that LPN that there was no substantive change to the parties? agreement. LPN, either directly or through would assure, at all times, that the District successfully navigated the auction process. 27. Consistent with representations that this change was simply a temporary swap?out of PWC for LPN during the Quiet Period, there was no financial consequence to the proposed amendments. LPN continued to retain its right to receive .3 6.5% of the proceeds from the sale of the District?s spectrum rights in the auction, and LPN assured the District orally and in writing that the amendments were ?at no coSt? to the District and were merely ups? to adjust the contract language to conform to the Quiet Period Rule. With respect to the Bid Management Agreement, deKay wrote to a District representative: ?The changes to the bid management agreement are to accommodate prohibited communication rules.? FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 28. Material statements by LPN about the amendments were not true. For example, LPNfalsely stated to the District that this last-minute switch to was prompted by the October 2015 guidance when, in fact, the underlying Quiet Period Rule had been in place since June 2014. Similarly, nothing in the FCC rules prohibited a non-owner from bidding on behalf of an owner. . THE APPOINTMENT OF PWC TO ACT AS EXCLUSIVE BIDDING CONSULTANT AND AGENT IN PLACE OF LPN DURING THE QUIET PERIOD 29. Consistent with LPN statements at the time, a District representative con?rmed with LPN in writing that the proposed amendments did not represent a change in the May 16, 2013 agreements but were merely an assignment of certain of obligations to a third party, The representative advised LPN that she was not seeking Board approval of the amendments and LPN acknowledged its concurrence in that decision. Accordingly, the Board never voted to approve any of the December 2015 amendments, including the Amendment to Bid Management Agreement dated December 8, 2015. 30. The Amendment to Bid Management Agreement provided that LPN ?engaged to serve as subcontractor and agent? with respect to duties and obligations under that agreement because will be unable to communicate with the District [during the Quiet Period] regarding bids or bid strategy.? Therefore, the Amendment to Bid Management Agreement modi?ed the Bid Management Agreement to provide that LPN had ?designated PWC to be responsible for performing obligations under gem of the [Bid Management] Agreement and various of its subsections, including monitoring and assisting the District with its participation of Station (RF Channel 43), San Mateo, California (FCC Facility ID No. 58912) (the ?Station?) in the auction.? For all intents and purposes, PWC stepped into shoes with regard to contractual duties and obligations owed to the District. During the Quiet Period, PWC was appointed to act in place under the Bid Management Agreement asthe District?s ?exclusive bidding consultant and agent.? 31. The December 8, 2015 Amendment to Bid Management Agreement provided in part 10 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 follows: a. Section 2.2.2 of the Agreement shall be deleted and replaced with the following: ?Before the Quiet Period, timely prepare for review and submission by the District of the application for KCSM to participate fully in the Auction,? b. Section 2.2.3 of the Agreement shall be deleted and replaced with the following: c. Section 2.2.4. of the Agreement shall be deleted and replaced with the following: ?Prior to the ApplicatiOn Deadline, establish a general bidding strategy for maximizing the value in the Auction of the spectrum usage rights associated with the License; d. Section 2.2.5 of the Agreement shall be deleted and replaced with the following: ?Train and supervise the quali?ed personnel that the District appoints to act as its authorized bidders in the Auction to assure their satisfactory performance of the duties associated with authorized bidders in the Auction,? 6. Section 2.2.7[51 of the Agreement shall be deleted and replaced with the following: f. Section 2.2.10 of the Agreement shall be deleted and replaced with the following: ?Prepare, on behalf of. the District, responses to any requests for information which the FCC may make prior to or following, but not during, the Quiet Period,? g. Section 2.2.11 of the Agreement shall be deleted and replaced with the following: ?Participate with the District in any meetings or telephone conferences with the FCC as the FCC may request prior to or following, but not during, the Quiet Period;? h. Section 2.2.12 of the Agreement shall be deleted and replaced with the following: ?Communicate with the FCC on behalf of the District, prior to or following, but not during, the Quiet Period, regarding logistical matters relevant to participation in the Auction and the mechanics of obtaining any proceeds resulting from the District?s participation in the Auction,? i. Section 2.2.13 of the Agreement shall be deleted and replaced with the following: ?If, at the conclusion of the Auction, the FCC accepts the bid for relinquishrnent of the spectrum usage rights associated with the License, 5 Section 2.2.7 of the May 16, 2013 Bid Management Agreement placed sole responsibility on LPN to ?[t]imely submit all bids in the Auction for the District as may be required for continued participation in the Auction until successful relinquishment of the spectrum usage rights associated with the License; provided, however, that LPN shall not place any bid that would result in such relinquishment for less than the Minimum Bid Amount.? (emphasis in original). 11 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 prepare for the District all ?lings and applications as may be required to be ?led after the Quiet Period to complete the process of relinquishment;? j. The last sentence of Section 2.3 of the Agreement shall be deleted and replaced with the following: ?In implementing the strategy developed for the Auction, the District shall cause its authorized bidder to refrain from submitting a bid that would cause such an event to occur.? k. Two new final sentences shall be added to the end of Section 2.4[61 as follows: ?The Parties agree and acknowledge that LPN has engaged PricewaterhouseCoopers Advisory Services LLC to serve as subcontractor and agent and that PWC may provide to the District on behalf of LPN certain of the services set forth in Section 2.2 during the? Quiet'Period to the extent that can do so in compliance with the Rules and LPN cannot. To facilitate this arrangement, the District has executed a Letter of Authorization in the form attached to this Agreement as Attachment - 1. Section 2.6.3 of the Agreement shall be deleted and replaced with the following: ?Designate prior to the start of the Quiet Period up to three individuals who shall serve as the District?s authorized bidders during the Auction and who are authorized to place bids On behalf of the District during the Auction, will be trained by LPN to be familiar with the Rules applicable to the Auction, as well as with Auction processes and procedures, and will consult in every round during the Auction with in a prompt and timely manner,? 