2 3 4 5 Paul A. Tyrell (Bar No. 193798) Ryan C. Caplan (Bar No. 253037) PROCOPIO, CORY, HARGREAVES & SAVITCH LLP 525 B Street, Suite 2200 San Diego, California 92101 Telephone: 619.238.1 900 Facsimile: 619.235.0398 E-mail: paul.tyrell@procopio.com ryan.caplan@,procopio.com 6 7 Attorneys fo r Defendant/Cross-Complainant, BARDAV INC 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 COUNTY OF SAN DIEGO, CENTRAL DIVISION 10 11 12 PROPER MEDIA, LLC, a California limited liability company; CHRISTOPHER RICHMOND, an individual; and DREW SCHOENTRUP, an indi vidual, 13 Plaintiffs, 14 v. 15 16 BARDAV INC, a California corporation, and DAVID MIKKELSON, an individual, 17 Case No. 37-2017-00016311-CU-BC-CTL CROSS-COMPLAINT for: (1) BREACH OF CONTRACT; (2) BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING; (3) ACCOUNTING; (4) VIOLATIONS OF CALIFORNIA BUSINESS & PROFESSIONS CODE SECTIONS 17200 et seq.; and Defendants, (5) DECLARATORY RELIEF 18 19 Dept.: Judge: BARDA V INC, a California corporation, 20 Cross-Complainant, Complaint Filed: Trial Date: 21 v. 22 PROPER MEDIA, LLC, a California limited liability company; DREW SCHOENTRUP, an individual; and ROES 1 through 30, inclusive, 23 24 C-68 Hon. Judith F. Hayes IMAGED FILE DEMAND FOR JURY TRIAL Cross-Defendants. 25 26 27 28 CROSS-COMPLA INT DOCS 125263-000001/2926753.5 May 4, 2017 Not set Defendant/Cross-Complainant BARDAV INC alleges as follows: SUMMARY OF CROSS-ACTION 2 3 1. Bardav Inc ("Bardav" or "Cross-Complainant") owns and operates the popular 4 Snopes.com website, which it uses to support and advance the quality, authenticity, and accuracy 5 of news media. 6 contract under which Proper Media agreed to provide certain services to Bardav for the 7 Snopes.com website, subject to Bardav's ultimate discretion. Proper Media failed to perform its 8 contractual and legal obligations and Bardav eventually terminated the contract in accordance with 9 its terms. Proper Media is now wrongfully withholding money owed to Bardav and effectively Bardav and Proper Media, LLC ("Proper Media") were parties to a written 1O holding the Snopes.com website hostage by preventing Bardav from moving the website, 11 12 advertising and other back-end functions to another service provider. 2. At the same time that Proper Media is inflicting external harm upon Bardav, one of 13 Proper Media's principals, Drew Schoentrup, is trying to paralyze Bardav internally in an apparent 14 effort to force Bardav to continue its business relationship with Proper Media. Among other 15 things, Schoentrup is purporting to hold a director position within Bardav in an effort to give the 16 appearance that Bardav has a deadlocked board. Similarly, Schoentrup is purporting to control (via I7 Proper Media) a 50% ownership stake in Bardav, despite the fact that Schoentrup holds, at most, a J8 20% shareholder interest. 19 20 THE PARTIES 3. Defendant/Cross-Complainant Bardav is, and at all times mentioned in this Cross- 21 Complaint was, a corporation duly organized and existing under and by virtue of the laws of the 22 State of California, and doing business within the State of California. 23 4. Cross-Complainant is informed and believes, and on that basis alleges, that 24 Plaintiff/Cross-Defendant Proper Media is, and at all times mentioned in this Cross-Complaint was, 25 a California limited liability company with its principal place of business in San Diego, California. 26 5. Cross-Complainant is informed and believes, and on that basis alleges, that 27 Plaintiff/Cross-Defendant DREW SCHOENTRUP ("Schoentrup") is and individual who presently 28 resides in Puerto Rico. 2 CROSS-COMPLAINT DOCS 125263-000001 /2926753.5 6. The true names and capacities, whether individual, corporate, or otherwise of the 2 cross-defendants named in this Cross-Complaint as Roes 1 through 30, inclusive, are unknown to 3 Cross-Complainant. Cross-Complainant is informed and believes, and on that basis alleges, that 4 each of said fictitiously named cross-defendants is liable to Cross-Complainant on the causes of 5 action herein alleged and/or asserts some interest, legal or equitable, in the subject matter of this 6 action, and therefore Cross-Complainant sues said cross-defendants by said fictitious names. 7 Cross-Complainant will move to amend this Cross-Complaint when the true names and capacities 8 of said fictitiously named cross-defendants have been ascertained. 9 7. Proper Media, , Schoentrup, and Roes 1 through 30 are collectively referred to as 1O the "Cross-Defendants" herein. 11 8. Cross-Complainant is informed and believes, and on that basis alleges, that at all 12 times mentioned in this Cross-Complaint the Cross-Defendants, and each of them, were the agents, 13 servants, employees, and/or alter egos of each of the other co-Cross-Defendants, and in doing the 14 things alleged in this Cross-Complaint were acting within the scope of their authority as such 15 agent, servant, employee, and/or alter ego, and with the permission and consent of their co-Cross- 16 Defendants. JURISDICTION AND VENUE 17 18 9. This Court has jurisdiction over al I causes of action asserted in this Cross-Complaint 19 pursuant to California Constitution, Article VI, § l 0 and California Code of Civil Procedure section 20 410.10 because the acts and omissions alleged herein were committed in the State of California, 21 because this is a civil action wherein the matter in controversy, exclusive of interest, exceeds 22 $25,000, and because this case is a cause not given by statute to other trial courts. 23 10. Venue is proper in this Court pursuant to California Code of Civil Procedure section 24 395, because these claims are asserted in a cross-complaint to the above-captioned action filed in 25 this venue, Cross-Defendants reside and/or transact business within the County of San Diego, and 26 the unlawful conduct alleged herein was carried out, and had effects, in the County of San Diego. 