KCSM licensee and spectrum speculator trade lawsuits over failed FCC auction bid

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Spectrum speculator LocusPoint and the licensee of KCSM in San Mateo, Calif., have both filed lawsuits over their agreement to participate in the FCC’s spectrum auction.

LocusPoint Networks struck a deal in 2013 with the licensee, San Mateo County Community College District, which had offered KCSM for sale. LocusPoint agreed to subsidize the financially struggling station with quarterly payments of $225,000 for four years, or until the FCC auction began. In return, LocusPoint would receive 36.5 percent of the district’s auction proceeds.

But a bid that failed to be submitted — automatically kicking the district out of the auction — prompted the district to file suit this month against LocusPoint and PricewaterhouseCoopers Advisory Services, claiming breach of contract allegations.

The district contracted with LocusPoint and its subcontractor PricewaterhouseCoopers “in large part to ensure that the college district’s bids in the FCC auction were properly submitted,” district spokesperson Mitchell Bailey said in an email.

The two companies “provided the college district with assurances that they had multiple fail-safe procedures to ensure that bids were properly submitted,” Bailey said. “These assurances were provided in writing, but LPN and PwC failed to fulfill them.”

LocusPoint countersued, also claiming breach of contract.

According to LocusPoint’s complaint, the district designated three employees to place bids. The district entered the auction when it began in May 2016 and participated in 52 bidding rounds.

However, the district failed to place a bid Nov. 15, 2016, ending its participation in the auction. Despite the failure, the lawsuit alleges, a district representative signed a Bid Submission Confirmation Sheet at 7:12 a.m. for $114,494,613.

At that point, LocusPoint had made $3,375,000 in payments to support KCSM.

“In an instant,” the lawsuit contends, LocusPoint’s percentage of the auction proceeds “became worthless. LPN’s investment — the subsidies to fund KCSM until the auction and the time and effort to prepare the district for it — was wasted.”

Bailey presented a different scenario. He said that on Nov. 15, the PricewaterhouseCoopers representative “who was present and directing the bidding admitted that he failed to require a bid receipt from the FCC website and acknowledged that he simply ‘assumed’ a bid had been submitted.”

According to LocusPoint’s lawsuit, the district also “falsely certified” Dec. 16, 2016, that it was still in accordance with its LocusPoint agreement, which “enabled it to continue receiving quarterly subsidy payments.”

LocusPoint’s suit states that the district had agreed to return the subsidy payments plus 8 percent annual interest in the event that it did not fulfill its part of the deal.

Both parties are also requesting damages determined by a jury trial. A pretrial hearing is set for Aug. 10.

The district is exploring its options for the future of the station, Bailey said.

Read the lawsuits: