Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-92-01664/USCOURTS-caDC-92-01664-0/pdf.json

Parties Involved:
Wendy C. Coleman
Intervenor
Federal Communications Commission
Appellee
Florida Cellular Mobil Communications Corporation
Appellant
JAJ Cellular
Intervenor

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 10, 1994 Decided July 15, 1994

No. 92-1664

FLORIDA CELLULAR MOBIL COMMUNICATIONS CORPORATION,

APPELLANT

v.

FEDERAL COMMUNICATIONS COMMISSION,

APPELLEE

WENDY C. COLEMAN, DOING BUSINESS AS WCC CELLULAR;

JAJ CELLULAR,

INTERVENORS

Appeal of an Order of the

Federal Communications Commission

Michael D. Sullivan argued the cause for appellant. With him on the briefs was Gary Bellow.

Daniel M. Armstrong, Associate GeneralCounsel, FederalCommunicationsCommission, argued the

cause for appellee. With him on the brief were William E. Kennard, GeneralCounsel, Jane E. Mago,

Assistant GeneralCounsel, and John P. Greenspan, Counsel, FederalCommunicationsCommission.

John E. Ingle, Deputy Associate General Counsel, and Roberta L. Cook, Counsel, Federal

Communications Commission, entered an appearance.

John D. Seiver argued the cause for intervenor WendyC. Coleman. With him on the brief was James

F. Ireland, III.

Harry F. Cole entered an appearance for intervenor JAJ Cellular.

Before: MIKVA, Chief Judge, SENTELLE, Circuit Judge, and MACKINNON, Senior Circuit

Judge.

Opinion for the Court filed by Senior Circuit Judge MACKINNON.

MACKINNON, Senior Circuit Judge: Florida Cellular Mobil Communications Corporation

("Florida Cellular") appeals from decisions of the Federal Communications Commission

("Commission" or "FCC") that dismissed the company's application for a license to construct and

operate a cellular communicationssystemin southern Maryland and along Maryland'sEastern Shore.

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The Commission dismissed the application as "unacceptable for filing" because one of Florida

Cellular's shareholders held an interest in a competing applicant in violation of the FCC's multiple

ownership regulations. Because the regulations clearly provided that multiple ownership interests in

competing applicants were prohibited, and Florida Cellular was on notice that its application was

subject to dismissalfor non-compliance with FCCregulations, we affirmthe Commission's decisions.

I. BACKGROUND

In the early 1980's the Commission established procedures to determine which applicants

would be issued licenses to construct and operate cellular communications systems in the larger

metropolitan areas within the United States. The Commission refers to these areas as Metropolitan

Service Areas. The Commission permitted parties to these applications to have multiple ownership

interests of less than 17 in competing applicants in order to provide some latitude for the parties to

form business relationships. Cellular Lottery Order, 98 F.C.C.2d 175, 217-18 (1984), recon., 101

F.C.C.2d 577 (1985), furtherrecon., 59 Rad. Reg. 2d (P & F) 407 (1985). The procedures adopted

by the Commission allow for licenses to be issued to two carriers within each of the Service Areas,

with one license reserved for "wireline" carriers (telephone companies) and the other reserved for

"nonwireline" carriers (applicants other than telephone companies).

In order to streamline the licensing process and to provide cellular service to the public in a

more timely manner, the Commission has since 1984 selected the tentative licensee from among

competing applicants through a lottery, as authorized by section 309(i) of the Communications Act,

47 U.S.C. § 309(i) (1988), rather than through competitive hearings. Each facially complete

application is qualified to be included in a lottery for a particular Service Area license upon the

applicant's certification that the application is complete and contains all the information required by

the application form and the FCC regulations. Cellular Lotteries Further Reconsideration Order,

59 Rad. Reg. 2d (P & F) 407, 410 & n.16 (1985). To speed the selection process, however, once

the application isfiled, the FCC rules prohibit applicantsfrom filing amendmentsto their applications

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1Once the lottery is complete, the tentative selectee is permitted to file certain minor

amendments. 47 C.F.R. § 22.918(b) (1993). 

until the lottery produces the tentative selectee for the relevant market.1 Cellular Lottery Order, 98

F.C.C.2d 175, 220 (1984); 47 C.F.R. § 22.918(b) (1993). Once filed, the Commission does not

review the applications further until the lottery is completed.

