United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 29, 2000 Decided May 5, 2000

No. 99-1183

[Trinity Broadcasting of Florida, Inc. and ]{.smallcaps}

[Trinity Christian Center of Santa Ana, Inc.,
]{.smallcaps}*[d/b/a]{.smallcaps}*[ ]{.smallcaps}

[Trinity Broadcasting Network, ]{.smallcaps}

[Appellants]{.smallcaps}

v\.

[Federal Communications Commission, ]{.smallcaps}

[Appellee]{.smallcaps}

[Colby May, National Minority Television, Inc., ]{.smallcaps}

[Intervenors]{.smallcaps}

Consolidated with

99-1184, 99-1186

Appeals of an Order of the

Federal Communications Commission

*Timothy B. Dyk* argued the cause for appellants and intervenors
supporting appellants. With him on the briefs were *Howard A. Topel*,
*Kathryn R. Schmeltzer* and *Lawrence D. Rosenberg*. *Barry H.
Gottfried* entered an appearance.

*William H. Crispin, Dean R. Brenner* and *Katherine Connor Linton* were
on the brief of *amici curiae* Members of Congress, Senator John
Ashcroft and Congressman Randy Cunningham.

*Jordan W. Lorence* was on the brief of *amici curiae* Evangelical
Association of Pastors & Layman, et al.

*Joel Marcus,* Attorney, Federal Communications Commission, argued the
cause for appellee. With him on the brief were *Christopher J. Wright*,
General Counsel, and *Daniel M. Armstrong*, Associate General Counsel.
*C. Grey Pash, Jr.*, Counsel, entered an appearance.

Before: [Edwards]{.smallcaps}, *Chief Judge*, [Tatel]{.smallcaps} and
[Garland]{.smallcaps}, *Circuit Judges*.

Opinion for the Court filed by *Circuit Judge* [Tatel]{.smallcaps}.

[Tatel, ]{.smallcaps}*Circuit Judge*: This case presents a recurring
question of administrative law: What constitutes sufficiently fair
notice of an agency\'s interpretation of a regulation to justify
punishing someone for violating it? The Federal Communications
Commission interpreted its now‑superseded minority preference regulation
as requiring not only that a majority of an applicant\'s board of
directors be minorities, but also that an applicant demonstrate actual
control by minorities. Acting on this interpretation, the Commission
denied appellants\' application to renew a commercial television
broadcast license as a sanction for their earlier claim to a minority
preference based on a majority‑minority board. Although we defer to the
Commission\'s interpretation of its regulation as requiring actual
minority control, we find that neither the regulation nor the
Commission\'s related statements gave fair notice of that requirement.
We therefore vacate the Commission\'s denial of appellants\' license
renewal application.

I

\"Congress found that \'the effects of past inequities stemming from
racial and ethnic discrimination have resulted in a severe
underrepresentation of minorities in the media of mass communications.\'
\" *Metro Broad., Inc. v. FCC*, 497 U.S. 547, 566 (1990) (quoting [H.R.
Conf. Rep. No. ]{.smallcaps}97-765 at 43 (1982)), overruled by *Adarand
Constructors, Inc. v. Pena*, 515 U.S. 200, 227 (1995). In 1971,
minorities owned not a single television station anywhere in the United
States. *Id*. at 553. Having found that \"the viewing and listening
public suffers when minorities are underrepresented among owners of
television and radio stations,\" the Federal Communications Commission
has undertaken various measures \"to encourage minority participation in
the broadcast industry.\" *Id*. at 554. Congress also acted to promote
minority ownership, directing the Commission to:

establish rules and procedures to ensure that, in the

administration of any system of random selection under

this subsection used for granting licenses or construction

permits for any media of mass communications, signifi‑

cant preferences will be granted \[to certain applicants to

increase diversification of ownership\]. To further diver‑

sify the ownership of the media of mass communications,

an additional significant preference shall be granted to

any applicant controlled by a member or members of a

minority group.

Pub. L. No. 97-259, § 115(c)(1), 96 Stat. 1087 (1982), (codified at 47
U.S.C. § 309(i)(3)(A)).

Responding to this directive, the Commission issued a regulation
granting preferences to minority applicants in lotteries for low‑power
and translator television station licenses. 47 C.F.R. § 1.1622(b).
Low‑power and translator television stations operate \"on UHF channels
at much lower power than full service (conventional) television
stations.\" *Neighborhood TV Co., Inc. v. FCC*, 742 F.2d 629, 631 (D.C.
Cir. 1984). Section 1.1622(b) of the Commission\'s regulations granted
lottery preferences to \"\[a\]pplicants, more than 50% of whose
ownership interests are held by members of minority groups.\" 47 C.F.R.
§ 1.1622(b)(1). In a statement explaining section 1.1622(b), the
Commission provided several entity‑specific definitions of this
standard. With respect to \"stock corporations,\" the Commission said:
\"If a majority of the voting shares are held by minorities, the
corporation is entitled to a minority preference.\" *Public Notice*,
Mimeo No. 6030 at 4 (released August 19, 1983). Of particular
significance to this case, the Commission said that for \"non‑stock
corporations\" (for instance non‑profit corporations), \"\[i\]f a
majority of the governing board \... are minorities, the entity is
entitled to a minority preference.\" *Id.* *See also Random Selection
Lotteries*, 93 F.C.C.2d 952, 977 (1983) (\"We agree \... that nonstock
corporations \... should be judged as to minority status on the basis of
the composition of the board.\").

Limited to lotteries for low‑power/translator television station
licenses, section 1.1622 did not address minority underrepresentation in
the lucrative full‑power, commercial television station market. A
Commission advisory committee exploring the causes of
underrepresentation in that market concluded that minority broadcasters
faced serious shortages of capital. *See Strategies for Advancing
Minority Ownership Opportunities in Telecommunications* 19 (May 1982).
To address this problem, the committee suggested that the FCC encourage
partnerships between minority entrepreneur broadcasters and established
broadcasters. *Id*. at 24. The advisory committee warned, however, that
the Commission\'s multiple ownership regulation---which limited the
number of commercial broadcast licenses in which a particular entity
could have an interest---posed a significant barrier to such
partnerships. Because estab‑lished broadcasters holding the maximum
permissible number of licenses would be unable to have \"interests\" in
additional licenses, minority entrepreneurs with whom they formed
partnerships would be ineligible for television licenses. The advisory
committee recommended that the Commission grant \"waivers or expansion
of multiple ownership and diversification requirements to established
entrepreneurs who participate in telecommunications ventures with
minorities\.... For example, FCC policies should allow an established
entrepreneur to acquire an equity interest in a minority‑controlled
property that otherwise would exceed multiple ownership limits\....\"
*Id*. at 32.