27 Venue is proper in this district pursuant to Rule 1.2.2 of the San Diego Superior Court Rules. 28 3 CROSS-COMPLAINT DOCS 125263-00000112926753.5 GENERAL ALLEGATIONS 2 11. This action concerns the operation and control of the Snopes.com website, which is 3 owned by Bardav. Bardav is a California corporation founded in 2003 by then-husband and wife, 4 David and Barbara Mikkelson. Since its formation, Bardav has been the ownership entity for the 5 Snopes.com website, which Mr. Mikkelson first began as a personal project in as early as 1994. 6 Mr. and Mrs. Mikkelson were each directors of Bardav until Mrs. Mikkelson sold her ownership 7 interest in 2016, after which Mr. Mikkelson became the sole member on the Bardav board of 8 directors. Today, in addition to his position as director, Mr. Mikkelson is the President, CEO and 9 50% shareholder of Bardav. 10 12. On information and belief, Proper Media is an "internet media" company founded in 11 2015 by Schoentrup and Richmond. Proper Media advertises itself as owning, operating, and 12 representing web properties, working with website "publishers" and "advertising partners." 13 The General Service Agreement 14 13. On or about August 11, 2015, Bardav and Proper Media entered into a written one- 15 year contract entitled the General Service Agreement ("GSA"). Under the GSA, Proper Media 16 agreed to provide certain services to Bardav for the Snopes.com website during the term of the 17 agreement. 18 incorporated by reference herein. 19 20 14. A true and correct copy of the GSA is attached as Exhibit "A" hereto and is The GSA was premised on the following recitals: Publisher: Bardav, Inc., (Snopes) 21 * 22 Agent: Proper Media, LLC 23 * 24 * * * * WHEREAS, The Publisher is the owner and/or operator of Snopes.com (the "Website"); and 25 26 27 28 WHEREAS, the Publisher wishes to retain the Agent to ,provide content and website development services as well as advertising sales and trafficking, as set forth in this Agreement (the "Agreement") (Exhibit A, p. I.) 4 CROSS-COMPLAINT DOCS 125263-000001129267535 1 15. The GSA had an initial term of 1-year commencing on August I I, 2015, and 2 thereafter reverted to renewable monthly terms until such time it is terminated by either party: 3 Effective Date: August 11, 2015 4 "Term" means the period commencing upon the effective date and ending upon the termination of this agreement in accordance with Section 7. 5 6 (Exhibit A, p. 1.) 7 7. Term & Renewal 8 7 .1. Term: This Agreement shall remain in effect for a period of one (I) year from the date hereon (the "Initial Term"). Either party may terminate this Agreement by providing the other party with sixty (60) days written notice, with or without cause, prior to the expiration of the Initial Term. Unless previously terminated by notice as provided above, at the end of the Initial Term this Agreement shall renew for additional one (1) month terms (each a "Renewal Term") unless and until either party provides the other party with written notice of termination, with or without cause, at least sixty (60) days prior to renewal. 9 IO 11 12 13 14 15 16 (Exhibit A,§ 7.1, p. 4.) 16. The GSA also provided for immediate termination for cause upon Proper Media breaching and failing to cure within ten days: 17 7.2. Termination by Publisher: Publisher may terminate this Agreement by written notice to Agent if any of the following events occur: 18 19 (i) Agent fails to pay any amount due to Publisher within ten (10) days after Publisher gives Agent written notice of such nonpayment; or 20 21 (ii) Agent is in material breach of any term, condition, or provision of this Agreement and such breach is not cured within ten (10) days after Publisher gives Agent notice of such breach. 22 23 24 25 26 27 28 (Exhibit A , § 7.2, p. 4.) 17. Under the GSA, Bardav retained ultimate decision making on issues regarding staffing, content, and editorial guidelines. (See Exhibit A,§ 1, p. 2.) 18. Among other tasks, Proper Media contracted to represent Bardav with respect to advertisement procurement, placement, and management, subject to Bardav's ultimate discretion. 5 CROSS-COMPLAINT DOCS 125263-000001/2926753.5 (See Exhibit A, § 3, p. 2.) In connection therewith, Proper Media agreed to provide Bardav with 2 advertisement trafficking and reporting. (Exhibit A, § 3.1, p. 2.) Proper Media also agreed to use 3 its best efforts to ensure that the information in its tracking system was accurate. (Exhibit A, § 3.2, 4 p. 2.) 5 6 19. The GSA further provided that Proper Media would compensate Bardav based on advertising invoicing on a monthly basis: 7 3.5. Agent Commission Rate: The Agent shall pay to Publisher all amounts invoiced or to be invoiced by the Agent to advertisers for advertising placed on the Website up to $85,000 per month (the "Baseline") and fifty (50) percent of all amounts above the Baseline, calculated on a monthly basis ("Net Revenue"). 8 9 10 (Exhibit A,§ 3.5, p. 3.) 11 20. The remaining advertising revenue constituted the entirety of Proper Media's 12 compensation (exclusive of authorized expense reimbursements) under the GSA: "Other than the 13 commissions in this Section, and the expense reimbursements in Section 5, Agent shall not be 14 entitled to any fixed compensation for its services." (Exhibit A,§ 3.7, p. 3.) 15 2 1. Proper Media was obligated to pay Bardav sums owed under the GSA within forty- 16 five (45) days of the end of each month, regardless of whether Proper Media had received payment 17 from the advertisers: 18 4.3. Payment to Publisher: Regardless of whether the Agent has been paid by all Advertisers, the Agent shall pay Publisher the Net Revenue for each month no later than forty-five (45) days from the end of the month for which advertising was run on the Website provided that that the 45th day falls on a weekday and, if it falls on a weekend, the next business day. Publisher is responsible for all sales taxes, use taxes and any other similar taxes imposed by any federal, state or local governmental entity on the transactions contemplated by this Agreement, excluding taxes based upon Agent's net income. 19 20 21 22 23 (Exhibit A, § 4.3, p. 3.) 24 22. Proper Media was contractually obligated to invoice and collect all advertising 25 revenue for the Snopes.com website: "Agent's Obligations: Agent shall invoice and collect all 26 advertising revenue from Advertisers for content sold by Agent for placement on the Website." 27 (Exhibit A, § 4.1 , p. 3.) 28 6 CROSS-COM PLAINT DOCS 125263-00000 112926753.S 23. Notably, the GSA did not require or enable Proper Media to host the Snopes.com 2 website or to control its hosting. Rather, the GSA provides that "[Proper Media] shall consolidate 3 [Bardav's] existing server configuration to use load-balanced Linux servers paired with a MySQL 4 database server and a content delivery network[,]" without granting Proper Media ownership or 5 control over those servers. 6 Snopes.com website remained within Bardav' s sole ultimate discretion. At all relevant times, the decision of how and where to host the 7 The Stock Purchase Agreement 8 24. 9 In 2015, David and Barbara Mikkelson divorced, after which each retained an independent fifty percent (50%) ownership interest in Bardav. 25. 10 On or about July 1, 2016, pursuant to a written Stock Purchase Agreement (the 11 "SPA"), Barbara Mikkelson sold her 50% ownership interest in Bardav to Schoentrup, Richmond, 12 and non-parties Tyler Dunn, Vincent Green, and Ryan Miller, in the following percentages: 13 Purchase Percentage Name 40% Drew Schoentrup: 40% Christopher Richmond : 6.68% Tyler Dunn: 6.66% Vincent Green: Ryan Miller: 6.66% 14 15 1 Overall Ownership in Bardav 20% 20% 3.34% 3.33% 3.33% 16 26. 17 Under the SPA, the shares were sold to, and held by, the above-identified persons in 18 their individual capacity. The SPA makes no mention of any of these parties holding their shares 19 for the "benefit" of Proper Media. 27. 20 Likewise, the SPA does not provide that any of these acqumng individuals, 21 including Schoentrup, would obtain a position on Bardav's board of directors. The SPA was not 22 accompanied by any corporate resolution appointing Schoentrup or any of the other purchasers to 23 Bardav's board of directors. 28. 24 Importantly, the SPA contains an express integration provision, confirming that it 25 represents the entirety of the agreement reached with respect to the acquisition and ownership of 26 these shares. 27 28 1 The SPA contains a confidentiality provision and therefore Bardav is not attaching a copy to this public document. 7 CROSS-COMPLAINT DOCS 125263-00000 1/2926753.S 29. As a result of Bardav's S-Corp status, its shares cannot be held by companies but 2 must instead be held by individuals. Consistent therewith, the Bardav ownership interest sold by 3 Ms. Mikkelson was purchased by, and continues to be held by, Messrs. Schoentrup, Richmond, 4 Dunn, Green, and Miller in their individual capacity, and not for the benefit of any company, such 5 as Proper Media. 6 Proper Media Fails to Perform Under the GSA, is Terminated and Then Holds the 7 Snopes.com Website and Other Assets Hostage 8 30. 9 During the one-year term of the GSA, Proper Media repeatedly failed to remit timely payments that were owed to Bardav. Further, over time, Proper Media stopped performing 1O certain functions under the GSA and generally failed to perform at a sufficiently high level. 11 Further, Bardav concluded that it no longer made sense to allow Proper Media to siphon off large 12 sums of advertising revenue from Snopes.com when Proper Media was not providing value 13 commensurate with its compensation, and when Bardav could obtain the services it needed from 14 other vendors at significantly lower cost. 15 31. As noted above, the GSA's express language granted Bardav the right to terminate 16 the GSA at any time, with or without cause, on sixty (60) days' notice. On or about March 9, 17 2017, Bardav gave Proper Media written notification that it was terminating the GSA pursuant to 18 the Term & Renewal Section of the GSA, such that the GSA would terminate in sixty (60) days 19 (i.e., on May 7, 2017), unless otherwise terminated earlier for cause. The notice was sent by 20 Bardav's director and President, Mr. Mikkelson. 21 32. Despite holding no ownership interest in Bardav, Proper Media has recently held 22 itself out as "the beneficial owner of 50% of the shares in Bardav." Presumably based on this false 23 assertion, Proper Media has improperly attempted to exercise rights of a Bardav shareholder, 24 including attempting to call a special meeting, attempting to appoint directors, and attempting to 25 inspect corporate records. 26 33. Despite no corporate resolution appointing him to Bardav's board of directors, 27 Schoentrup has held himself out as a Bardav board member. Presumably based on this false 28 assertion, Schoentrup has improperly attempted to exercise rights of a Bardav director, including 8 CROSS-COM PL.A INT DOCS 125263-00000112926753.5 attempting to call a special meeting, attempting to appoint directors, attempting to manage business 2 3 decisions, and attempting to inspect corporate records. 34. On or about May I 9, 20I 7, Bardav made a written demand upon Proper Media for 4 certain information and data relating to Bardav and the Snopes.com website, of which Bardav is 5 the legal owner, but is presently in Proper Media's possession, custody, or control. 6 emphasized the time-sensitive nature of this demand and requested compliance by the close of 7 business on May 22, 20 I 7. 