32. Again, LPN assured the District that these amendments Were at ?no cost? to the District and did not materially change the obligations under the May 16, 2013 agreements, except for the obligations assigned to to perform for which LPN remained ?primarily responsible? under Section 2.4 of the Bid Management Agreement. AUCTION TRAINING PROVIDED BY PWC 33. Beginning in or about January 2016 and with the onset of the Quiet Period, PWC was in regular contact with the District about the auction process. PWC consistently assured the District that it had developed detailed and fail?safe procedures to successfully navigate the auction process. PwC?s plan included monitoring and ensuring that the District took all the necessary pre- auction steps with the FCC, training the District on the PWC-guided auction process and requiring 6 Section 2.4 of the May 16, 20.13 Bid Management Agreement provided: ?The District expressly acknowledges that in performing its duties hereunder, LPN may engage independent consultants, agents and subcontractors at its own expense. LPN agrees that any such engagement shall be undertaken under direction and supervision, and LPN shall remain primarily responsible for satisfaction of its obligations hereunder notwithstanding such engagement.? 12 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 in-person participation by PWC at each and every stage and round of the auction. Indeed, PwC?s plan was documented in a ?Playbook? which the District is informed and believes was created by LPN and PWC. That Playbook was provided to the District and detailed how would be guiding the District successfully throughout the auction process. 34. In the months before bidding commenced in the auction, sent regular emails to the District advising them on auction process. PwC?s emails included, among other things, notices of certain upcoming tasks, directions to the District on how any task should be completed and, ?nally, a confirmatory step by to ensure that the District had, in fact, completed the required task as instructed. 35. For example, in February 2016, PWC wrote the District to confirm that the District had received a letter from the FCC concerning the District?s status as a station applicant for the auction. asked for a copy of the letter and warned the District that the FCC may require the District to take certain action to update its application. PWC also advised the District about upcoming steps that the FCC would be taking. For instance, PWC advised that the FCC would be issuing a ?First Con?dential Status Letter? to each applicant and that the letter might trigger the need for minor amendments to the District?s application in a relatively tight time frame. also notified the District that the FCC would then be issuing a ?Second Con?dential Status Letter? that would advise the District how to confirm their commitment to participate in the auction and receive the SecurID tokens required to participate in the auction. While the District?s bidders had no familiarity with these procedures, PWC advised that it would be following up with the District on these issues and, indeed, that is what happened. PwC?s instructions even included the minutiae of each of the steps. For example, PWC explained that the FCC would be sending the SecurID tokens in a package that would be delivered to a speci?c person at the District and that while a signature would be required for delivery of those tokens, the signer for the package need not be the person identified as the recipient on the parcel. Of course, PWC. later followed up again to make sure the SecurID tokens were received. 36. made clear during the training that PWC would control and direct the District?s participation in the auction and that PWC was required to be present at each bidding session to 13 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 monitor, observe and direct all actions of the District bidder once the bidder logged in to the auction. Indeed, the bidding consultant actually viewed the District bidders? computer screens during the entirety of each and every bidding session and literally directed each bidder?s every action. 37. PWC also developed and implemented protocols to con?rm actual bidding activity during each round. For example, as part of PwC?s Playbook, and/or LPN developed and utilized a ?Bid Submission Con?rmation Sheet? that PWC was to complete and sign con?rming PwC?s observation of the bidding process and, for active bidding sessions, con?rming that a bid was submitted. On each Bid Submission Con?rmation Sheet, the agent was to note the date, time and amount of the District?s submitted bid. At the end of each round, and only after PWC had ?lled out the sheet, the District bidder was to countersign the sheet. According to PWC, the Bid Submission Con?rmation Sheets were. sign-in sheets to enable confirmation of execution of agreed- upon Auction plans and a?irm actions taken by Authorized Bidder with a?irmation from Consulting Team member. Specific guidance from start to ?nish for each round regarding logistics (Bid location and signature binder storage).? (emphasis added). 38. Also during this pre-auctionrperiod, District representatives, at PwC?s direction, participated in a ?mock auction? made available by the FCC in May 2016. PWC explained that ?[a]ttending all rounds [of the training] will help us to iron out any questions/issues that may arise during the clock rounds, and reduce the chance that any of us are unable to execute the bidding 14 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 process.? Both PWC consulting team members who were assigned to the District participated in the ?mock auction? along with all three of the District?s bidding representatives. Although both members of PwC?s designated consulting team participated in certain pre-auction activity, including the mock auction, only one of them, John Impullitti, actually participated in the actual auction during the so?called clock rounds. 39. PwC?s training approach emphasized how would directly monitor and guide the District bidders in each and every step of the auction process and con?rm that all necessary steps had been taken in order to assure the District?s continued and successful participation in the auction. At all times, the District understood that its role was to comply with the directions of because as the experts on the auction and the representative of LPN, was there to ensure the parties? successful participation in the auction. 40. During both the pre-auction period and during the bidding rounds, PwC?s Impullitti repeatedly advised the District that he was required to personally witness any and all auction bids, was required to con?rm that bids were submitted as required and that the District could not participate in the auction without Impullitti?s presence and involvement. Indeed, each auction session (or round) started with PwC?s Impullitti meeting one of the three District bidders in person at the bidder?s of?ce and arranging the seating so that both Impullitti and the District bidder could simultaneously view the computer screen through which any bidding would occur. 41. The auction system allowed a bidder, after submitting a bid, to print out a CC-generated bid summary receipt (an Bid Receipt?) con?rming that the FCC had successfully received the bid. Surprisingly, in spite of the fact that and most important and ultimate responsibility was to assure that a bid was successfully placed in each round as required and that a FCC Bid Receipt was the only FCC con?rmation of a successfully placed bid, neither PwC?s Playbook nor its Bid Submission Con?rmation Sheet prompted or advised the District bidder or the consultant to obtain FCC Bid Receipts. Nor did the Playbook recognize or even mention the importance of obtaining a FCC Bid Receipt immediately after placing a bid. Nonetheless, Impullitti was aware that FCC Bid Receipts were available, knew how to obtain them and after each bidding round prior to November 15, 2016, 15 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 directed District bidders to generate a FCC Bid Receipt con?rming the receipt of a bid when i a bid had been placed. PWC CLOSELY MONITORED AND CONTROLLED THE PARTICIPATION IN THE AUCTION 42. The reverse auction required four stages to close. Stage 1 of the auction comprised 52 rounds, began on May 31, 2016 and ended on June 29, 2016. Stage 2 comprised 53 rounds, began on September 13, 2016 and ended on October 13, 2016. Stage 3 comprised 52 rounds, began on November 1, 2016 and ended on December 1, 2016. The fourth and ?nal stage of the auction comprised 53 rounds, began on December 13, 2016 and ended on January 13, 2017. 43. The FCC rules provided that failure of a reverse?auction participant to place a bid in any round in which a bid option was available would result in the participant being dropped from the auction and excluded from future bid opportunities. Accordingly, participating broadcast licensees (or their agents) were required to be present for all reverse-auction bidding rounds, or to place a ?proxy bid,? in order to avoid being dropped from the auction. 44. Under the direction of PwC?s Impullitti, a District bidder properly submitted a responsive bid in the auction?s opening round (Stage 1; Round 1), which occurred on May 31, 2016. Impullitti directed and monitored the bidding, prepared and signed a Bid Submission Con?rmation Sheet and guided the bidder to obtain a FCC Bid Receipt. Impullitti also directed and monitored one of the three District bidders in each subsequent round of the auction. 45. For each of the rounds in which the District participated, its bidder logged in for the respective round in the presence of and under the direction of PwC?s Impullitti. In each round, Impullitti gave Speci?c directions to the DiStrict?s bidder at each step of the bidding process, including speci?c instructions to submit a bid during each bidding round. He then ?lled out and signed a Bid Submission Con?rmation Sheet based on his observation of bidding status and any actual bidding activity. Impullitti was required by PwC?s and/or procedures to immediately upload an electronic copy of the Bid Submission Con?rmation Sheet to a secure ?Box? cloud storage ?le, Where all of the District?s auction records were and are maintained. Although not mentioned in the Playbook, Impullitti?s consistent practice in each round was to direct the bidder or 16 FIRST AMENDED CIVIL COMPLAINT otherWise assure that a FCC Bid Receipt was obtained through the auction website continuing an actual bid by the District had been received by the FCC. 46. In the eleventh round of Stage 1, which occurred on June 8, 2016, status changed to ?Frozen Provisionally Winning.? A station with a ?frozen? status in a given round was not required (or even permitted) to place a bid in that round. status did not change for the remainder of Stage 1, and KCSM-TV therefore was not required to place additional bids in Stage 1. entered Stage 2 with a status of ?Frozen Pending Catch-up? and maintained that status until Round 12, when it resumed bidding until again changing to ?Frozen Provisionally Winning? status in Round 18 of Stage 2. status through the first 17 Rounds of Stage 3 remained ?Frozen Pending CatCh?up.? On November 10, 2016, in Stage 3; Round 18, status was no longer ?Frozen Pending Catch-up.? In Rounds 18 and 19 (which both occurred on November 10, 2016), Impullitti monitored and directed the District bidder to log in and submit a bid. For both rounds, Impullitti completed and signed a Bid Submission Con?rmation Sheet, had it countersigned by the bidder, and assured that a FCC Bid Receipt was generated. 1 i I 47. No auction activity took place on November 11, 2016 when the FCC was closed for the Veterans Day holiday. I 48. Auction activity resumed on November 14, 2016 and the District?s bidder effectuated the District?s responsive submissions in the three Rounds conducted that day (Stage 3; Rounds 20, 21 and 22). All three of that day?s bidding rounds were monitored and directed by Impullitti, who prepared a Bid Submission Con?rmation Sheet for each of those Rounds and directed that FCC Bid Receipts be obtained before the Round closed. STAGE 3; ROUND 23 23?) 