In 1985, the Commission took a step toward facilitating the partnerships
the advisory committee had recommended. It granted an exception to the
multiple ownership limits for \"minority‑controlled\" broadcast
stations. As amended, the regulation stated:

No license for a \... TV broadcast station shall be

granted, transferred or assigned to any party (including

all parties under common control) if the grant, transfer

or assignment of such license would result in such party

or any of its stockholders, partners, members, officers or

directors, directly or indirectly, owning, operating or

controlling, or having a cognizable interest in, either:

\(i\) more than fourteen (14) stations in the same ser‑

vice, or

\(ii\) more than twelve (12) stations in the same service

which are not minority‑controlled.

47 C.F.R. § 73.3555(d)(1) (1990). In other words, section 73.3555
essentially limited broadcasters to having interests in twelve licenses,
except that they could have interests in two additional licenses for
\"minority‑controlled\" stations. In language central to this case,
section 73.3555 continued: \" \'\[M\]inority‑controlled\' means more
than 50 percent owned by one or more members of a minority group.\"
*Id*. § 73.3555(d)(3)(iii). Although section 73.3555 provided no further
definition of \"minority‑controlled,\" it concluded with this note:
\"The word \'control\' as used herein is not limited to majority stock
ownership, but includes actual working control in whatever manner
exercised.\" *Id*. § 73.3555 note 1.

Congress has since eliminated the multiple ownership limits. *See*
Telecommunications Act of 1996, Pub. L. No. 104-104, § 202(c)(1)(A), 110
Stat. 56. But because the events leading up to this case occurred during
the period section 73.3555 was in effect, that section controls the
disposition of this case, as all parties agree.

Created by Dr. Paul Crouch in 1973, appellant Trinity Christian Center
of Santa Ana, Inc., d/b/a Trinity Broadcasting Network (\"TBN\"), is a
non‑profit \"electronic evangelical ministry.\" Crouch serves as TBN\'s
President. TBN produces its own religious programming, which it uses as
the core of its twenty‑four hour broadcast. Its broadcasts also include
religious programs produced by other ministries---\"a wide variety of
Protestant and Episcopalian denominations, as well as Catholic, Seventh
Day Adventist, and Messianic Jewish programs.\" Reaching viewers
throughout the country, TBN\'s programming is broadcast on TBN\'s own
commercial and translator television stations and on stations operated
by smaller non‑profit corporations like appellant Trinity Broadcasting
Florida, Inc. (\"TBF\"), which Crouch created to carry TBN programming.

Pearl Jane Duff, an African American minister, started as a volunteer at
TBN but was quickly hired as a salaried employee. She became Crouch\'s
assistant in 1981 and has worked at TBN in that capacity ever since.
Shortly after Duff began working for TBN, she was appointed to the
boards of TBN and TBF. She remained on those boards until resigning in
the summer of 1984.

In 1980, Crouch formed Translator TV, Inc. (\"TTI\"), predecessor to
intervenor National Minority Television, Inc., a non‑profit, non‑stock
religious broadcast corporation. Crouch explained his creation of TTI as
follows: In a conversation with Richard Wiley, former Chairman of the
FCC, Wiley \"impressed upon me very strongly that the emerging policy of
the FCC was to foster the integration of minorities into broadcasting.
He encouraged me to \... begin thinking of directions that TBN could
take as our network grew to assist in the implementation of this
emerging policy.\" According to Crouch, he \"conceived of the idea to
organize a new company that would integrate minorities into broadcasting
and further promote the emerging policy Mr. Wiley spoke to me about\....
I felt that TTI would both help to implement the FCC\'s minority
ownership policy and hopefully allow TBN to develop, as new affiliates,
stations that TTI might acquire.\" Two of TTI\'s three board members
were minorities: Duff served as Vice President and Secretary, and
Phillip Espinoza, an Hispanic pastor, served as Chief Financial Officer.
Crouch, a non‑minority and President of TTI, served as the third board
member.

Focusing on the translator television market, TTI filed seventeen
applications for FCC permits to construct translator television stations
to rebroadcast TBN programming. The Commission, however, had frozen all
new translator television applications, so it took no action on TTI\'s.
When the Commission promulgated section 1.1622(b)(1)\'s minority
preference for translator television licenses, TTI amended its pending
applications and filed certifications with the FCC claiming entitlement
to minority preferences based on its majority‑minority board. Because
translator television station license applications were still frozen,
the Commission had no occasion to assess TTI\'s eligibility for a
minority preference. TTI held no other licenses and conducted very
little business while waiting for the Commission to act on its
applications, functioning for all intents and purposes as a part of TBN:
TTI maintained no separate bank account, it had no accountant or lawyer
of its own, and its board conducted its annual meetings jointly with
TBN\'s affiliates.

Meanwhile, the Commission had promulgated section 73.3555, the minority
exception to the high‑power multiple ownership limit. At that time,
Crouch and TBN held licenses for twelve high‑power stations. TBN\'s
counsel, intervenor Colby May, advised Crouch that TBN could acquire
interests in two additional stations as long as those stations were
\"minority‑controlled.\" May testified that he thought TTI was
minority‑controlled because a majority of its board members were
minorities, and he so advised Crouch.