8 9 35. Cross-Defendants failed and refused to comply with Bardav's written demand, and are instead holding hostage the requested information and data belonging to Bardav. 10 FIRST CAUSE OF ACTION II (Breach of Contract against Proper Media and Roes 1 through 30) I2 13 14 Bardav 36. Cross-Complainant incorporates by reference each and every allegation contained in each paragraph above and below as though the same were set forth in full herein. 37. On or about August 11, 2015, Bardav, Proper Media, and Roes I through 30 entered 15 into a written General Service Agreement (the GSA), under which Proper Media and Roes 1 16 through 30 agreed to provide certain content and website development and maintenance services to 17 Bardav for the Snopes.com website, during the term of the agreement. (See Exhibit A.) 18 38. Bardav has fully performed all conditions, covenants, and promises required on its 19 part to be performed in accordance with the GSA, except as prevented and/or excused by Proper 20 Media and/or Roes 1 through 30. 21 39. By entering into the GSA, Proper Media and Roes 1 through 30 expressly agreed to . 22 abide by the terms of those agreements with Bardav. 23 materially breached the GSA by, among other things: Proper Media and Roes 1 through 30 have 24 a. failing to make payments of revenues owed to Bardav under the GSA; 25 b. failing to provide trafficking and reporting to Bardav; and 26 c. failing to perform in other ways that may be revealed m the course of 27 discovery. 28 9 CROSS-COMPLAINT DOCS 125263-00000112926753.5 40. 2 As a direct and proximate result of these breaches of the GSA by Proper Media and Roes 1 through 30, Bardav has suffered damage, plus interest thereon, according to proof at trial. 3 SECOND CAUSE OF ACTION 4 (Breach of the Implied Covenant of Good Faith and Fair Dealing 5 against Proper Media and Roes 1 through 30) 41. 6 7 each paragraph above and below as though the same were set forth in full herein. 42. 8 9 Cross-Complainant incorporates by reference each and every allegation contained in On or about August 11 , 2015, Bardav, Proper Media, and Roes 1 through 30 entered into a -wTitten General Service Agreement (the GSA), under which Proper Media and Roes 1 1O through 30 agreed to provide certain content and website development and maintenance services to 11 Bardav for the Snopes.com website, during the term of the agreement. (See Exhibit A.) 43. 12 Bardav has fully performed all conditions, covenants, and promises required on its 13 part to be performed in accordance with the GSA, except as prevented and/or excused by Proper 14 Media and/or Roes 1 through 30. 44. 15 16 During the course of the term of the GSA, Proper Media and Roes 1 through 30 unfairly interfered with Bardav's right to receive the benefits of the GSA by, among other things: a. 17 failing and refusing to provide Bardav with information concerning the 18 Snopes.com website and infrastructure, of which Bardav is the legal owner as recognized under the 19 GSA; 20 21 22 23 24 b. failing and refusing to provide Bardav with a copy of the codebase for the Snopes.com website, of which Bardav is the legal owner as recognized under the GSA; c. failing and refusing to provide Bardav with access to the repositories for the Snopes.com website, of which Bardav is the legal owner as recognized under the GSA; d. failing and refusing to provide Bardav with access to all Bardav's electronic 25 communications as well as data for the Snopes.com website, of which Bardav is the legal owner as 26 recognized under the GSA; and 27 e. 28 failing and refusing to cooperate with the transition of the Snopes.com website and other backend functions to another service provider. 10 CROSS-COMPLAINT DOCS 125263-00000 I/2926753.5 45. 2 The acts alleged herein constitute a breach of the GSA's implied covenant of good faith and fair dealing in that they interfered with Bardav's right to receive the benefits of the GSA. 46. 3 As a direct and proximate result of Proper Media's and Roes I through 30's 4 breaches of the implied covenant of good faith and fair dealing in the GSA, Bardav has suffered 5 damage, plus interest thereon, according to proof at trial. 6 THIRD CAUSE OF ACTION 7 (Accounting against Proper Media and Roes 1 through 30) 47. 8 9 Cross-Complainant incorporates by reference each and every allegation contained in each paragraph above and below as though the same were set forth in full herein. 48. 10 On or about August 11, 2015, Bardav, Proper Media, and Roes 1 through 30 entered 11 into a written General Service Agreement (the GSA), under which Proper Media and Roes 1 12 through 30 agreed to provide certain content and website development and maintenance services to 13 Bardav for the Snopes.com website, during the term of the agreement. (See Exhibit A.) 49. 14 Proper Media's and Roes 1 through 30's obligations under the GSA include paying 15 Net Revenues to Bardav generated by advertisement revenue invoiced, or to be invoiced, by Proper 16 Media and Roes 1 through 30 for the Snopes.com website during the term of the GSA. 50. 17 18 Under the GSA, Proper Media and Roes 1 through 30 are obligated to provide trafficking and reporting to Bardav regarding all advertising placed on the Snopes.com website. 51. 19 Under the GSA, Proper Media and Roes 1 through 30 are obligated to invoice and 20 collect all advertising revenue from advertisers for content sold by Proper Media for placement on 21 the 22 23 24 Snopes.c~m 52. website. Proper Media and Roes 1 through 30 have failed to pay Bardav net revenues owed to it for advertisements invoiced, or to be invoiced, for placement on the Snopes.com website. 53. The amount of money due from Proper Media and Roes 1 through 30 to Bardav for 25 net revenues is unknown to Bardav and cannot be ascertained without an accounting of Proper 26 Media's and Roes 1 through 30's books, records, contracts, and financials. 