California First LLC v. DGS

1 Stuart A. Liner, Esq.
(SBN: 137495)
sliner@linerlaw.com
2 Angela C. Agrusa, Esq. (SBN: 131337)
aagrusa@linerlaw.com
3 Kim Zeldin, Esq. (SBN: 135780)
kzeldin(ti!linerlaw .com
4 LINER GRODE STEIN Y ANKELEVITZ
SUNSHINE REGENSTREIF & TAYLOR LLP
5 llOOGiendonAvenue, 14thFloor
Los Angeles, California 90024-3503
6 Telephone: (310) 500-3500
Facsimile: (310) 500-3501
7
Attorneys for Plaintiff
8 CALIFORNIA FIRST, LP
APR 2 3 7-013
CLERK OF THE COURT
BY: CAROLYN BALISTRERI
Deputy Clerk
9
10
11
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
12 CALIFORNIA FIRST, LP, a Delaware Limited )
13
Partnership, \)
Plaintiff,
14 vs. )
15 CALIFORNIA DEPARTMENT OF GENERAL )l
SERVICES; SCOTT HARVEY, in his capacity
16 as Acting Director of the )
of General Services; and DOES !:through 50, ))
17 inclusive, -
18 Defendants.
19
20
21
l
l
)
)
)
l

23
24
25
26
27
28
\ !
Case No. CGCI0-505436
SECOND AMENDED COMPLAINT
FOR:
1) SPECIFIC PERFORMANCE OF
CONTRACTFORSALEOFREAL
PROPERTY;
2) BREACH OF CONTRACT;
3) BREACH OF COVENANT OF GOOD
FAITH AND FAIR DEALING;
4) BREACH OF CONTRACT
MODIFIED BY CONDUCT;
5) BREACH OF IMPLIED CONTRACT;
6) BREACH OF COVENANT OF GOOD
FAITH AND FAIR DEALING
(MODIFIED AND/OR IMPLIED
CONTRACT)
Date Action Filed: November 16, 2010
3ssJ11ao1r 1oi1sos
1
2 1.
INTRODUCTION
In the face of what is considered to be the worst financial crisis this state has ever
3 experienced, the California Legislature authorized the state of California's Department of General
4 Services ("DGS") to sell eleven state-owned properties to help reduce California's ballooning
5 budget shortfall, currently estimated at over $25 billion. Following an extensive bidding process
6 spanning several months involving over 300 bidders, in late 2010, while Governor Schwarzenegger
7 was in office, DGS entered into a binding, written 31-page fully-executed contract with California
8 First, LP ("California First") to sell the eleven properties for the undisputed fair market price of
9 $2.33 billion and lease them back to the state. In its contract, the state expressly agreed that if it
10 "fails to consummate the transaction contemplated by this Agreement" for any reason, California
11 First, LP will be entitled to express legal remedies, including specific performance. The contract
12 sets forth a 30-day time period in which such suit would have to be filed. For months following
13 entering into the contract, DGS and the state, both under the Schwarzenegger administration and
14 later under the newly elected Governor Brown administration, repeatedly affirmed the binding
15 nature of the contract in legal filings, the media and communications with California First, LP and,
16 in response to these affirmations, the purchaser made a $55,000,000 cash deposit for the sale and
17 continued to incur expenses and other obligations associated with the expected closing of the
18 transaction. The state admits that it had "express contractual obligations" requiring it to
19 consummate the contract. Yet, on February 9, 2011, in a sudden and unprovoked turn of position,
20 Governor Brown announced via a televised press conference that the state would not go through
21 with the contract and even went so far as to the declare the contract "dead." No matter what
22 political motivations inspired Governor Brown to repudiate the contract, a deal is a deal and
23 Defendants bear the legal obligation to remediate the harm caused to California First, LP for their
24 breach.
25
26 2.
THE PARTIES
Plaintiff California First, LP ("Plaintiff' or "California First") is and, at all relevant
27 times herein, was a limited partnership organized and existing under the laws of Delaware and is
28 and was at all times mentioned herein qualified to do business in California.
1
SECOND AMENDED OM PLAINT
38831/001/1017505
1 3.
Plaintiff is informed and believes and therefore alleges that Defendant California
2 Department of General Services ("DGS") is and, at all relevant times herein, was a state department
3 which acts as the business manager for the state of California by providing services including
4 procurement and acquisition, real estate management, leasing and design services. (Gov. Code
5 14600 et seq.).
6 4.
Plaintiff is informed and believes and therefore alleges that Defendant Scott Harvey
7 ("Harvey") is the Acting Director of the California DGS and therefore the head of DGS. (Gov.
8 Code 14605). Plaintiff brings this action against Harvey in his official capacity. (DGS and
9 Harvey may be referred to collectively herein as "Defendants").
10 5.
Plaintiff does not know the true names and capacities of those defendants sued
11 herein as DOES 1 through 50, inclusive, and therefore sues these defendants by such fictitious
12 names. Plaintiff will amend this Complaint to allege their true names and capacities when such are
13 ascertained. Plaintiff is informed and believes, and on that basis alleges, that each of the
14 defendants sued herein as DOES 1 through 50, inclusive, are in some manner legally responsible
15 for the wrongful acts set forth herein.
16
17 6.
VENUE
A portion of the real property that is the subject of this action is located in the City
18 and County of Los Angeles, making the Superior Court of Los Angeles a proper court for the trial
19 of this matter (Cal. Code Civ. Proc. 392(a)(l)), specifically the real property at the following
20 addresses:
21 300 South Spring Street in the City and County of Los Angeles; and
22 320 West 4th Street in the City and County of Los Angeles.
23
FACTUAL ALLEGATIONS
24 A.
25
The Legislature Authorizes DGS to Sell Eleven State Buildings
7.
In 2009, in response to California's budget crisis, the Legislature and Governor
26 Schwarzenegger took decisive action. Chapter 20, Statutes of 2009 (AB 22), passed by the
27 Legislature in July 2009, authorized DGS to sell and lease back to the state eleven state properties.
28 See Gov't Code 14670.13. AB 22 was approved in the Senate on a 37 to 0 vote and in the
2
38831/001/ 1017505
1 Assembly by a margin of 76 to 3. The eleven properties include: (1) Attorney General Building,
2 1300 I Street, Sacramento, California; (2) Capital Area East End Complex, 1430 N. Street; 1500,
3 1501, 1615 and 1616 Capital Avenue, Sacramento, California; (3) Department of Justice Building,
4 4949 Broadway, Sacramento, California; (4) Franchise Tax Board Complex, 9645 Butterfield Way,
5 Sacramento, California; (5) California Emergency Management Agency Building, 3650 Schriever
6 Avenue, Sacramento, California; (6) Judge Joseph Rattigan Building, 50 D Street, Santa Rosa,
7 California; (7) Elihu Harris Building, 1515 Clay Street, Oakland, California; (8) Edmund G. Brown
8 Building (Public Utilities Commission), 505 Van Ness Avenue, San Francisco, California; (9) San
9 Francisco Civic Center, 350 McAllister Avenue and 455 Golden Gate Avenue, San Francisco,
10 California; (10) Junipero Serra State Building, 320 West Fourth Street, Los Angeles, California;
11 and (11) Ronald Reagan State Building, 300 South Spring Street, Los Angeles, California
12 (collectively referred to as the "Properties"). Governor Schwarzenegger signed AB 22 as urgency
13 legislation so that it became effective immediately.
14 8.
Government Code 14670.13 (AB 22) authorizes DGS to sell the Properties and
15 lease the buildings back from the new owners through long-term leases. The purpose of a sale-
16 leaseback, like the one authorized by AB 22, is to free up the original owner's equity while
17 allowing the owner to retain the use of the property. The leaseback component is essential to the
18 state since it will continue to need space in the buildings included in the sale.
19 9.
Government Code 14670.13 (AB 22) gives DGS broad discretion in determining
20 the terms and conditions of any transaction. Government Code 14670.13(a) provides:
21 "Notwithstanding any other law, but subject to the conditions specified in subdivision (c)
22 [providing that the proceeds of a sale will be used to defease or otherwise retire lease revenue
23 bonds on the real property and buildings at issue], the Department of General Services may enter
24 into a sale or long-term lease of the properties specified in subdivision (b). A sale or long-term
25 lease entered into pursuant to this section may include an option for the state to repurchase that
26 property or building, or both. The Director of General Services may determine the other terms and
27 conditions that shall be imposed upon that sale or lease, for the best interest of the state. Any sale
28 of property pursuant to this section shall be for no less than fair market value."
3
38831/001/ 1017505
1 10.
The Legislature also required that, thirty days prior to executing any sale or lease
2 agreement, the Director must report to the "chairs of the fiscal committees to the Legislature the
3 terms and conditions of the transaction, including, but not limited to, the financial terms," so that
4 the Legislature could exercise oversight of the transaction. See Gov't Code 14670.13(e). The
5 Legislature "can use this notification period to scrutinize the deal and stop the sale if it is
6 unfavorable to the state." See Legislative Analyst's Office Report dated April 27, 2010, p. 16.
7 B. DGS Exercises Its Authority to Select A Purchaser And Chooses California First
8 11.
To implement AB 22, DOS conducted a competitive process to select a nationally
9 recognized commercial real estate brokerage firm -- CB Richard Ellis ("CBRE") -- to assist with
10 the marketing of the Properties and to evaluate the purchase offers.
11 12.
In consultation with CBRE, a managed bid process was selected to achieve the
12 maximum price and provide the highest certainty of closure. Successive rounds of offers to reduce
13 the pool of bidders based upon price, ability to close and other factors were implemented. During
14 each successive round, prospective buyers conducted, reviewed, reconciled, addressed and/or
15 priced due diligence matters in their revised offers.
16 13.
Initial offers on the Properties were due April 14, 2010. CBRE's marketing effort
17 resulted in a total of 391 offers on the eleven properties from sixty-four entities. "The offers
18 included individually priced offers on each building; however, the most aggressive pricing came
19 largely from 30 offers for the entire portfolio. Portfolio buyers were given the opportunity to
20 submit a second round of offers on May 11. CBRE received 16 increased portfolio offers, 11 of
21 which exceeded the state's $2 billion estimate of the value of the properties. Those 11 bidders
22 were then invited to submit a 'best and final' offer by May 21." "State of California Selects Buyer
23 for State Buildings," California Department of General Services ("DOS") Press Release, October
24 11, 2010, p. 2, ii 3.
25 14.
From May 21 to October 11, 2011, DOS, in conjunction with CBRE, its broker,
26 evaluated the top offers. As reported by DOS in its October 11th press release: "This evaluation
27 included a comprehensive analysis of each of the 11 best and final offers which included separate
28 interviews with each finalist. Buyers were evaluated based on a reconciliation of two primary
4
SE ND AMENDED COMPLAINT
38831/001/ 1017505
1 factors -- price and certainty of execution. CB Richard Ellis investigated with DGS the bidder's
2 track record; and how much due diligence the bidder had done on the state properties prior to
3 making a buyer selection." As a result of the "lengthy" bidding process, DGS accepted California
4 First's offer of $2.33 billion for the Properties. Quoting from the state's Emergency Motion for
5 Relief From Stay; Memorandum; Order; Relief Requested by Monday December 20, 2010 at 12:00
6 Noon, filed in the Court of Appeal of the State of California, Sixth Appellate District, December
7 16, 2010, p. 3, ir 2.
8 15. On October 11, 2010, DGS announced it had selected California First as the buyer
9 for the Properties and issued an award letter to California First. In a press release issued on
10 October 11, DGS stated, in relevant part: "The winning offer was $2.33 billion -- resulting in more
11 than $1.2 billion for the state general fund, and $1. 09 billion to pay off bonds on the buildings.
12 Over the next 20 years, the state will lease the offices back from the new owner at predetermined
13 rates, and will no longer maintain, operate, or repair the buildings. All the leases with California
14 First allow the state to buy back any or all of the buildings at anytime during the 20-year term."
15 "State of California Selects Buyer for State Buildings," DGS Press Release, October 11, 2010, p.
16 1,ifl.
17 16. In the press release, then-Acting DGS Director Ron Diedrich stated: "After an
18 extensive review of the more than 300 bids that were received, I have determined that this offer
19 presents the best value for the state and achieves the goals set forth by the Legislature and
20 Governor." He further stated: "This sale will allow us to bring in desperately needed revenues and
21 free the state from the ongoing costs and risks of owning real estate." "State of California Selects
22 Buyer for State Buildings," DGS Press Release, October 11, 2010, p. 1, if 2.
23 17. On October 11, 2010, DGS reported to the Joint Legislative Budget Committee on
24 the terms and conditions of the proposed transaction with California First, including the financial
25 terms, as required by AB 22. In his letter to the Legislature, then-Acting DGS Director Ron
26 Diedrich shared the department's economic analysis of the sale comparing the status quo
27 ownership of the buildings to the sale and leaseback transaction. Using a series of reasonable and
28 prudent assumptions, the state's analysis showed that the sale would allow California to retire
5
38831/001/ 1017505
1 $1. 09 billion in bond debt, leaving over $1.2 billion in new revenues to shore up the state budget
2 and, as a result, would eliminate the need for more program cuts statewide or tax increases. The
3 state concluded that, by no longer owning the Properties, the state would eliminate annual
4 operating expenses. The state also concluded that in entering into the transaction, the state would
5 no longer have the responsibility for deferred and major capital improvements for each of the 11
6 properties, nor would it bear the obligation to pay for unforeseen and unpredictable repairs that are
7 inevitable due to the age of the buildings sold. DGS estimated the sale-leaseback would result in
8 $2 million of savings in the first 20 years. In essence, the state confirmed that the transaction
9 would result in an immediate infusion of revenue to meet the state's budget crisis and would save
10 the state money for years forward under the lease component of the transaction. DGS
11 Correspondence from Ronald L. Diedrich to Joint Legislative Budget Committee, October 11,
12 2010.
13 18.
On November 5, 2010, the Legislative Analyst's Office ("LAO") provided the
14 Legislature with a summary and analysis of the sale-leaseback transaction. The LAO provides
15 fiscal and policy advice to the Legislature. It is overseen by the Joint Legislative Budget
16 Committee, a 16-member bipartisan committee. In independently reviewing the sale-leaseback
17 transaction with California First, the LAO concluded that the sales price constituted fair market
18 value. On page 2 of that report the LAO stated: "Although the legislation gave DGS the authority
19 to determine most aspects of the sale and lease, it requires the sale price to be no less than market
20 value. The sale price of $2.3 billion meets this condition by all measures of which we are
21 aware." (Emphasis added). LAO Correspondence from Michael Cohen, Deputy Legislative
22 Analyst to Legislative Budget Committee, November 5, 2010, p. 2, 4.
23 c.
24
25
DGS Enters Into A Binding Contract With California First For the Sale of the
Properties
19.
On November 15, 2010, more than thirty days after DGS provided its report to the
26 Legislature, the state entered into the Purchase and Sale Agreement with California First (the
27 "Contract") for the sale of the Properties for $2.3 billion. A true and correct copy of the Contract is
28
6
38831/001/ 1017505
1 attached hereto as Exhibit A. This resulted in $1.2 billion in general funds revenue available to the
2 state after existing obligations on the buildings are satisfied.
3 20.
As part of its own decision to enter into the Contract, California First conducted due
4 diligence on the Properties and was prepared to complete the transaction without contingencies.
5 21.
Pursuant to the Contract, DGS would enter into long-term leases at predetermined
6 rates, and would no longer bear the responsibility to maintain, operate, or repair the buildings.