Deciding to broaden its focus from translator television to commercial
television, TTI changed its name to National Minority Television, Inc.
(\"NMTV\") and applied for a license for a commercial high‑power station
in Odessa, Texas. NMTV was the first minority broadcaster to claim
section 73.3555\'s minority exception to the multiple ownership limit.
In an attachment to its Odessa application entitled \"Broadcast
Interests and Statement of Compliance with Rule 73.3555(d),\" NMTV
asserted that issuing it the license was consistent with the multiple
ownership regulation: \"\[W\]hile one of NMTV\'s principals, Paul F.
Crouch, presently has an interest in 12 commercial television facilities
\... a majority of its directors are minorities, and NMTV is therefore
minority controlled and in compliance with rule 73.3555(d)(1).\" The
application did not mention that NMTV board member Duff was employed by
TBN, or that she had previously served on TBN\'s board.

An attorney in the Commission\'s Mass Media Bureau assigned to review
NMTV\'s application contacted May, asking for more detail about NMTV.
May explained that Trinity would provide NMTV\'s financing and
programming and that Duff worked for Trinity. \"Concerned\" about the
overlap between Trinity and NMTV, the Commission attorney went to his
supervisor, who asked May for NMTV\'s bylaws. May testified that the
supervisor \"was interested in determining that NMTV\'s affairs were
governed by the majority vote of its directors, and that unanimous votes
were not required.\" After May provided the requested information, the
Mass Media Bureau and ultimately the Commission approved the
application.

Having obtained the Odessa license and acting on May\'s advice, NMTV
began observing more of the formalities of a corporate entity. *See
Trinity Broad. of Florida, Inc.*, 14 F.C.C.R. 13570, 13591 ¶ 56 (1999)
(\"*Trinity*\"). It opened its own bank accounts, began paying TBN for
accounting and legal services, and conducted regular board meetings.
*Id*. at 13591 ¶¶ 56-57. NMTV also applied for a second license, this
one for a station in Portland, Oregon. Like the Odessa application, the
Portland application asserted that granting NMTV the license would not
violate the multiple ownership regulation because NMTV was
minority‑controlled. Again, the Commission approved the application. The
Portland and Odessa licenses gave Crouch interests in fourteen stations,
the limit under the multiple ownership rules.

Shortly after acquiring the Portland license, NMTV sold the Odessa
license, freeing it to purchase another station, which it attempted to
do by bidding on a license for a bankrupt Wilmington, Delaware station.
In its application to the FCC for approval of the Wilmington purchase,
NMTV asserted, as it had in the Odessa and Portland applications, that
approving its license acquisition would not violate the multiple
ownership limits because, since minorities constituted a majority of its
board, it was minority‑controlled. A petition filed by a challenger to
NMTV\'s application asserted that Crouch and TBN (not a
minority‑controlled corporation) actually controlled NMTV and that
Crouch had therefore violated the multiple ownership regulation by
having interests in more than twelve stations, none of which was
minority‑controlled. Before the FCC could resolve the question of
NMTV\'s minority status, NMTV withdrew its application because its
authorization from the Delaware bankruptcy court to purchase the license
had expired.

The question of NMTV\'s minority status arose again, this time in the
proceedings that led to the Commission\'s denial of the commercial
television license renewal at issue in this case. When TBN\'s Florida
affiliate, TBF, filed an application to renew its license for WHFT,
Channel 45, a commercial television station in Miami, a competitor for
the license asserted, as had the party opposing the Delaware license,
that Crouch had violated the multiple ownership regulation by exerting
control over NMTV. The Commission issued a Hearing Designation Order,
instructing an Administrative Law Judge to determine, among other
things, whether Crouch and TBN \"exercised *de facto* control over\"
NMTV, whether Crouch and TBN abused the FCC\'s processes \"by using NMTV
to evade the provisions\" of the multiple ownership regulation, and
whether TBF \"is qualified to remain a Commission licensee\" in light of
any evidence adduced on the preceding two questions. *Hearing
Designation Order*, 8 F.C.C.R. 2475, 2481 ¶ 8 (1993).

Examining Crouch\'s and TBN\'s conduct from 1987 to 1991 (the period
during which TBF held the Miami license), the ALJ concluded that TBN and
Crouch exercised *de facto* control over NMTV and that NMTV was
therefore not \"minority‑controlled.\" *Trinity Broad. of Fla., Inc.,
Initial Decision of Administrative Law Judge*, 10 F.C.C.R. 12020 (1995).
The ALJ also ruled that \"NMTV, Crouch and TBN abused the Commission\'s
processes\" not only by creating NMTV as a \"sham corporation\" to evade
the multiple ownership regulation, but also by repeatedly concealing
material facts from the Commission that would have demonstrated that TBN
controlled NMTV---primarily Duff\'s employment relationship with TBN and
the extensive interrelationship between TBN and NMTV. *Id*. at 12061 ¶¶
329-30 & n.47. The ALJ concluded that Crouch\'s conduct in connection
with TTI and TTI\'s representations in its low power applications also
supported an abuse of process finding. *Id*. at 12060 ¶¶ 325-26. The
Commission\'s Mass Media Bureau Trial Staff thought section 73.3555\'s
actual control requirement insufficiently clear to justify denying
TBF\'s license, but the ALJ disagreed, finding that because of TBN\'s
and Crouch\'s \"willful\" and \"egregious\" misconduct, TBF was
unqualified to hold the Miami license. *Id*. at 12062 ¶¶ 331, 333.

By a three to two vote, the Commission upheld the ALJ\'s abuse of
process determination with respect to NMTV\'s high‑power Odessa and
Portland television station applications. *Trinity,* 14 F.C.C.R. 13570.
Ruling that section 73.3555 required *de facto* minority control, the
Commission found that TBN, not NMTV\'s minority board, actually
controlled NMTV. \"Commission rules and precedent have always given fair
notice that de facto control is required to take advantage of the
special provision concerning minority ownership in the multiple
ownership rules.\" *Id*. at 13602 ¶ 86. \"\[T\]he principals knew,\" the
Commission concluded, \"that, because of the relationship between NMTV
and TBN, their claim of minority control was at best doubtful and at
worst false.\" *Id*. at 13601 ¶ 83. This \"serious abuse of process with
respect to NMTV\'s full power applications\" warranted denying TBF\'s
license renewal application. *Id*. at 13601 ¶ 85, 13610 ¶¶ 100-01. In
view of that conclusion, the Commission addressed only briefly the
ALJ\'s abuse of process determination with respect to the
low‑power/translator television license applications, reversing the ALJ
because \"applicants may well have been confused \... that the exercise
of de facto control by nonminorities subverted the purposes of the
minority ownership

policy\....\" *Id*. at 13601 ¶ 85. Dissenting from the high‑power abuse
of process determination and the denial of TBF\'s renewal application,
two commissioners disagreed with the majority that section 73.3555
provided fair notice: \"\[Section 73.3555\] certainly did not make clear
that a *de facto* control showing was necessary\....\" *Id*. at 13632
(Commissioners Furchgott-Roth and Powell, dissenting in part). \"In
these circumstances,\" they said, \"we find that imposition of the
\'death penalty\' of disqualification is both unfair and unwarranted.\"
*Id*. at 13634.