27 28 11 CROSS-COMPLAINT DOCS 125263-00000112926753.5 1 54. Proper Media and Roes 1 through 30 have failed to tender an appropriate accounting 2 of the aforementioned monies invoiced or to be invoiced, thereby entitling Bardav to equitable 3 relief in the form of an accounting of all amounts owing under the GSA. 4 FOURTH CAUSE OF ACTION 5 (Violation of California Business & Professions Code § 17200 et seq. 6 against all Cross-Defendants) 7 8 9 55. Cross-Complainant incorporates by reference each and every allegation contained in each paragraph above and below as though the same were set forth in full herein. 56. Cross-Defendants' conduct was and is unlawful, unfair, and fraudulent, constituting 1O unfair competition and unfair business practices under California Business and Professions Code 11 sections 17200 et seq. 12 revenues intended for Bardav in their possession; refusing to use commercially reasonable efforts 13 to obtain payments from advertisers that are owed to Bardav; holding hostage the Snopes.com 14 website, infrastructure information and files for which Bardav is the legal owner; and other acts 15 and omissions as set forth herein. This unlawful, unfair, and fraudulent conduct constitutes unfair 16 competition and unlawful business practices relative to Bardav as well as others in the industry. 17 Among other things, the acts alleged herein have effectively prevented Bardav from doing business 18 with competitors of Proper Media, and the efforts of Mr. Schoentrup to try to paralyze Bardav 19 appear designed to prevent Bardav from doing business with Proper Media's competitors and to 20 discourage those competitors from doing business with Bardav. 21 22 23 57. Cross-Defendants' acts include, without limitation, refusing the remit As a result of their conduct, Cross-Defendants have been unjustly enriched in an amount subject to proof at trial, and Bardav is entitled to restitution and disgorgement remedies. 58. Bardav is entitled to injunctive relief and other equitable remedies. Bardav has 24 suffered irreparable harm as a result of Cross-Defendants' activities and will continue to suffer 25 irreparable injury that cannot be adequately remedied at law unless and until enjoined and 26 restrained by this Court. 27 28 12 C ROSS-COMP LAINT DOCS 125263-00000 1/2926753.5 l FIFTH CAUSE OF ACTION 2 (Declaratory Relief against a1J Cross-Defendants) 3 4 5 6 7 8 59. each paragraph above and below as though the same were set forth in full herein. 60. 61. a. b. Proper Media is not entitled to withhold the codebase for the Snopes.com website from Bardav; c. Proper Media is not entitled to withhold access to the Snopes.com website domain and repositories from Bardav; d. 15 16 Proper Media is not entitled to withhold infrastructure information regarding the Snopes.com website from Bardav; 13 14 Bardav desires a judicial determination of the parties' rights and duties concerning Bardav and the Snopes.com website, including a declaration that: 11 12 A dispute has arisen between the parties with respect to Cross-Defendants' alleged ownership interests in Bardav and the Snopes.com website, and rights attendant thereto. 9 IO Cross-Complainant incorporates by reference each and every allegation contained in Proper Media is not entitled to withhold access to Bardav's email, Slack communications, and Asana project management data messages from Bardav; 17 e. The GSA was terminated effective of May 7, 2017; 18 f. Proper Media does not possess an ownership interest in Bardav; 19 g. Schoentrup owns a twenty percent (20%) interest in Bardav in his individual 20 capacity, and not for the benefit of Proper Media; 21 h. Schoentrup does not hold a position on Bardav's board of directors; and 22 1. The decision of how and where to host the Snopes.com website is within 23 Bardav's sole discretion. PRAYER FOR RELIEF 24 25 WHEREFORE, Cross-Complainant prays for judgment as follows : 26 I. For actual damages according to proof; 27 2. For special damages according to proof; 28 3. For consequential damages according to proof; 13 CROSS-COMPLAINT DOCS 125263-000001 /2926753.5 4. For an accounting to determine, inter alia, advertising revenues invoiced or to be 2 invoiced to advertisers during the term of the GSA and revenues owed to Bardav 3 under the GSA; 4 5. For restitution and/or disgorgement of ill-gotten gains; 5 6. For injunctive relief enjoining Cross-Defendants from engaging in acts of unfair competition and unlawful business practices; 6 7. 7 For a judicial declaration that: a. 8 Proper Media is not entitled to withhold infrastructure information regarding the Snopes.com website from Bardav; 9 b. 10 Proper Media is not entitled to withhold the codebase for the Snopes.com website from Bardav; 11 c. 12 Proper Media is not entitled to withhold access to the Snopes.com website domain and repositories from Bardav; 13 d. 14 Proper Media is not entitled to withhold access to Bardav's email, Slack 15 communications, and Asana project management data messages from 16 Bard av; 17 e. The GSA was terminated effective of May 7, 2017; 18 f. Proper Media does not possess an ownership interest in Bardav; 19 g. Schoentrup owns a twenty percent (20%) interest in Bardav in his individual capacity, and not for the benefit of Proper Media; 20 21 h. Schoentrup does not hold a position on Bardav's board of directors; and 22 1. The decision of how and where to host the Snopes.com website is within Bardav's sole discretion. 23 8. 24 For interest at the maximum legally permissible rate from the date of the initial breach(es); 25 26 I II 27 II I 28 14 CROSS-COMPLAINT DOCS 125263--000001/2926753 5 2 9. For costs of suit incurred herein; and 10. For such other and further relief as the Court deems just and proper. 