7 California First's affiliate, California First, LLC, would assume responsibility for managing the
8 leases and Properties.
9 22.
In Section 4.2.1 DGS represents and warrants that it has the "power to enter into this
1 O Agreement and to execute and deliver this Agreement and to perform all duties and obligations
11 imposed upon it hereunder," and that it has "obtained all necessary approvals required in
12 connection with the execution, delivery and performance of this Agreement and the transaction
13 contemplated herein and has obtained the consent of all entities and parties (whether private or
14 governmental) necessary to bind [DGS] to this Agreement."
15 23.
California First performed all conditions, covenants and promises required of it to
16 be performed in accordance with the terms and conditions of the Contract, except for those
17 conditions, covenants and promises of which performance has been legally excused. For example,
18 pursuant to the terms of the Contract and with the permission, acquiescence and/or agreement of
19 the state, California First had deposited fifty-five millions dollars ($55,000,000.00) into an escrow
20 account and in reliance on the state's ongoing and repeated affirmation of its ability and intent to
21 perform its own contractual obligations to California First.
22 24.
The transaction was set to close thirty days after November 15, 2010, which was
23 December 15, 2010.
24 25.
During the period of time from November 15, 2010 to December 15, 2010, DGS
25 and California First devoted substantial time and effort to timely close the transaction. During this
26 time, for example, DGS continued to prepare and deposit documents into escrow for purposes of
27 closing the transaction; DGS prepared and disseminated draft escrow instructions for a December
28 15, 2010 closing; DGS worked with the courts to resolve any alleged ownership interests the courts
7
388311001/ 1017505
1 claimed with respect to the personal property included in the Contract; DGS worked with
2 California First to resolve title insurance issues relating to the transaction; and DGS and California
3 First worked together to prepare and execute leases and other ancillary documents in connection
4 with the Contract. Moreover, on December 9, 2010, DGS submitted final, executed escrow
5 instructions to the escrow agent, First American Title Company, a true and correct copy of which is
6 attached as Exhibit B hereto (the "December 9 Escrow Instructions").
7 26.
Section 7 .1 of the Contract provides that, if DGS fails to consummate the
8 transaction contemplated by the Contract or otherwise breaches the Contract, California First may
9 either terminate the Contract or "pursue the remedy of specific performance of Seller's obligations
10 under this Agreement." Section 7 .1 further provided that any suit for specific performance must be
11 filed within thirty days after California First first becomes aware of the breach or default by DGS.
12 27.
Section 7.1 of the Contract further provides that California First has the right to sue
13 DGS for damages as a result of a breach of the Contract.
14 28.
Section 9.9 of the Contract provides that the prevailing party in any action to
15 enforce the terms of the Contract shall be entitled to recover reasonable attorneys' fees, in addition
16 to other damages or remedies.
17 D.
18
19
The State Successfully Fights Off Efforts By Two Former Building Commissioners to
Block the Sale of the Properties in San Francisco Superior Court
29.
On November 16, 2010, the day after the Contract was entered into, two former
20 members of the Los Angeles State Building Authority Governing Board dismissed by Governor
21 Schwarzenegger, initiated an action in San Francisco Superior Court as "private taxpayers"
22 alleging the transaction was illegal and unconstitutional and seeking to enjoin the closing of sale of
23 the Properties pursuant to the Contract. Epstein et al. v. Arnold Schwarzenegger et al., San
24 Francisco Superior Court Case No. CGC-10-505436 (the "Epstein Action").
25 30.
The Epstein Action sought a writ of mandate to compel Governor Schwarzenegger,
26 DGS and the Acting Director of DGS at the time, Diedrich, to allow the Judicial Council to
27 exercise its authority and control over the appellate court facilities that are among the Properties. It
28 further sought to enjoin the sale of the Properties on that basis and further alleged that the Contract
8
SECOND AMENDED OMPLAINT
38831/001/ 1017505
1 constitutes an "illegal expenditure and illegal waste of public funds" and an "unconstitutional gift
2 of public goods." Petition for Writ of Mandate; Complaint for Injunctive Relief and Declaratory
3 Relief for: Failure to Comply with State Law, Waste of Public Funds, Unconstitutional Gift of
4 Public Goods, Epstein et al. v. Arnold Schwarzenegger et al., San Francisco Superior Court Case
5 No. CGC-10-505436, p. 24, if 58, lines 26-27.
6 31.
The state assured California First that it would oppose the motion and it did so. The
7 state advised California First that it believed it would successfully defeat the motion. Amongst
8 other things, the state opposed the motion by informing the court that the transaction was not
9 unlawful and that it was concerned that failure to consummate the sale would result in a breach of
10 contract, causing significant harm to the state as a result.
11 '32.
For example, on November 22, 2010, in its Opposition to the Epstein plaintiffs'
12 motion for preliminary injunction, the state admitted, " ... the sales transaction as authorized by the
13 Legislature fully complies with California law .... [there is] no evidence that the transaction is
14 unlawful, no basis exists for the issuance of a preliminary injunction." Respondent's/Defendant's
15 Opposition to Petitioner/Respondents' Ex Parte Application for Temporary Restraining Order and
16 Order to Show Cause Re Preliminary Injunction Motion, Epstein et al. v. Arnold Schwarzenegger
17 et al., San Francisco Superior Court Case No. CGC-10-505436, p. 1.