Appellants TBN and TBF, joined by intervenors NMTV and Colby May
(throughout this opinion, we shall refer to these appellants and
intervenors as \"Trinity\"), challenge both the Commission\'s
determination that TBN and Crouch abused Commission processes when NMTV
filed high‑power applications asserting that it was
\"minority‑controlled,\" and the Commission\'s denial of TBF\'s renewal
application. Trinity does not challenge the Commission\'s finding that
TBN exercised *de facto* control over NMTV. Instead, it contends that
TBN\'s exercise of *de facto* control did not justify denying TBF\'s
license renewal. In support of this claim, Trinity makes several
arguments, only two of which require our attention: (1) the
Commission\'s interpretation of section 73.3555 as requiring *de facto*
minority control is unreasonable; and (2) even if the Commission\'s
interpretation is reasonable, the regulation failed to provide fair
notice that *de facto* minority control was required. We consider each
argument in turn.

II

Trinity argues that section 73.3555 requires only that a majority of a
non‑profit entity\'s board members be minorities. According to Trinity,
the regulation does not require that the minority board members exercise
\"actual,\" *i.e.*, *de facto*, control over the entity. Acknowledging
our traditional deference to an agency\'s interpretation of its own
regulations, Trinity contends that no deference is warranted in this
case because the Commission\'s interpretation of section 73.3555 as
requiring *de facto* minority control conflicts with the regulation\'s
plain language. *See Thomas Jefferson Univ. v. Shalala*, 512 U.S. 504,
512 (1994) (holding that agency\'s interpretation may not be entitled to
deference if an alternative interpretation \"is compelled by the
regulation\'s plain language\") (internal quotation marks omitted).
Trinity relies on the fact that section 73.3555\'s only definition of
\"minority‑controlled\"---\"more than 50 percent owned by one or more
members of a minority group,\" 47 C.F.R. § 73.3555(d)(3)(iii)
(1990)---says nothing about *de facto* control.

As the Commission points out, however, its *de facto* control
requirement derives directly from the term being defined, *i.e.*,
\"minority‑*controlled*.\" As the Commission also points out, the
definition of \"minority‑controlled\" does not even apply to Trinity,
for it speaks only in terms of \"ownership,\" a concept having no
meaning with respect to non‑profit entities. For these reasons, we agree
with the Commission that no conflict exists between section 73.3555\'s
plain language and the Commission\'s ruling that majority‑minority
boards of directors of non‑profit entities must exercise *de facto*
control.

The question, then, is this: Does the Commission\'s interpretation
\"sensibly conform\" to both the purpose and the text of the regulation?
*Buffalo Crushed Stone, Inc. v. Surface Transp. Bd.*, 194 F.3d 125, 128
(D.C. Cir. 1999) (internal quotation marks omitted). In answering this
question, we \"accord \[the Commission\'s\] interpretation of its own
regulations a high level of deference, accepting it unless it is plainly
wrong.\" *General Elec. Co. v. EPA*, 53 F.3d 1324, 1327 (D.C. Cir. 1995)
(internal citations and quotation marks omitted). \"Our task is not to
decide which among several competing interpretations best serves the
regulatory purpose;\" rather, \"we must defer to the \[agency\'s\]
interpretation unless an alternative reading is compelled by the
regulation\'s plain language or by other indications of the
\[agency\'s\] intent at the time of the regulation\'s promulgation.\"
*Thomas Jefferson Univ.*, 512 U.S. at 512 (internal quotation marks
omitted). \"\[E\]ven where the petitioner advances a more plausible
reading of the regulations than that offered by the agency, it is the
agency\'s choice that receives substantial deference.\" *GE*, 53 F.3d at
1327 (internal quotation marks omitted). Applying this exceedingly
deferential standard of review, we conclude that the Commission\'s
requirement that majority‑minority boards of non‑profit entities
exercise *de facto* control represents a reasonable interpretation of
section 73.3555.

We begin with the concept of \"minority‑controlled.\" As the Commission
points out, interpreting section 73.3555 as not requiring *de facto*
minority control would not only read the word \"controlled\" out of the
regulation, but would run counter to the Commission\'s \"longstanding
focus on control\" and real parties in interest. The Commission put it
this way in its brief: \"The agency has consistently looked beyond the
ownership structure of licensees to determine who is the \'real party in
interest\'---whether a person \'is or will be in a position to actually
or potentially control the operation of the station.\' \" Trinity\'s
interpretation, moreover, would undermine the regulation\'s purpose.
\"\[I\]t is hard to imagine,\" the Commission reasoned, \"how an entity
controlled by minorities in name only or in which the minorities\'
interests are totally passive could foster the objective of the
Commission\'s policies to broaden minority voices and spheres of
influence over the airwaves.\" *Trinity*, 14 F.C.C.R. at 13602 ¶ 87
(internal quotation marks omitted). According to the Commission,
interpreting the regulation to require only a majority‑minority board
\"would provide an incentive for non‑minorities to hire front‑men.\" The
Commission\'s position has intuitive logic: How could an entity actually
controlled by non‑minorities be \"minority‑controlled?\"