49. Round 23 of the auction occurred on November 15, 2016. The District bidder for that day signed in to the auction site early in the first round shortly after 7:00 am. PST in Impullitti?s presence (who was seated immediately behind her) and at his direction. The bidder that morning had been out of town the previous day and did not participate in Rounds 20, 21 and 22. The bidder logged in to the auction website as directed and then waited as Impullitti observed 17 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 the bidding status and completed the Bid Submission Con?rmation Sheet which stated that a bid had been submitted based on what he observed on the screen. In Impullitti?s words, they had ?submitted a bid in accordance with the bidding strategy.? Impullitti recorded thatvthe bid amount was $114,494,613. Nevertheless, he signed the Bid Submission Con?rmation Sheet af?rming that the bid had been placed at ?7:12 am. and that the information he had recorded ?completely and accurately reflect[s] the actions taken during the auction.? Impullitti did not follow his usual procedure and did not request that the District bidder generate and capture g. print or create a PDF) a FCC Bid Receipt con?rming the receipt of a bid. Rather, he simply presented his handwritten Bid Submission Con?rmation Sheet to the bidder for counter-signature. Impullitti observed the District bidder log out of the auction and he then left her of?ce. At that time, there was still approximately 45 minutes left to place a bid in Round 23. 50. While Impullitti noted on the Bid Submission Con?rmation Sheet that this was an active bidding session, he failed to direct the bidder to submit a bid. Had he done so, the bidder would have navigated to the submit button (which could be revealed by scrolling the screen to the right) and clicked on it actions that were readily viewable by Impullitti who sat only a matter of inches from the computer screen. Compounding the problem, Impullitti also failed to direct the bidder to generate and print a FCC Bid Receipt (or otherwise assure that a FCC Bid Receipt was obtained), which he could have done at any time before Round 23 ended at 8:00 am. PST, approximately 45 minutes after he signed the Bid Submission Con?rmation Sheet. Had Impullitti taken prompt and reasonable steps to obtain a FCC Bid Receipt as he had done in every previous I bidding round, he would have realized that no bid had been submitted for Round 23. Similarly, had LPN and/or PWC properly developed the Bid Submission Con?rmation Sheet checklist to include and require a printout of the FCC Bid Receipt, the only o??icial con?rmation that a bid had been submitted, Impullitti would have been forced to realize that no bid had been submitted for Round 23 and he would have directed the District bidder to place a bid and obtain a FCC Bid Receipt before Round 23 ended. I 51. Impullitti?s belief that a bid had been submitted in Round 23 was mistaken. At the scheduled opening of Round 24, which started at 10:00 am. PST that same day, the bidder, with 18 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 Impullitti present, as required, logged in to the auction site and saw the Station?s status listed as ?dropped out of bidding.? Impullitti (who initially thought they were provisionally winning based on his observation of the auction screen) and the bidder quickly initiated a series of efforts to have KCSM-TVlreinstated as an active bidder in the auction. 52. To that end, the bidder contacted, and attempted to contact, FCC auction personnel by telephone and e?mail. In the course of each contact, she was informed that termination as a bidder was not reversible. At some point in the course of her November 15, 2016 efforts to reenter the District in the auction, the District bidder realized she could not recall having seen or having generated and downloaded a FCC Bid Receipt for Round 23. Impullitti also admits that, in connection with Round 23, he ?assumed the bid was submitted? and ?did not request the bid summary print out.? Impullitti prepared a Bid Submission Con?rmation Sheet for Round 24 noting the new status. 53. Despite its best efforts, the District?s efforts to have KCSM-TV reinstated as an active bidder in the auction ultimately proved fruitless. I REMAINDER OF THE QUIET PERIOD 54. Although the FCC had dropped KCSM-TV from the auction for failing to submit a bid, KCSM-TV remained a ?covered entity? under the rules, and both the Districtand Impullitti were prohibited, from disclosing the events or the fact that KCSM-TV had exited the auction to any other covered entity, including LPN, until the end of the Quiet Period. END OF THE QUIET PERIOD 55. After the close of the Quiet Period, the District was approached by the licensee of a public television station, who apparently made a successful bid in the auction. That licensee inquired whether KCSM-TV survived the auction and, if so, whether the District would be interested in channel sharing or a sale. 5 6. In compliance with the parties? agreement, the District contacted LPN to inquire whether LPN wished to be involved in discussions with the potential buyer expressing interest in the Station. LPN refused and continues to refuse to work in good faith to sell the Station in the manner contemplated by the parties under Section 6 of the Put/ Call Option Agreement, in which 19 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 LPN agreed to work together with the District ?in good faith to develop a strategy to maximize the value of the Station? and to ?use commercially reasonable efforts to identify a suitable Buyer and consummate a Sale.? Rather, LPN insisted, and continues to insist, that it does not have any further obligations under the parties? agreements. LPN SHIRKS ITS RESPONSIBILITIES AND BLAMES THE DISTRICT 57. . LPN, through its counsel, sent a letter to the District dated February 421, 2017. In the February 21 letter, LPN alleged that the District was actually the party in breach of its obligations under the contracts. The letter includes baseless assertions against the District and shows a complete about-face by LPN on the parties? rights and obligations. Rather than accurately acknowledging that, as per the parties? written agreements, LPN was the party who, at all times, was the ?exclusive bidding consultant and agent for the District? and that LPN was responsible ?to develop and ileement? any and all strategies to assure the District?s successful participation in the auction and (ii) that, in exchange for these critical auction services, the District had agreed to pay LPN 36.5% of the sale proceeds (which under valuation would be more than $25 million due to LPN), LPN unabashedly blamed the District for own failure. Ironically, counsel nearly entirely ignores the conduct of its own agent, Yet, was the agent chosen by LPN, was the manager that LPN put onsite at the District, was the party trained by LPN, and was the party who was monitoring and supervising the auction at each and every stage to assure that a bid was successfully placed. When failed to perform contractual obligations, that failure was failure. Moreover, the parties? agreements expressly required LPN to direct and supervise any work by such agents and stated that, at all times, shall remain primarily responsible for satisfaction of its obligations hereunder notwithstanding such engagement.? 58. Consistent with its refusal to acknowledge the actual terms of the parties? agreements, counsel also, for the first time, suggested that the December 2015 amendments g. the documents that own CEO and co-founder said were language ups? and were ?needed to keep things on track and easy for you folks [the District], and also compliant with FCC rules?), in fact placed not a clerical obligation on the District to participate in the auction 20 FIRST AMENDED CIVIL COMPLAINT the owner of the Station but purportedly shifted the overall contractual obligation for ensuring the District?s successful participation in the auction onto the District its-elf (notwithstanding concurrent assertion that it was entitled to more than $25 million for guaranteeing that very obligation). Neither the agreements nor any of the contemporaneous discussions support re- writing of the parties? obligations. FIRST CAUSE OF ACTION (Breach of Contract Against LPN) 59. The District incorporates by reference paragraphs 1 through 58 as if each were fully alleged herein. 60. The District and LPN entered into a series of contracts. Among the contracts between the District and LPN is a valid and binding Bid Management Agreement, executed on May 16, 2013. 61. Pursuant to the parties? Bid Management Agreement, LPN was the ?exclusive bidding consultant and agent for the District to develop and implement? any and all strategies to ensure the District?s successful participation in the auction. As the exclusive agent responsible for implementing the parties? auction strategy for KCSM-TV, LPN had the sole obligation to assure the timely submission of bids in the auction. obligations also included training and supervising the bidders to ?assure their satisfactory performance of the duties? in the auction, keeping the District informed concerning the bidding process and taking ?all such other actions as may be reasonably required by the District as its bidding consultant and agent to achieve its successful participation in the Auction.? 2 62. The District has performed all terms, conditions, and obligations of the agreements with LPN to be performed on its part, excepting only those that have been waived or excused by actions or failures of performance. 63. LPN breached the parties? agreements, including the Bid Management Agreement, in numerous ways, including but not limited to: failing to assure'the timely submission of a bid, failing to properly train and supervise PWC, and failing to take all actions reasonably required to ensure the District?s successful participation in the auction. 21 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.V2 64. Had LPN performed its duties, the District?s bid in Round 23 of the auction would have been submitted, the District would not have been dropped out of the auction, and the District would have continued to Round 24?and any and all subsequent rounds?of the auction according to the parties? auction strategy. 65. As a direct and proximate result of breaches, the District has sustained, and will continue to sustain, damages in an amount in excess of the minimum jurisdictional amount of this Court to be determined according to proof at trial. WHEREFORE, the District prays for relief as hereinafter set forth. SECOND CAUSE OF ACTION (Breach of the Implied Covenant of Good Faith and Fair Dealing Against LPN) 66. The District incorporates by reference paragraphs 1 through 65 as if each were fully alleged herein. 67. Implied in the agreements with LPN, including the Bid Management Agreement, is a covenant of good faith and fair dealing which prohibits LPN from taking actions to prevent the District from enjoying the bene?ts of the contract. 68. As the ?exclusive bidding consultant and agent for the District,? LPN was responsible ?to develop and implement? any and all strategies to ensure the District?s successful participation in the auction. As the exclusive agent responsible for implementing the parties? auction strategy for KCSM-TV, LPN had the obligation to assure the timely submission of bids in the auction. obligations included development and implementation of strategies and procedures to ensure timely submission of bids in the auction, training and supervising the bidders to ?assure their satisfactory performance of the duties? in the auction, keeping the District informed concerning the bidding process ?including, but not limited to, the results of each bidding round and expected bids in the next bidding round? and taking ?all such other actions as may be reasonably required by the District as its bidding consultant and agent to achieve its successful participation in the Auction.? 69. Pursuant to Section 2.8 of the Bid Management Agreement, LPN and the District further agreed that if the FCC adopted rules for the auction that affected their respective 22 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 obligations, LPN and the District would ?negotiate in good faith to modify [the Bid Management Agreement] to the extent required for the intent of the Parties in [the Bid Management Agreement] and in the Funding Documents.? 