18 33.
Consistent with the positions it took in the Epstein Action and in its statements to
19 California First, the state publicly reported that it intended to complete the sale of the Properties.
20 The lawyer hired by Governor Schwarzenegger to represent the state is reported in an LA Times
21 news article on November 26, 2010 as stating that the state "intends to complete the sale" of the
22 Properties.
23 34.
On December 10, 2010, the trial court denied the former building commissioners'
24 application for a preliminary injunction. The court's order provides in pertinent part:
25 Selling the buildings does not violate G.C. section 69204 (Judicial Council exercises
authority). G.C. section 14670.13 states Lb.at 'notwithstanding any other law the
26 sale can go forward. G.C section 69204 does not designate the Judicial Council as
the owners of the buildings and its auth rization i.s not required. Selling the
27 buildings does not implicate the separation of powers doctrine or affect a core
function of the judicial branch. See Superior Court of Mendocino v. C nnty of
28 Mendocino (1996) 13 Cal 4th 45. The Court will not interfere with the discretion of
9
SECOND AMENDED COMPLAfNT
38831/001/ 1017505
1 the executive and legislative branches.
2 ******
3 Additionally, there has been no illegal d legation of authority. The legislature was
specific in its delegation identified specific buil lings, and stated the price of fair
4 market value or greater. The Legis lature requfred defendant to report back before the
deal was consummated.
5
6
7
8
9
IO
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Order Denying Petitioner/Plaintiffs' Application for Preliminary Injunction and Intervenor's
Joinder Thereto, Epstein et al. v. Arnold Schwarzenegger et al., San Francisco Superior Court Case
No. CGC-I0-505436, p. 2, lines 6-12 and 15-17.
E. The State Continues to Vigorously Oppose the Former Building Commissioners'
Efforts to Prevent Consummation of the Contract in the Court of Appeal
35. On December 13, 20IO, the former building commissioners appealed the trial
court's order and requested a stay of the sale until a hearing.
36. The state continued to assure California First that it intended to and would complete
the transaction pursuant to the Contract it had signed and would continue to act to defeat the former
building commissioners' efforts to block the sale.
37. On December 15, 20IO, in its Preliminary Opposition to the Petition, in the Court of
Appeal, the state argued: "In seeking to enjoin the sale, Petitioners asked the Court to rewrite the
contract and prevent the State from meeting its express contractual obligations. This the Court
cannot do." Real Parties in Interest's Preliminary Opposition to Petition, In the Court of Appeal of
the State of California Sixth Appellate District (Case No. H036265), p. 11.
38. On December 16, 2010, the state filed an Emergency Motion for Relief from Stay,
urging the Court of Appeal to lift the stay and permit the sale of the Properties to close. In its
Emergency Motion for Relief from Stay, the state affirms the existence of the Contract, its intent
and efforts to perform its obligations under the Contract and the harm that would result if the state
and the Legislature's intent were not followed. The state made the following important admissions
in that motion:
"On November 15, 20IO, pursuant to ... enabling legislation, and following a lengthy
bidding process, DGS entered into a Purchase and Sale Agreement with California First,
IO
38831/001/ 1017505
1 LLP to sell the buildings for $2.3 billion, resulting in $1.2 billion in General Funds revenue
2 available to the state after existing obligations on the buildings are satisfied;"
3 "DGS has been diligently working toward completing all necessary actions in time to close
4 escrow on the transaction on December 15, 2010;"
5 "The Stay Order is ... jeopardizing a $2.3 billion transaction specifically authorized by the
6 Legislature and is depriving the state of $1.2 billion in desperately needed General Fund
7 Revenue;"
8 "Whatever interest the Stay Order purportedly protects is outweighed by its improper
9 interference with the Legislature's authority, and it thus constitutes an untenable frustration
10 of the Legislature's intent." and
11 " ... [I]t is absolutely untenable that three disgruntled taxpayers are being permitted to
12 single-handedly delay (and thereby threaten) the Legislature's plan to sell certain assets to
13 help alleviate an immediate financial crisis. The will of the people of California, express
14 through their dully elected Legislature, cannot be so easy to subvert."
15 Emergency Motion for Relief from Stay; Memorandum; Order, In the Court of Appeal of the
16 State of California Sixth Appellate District (Case No. H036265), Dated: 12/16/10, pp. 2-3, 5-6, 9.
17 39.
On or about December 21, 2010, Arnold Schwarzenegger, Ron Diedrich, and DGS,
18 in their continuing effort to effectuate the sale of the Properties, filed a Petition for Extraordinary
19 Relief, including Writ of Mandate and Request for Immediate Relief from Stay and Memorandum
20 with the California Supreme Court (the "Supreme Court Petition").
21 40.
The state's Supreme Court Petition not only recognized a binding agreement to sell
22 the Properties to Plaintiff, but characterized it as a "vital sale" that would provide the state of
23 California with "$1.2 billion in desperately needed revenue in the midst of an unprecedented
24 financial crisis." The state urged the Supreme Court to issue a preemptory writ of mandate
25 commanding the Court of Appeal to vacate its December 13, 2010 Stay Order and issue a new
26 order denying the stay. Petition for Extraordinary Relief, including Writ of Mandate and Request
27 for Immediate Relief from Stay, California Supreme Court, p. 3, ii 3 and p. 5, ii 6.
28
11
SECOND AMEND D OMPLAINT
38831/001/ 1017505
1 41.
Despite these efforts, on December 28, 2010, the California Supreme Court issued
2 its Order denying the Supreme Court Petition for Writ of Mandate and Request for Immediate
3 Relief from Stay.
4 F. After the Change in Administration, the State Continues to Assure California First
5 that It Will Complete the Transaction
6 42.
On or about January 3, 2011, Governor Brown was sworn in as Governor of
7 California to replace Governor Arnold Schwarzenegger. In or about January 2011, Scott Harvey
8 became Acting Director of DGS.
9 43.
At a January 10, 2011 press conference, Governor Brown reaffirmed the state's
10 intent to consummate the Contract by revealing his proposed budget, which included the money the
11 state would receive once the Contract was consummated.
12 44.
While California First understood from press reports that political pressures were
13 being placed on Governor Brown with respect to the Contract throughout January 2011, the state
14 repeatedly assured the public and California First that it would consummate the transaction.
15 45.
On January 27, 2011 the Court of Appeal granted Service Employees International
16 Union, Local 1000 application to file an Amicus Brief in Support of the Epstein plaintiffs in the
1 7 Court of Appeal.
18 G.
19
Suddenly, Without Warning to California First, Governor Brown Repudiates the
Contract
20 46.
At a February 9, 2011 press conference, Governor Brown announced, for the first
21 time and in contradiction to past statements, that the state would not proceed with the sale of the
22 Properties.
23 47.
On the same day, Mr. Harvey transmitted a letter to Plaintiff purporting to terminate
24 the Contract (the "Termination Letter"). A true and correct copy of the Termination Letter is
25 attached hereto as Exhibit C.
26 48. The Termination Letter provides as follows:
27 J am writing to let you know that the proposed sale of the 11 state-owned
properti es authorized by Government Code secti.on 14670.13 will not proceed any
28 further. Accordi ngly the Department of General Services is rejecting all bids, to
12
38831/001/ 1017505
1 include that submitted by California First. We will notify the escrow agent to
terminate the escrow account.
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
49. The Termination Letter erroneously refers to the Contract as a "proposed sale,"
contradicting prior public statements and judicial admissions made by the state that there was a
binding contract between DGS and California First. For example, in the Epstein Action, the state,
in its efforts to effectuate the sale of the Properties, filed the Declaration of Robert McKinnon in
Opposition to Petitioners/Plaintiffs' Ex Parte Application for a Temporary Restraining Order and
Order to Show Cause Re Preliminary Injunction (the "McKinnon Declaration"). The McKinnon
Declaration provides that Mr. McKinnon was, at that time, an Assistant Branch Chief with DGS
that was charged with managing the implementation of Government Code Section 14670.13
relating to the sale of the eleven state-owned properties. McKinnon Deel., pp. 1-2, 1-2.
50. The McKinnon Declaration acknowledges that "DGS accepted California First's
offer of $2.33 billion for the entire 11 state buildings" and that on November 15, 2010, "the State
entered into a Purchase and Sale Agreement with California First." McKinnon Deel., p. 2, 9; p.3,
11.
H. California First Timely Demands Performance
51. By letter dated March 4, 2011, California First wrote to Mr. Harvey and DGS
demanding that the state perform all obligations required of it pursuant to the Contract and rescind
the attempted "termination" set forth in the February 9, 2011 letter.
52. By letter dated March 7, 2011, DGS advised California First that it would not
rescind its February 9, 2011 letter.
53. Pursuant to Section 7.1 of the Contract, California First files this action for specific
performance within thirty days after it first becomes aware of the breach or default by DGS.
FIRST CAUSE OF ACTION
(Specific Performance Against All Defendants)
54. Plaintiff re-alleges and repeats paragraphs 1 through 53, inclusive, as though set
forth in full herein.
55. The consideration set forth in the Contract was fair and reasonable at the time of
execution of the Contract.
13
38831/001/ IOI 7505
1
2
56.
57.
The Contract is fair, just, and reasonable in all respects as to the Defendants.
Plaintiff has performed all conditions, covenants and promises required of it to be
3 performed in accordance with the terms and conditions of the Contract, except for those conditions,
4 covenants and promises of which performance has been legally excused.
5 58.
Plaintiff is now and has been ready, willing and able to perform under the terms and
6 conditions required of it in accordance with the Contract and has offered, and continues to offer, to
7 perform them, except those that are excused by Defendants' breach of the Contract, or otherwise.
8 59.
Defendants have failed and refused and continue to fail and refuse to perform the
9 terms and conditions of the Contract, which are required on their part, and Plaintiff is entitled to an
10 order requiring Defendants to specifically perform the terms and conditions of the Contract.
11 60.
California First has no adequate legal remedy at law in that the Properties are unique
12 and, pursuant to Civil Code 3387, monetary damages are presumed inadequate for the breach. As
13 such, Plaintiff needs and seeks an order requiring Defendants to specifically perform under the
14 terms of the Contract by selling the Properties to California First pursuant to the terms of the
15 Contract. Moreover, Section 7.1 of the Contract unambiguously gives Plaintiff the right to seek
16 specific performance of the Contract as a remedy upon Defendants' default or breach. California
1 7 First is also entitled to an equitable accounting for all incidental losses it suffered or additional
18 costs it incurred as a result of Defendants' failure to convey the Properties on the date specified in
19 the Contract, such that performance is related back to the date specified in the Contract so as to
20 fully vindicate Plaintiffs contractual rights. California First's incidental losses include, but are not
21 limited to, any increased financing costs and lost revenue it would have derived from its ownership
22 and operation of the Properties as of the date specified in the Contract.
23
24
25 61.
SECOND CAUSE OF ACTION
(Breach of Contract Against All Defendants -- Pied in the Alternative)
Plaintiff re-alleges and repeats paragraphs 1 through 53, inclusive, as though set
26 forth in full herein.
27
28
38831/001/ 1017505
14
SE OND AMENDED COMPLAINT
1 62. Plaintiff has performed all conditions, covenants and promises required of it to be
2 performed in accordance with the terms and conditions of the Contract, except for those conditions,
3 covenants and promises of which performance has been legally excused.
4 63. Plaintiff is now and has been ready, willing and able to perform under the terms and
5 conditions required of it in accordance with the Contract and has offered, and continues to offer, to
6 perform them, except those that are excused by Defendants' breach of the Contract, or otherwise.
7 64. Defendants have failed and refused and continue to fail and refuse to perform the
8 terms and conditions of the Contract, which are required on their part, and Plaintiff is entitled to an
9 order requiring Defendants to specifically perform the terms and conditions of the Contract.
10 65. In the alternative to the specific performance remedy, and as a result of Defendants'
11 breach of the Contract, California First has been damaged in an amount in excess of this Court's
12 jurisdiction to be proven at the time of trial.
13 THIRD CAUSE OF ACTION
14 (Breach of Covenant of Good Faith and Fair Dealing Against All Defendants -- Pied in the
15 Alternative)
16 66. Plaintiff re-alleges and repeats paragraphs 1through53, inclusive, as though set
1 7 forth in full herein.
18 67. Defendants owed California First an obligation of good faith and fair dealing, which
19 required that they refrain from any acts or omissions that would destroy or materially impede
20 California First's right to receive the benefits to which it is entitled under the Contract.
21 68. Defendants engaged in the activities alleged herein notwithstanding the existence of
22 the covenant of good faith and fair dealing, and, in doing so, deprived and will deprive Plaintiff of
23 the benefits to which it was and is entitled under the Contract. Specifically, Defendants unilaterally
24 terminated the Contract without cause and refused to perform their duties under the Contract, thus
25 depriving Plaintiff of the benefit to which it is entitled. The acts alleged above, among others,
26 constitute breaches by the Defendants of the covenant of good faith and fair dealing.
27
28
38831/00111017505
15
SECOND AMEND D COMPLAINT
1 69.
In the alternative to the specific performance remedy, and as a result of Defendants'
2 breach of the Contract, Plaintiff has been damaged in an amount in excess of this Court's
3 jurisdiction to be proven at the time of trial.
4 FOURTH CAUSE OF ACTION
5 (Bre.ach of Contract Modified By Conduct Against All Defendants -- Pied in the Alternative)
6 70.
Plaintiff re-alleges and repeats paragraphs 1 through 53, inclusive, as though set
8 71.
DGS, by and through its conduct, modified the Contract, the material terms of which
9 are reflected in the December 9 Escrow Instructions (the "Modified Contract").
10 72. Plaintiff has performed all conditions, covenants and promises required of it to be
11 performed in accordance with the terms and conditions of the Modified Contract, except for those
12 conditions, covenants and promises of which performance has been legally excused.
13 73.
14 conditions required of it in accordance with the Modified Contract and has offered, and continues
15 to offer, to perform them, except those that are excused by Defendants' breach of the Modified
16 Contract, or otherwise.
17 74.
18 terms and conditions of the Modified Contract, which are required on their part, and Plaintiff is
19 entitled to an order requiring Defendants to specifically perform the terms and conditions of the
20 Modified Contract.
21 75.
24 terms of the Modified Contract by selling the Properties to California First pursuant to the terms of
25 the Modified Contract. California First is also entitled to an equitable accounting for all incidental
26 losses it suffered or additional costs it incurred as a result of Defendants' failure to convey the
27 Properties on the date specified in the Modified Contract, such that performance is related back to
28 the date specified in the Modified Contract so as to fully vindicate Plaintiffs contractual rights.
16
38831/00111017505
1 California First' s incidental losses include, but are not limited to, any increased financing costs and
2 lost revenue it would have derived from its ownership and operation of the Properties as of the date
3 specified in the Modified Contract.
4 76.
5 breach of the Modified Contract, California First has been damaged in an amount in excess of this
6 Court's jurisdiction to be proven at the time of trial.
7 FIFTH CAUSE OF ACTION
8 (Breach of Implied Contract Against All Defendants -- Pied in the Alternative)
9 77.
Plaintiff re-alleges and repeats paragraphs 1through53, inclusive, as though set
11 78.
DGS, by and through its conduct on and after November 18, 2010 entered into an
12 implied contract to sell the Properties to California First, the material terms of which are set forth in
13 the December 9 Escrow Instructions (the "Implied Contract").
14 79.
Plaintiff has performed all conditions, covenants and promises required of it to be
15 performed in accordance with the terms and conditions of the Implied Contract, except for those
16 conditions, covenants and promises of which performance has been legally excused.
17 80.
18 conditions required of it in accordance with the Implied Contract and has offered, and continues to
19 offer, to perform them, except those that are excused by Defendants' breach of the Implied
20 Contract, or otherwise.
21 81.
22 terms and conditions of the Implied Contract, which are required on their part, and Plaintiff is
23 entitled to an order requiring Defendants to specifically perform the terms and conditions of the
24 Implied Contract.
25 82.
28 terms of the Implied Contract by selling the Properties to California First pursuant to the terms of
17
38831/001/ 1017505
the Implied Contract. California First is also entitled to an equitable accounting for all incidental
2 losses it suffered or additional costs it incurred as a result of Defendants' failure to convey the
3 Properties on the date specified in the Implied Contract, such that performance is related back to
4 the date specified in the Implied Contract so as to fully vindicate Plaintiffs contractual rights.
5 California First's incidental losses include, but are not limited to, any increased financing costs and
6 lost revenue it would have derived from its ownership and operation of the Properties as of the date
7 specified in the Implied Contract.
8 83. In the alternative to the specific performance remedy, and as a result of Defendants'
9 breach of the Implied Contract, California First has been damaged in an amount in excess of this
10 Court's jurisdiction to be proven at the time of trial.
11 SIXTH CAUSE OF ACTION
12 (Breach of Covenant of Good Faith and Fair Dealing in Modified Contract and/or Implied
13 Contract Against All Defendants -- Pied in the Alternative)
14 84. Plaintiff re-alleges and repeats paragraphs 1 through 53, inclusive, as though set
16 85. Defendants owed California First an obligation of good faith and fair dealing, which
17 required that they refrain from any acts or omissions that would destroy or materially impede
18 California First's right to receive the benefits to which it is entitled under the Modified Contract
19 and/or the Implied Contract.
20 86. Defendants engaged in the activities alleged herein notwithstanding the existence of
21 the covenant of good faith and fair dealing, and, in doing so, deprived and will deprive Plaintiff of
22 the benefits to which it was and is entitled under the Modified Contract and/or the Implied
23 Contract. Specifically, Defendants unilaterally terminated the Modified and/or the Implied
24 Contract without cause and refused to perform their duties under the Modified and/or the Implied
25 Contract, thus depriving Plaintiff of the benefit to which it is entitled. The acts alleged above,
26 among others, constitute breaches by the Defendants of the covenant of good faith and fair dealing.
27
28
SE MPLAINT
38831/001/ 1017505
1 87.
2 breach of the Implied Contract and/or the Modified Contract, Plaintiff has been damaged in an
3 amount in excess of this Court's jurisdiction to be proven at the time of trial.
4
5
6 WHEREFORE, Plaintiff respectfully prays for judgment as follows:
7 ON THE FIRST CAUSE OF ACTION:
8 1.
For a decree that Defendants be ordered and directed to convey the Properties to
9 Plaintiff pursuant to the terms of the Contract, and that the Court perform an equitable accounting
1 O and compensate Plaintiff for all incidental losses it suffered or additional costs it incurred as a
11 result of Defendants' failure to convey the Properties on the date specified in the Contract;
12
13
2.
3.
For costs of suit herein incurred, including reasonable attorneys' fees; and
For prejudgment interest.
14 ON THE SECOND CAUSE OF ACTION:
15 1.
In the alternative to the specific performance remedy, for general and compensatory
16 damages in an amount according to proof at the time of trial;
17
18
2.
3.
19 ON THE THIRD CAUSE OF ACTION:
20 1.
22
23
2.
3.
24 ON THE FOURTH CAUSE OF ACTION:
25 1.
26 Plaintiff pursuant to the terms of the Modified Contract, and that the Court perform an equitable
27 accounting and compensate Plaintiff for all incidental losses it suffered or additional costs it
28
19
38831/001/ 1017505
1 incurred as a result of Defendants' failure to convey the Properties on the date specified in the
2 Modified Contract;
3 2.
5
6
3.
4.
7 ON THE FIFTH CAUSE OF ACTION
8 1.
9 Plaintiff pursuant to the terms of the Implied Contract, and that the Court perform an equitable
10 accounting and compensate Plaintiff for all incidental losses it suffered or additional costs it
11 incurred as a result of Defendants' failure to convey the Properties on the date specified in the
12 Implied Contract;
13 2.
15
16
3.
4.
17 ON THE SIXTH CAUSE OF ACTION
18 1.
20
21
22
23
24
25
26
27
28
2.
3.
38831/001/ 1017505
20
SECOND AM NDED COMPLAINT
1 ON ALL CAUSES OF ACTION:
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
1.
2.
For such other relief as the Court deems just or proper.
Dated: April 23, 2013
LINER GRODE STEIN Y ANKELEVITZ
SUNSHINE REGENSTREIF & TAYLOR LLP
By:
21
38831/001/ 1017505

California First LLC v. DGS

Diunggah oleh

Informasi Dokumen

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

California First LLC v. DGS

Diunggah oleh

Hak Cipta:

Format Tersedia

1 Stuart A. Liner, Esq.

Anda mungkin juga menyukai