In support of its interpretation of section 73.3555 as requiring that
non‑stock corporations demonstrate actual minority control, the
Commission points to two additional authorities: (1) Note 1 of section
73.3555, which provides that \"\[t\]he word \'control\' as used herein
is not limited to majority stock ownership, but includes actual working
control in whatever manner exercised,\" and (2) a footnote to the
Commission\'s 1985 Order adopting section 73.3555\'s minority exception,
*see Amendment of Section 73.3555*, 100 F.C.C.2d 74, 95 n. 59 (1985),
which cites a 1982 Policy Statement saying that preferential treatment
in the form of tax certificates would be granted \" \'where minority
ownership is in excess of 50% *or* controlling. Whether certificates
would be granted in *other* cases will depend on whether minority
involvement is significant enough to justify the certificate in light of
the purpose of the policy announced herein.\' \" *Trinity*, 14 F.C.C.R.
at 13603 ¶ 88 (*quoting Minority Ownership in Broad.*, 92 F.C.C.2d 849,
853 ¶ 7 (1982)) (emphasis added). Both statements define control in
terms of either majority stock ownership or actual control. Because
non‑profits like Trinity, having no stockholders, are unable to
demonstrate \"majority stock ownership,\" we think it not unreasonable
for the Commission to read Note 1 and the 1982 Policy Statement to
require non‑profits to show actual control by minorities.

Relying on *Southwest Texas Public Broadcasting Council*, 85 F.C.C.2d
713, 715 (1981), the Commission also contends that it has
\"long‑standing precedent, applicable to non‑stock corporations such as
NMTV, that \'control\' encompasses every form of actual or legal control
over basic operating policies.\" *Trinity*, 14 F.C.C.R. at 13602 ¶ 86.
In *Southwest Texas*, the agency \"looked beyond legal title\" at who
*actually* controlled the operation of a station licensed to a
non‑profit entity in order to determine whether the non‑profit had
illegally transferred control of the station. 85 F.C.C.2d at 715.
Although *Southwest Texas* involved a provision of the Communications
Act not at issue here, the case supports the Commission\'s general
argument that it goes beyond legal formalities---legal title in that
case and boards of directors here---to determine control.

Urging us not to defer to the Commission\'s interpretation of section
73.3555, Trinity argues that requiring *de facto* minority control
conflicts with prior Commission statements. It points first to the
Commission\'s statement that \"\[i\]n a non‑stock corporation the
Commission *normally* looks to directors in evaluating ownership and
control.\" *Hearing Designation Order*, 8 F.C.C.R. at 2475 ¶ 4 n.1
(*citing Roanoke Christian Broad., Inc.*, 52 R.R.2d 1725 (Rev. Bd.
1983)) (emphasis added). The Commission has a persuasive response:
Looking first to the board of directors as one indicator of control is
not at all inconsistent with its interpretation of section 73.3555 as
requiring that majority‑minority boards *actually control* non‑profit
corporations. Trinity next points to the Commission\'s statement in
connection with section 1.1622 (the low‑power regulation) that \"\[i\]f
a majority of the governing board \... are minorities, the entity is
entitled to a minority preference.\" *Public Notice*, Mimeo No. 6030 at
4 (released August 19, 1983). This statement, Trinity argues, forecloses
the Commission from interpreting section 73.3555 as requiring *de facto*
minority control. We disagree. The statement was made in connection with
the Commission\'s regulation governing minority preferences in the
*low‑power* market, and until this proceeding the Commission had never
addressed how section 73.3555 applies to non‑stock corporations. As the
Commission itself said when it promulgated section 73.3555, it \"has
adopted different standards of minority control depending on the
mechanism used to foster its minority policies.\" *Amendment of Section
73.3555*, 100 F.C.C.2d at 95 ¶ 46.

We are equally unpersuaded by Trinity\'s contention that the
Commission\'s interpretation of section 73.3555 conflicts with the
agency\'s position before the Supreme Court in *Metro Broadcasting*, 497
U.S. 547, where the Commission defended the intrinsic value of minority
ownership. Not only does Trinity\'s argument rely on an incorrect
assumption---that the Commission\'s previous recognition of minority
ownership\'s value bars it from taking a different position when
interpreting a different regulation---but the Commission\'s
interpretation here is not necessarily inconsistent with its prior
emphasis on ownership. Because this case involves the definition of
\"controlled\" in the context of non‑profits for which the concept of
\"ownership\" has no meaning, the Commission\'s prior emphasis on
ownership casts no doubt on its interpretation of section 73.3555.

Trinity next argues that the Commission\'s definition of
\"minority‑controlled\" undermines section 73.3555\'s purpose.
Acknowledging that section 73.3555 was designed to encourage established
broadcasters to provide support to minority broadcasters, Trinity says
that \"a *de facto* control standard could lead to exceedingly difficult
interpretive questions. A bright line \'ownership\' standard \[is\] more
workable than a more nebulous \'ownership\' and *de facto* control
standard\.... \[Bright‑line\] rules prevent \'controversy and
confusion,\' thereby \'encourag\[ing\] settled expectations and, in
doing so, foster\[ing\] investment by businesses and individuals.\' \"

Perhaps Trinity is correct. Perhaps requiring *de facto *minority
control will discourage established broadcasters, or at least non‑profit
established broadcasters, from providing the kinds of assistance that
the Commission had hoped section 73.3555 would foster and that Trinity
made available to NMTV. A challenge to an agency\'s interpretation of
its own regulation, however, turns not on whether the *challenger* has
articulated a rationale to support its interpretation, but on whether
the *agency* has offered an explanation that is reasonable and
consistent with the regulation\'s language and history. *See GE*, 53
F.3d at 1327. In this case, we have no doubt that the Commission\'s
desire to promote true minority control and to prevent sham arrangements
is sufficient to justify its interpretation of section 73.3555 as
requiring *de facto* minority control.

Finally, Trinity observes that, in a dissent from the Commission\'s
Order adopting section 73.3555, Commissioner Patrick interpreted the
regulation as not requiring *de facto* minority control: \"Under the
majority\'s scheme, the right to purchase broadcast stations over the
established ceiling turns upon the race of the proposed owners alone. No
further showing is required with respect to how these new owners may
contribute to diversity. No concern is given as to whether the 51%
minority owners will exert any influence on the station\'s programming
or will have any control at all.\" *Amendment of Section 73.3555*, 100
F.C.C.2d at 104 (Commissioner Patrick dissenting in part). Because the
majority adopting section 73.3555 neither responded to this concern nor
offered a contrary interpretation, Trinity argues that the Commission
may not now interpret section 73.3555 to give any \"concern\" to whether
the minority owners \"will have any control at all.\" In the decision on
appeal in this case, however, the Commission interpreted section 73.3555
as requiring *de facto* minority control, and it is to that decision,
not to the earlier dissent, that we owe deference.