3 4 DATED: June 7 , 20 17 PROCOPIO, CORY, HARGREAVES & SAVITCH LLP 5 ,,-:;) 6 By: 7 Paul A. ell Ryan C. Caplan Attorneys for Defendant/Cross-Complainant, BARDJ\V INC 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15 CROSS-COMPLAINT DOCS 125263-00000112926753.5 EXHIBIT A GEN ERAL SERVICES Publis her ; Bardav, Inc., (Snopes) AGREE ~ ENT Jurisdiction of O rga n ization: URL of Publisher: www.snopes.com City: Address: I Zip: Country: State: I Phone: I Contact Person: David Mikkelson Phone: E-mail : Agent: Proper Media, LLC Jurisdiction of O rgani zation: Californ ia Addre ss: 41 55 Mission Blvd . City: San Diego Country: USA I Zip: 921 09 Phone: (509) 995-5654 State: CA ' -- Contact Person: Drew Schocntrup Phone: (509) 995-5654 E-mail: drew@proper. io WtiEREAS, The Publisher is the owner and/or operator of Snopes.com (the "Website"); and WHEREAS, The Publisher wish es to retai n the Agent to provide content and website development services as well as advertising sa les and trafficking, as set forth in t his Agreement (the "Agreement"). NOW, TH EREFORE , in consideration of the mutual promises contained herein, and for other good and valuable consid eration, the receipt and sufficiency of which are hereby acknowledged, the Agent and the Publish er (each a "Party" and, collectively, the " Parties"), intending to be legally bound, do hereby agree as follows: Effective Date: August 11, 2015 "Term" m eans the period com mencing upon the effective date and ending upon the termination of t his agreeme nt in accordance with Section 7. CO NFIDENTI AL PROP2 R In con sideration of t he t erms and conditions set forth herein, the Parties hereby agree as follows: 1. W e bsite Cont ent Ll. Staff: At Publ'-" ;r's d•--·- t ion, Agent shall recruit , train and m1nage a staff of w riters, rc~"'"' 'Che rs, and editors ( collectivel y_,.,~ ·· s taff") , all of whom shall be employ"'"'~ or independen t contractors of Agen t , not of Publi,..i...;r, for t h e p:_irpose of generating high quality, relevan t articl es (" Content" ) and publishing sv-"' Comcnr to th e Website . It is anticipa ted t hat the Content will include news related to currcrH even ts as w ell as research and fact checks related to rumor'> and myths, both vira l an d historical. 1.2. Edi· r~· a l Guidelines : P;;bliShN and Agent shall work t ogether to e ... blish editorial guidelines fo r th e Content . Agent w ill be -""'")On sible to cr.'orc e th c<;c guidel ines t hrough the Content Manag 0:o: ~nt System described in Secti on 2.1. and ma nrr ~ "·; t of the s· ~ f:. 1.3. Dispu tes : In the event a dispu te a rirr; between Publisher and Agent regardi ng the Staff. Content or Editorial Guidelines, Publisher will retain sole discretion on how t o r<>c;0lve such a dispu te. 2. Infra <;tructu re 2.1. Content Man2-;-"T'"'lt: Agent sh all extend Publisher's existing WordPrrc; c; Content Management System. incorporating plugins and tools as necessa ry, to support and en hance the Stt:ff'<; ability to develop an d publish C0n· --it. 2 . 2 . Design : The Webs;tr "; cu -rent design soans a number of pDge ;rm pl atcs and th emes A ~0 -it shall design a mobile -first re spo..,sive, un:fied theme and redeveiop the variou s templ ates to confc -~ to t his t h eme . Pu b :;;:·,.~r w ill · M1 !n cor, ·-~• over ~he finJ I theme and t•:m p • ·· ~ s t :-; be used on the live v.: ~; 'Jn of the Website. 2.J. Serv"'s: Agent shall con solidate Publisher's e xisting server con fig uration to use load -balanced Lin ux servers paired with a MySQL database scr\.'er an d a content delivp···,1 net111 r -~: . It Is en visioned thrit the consolidation will ir---· 1sc the sr~cd , redu ndancy, an d efficiency of the Websi te, while <1t th e same time lowerin g the cc ··,,-;ponding serve r re lated exp enses. Fu -· ... '!r, Agent shall be responsible to maint ain th e servers described herein and to make all reasonable ·"· ·t s to m <>rl. and efficiency for the Website. 2.4. Q(')rr,1ins : The Website currently soans rr. L1ltiple domains, including sr.ooes com, m.sn opes.com and new.sn opes .com . Utilizing practices rhat will preserve existing Ser ···'- Engine Optimi1m ion and link struct ures, Agent sh all rr:·~ rge ail :1('} rna in 5 r ·- ,.ci;i ~ ,., 1 wit h rhe Websit e to r: - 1pes c:-: -n. Additionally, Agen t shal l migra te ... :i ·d ·codcd r: ~·e n t Cl: "· ~.,t~ y associat ed with these doma'n<; to .... ~ Content Managemt'-,r Sys tem dc<,r--'bed 1n Secrion 2, 1. 3. Adve r frrn m ents 3 . 1. Representation: Agent shall represen t Publisher with respect t o the placement of advertisements on t he Publisher's Website, including without lim itation, bann er and video advertisem ents, "native" and incontent ads, t he solicitation of Website adv erti sing purcha ses directly from Advertisers (including Exchanges, Agencies, Demand Side Partners, Bran ds, etc.) for placement on the Website, and the re porting of th e resu lts th erefrom to Advert isers and the Publisher . In conn ection with the foregoing, Agent shall provide trafficking and r eporting to Publisher . 3.2 Online Tracking System: Agent shall maintain an online tracking system, which, among other thin gs, identifi es the revenue earned, impressions served, and average CPM on a daily basis. Agent shall use its b est efforts to ensure that the information in its online t racking system is accurate. 3.3 License Gran t : Publisher h ereby grants Agent the prima ry exclu sive right to sell and ma rk et all advertisements on the Website during the t erm of this agreement. Publisher maintains t he right to refu se to run any ad type or placemenr. 3.4, Placement an d Management: Agen t shall place and manage all advertisements t hrough its ad-server and will be responsible for al l aspects of ensuring ad vertisement s are served properly, on t ime, and appropriately ta rg eted. · CONFIDENTIAL PROPJ.:R 3 .5. Agent Commission Ra t e: The Agent shall pay to Publisher all amounts invoiced or to be in voiced by the Agent to advertisers for advertising placed on the Websi te up to $85, 000 per mon th (the "Baseline") and fifty (50) percent of all am ount s above the Baseline, calculated on a monthly basis ("Net Revenue"). 