70. LPN breached the implied covenant of good faith and fair dealing in various ways including, but not limited to: (C) (6) failing to candidly and in good faith inform the District about the FCC Quiet Period Rule in June 2014, including how that rule could impact the parties? agreements; falsely stating that the last-minute switch to was prompted by the October 2015 guidance when, in fact, the position on this issue had been in place since June 2014; falsely stating that the District, instead of LPN, or some other third party, was required to place the bid directly because the District was the owner of the Station; failing to negotiate the amendments in good faith including failing to disclose what portions of the amendments were actually required by the Quiet Period Rule as well as what portions were simply to accommodate business structure and/or preferences and/or PwC?s requirements and/or preferences, (ii) waiting until shortly before the Quiet Period was set to begin to disclose the fact that LPN had hired and was now seeking to amend the parties? agreement and in NOVember and December 2015 misrepresenting purported views about the signi?cance of the amendments (including assuring the District that these late-stage amendments did not materially change the agreements except for the assignment of certain LPN responsibilities to during the Quiet Period and were ?at no cost? to the District and were merely language ups? and ?to accommodate prohibited communications rules? during the Quiet Period) and only disclosing its actual views after KCSM-TV was dropped from the auction; and through the amendments to the agreements (should this Court determine they are valid in whole or part), placing additional duties on the District and/or purporting to shift responsibility or liability to the District for certain LPN obligations under the 23 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 guise that such changes were required by the FCC Quiet Period Rule. 71. The District has performed all terms, conditions, and obligations of the agreements to be performed on its part, excepting only those that have been waived or excused by actions or failures of performance. 72. As a direct and proximate result of breaches of the implied covenant of good faith and fair dealing the District has sustained, and will continue to sustain, damages in an amount in excess of the minimum jurisdictional amount of this Court to be determined according to proof at trial. . WHEREFORE, the District prays for relief as hereinafter set forth. THIRD CAUSE OF ACTION (Breach of Fiduciary Duty Against LPN and PWC) 73. The District incorporates by reference all of the above paragraphs as if each were fully alleged herein. 74. As detailed in the Bidding Agreement, the District authorized LPN to act as its ?exclusive bidding consultant and agent for the District to develop and implement? any and all strategies to ensure the District?s successful participation in the auction. The District further allowed LPN to ?engage independent consultants, agents and subcontractors at its own expense.? However, the agreement required LPN to direct and supervise any work by such agents and, at all times, shall remain primarily responsible for satisfaction of its obligations hereunder notwithstanding such engagement.? 75. At some point prior to December 2015, LPN engaged to serve as its agent and subcontractor to perform certain of contraCtual obligations due to the District. In light of representations about the need for this arrangement with to comply with the Quiet Period Rule as well as other assurances that LPN would continue to assure the District?s successful participation in the auction, the District executed a letter of authorization acknowledging that LPN had designated ?to be responsible for performing obligations under of the Agreement and various of its subsections, including monitoring and assisting the District with its participation of Station KCSM-TV (RF Channel 43), San Mateo, California (FCC Facility 24 FIRST AMENDED CIVIL COMPLAINT No. 58912) (the ?Stating?? in the auction.? The District further agreed to cooperate with so that PWC could carry out obligations. 76. In light of the above, LPN (directly as well as indirectly through PWC) and (through its agreement with LPN and-through its Work for the District) agreed to act as the District?s bidding agent and/or subagent. I 77. As the District?s agent and/or subagent, LPN and PWC owed the District a ?duciary duty to use reasonable care, skill, and diligence. 78. LPN breached its ?duciary duty to the District to use reasonable care, skill, and diligence in various ways including, but not limited to: failing to properly train and supervise failing to develop a suf?cient procedure for the auction that would assure the timely submission of a bid during all available bidding rounds; failing to include, in its auction procedures and bidding protocols, a requirement to obtain and print the FCC Bid Receipt, which was the only a?cial con?rmation that the FCC had actually received and processed a bid; failing to properly monitor and the performance of its duties owed to the District; failing to keep the District informed concerning the bidding process, including, but not limited to, the results of each bidding round and expected bids in the next bidding round; and failing to take all actions reasonably required to ensure the District?s I successful participation in the auction. 79. PWC breached its ?duciary duty to the District to use reasonable care, skill, and diligence by in various ways including, but not limited to: failing to include, in its auction procedures and bidding protocols, a requirement to obtain and print the FCC Bid Receipt; failing to properly momtor and supervise the bidding process; failing to ensure that the website was properly displaying on District 25 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 bidders? computer monitors being utilized for the bidding process; failing to properly monitor, observe and/or con?rm whether a bid had been submitted on November 15, 2016; I failing to assure that the District?s bid was submitted on November 15, 2016; failing to direct the bidder to capture.(e. g. print out, create a PDF) the FCC Bid Receipt from the website which would have shown the true status of thebidding; failing to utilize the approximately 45 minutes of remaining time during the Round 23 bidding session to assure that the District?s bid was properly, submitted; and i preparing and then certifying that a bid had been placed on November 15, 2016 when, in fact, no bid had been submitted. 80. As professional agents and/or subagents, LPN and PWC owed a heightened ?duciary duty to the District, requiring LPN and PWC to have the particular knowledge and to exercise the particular skill and diligence expected of them. LPN, for example, was touted as the expert in this area and it was the party Who engaged and trained and the District is informed and believes that LPN purportedly imparted its specialized knowledge to PWC as part of that training process. 81. LPN and breached their respective ?duciary duties to the District to exercise the particular knowledge, skill, and diligence expected of them by failing to use their respective specialized knowledge in a diligent manner and to exercise the required due care which each owed the District to avoid any failure to place a bid in the auction or to otherwise assure the ability of the District to continue itsparticipation in the auction. 82. Had LPN and ful?lled their ?duciary duties to the District, the District?s bid in Round 23 of the auction would have been submitted, the District would not have been dropped out of the auction, and the District would have continued to Round 24-and any and all subsequent rounds?of the auction. 83. As a direct and proximate result of and PwC?s breaches of their ?duciary 26 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 duties, the District has sustained, and will continue to sustain, damages in an amount in excess of the minimum jurisdictional amount of this Court to be determined according to proof at trial. WHEREFORE, the District prays for relief as hereinafter set forth. FOURTH CAUSE OF ACTION (Negligence Against PWC) 84. The District incorporates by reference paragraphs 1 through 58 as if each were fully alleged herein. 85. By Virtue of its special relationship with the District, owed a duty of reasonable care to the District in conducting the bidding process. 86. PWC negligently breached that duty of care by: failing to include, in its auction procedures and bidding protocols, a requirement to obtain and print the FCC Bid Receipt; failing to properly monitor and supervise the bidding process; failing to ensure that the website was properly displaying on District bidders? computer monitors being utilized for the bidding process; failing to properly monitor, observe and/or con?rm whether a bid had been submitted on November 15, 2016; failing to assure that the District?s bid was submitted on November 15, 2016; failing to direct the bidder to capture g. print out, create a PDF) the FCC Bid Receipt from the website which would have shown the true status of the bidding; failing to utilize the approximately 45 minutes of remaining time during the Round 23 bidding session to assure that the District?s bid was properly submitted; and i preparing and then certifying that a bid had been placed on November 15 2015 when, in fact, no bid had been submitted. 87. Had not acted negligently, the District?s bid in Round 23 of the auction would have been submitted, the District would not have been dropped out of the auction, and the District 27 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 would have continued to Round 24?and any and all subsequent rounds?of the auction. 88. As a direct and proximate result of PwC?s negligence, the District has sustained, and will continue to sustain, damages in an amount in excess of the minimum jurisdictional amount of this Court to be determined according to proof at trial. WHEREFORE, the District prays for relief as hereinafter set forth. FIFTH CAUSE OF ACTION (Declaratory Relief Against LPN) 89. The District incorporates by reference paragraphs 1 through 58 as if each were fully alleged herein. 90. An actual controversy has arisen and now exists between the District and LPN with respect to their respective rights and obligations under the Bid Management Agreement and the amendments to agreements referenced in paragraph 16 above, including, but not limited to, the following: the District contends, and LPN denies, that the amendments set forth in paragraph 16 do not materially alter the rights and obligations of the parties under the May 16, 2013 agreements, except for the assignment of certain LPN obligations to PWC, and do not alter the iobligation of LPN to ?[t]imely submit all bids in the Auction for the District as may be required for continued participation in the Auction.? To the extent that LPN contends otherwise, the amendments are invalid and unenforceable against the District for two separate and independent reasons: the amendments were never approved or rati?ed by the Board as required by section 81655 of the Education Code; and (ii) based on recently disclosed interpretation of those amendments e. LPN contends the amendments materially shifted certain obligations'of LPN to the District), such amendments fail for lack of consideration. 91. The District desires a judicial determination of its rights and duties, and a declaration that: the amendments do not materially alter the rights and obligations of the parties under the May 16, 2013 agreements, except for the assignment of certain LPN obligations to PWC, and do not alter the obligation of LPN under the Bid Management Agreement to ?[t]imely submit all bids in the 28 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958v2 Auction for the District as may be required for continued participation in the Auction?; and/or the amendments set forth in paragraph 16, including the Amendment to Bid Management Agreement, are not valid as a matter of law pursuant to the California Education Code; and/or (0) to the extent that the Court determines that the amendments set forth in paragraph 16 are valid under the California Education Code and materially changed the parties? May 16, 2013 agreements (which LPN-now contends and the District disputes), the amendments are invalid due to lack of consideration. 92. WHEREF ORE, the District prays for relief as hereinafter set forth. SIXTH CAUSE or ACTION (Contractual Indemni?cation Against LPN) 93. The District incorporates by reference all of the above paragraphs as if each were fully alleged herein. 94. Pursuant to Section 7.2 of the Bid Management Agreement, shall indemnify and hold harmless the District, as well as its of?cers, directors, employees and agents, from all Losses arising out of any breach of any representation, warranty, obligation or performance of LPN under this Agreement, (ii) any actions by LPN that are inconsistent with the FCC Rules or any gross negligence or willful misconduct by LPN relative to its obligations under this Agreement.? ?Losses? is a de?ned term under the contract which means ?all liabilities, claims, costs, damages, ?nes, forfeitures and expenses.? 