To sum up, requiring *de facto* minority control of non‑profit
corporations represents a reasonable interpretation of section 73.3555.
Although Trinity offers a plausible alternative interpretation, we
cannot say, in view of the regulation\'s language and underlying policy,
that the Commission\'s interpretation is \"plainly wrong.\"

III

Were we simply reviewing the Commission\'s interpretation of its
regulation, our task would be at an end. But the Commission has not just
interpreted section 73.3555. Concluding that Trinity had abused
Commission processes by exercising *de facto* control over NMTV in
violation of section 73.3555, the Commission imposed a severe
penalty---denial of Trinity\'s application to renew its commercial
television station license. Because \"\[d\]ue process requires that
parties receive fair notice before being deprived of property,\" we have
repeatedly held that \"\[i\]n the absence of notice---for example, where
the regulation is not sufficiently clear to warn a party about what is
expected of it---an agency may not deprive a party of property by
imposing civil or criminal liability.\" *GE*, 53 F.3d at 1328-29. We
thus ask whether \"by reviewing the regulations and other public
statements issued by the agency, a regulated party acting in good faith
would be able to identify, with ascertainable certainty, the standards
with which the agency expects parties to conform\....\" *Id*. at 1329
(internal quotation marks omitted).

In *Satellite Broadcasting Co., Inc. v. FCC*, 824 F.2d 1 (D.C. Cir.
1987), for example, the Commission had dismissed as untimely
applications to operate radio stations, finding that the applications
had been filed in the wrong location. Because the rules addressed the
filing of applications \"in a baffling and inconsistent fashion,\" we
held that the FCC had failed to give fair notice of its interpretation
and thus could not \"use that interpretation to cut off a party\'s
right.\" *Id*. at 2, 4. In *GE*, EPA had fined General Electric for
distilling used solvents and incinerating only the contaminated portion
instead of immediately incinerating the entire solution. 53 F.3d at
1326-27. Although we deferred to EPA\'s interpretation of its
regulations as requiring immediate incineration of the entire solution,
we held that the agency could not fine GE for its failure to comply with
an interpretation that was \"so far from a reasonable person\'s
understanding of the regulations that \[the regulations\] could not have
fairly informed GE of the agency\'s perspective.\" *Id*. at 1330. *See
also, e.g., United States v. Chrysler Corp.*, 158 F.3d 1350, 1354-57
(D.C. Cir. 1998) (holding that agency failed to provide fair notice of
specific requirements of compliance testing and government therefore
could not seek an automobile recall on the ground that Chrysler had
failed properly to perform the testing); *Rollins Envtl. Svcs. (NJ) Inc.
v. EPA*, 937 F.2d 649, 653 (D.C. Cir. 1991) (rescinding fine assessed by
EPA because regulation was ambiguous); *Gates & Fox Co., Inc. v. OSHRC*,
790 F.2d 154, 156 (D.C. Cir. 1986) (holding that agency failed to give
fair notice of its interpretation that breathing equipment was required
where the regulation \"would reasonably be read\" not to require the
equipment).

Conceding that the denial of a broadcast license triggers due process
protection, the Commission argues that section 73.3555 gave fair notice
that non‑profit entities had to demonstrate *de facto* minority control.
Trinity disagrees. Not only did section 73.3555 itself fail to make
clear that non‑profits had to show anything other than a
majority‑minority board, Trinity argues, but Commission statements in
connection with the low‑power minority preference regulation, together
with Commission action on Trinity\'s high‑power applications, led it to
believe that a majority‑minority board was sufficient.

We begin again with section 73.3555\'s requirement that an entity be
\"minority‑controlled.\" This time we ask not whether interpreting the
term \"minority‑controlled\" as requiring *de facto* minority control in
the non‑profit context is \"plainly wrong,\" but whether that
interpretation is \"ascertainably certain.\" Although section 73.3555
never defines \"minority‑controlled\" in the context of non‑profit
organizations, the Commission maintains that section 73.3555\'s use of
the word \"controlled\" should have made clear to Trinity that the
agency was interested in actual control. Under the circumstances of this
case, we disagree.

To begin with, the Commission never clearly articulates its theory of
where or how section 73.3555 requires \"actual minority control.\" At
various points in both its decision and in its brief here, the
Commission appears to contend that the term \"minority‑controlled\"
requires an entity to show that minorities have *either* majority stock
ownership *or* actual control; since non‑profits lack stock owners and
cannot show that they are \"more than 50 percent owned by one or more
members of a minority group,\" they must demonstrate actual minority
control. *See, e.g.*, 14 F.C.C.R. at 13603-04 ¶ 88 (\"\[W\]hat the
Commission had in mind was 50 percent ownership that constitutes voting
control or an equivalent degree of interest.\"). Elsewhere, however, the
Commission seems to agree with Trinity that \"stock ownership\" means
board membership in the non‑profit context. Viewed this way, the actual
control requirement stems from the word \"ownership\"---entities must
demonstrate not only that minorities own more than fifty percent of the
stock or that they have majority‑minority boards, but also that those
\"ownership\" interests are *bona fide*. *Id*. at 13604 ¶ 90 (\"\[T\]he
Commission has consistently required that minorities have both a
substantial equity interest and actual control of the station.\"). In
other words, both non‑profits and stock corporations would have to show
*de facto* minority control. As we said of a similar situation in *GE*,
\"\[s\]uch confusion does not inspire confidence in the clarity of the
regulatory scheme.\" 53 F.3d at 1332.