3.6. ComScore Assignment: Publisher shall sign the Tra ffi c Assignment Request for Com Score Inc. Reporting which is attached hereto as Exhibit "A." 3 .7. Other t han t he commissions in this Section, and the expense reimburs em ents in Sect ion 5, Agent shall not be entitl ed to any fi xed compensa t ion for its serv ices. 4 . Billing & Payr:nent 4. 1. Agent' s Obligations : Agen t shall invoice and collect all advert ising revenue from Adv ertisers for content sold by Agent for placement on the Website. 4 .2. Collections : Advertisers. A ge~ t will use commerciall y reasonable efforts to collect any mon ies owed to Agen t by 4.3 . Paymen t to Publisher: Regardless of whether the Agent has been paid by all Advertisers, the Agent shalt pay Publisher the Net Revenu e for each m onth no later than forty -five (45) days from th e end of the month for which adverti sing was r un on the Website provided that that th e 4 5th day falls on a weekday and, if it falls on a weekend, the next business day. Publisher is responsible for all sales taxes, use ta xes and any other sim ilar ta xes imposed by any federal, state or local governmental entity on t he transactions contemplated by this Agreement, excluding taxes based upon Agent's net income . 4.4. Revenue Derived by Fraud: Agent shall not be liable for any paymen t based on (a ) any fra udulent impressions gene rated by any person, bot, automated program or sim ilar device or for fraudulent clicks similarly generated on any ad, as reasonably determ ined by Agent; (b) ads delivered to end users wh ose browsers have the ads disabled; (c) or impressions co-mingled with a significant number of fra udulent impressions or frau dulent clicks described in (a) above, or as a result of other breach of this Ag reemen t by Publisher for an y applica ble pa y period. Agent reserves the right to withhold in th e event of any breach of this Agreemen t. 5. Additiona l ExpC'n<;e'> Pu bl' ~ '-~r·s Expenses: 5.1. Staff: Expenses paid d irectly to t he Staff described in Section 1.1. Agent sha ll be responsible for making such pay m ents to the Staff and deduct ing t his amount from t he Net Re venue. 5.2 . In frastruct ure : A S2 .500 monthly fee for t he In frast ru ct ure described in Section 2. 5.3 . Budget : Agent shall provide to Publisher a m on t hly budget of all expenses for Publisher's pri or approval and shall not exceed this budget by m ore than 10% withou t express written approval of Publisher . Agent's Expenses : 5.4 Agent shall be responsible to pay for all expenses incurred from the Infrastructure described in Section 2 in excess of Publisher' s fee set forth in Section 5.2, including expenses for Servers and expenses incurred as a result o f hiring third-party independent contractors for website related development. 6. Marketing/Public Re lations 6 . 1. Agent may refer t o the Publisher and t he Website in Agent's cor porat e web site, press relea ses and m ar keting collatera l . CONFIDENTIAL PROPl:R 7. Te rm & Renewal 7.1. Term : This Agreement shall remai n in effect for a p eriod of one (1) year from the date hereof (the "Initial Term") . Either party may terminate th is Agreement by providing the other party with sixty (60) days written notice, with or without cause, prior to the expiration of the Initial Term . Unless pre viously t erm inated by notice as provided above, at the en d of the Initial Term this Agreement shall renew for additional on e ( 1) m onth terms (each a "Renewal Term") unless and until either party provides the other party with written notice of termi nation, with or with out cau se, at least sixty (60) days prior to renewal. 7 .2. Termi nation by Publisher: Publisher may terminate this Agreement by written notice to Agent if any of the follow events occur: (i) Agent fai ls to pay any amount due to Publisher within ten ( 10) days after Publisher gives Agent w ritte n notice of such nonpayment; or (ii) Agent is in materi al breach of any term, condition, or provision of this Agreem ent and su ch breach is not cured within ten ( 10) days after Publisher gives Agent notice of such breach . 7 .3. Term ination by Agent: Agen t may terminate th is Agreement by written notice to Publisher if any of the follow even ts occur : (i) Publisher is in material breach of any term, condition, or provi sion of this Agreement and su ch bre ach is not cured within ten ( 10) days after Agent gives Publisher notice of such breach. 8. Right of Fir.;t Re f u sa l 8.1. Agi;:i~ is herebv gran te d a r'-"lt o ff• -~ · refusal to purchase all or a port ion oft'--;: Website for t he same price and on the sam e rr -- -: and conditions as Publisr"r is prepa red to arrcpt fro m a third 110r.y buyer :it any time dur i-ri th e during the 1nitial Tf'-- or a Renewal Tc ··- of this Ag rr-,..,m ent . Publ:-.her shall notify Agent of t he receipt of an o ffer to purr'- 1<;e t he Website that Publisher is prepare d to accept, prior to ;- --,...;, r ·- ;i the r.ilmr.., and Agent shal l have th irt y (30) days zi fter receipt th ereof to not ify Publ'shcr t h at Agent elects to cx --- i$C 'r<> ri gh t off ·-- refusal and p~: -, "' asc the W eb~" · ' on st:rh t.- -- -; and cond it ions. 9. Representations, Warranties and Covenants 9.1 . The Publisher hereby represents, warra nts and coven ants t hat : (i) all of the information provided by Publisher to enter into t his Agreement is correct and current ; (ii) Publisher is the owner of th e Website or legally authorized to act on behalf of the owner of such Website for the purposes of this Agreement ; (iii } use of the Web site by Agent or any of Agent's Advertisers will not infringe upon any third party intellectual property righ ts, including, without limitation, United States or foreign trademarks, pa tents, copyrights, rights of publicity, moral rights, music performance or o t her music-related rights, or any other th ird-party right; (iv) the Website does not and will not contain any content which violates any applicable law or regu lation, and (v) Publisher has a ll necessary rights and authority to enter into th is Agreement and place advertising, and authorize the placement of ad vertising on the Website. 10. Indemnification 10.1. Each Party and its successors and assigns sha!I indemnify, defend, and hold harmless the other Party, its affiliated companies, and their successors and assigns from and against any an d all : deman ds, judgments, losses, costs, expenses (including, but not limited to, the cost of obtaining an opinion of cou nsel in ~es pon s e to a notice of potential infringement of the righ ts of any other person or organizat ion), obligations, liabilities, damages, fi nes, recoveries and deficiencies , including without lim itation interest , penalties, reasonable attorneys' fees and costs (collectively, "Losses") In connection with a cl aim, action, suit or proceeding m ade, brought or commenced by a t hird pa rty other than an affil iated company of the indemnified Party (each, a "Claim"), tha t any such party may incur or suffer, which arise, resu lt from, or relate to the breach by the indem nifying Party of any of its representations, warranties or cov enants set forth in t his Agreement. CONFIDENTl/\L 11. Liability 11. l. No Liability. AGENT JS NOT AND SH ALL NOT BE LIABLE FOR THE CONTENT OF THE ADVERTI SI NG SUPPLI ED BY ADVERTISERS. AGENT MAKES NO WARRANTY OF AN Y KIND WITH RESPECT TO THE SERVICES PROVIDED UNDER THI S AGREEMENT, WH ETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE INCLUDI NG WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABI LITY, FITNESS FOR A PARTICULAR PU RPOSE, AND NONINFRI NGEMENT. 12. Gener al 12 . 1. Waiver: Failure by either Party to en fo rce an y provision of t his Agreement shall not b e deemed a waiv er of futu re enforcement o f that or any other provision. Any waiver, am endment or other modification of any provision of t his Agreement shall be effective only if in writing and sign ed by the Parties. Fa ilure by eith er Party to en force an y provis ion of thi s Agreemen t shall be effective only if in writing and signed by both Parties. 12.2. Severability: If an y provision of t his Agree ment is held by fin al j udgm ent o f a court of compe ten t jurisdiction to be invalid, illegal or unenforcea ble, such invalid , illegal or unen forceable provision sh all be severed from the rem ainder of t his Agreement, and the rem ainder of t his Agreemen t Sha.II be en force d unless the severance o f the unen forceable pro vision re nders th e agreem ent commercially unreasonable for eith er party . 12.3. Bindin g Effect . This a --n,,m cnt inures to t he ber- "· of and is binding upon rh e p;''"t'cs . th eir respect ive succe, - .. -s in int.::rest anc t'" e1r assigns by way of m l"'-'i''!r, s;ile, ncquisit1 on, transfer of substantially all o f th e transferrin g part y's assets, st ock or bu siness, including the Website. 12 .4. Choice of La w : This A ,:ir.~-~1111 -· is governed by t ... c lav" s of the S'.:i' c of Califr --' :i . 12 .5. Ent ire Agreement: This is th e en tire agreem ent of the parties relati ng to t his subject and it supersedes all o t her com m itm ents, n egotiat ions and understandings . CONFIDE NT IAL PROPl:R Bardav, Inc. P rin t Name and Title: Date: P rint Na me an d Title: Date: Sy : Pro r>N Media, LLC: I / ( By: w-•'/' • I ;/ •I I - - -· • ,, • _(/_ ('.!/ t. "" h-< r CON FIDEN TIAL I I c..v-iv; --..: ur f. .. _J __ Ex hibit A Traffic Assignment Request for comScore, Inc., Reporting l, David Mikkelson, Owner of Bardav, Inc. ("Bardav"), certi fy that Bardav is the majority owner of www.snopcs.com and enjoys a legitim ate business relationship with Proper Media, LLC, justify ing the aggregation of this traffic, and requ ests assignment of the t raffic to t hese URLs from Bardav to Proper Media, LLC in the comScore Inc. syndicated audience m easurement reports. In requ esting this assignment, I understand that Bardav will not rece ive credi t for t raffic to t hese URLs in the syndicated audience reports for those ent it ies where Prope r Media, LLC elects to include th ese URLs . These URLs may not be ilSSigned to any other company during the term of t he Agreement between Bardav and Proper Media, LLC. In the event that comScore Inc. receives mu ltiple reque sts for assig nment of the same URL, com Score Inc. will review and honor the req uest m ost recently received. l understand that this request is subject to review by comScore Inc. to determ ine that t he assignmen t of traffic is con sistent with comScore Inc. repo rting r ules . comScore Inc. retain s th e rig h t in its sole discreti on to refuse the req uested assignment if such assignment would in fact be inconsisten t with comScore Inc. report ing rul es. ff necessary, comScore Inc. may require additional documentation to verify ownership of the URLs before granting t his request. For example, if Bardav is not the named registrant of the URLs liste d below, Bardav must provide docum entation demonstrating that t he registrant of th ose URLs is (1) owned or ( 2 ) employed by Bardav. I understand that acceptance of this letter by comScore Inc. imposes no legal liability whatsoever on comScore Inc. for damages, whet'ier actual, incid ental or consequential, relating to the maintenance or reporting of the attached URLs. I understand that Bardav is fully responsible for timely notification to comScore Inc. of any upda cs to the list below, including, but not limited to, changes in ownership of any of those URLs. www .snopes.com Signature Name Title Company Date CO NFIDENTIAL