95. This indemni?cation and hold-harmless language indicates that: (1) LPN expressly contemplated that its breach of its obligations under the Bid Management Agreement and/or any gross negligence or willful misconduct by LPN relative to its obligations under that agreement could result in Losses to the District; and (2) LPN agreed to hold the District harmless if such actions occurred. 96. The District performed all terms, conditions, and obligations of the Bid 29 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 LII-PLUM Management Agreement to be performed on its part, excepting only those that have been waived or excused by actions or failures of performance. 97. As set forth herein, LPN breached its obligations under the Bid Management Agreement in numerous ways that, in turn, resulted in Losses by the District. 98. As set forth herein, LPN, by its Own performance and by and through the performance of its own agent, was grossly negligent in performance of obligations under the Bid Management Agreement and that negligence, in turn, resulted in Losses by the District. 99. As a direct and proximate result of the breaches of the Bid Management Agreement, the District has sustained, and will continue to sustain, Losses in an amount to be more particularly proven at trial, but reasonably believed to exceed the minimum jurisdictional amount of this Court. 100. Pursuant to Section 7.2 of the Bid Management Agreement, LPN must indemnify the District for the Losses sustained to date as well as those continuing Losses by the District as a result of breaches of the Bid Management Agreement and the conduct of both LPN and its agent, WHEREFORE, the District prays for relief as hereinafter set forth. SEVENTH CAUSE OF ACTION (Breach of Contract?Failure to Perform Post-Auction Obligations Against LPN) 101. . The District incorporates by reference paragraphs 1 through '58 as if each were fully alleged herein. . 102. Among other agreements, the District and LPN entered into the Funding Agreement and the Put/Call Option Agreement'in or about May 2013. 103. By its express language, the purpose of the Put/Call Option Agreement was to set forth the conditions upon which the District would relinquish the Station?s spectrum usage rights through participation in the auction or a sale to a buyer in the event that the District was not successful in relinquishing the Station?s spectrum usage rights in the auction, in exchange for certain funding by LPN and a share of sale proceeds. The Put/Call Option Agreement therefore 30 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 expressly contemplated a possibility where the District?s participation in the auction would not result in a sale. 104. Section 6 of the Put/Call Option Agreement (?Mechanics of a Sale?) provided as follows: ?In the event that [the District] participates in the Auction and an Auction Sale does not occur, the parties will work together in good faith to develop a strategy to maximize the value of the Station and each shall use commercially reasonable efforts to identify a suitable Buyer and consummate a Sale. Following receipt of a valid Sale Call Notice by [the District] or a valid Put Notice by LPN, subject to the terms and conditions of this Agreement, [the District] and LPN shall proceed in good faith to negotiate, prepare and execute a de?nitive agreement with the Buyer for the Sale (the ?Sale 105. After the close of the Quiet Period, the District was approached by the licensee of a public television station who inquired whether the District would be interested in channel sharing or a sale to that station. 106. In compliance with the parties? agreement, the District contacted LPN to inquire whether LPN wished to be involved in discussions with the potential buyer expressing interest in KCSM-TV. LPN refused and continues to re?ise to work in good faith to sell KCSM-TV in the manner contemplated by the parties. 107. Similarly, the Funding Agreement provided for the continuation of certain subsidy payments (in installments of $225,000) by LPN to the District through a portion of 2017. LPN failed and continues to fail to provide the ongoing subsidy as contemplated by the parties? agreements. 108. The District has performed all terms, conditions, and obligations of the agreements to be perfOrmed on its part, excepting only those that have been waived or excused by actions or failures of performance. 109. LPN has breached and/or repudiated its duties under Section 6 of the Put/Call Option Agreement, and specifically its contractual obligation to work together with the District in good faith to develop a strategy to maximize the value of the Station, and to ?use commercially reasonable efforts to identify a suitable Buyer and consummate a Sale.? LPN has also breached the 31 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 Funding Agreement by failing to make the subsidy payments. LPN has further breached and/or repudiated the agreements by insisting that it does not have any further obligations under the parties? May 16, 2013 agreements. 110. As a direct and proximate result of breaches, the District has sustained, and will continue to sustain, damages in an amount in excess the minimum jurisdictional amount of this Court to be determined according to proof at trial. WHEREFORE, the District prays for relief as hereinafter set forth. PRAYER FOR RELIEF Wherefore, the District prays for judgment against LPN and PWC as follows: 1. 2. Damages in an amount according to proof at trial; Interest at the legal rate of ten percent per annum through the date of entry of judgment herein; Reasonable attorneys? fees; Costs of suit; A judicial determination of the respective rights and duties of the District and LPN as set forth herein; and Such other and further relief as the Court may deem proper. 32 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 Dated: April 12, 2017. COUNTY OF SAN MATEO, . OFFICE OF COUNTY COUNSEL By: E. MEW CRAIG N. BAUMGARTNER, Attorneys for SAN MATEO COUNTY COMMUNITY COLLEGE DISTRICT Dated: April 12, 2017.. PILLSBURY WINTHROP SHAW PITTMAN LLP By: WEMAN DIANNE L. ENEY TY Attorneys for SAN MATEO COMMUNITY COLLEGE DISTRICT 3 3 FIRST AMENDED CIVIL COMPLAINT 4815-3766-9958.v2 .N r?A r?A?rDEMAND FOR JURY TRIAL Plaintiff hereby demands a trial by jury in the above-captioned action of all issues triable by jury. Dated: April 12, 2017. COUNTY OF SAN MATEO, OFFICE OF COUNTY COUNSEL By: E. MEOLA CRAIG N. BAUMGARTNER, Attorneys for SAN MATEO COUNTY COMMUNITY COLLEGE DISTRICT Dated: April 12, 2017. PILLSBURY WINTHROP SHAW PITTMAN LLP Attorneys for COMMUNITY COLLEGE DISTRICT 34 FIRST AMENDED CIVIL COMPLAINT