The Commission argues that \"\[a\] reasonable reader could have
ascertained that a regulation requiring \'minority control\' by
implication forbade control by non‑minorities.\" This argument might
have some force but for the fact that the Commission\'s only clear
statements (until it refused to renew Trinity\'s Florida license) about
what constituted minority control over \"non‑stock corporations\" like
Trinity were these: \"If a majority of the governing board \... are
minorities, the entity is entitled to a minority preference,\" *Public
Notice*, Mimeo No. 6030 at 4 (released August 19, 1983); and \"\[w\]e
agree \... that nonstock corporations \... should be judged as to
minority status on the basis of the composition of the board.\" *Random
Selection Lotteries*, 93 F.C.C.2d at 977. To be sure, the Commission
made these statements in connection with section 1.1622, the low‑power
minority preference rule, but section 1.1622\'s language is virtually
identical to section 73.3555\'s: the former granted minority preferences
to \"\[a\]pplicants, more than 50% of whose ownership interests are held
by members of minority groups,\" 47 C.F.R. § 1.1622(b)(1); the latter
granted preferences to entities \"more than 50 percent owned by one or
more members of a minority group.\" 47 C.F.R. § 73.3555(d)(3)(iii)
(1990). Applicants could thus have assumed, quite reasonably we think,
that section 1.1622\'s statements regarding non‑stock corporations
applied equally to section 73.3555. And just as those statements \"may
well have \... confused\" low‑power applicants, as the Commission itself
found, *Trinity*, 14 F.C.C.R. at 13601 ¶ 85, they may have \"confused\"
high‑power applicants like Trinity.

The Commission responds that the *absence* of a similar statement in
connection with section 73.3555 should have alerted Trinity that a
majority‑minority board was *in*sufficient for section 73.3555 purposes.
But the standard is \"ascertainable certainty.\" Although we agree with
the Commission that its statements in the low‑power context do not
\"carr\[y\] over automatically\" into the full‑power realm, we also
think that where, as here, the agency failed to provide a relevant
definition for the key regulatory term---\"minority‑controlled\"---the
applicant is entitled to rely on the agency\'s prior interpretation of a
nearly identical regulation. *See Satellite Broad.*, 824 F.2d at 4
(\"The Commission through its regulatory power cannot, in effect, punish
a member of the regulated class for reasonably interpreting Commission
rules. Otherwise the practice of administrative law would come to
resemble \'Russian Roulette.\' \").

Given the facts of this case, Trinity\'s interpretation of section
73.3555 as requiring only a majority‑minority board is particularly
understandable. After NMTV\'s predecessor, TTI, applied for
low‑power/translator television licenses, the Commission issued its
low‑power/translator television minority preference regulation along
with its statement \"that non‑stock corporations \... should be judged
as to minority status on the basis of the composition of the board.\"
*Random Selection Lotteries*, 93 F.C.C.2d at 977. Issuing a Public
Notice informing TTI and other low‑power/translator television license
applicants of section 1.1622\'s passage and instructing them to complete
supplemental forms regarding their eligibility for minority preferences,
the Commission reiterated: For \"non‑stock corporations \... \[i\]f a
majority of the governing board \... are minorities, the entity is
entitled to a minority preference.\" *Public Notice*, Mimeo No. 6030 at
4 (released August 19, 1983). When NMTV moved into the high‑power,
commercial television realm with its Odessa license application, nothing
in section 73.3555 signaled that the Commission might require non‑stock
corporations to demonstrate anything beyond a majority‑minority board.
No wonder Crouch, acting on the advice of counsel, assumed that if the
company was entitled to a minority preference under the low‑power
regulation, the Commission would consider it \"minority‑controlled\"
under the virtually identical high‑power regulation. NMTV\'s commercial
television station license applications, moreover, disclosed that NMTV
was operating on exactly that belief. In support of NMTV\'s claims to
minority preferences, the applications stated that \"a majority of its
directors are minorities, and NMTV is therefore minority controlled.\"
Based on both these representations and its own investigation into
NMTV\'s license application, the Commission awarded NMTV the Odessa
license. May testified that the award of the Odessa license \"further
confirmed my belief that NMTV\'s structure complied with Commission
policy.\" Not until the Commission began inquiring into NMTV\'s
application for the Wilmington license did the agency give NMTV any
reason to believe that \"minority‑controlled\" might mean something
beyond a majority‑minority board.

Neither Note 1 nor the Commission\'s footnote reference to its 1982
Policy Statement gave Trinity \"fair notice\" that the Commission was
abandoning its low‑power approach and interpreting section 73.3555 to
require minority directors of non‑profit organizations to demonstrate
actual control. Even setting aside the fact that the 1982 Policy
Statement appears only in a footnote, *see McElroy Electronics Corp. v.
FCC*, 990 F.2d 1351, 1366 (D.C. Cir. 1993) (cautioning the Commission
\"not to bury what it believes to be the heart of its order in the last
line of a footnote\"), because the Commission has equated seats on
non‑profit boards with \"ownership\" in other contexts, *see Hearing
Designation Order*, 8 F.C.C.R. at 2475 ¶ 4 n.1 (\"In a non‑stock
corporation the Commission normally looks to directors in evaluating
ownership and control.\") (*citing Roanoke*, 52 R.R.2d 1725), a
non‑profit applicant could reasonably interpret Note 1 and the 1982
Policy Statement to mean that a non‑profit entity would have to show
either that it had a majority‑minority board or that minorities had
actual control, not both. *See Trinity*, 14 F.C.C.R. at 13628-30
(Commissioners Furchtgott-Roth and Powell, dissenting in part).

Nor can we find \"ascertainable certainty\" in *Southwest Texas*.
Perhaps in hindsight the Commission\'s action in that case---determining
whether an unauthorized transfer of control had occurred by going beyond
the formality of legal title to examining a television station\'s actual
operations---could reflect a \"long‑standing\" policy of looking at
actual, rather than formal, control. But the Commission had given no
indication that a general policy expressed in *Southwest Texas*, a case
arising in a different factual setting under a different provision of
the Communications Act, would transfer to section 73.3555\'s definition
of \"minority‑controlled.\"

Finally, section 73.3555\'s underlying purpose cannot provide the fair
notice required by due process. Before an agency can sanction a company
for its failure to comply with regulatory requirements, the agency
\"must have either put this language into \[the regulation\] itself, or
at least referenced this language in \[the regulation\].\" *Chrysler*,
158 F.3d at 1356. General references to a regulation\'s policy will not
do.

We find the Commission\'s insistence that section 73.3555 provided fair
notice particularly problematic in view of the Commission\'s failure to
explain satisfactorily how denying Trinity\'s license can be reconciled
with cases where it found regulatory requirements too unclear to justify
sanctioning other broadcasters. In *Fox Television Stations, Inc.*, 10
F.C.C.R. 8452 (1995), *on reconsideration*, 11 F.C.C.R. 5714 (1995), for
example, the Commission ruled that when determining whether a licensee
had exceeded a twenty‑five percent statutory benchmark for alien
ownership, it would measure \"ownership\" by considering the percentage
of alien equity capital contributions rather than the percentage of
outstanding shares of all classes of stock held by aliens. Measured by
that standard, Fox\'s alien ownership far exceeded the statutory
benchmark because \"foreign interests contributed more than 99% of the
capital of all classes of stock,\" a fact that Fox\'s applications
failed to reveal. *Id*. at 8474 ¶ 50. Concluding, however, that Fox\'s
interpretation of the statute as requiring it to report only the
percentage of alien stock ownership was \"not facially implausible,\"
*id*. at 5808 ¶ 137, and that \"our reported decisions \... would not
*necessarily* have led a reasonable applicant\" to the conclusion that
the Commission would measure ownership in terms of equity contributions,
the Commission chose not to deny Fox\'s license renewal. *Id*. at 8486 ¶
82 (emphasis added). The Commission reached a similar result in *CBS,
Inc*., 69 F.C.C.2d 1082, 1092-93 (1978), refusing to deny CBS licenses
in spite of the company\'s \"misrepresentations\" to the Commission:
\"Since there have been no prior cases of a similar nature to serve as
examples \... network management heretofore has not been made aware \...
of the grave consequences to the licensee which can result from such
misrepresentations of facts to the Commission.\" *See also Roy M.
Speer*, 11 F.C.C.R. 18393, 18422-23 (1996) (concluding that Silver King,
a Home Shopping Network spin‑off, had violated the FCC\'s ownership
attribution rules, but refusing to revoke its license \"given the
various legal conclusions that can be drawn from Silver King\'s
documented activities.\")

If Fox\'s \"not facially implausible\" interpretation did not warrant
denying its license renewal application, how can Trinity\'s \"perhaps
literally accurate\" (the Commission\'s own words) interpretation
justify denying its license renewal application? If the absence of
\"prior cases of a similar nature to serve as examples\" persuaded the
Commission not to sanction CBS for its misrepresentations, how can the
Commission justify penalizing Trinity in view of the fact that not only
was there no agency precedent regarding control of non‑profits, but
Commission statements supported Trinity\'s belief that a
majority‑minority board was sufficient to obtain a minority preference?
The Commission never answers these questions---not in its decision, not
in its brief, not at oral argument. *See Orion Communications Ltd. v.
FCC*, 131 F.3d 176, 181 (D.C. Cir. 1997) (\"Although the Commission is
not necessarily bound by its prior decisions, \... the Commission is
bound to provide an explanation when it departs from a clear
precedent.\").

For all of these reasons, our conclusion in *GE* applies here as well:
\"Where, as here, the regulations and other policy statements are
unclear, where the petitioner\'s interpretation is reasonable, and where
the agency itself struggles to provide a definitive reading of the
regulatory requirements, a regulated party is not \'on notice\' of the
agency\'s ultimate interpretation of the regulations, and may not be
punished.\" 53 F.3d at 1333-34.

IV

The Commission contends that even \"\[i\]f the Court disagrees with our
assessment\" that the regulation clearly required *de facto* minority
control, \"it may still find that TBN intended to mislead the Commission
by creating a sham ownership structure\....\" Conceding that the
commercial television station application asked for information about
neither the TBN/NMTV relationship nor Duff\'s employment with TBN, the
Commission faulted Trinity because \"\[a\] reasonable person could
appreciate that if all the circumstances had been made clear, the
Commission would have had ample reason to inquire further and ultimately
to deny NMTV\'s application.\" *Trinity,* 14 F.C.C.R. at 13601 ¶ 84. But
this argument rests entirely on the Commission\'s flawed conclusion that
the regulation clearly required *de facto* minority control. Unless the
*de facto* control requirement was ascertainably certain, a \"reasonable
person\" would not have been able to \"appreciate\" the need to disclose
these facts. Indeed, in view of the low‑power regulation\'s statement
that a majority‑minority board entitled an entity to a minority
preference, a \"reasonable person\" might well have thought that
information about the relationship between NMTV and TBN was irrelevant.
Asked about this at oral argument, Commission counsel candidly conceded
that if the regulation was not clear, Trinity would have had no
obligation to disclose the omitted information because it would not have
known that the information was at all \"material.\"

The Commission also argues that Trinity had actual notice of the *de
facto* control requirement. Not only does this amount to a *post‑hoc*
rationalization---the Commission nowhere relied on actual knowledge as a
basis for finding abuse of process, *see SEC v. Chenery*, 318 U.S. 80,
95 (1943) (\"\[A\]n administrative order cannot be upheld unless the
grounds upon which the agency acted in exercising its powers were those
upon which its action can be sustained.\")---it also rests on the
Commission\'s misleading use of a fragment of the testimony of
Trinity\'s lawyer, Colby May. The Commission\'s brief quotes May as
saying: \" \'I understood always that the Board of Directors of \[NMTV\]
had to be the parties that were in fact controlling and operating
\[NMTV\].\' \" The Commission neither quotes nor acknowledges the second
half of May\'s sentence: \"\... and they did that by coming to meetings,
participating in the discussions at meetings, voting at meetings, and
generally directing the policies and affairs of the company.\" It was
because of this advice that, after NMTV was awarded the Odessa license,
its board began observing these formalities. Asked about all of this at
oral argument, Commission counsel conceded that there was no actual
notice and that if we were to disagree with the Commission\'s conclusion
that the regulation was clear, \"that\'s the end of the case.\"

The Commission\'s denial of Trinity\'s license renewal application is
vacated.

*So ordered*.