When the lottery produces a tentative selectee, the Commission reviews only the selected

application to determine whether it is "acceptable for filing," i.e., whether it complies with the FCC

procedural and substantive rules and regulations. 47 C.F.R. § 22.20(a)(2) (1993). One of the

Commission's principal cellular rulemaking ordersstatesthat "the tentative selectee's application will

be carefully reviewed to ensure its compliance with the cellular application standards and will be

dismissed for failure to do so." Cellular Lotteries Further Reconsideration Order, 59 Rad. Reg. 2d

(P & F) 407, 410 (1985). The FCC rules also provide:

(a) Unlessthe Commission shall otherwise permit, an applicationwillbe unacceptable

for filing and will be returned to the applicant ... if:

(2) The application does not complywith theCommission'srules, regulations,specific

requirements for additional information or other requirements.

47 C.F.R. § 22.20(a)(2) (1993). If it determines that the application is acceptable, the Commission

provides public notice as to the identity of the tentative licensee. Competing applicants are then

entitled to challenge the application ofthe tentative licensee byfiling petitionsto deny the application.

In 1985, the Commission established procedures for processing applications for cellular

licenses in the remaining areas of the country, the so-called Rural Service Areas. Although most of

the procedures established for the Metropolitan Service Area application process applied, the

Commission's experience inprocessing the applicationsfortheMetropolitanServiceAreas convinced

the Commission to change some ofthe regulationsfor the processing ofthe applicationsfor the Rural

Service Areas. The Commission amended its regulations concerning partial settlements, multiple

ownership interestsin more than one applicant for the same Rural Service Area license, and transfers

ofinterestsinRural Service Area applications. See Amendment of the Commission's Rulesfor Rural

Cellular Service, 64 Rad. Reg. 2d (P & F) 1382, 1383 (1988) [hereinafter "Cellular Amendment "].

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2The Commission described a "partial settlement" as:

any arrangement among fewer than all of the applicants in a market that provides

any reciprocal interests in the applications of the parties to the arrangement. The

term includes the so-called "alliance agreements" whereby each participant in the

alliance agrees that if it wins a particular market it will retain at least 50.17 of the

application and that the other members of the alliance will each obtain a maximum

interest of 0.997 in the winning application.

Cellular Amendment, 64 Rad. Reg. 2d at 1383 n.3. 

The Commission found that allowing multiple ownership interests of less than 17 in competing

cellular applications encouraged applicants to enter into partial settlements2 whereby the applicants

made mutual promisesto conveya portion oftheir intereststo other members ofthe settlement group

upon being selected as the tentative selectee. In turn these partial settlements delayed the

inauguration of service to the public because they encouraged losing applicants to file petitions to

deny the winning applications alleging that the tentative selectees were not the real partiesin interest.

To prevent this delay in inaugurating cellular service in the Rural Service Areas, the Commission

adopted 47 C.F.R. § 22.921 which in relevant part provides:

For Rural Service Areas, no party to a non-wireline application shall have an

ownership interest, direct or indirect, in more than one application for the same Rural

Service Area, including an interest of less than one percent.

47 C.F.R. § 22.921(b) (1993). The Commission also acted to prevent the delay associated with the

pre-licensing transfer or assignment of cellular applications. Noting that such transfers required the

Commission to restart the application processing cycle and to issue a new public notice which "results

in the disruption of orderly processing, slows the initiation of service to the public, and is not in the

public interest," Cellular Amendment, 64 Rad. Reg. 2d at 1387, the Commission also adopted 47

C.F.R. § 22.922 which at the relevant time provided:

Notwithstanding any other section of this Part, the sale, transfer, assignment or other

alienation of any cellular application to offer service to Rural Service Areas is

prohibited prior to the grant of a construction authorization. This restriction on

transfers of interests in such cellular applications shall include any form of alienation,

including option arrangements and agreements, as well as equity and debt placement

plans.

47 C.F.R. § 22.922(a) (1988).

II. FACTS

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Florida Cellular was organized in 1983 for the purpose of filing applications to provide

cellularservice in seven ofthe Metropolitan Service Areas. Yerger Yandell was one of the company's

original shareholders, having paid $10,000 for an 0.857 interest in Florida Cellular. Although the

company had hired counsel to prepare and file the applications, no applications were ever filed on

Florida Cellular's behalf for these areas. In 1984, Mr. Yandell moved to a new residence without

notifying the company of his new address, apparently believing that the company was defunct.

Although Florida Cellular began mailing periodic notices to its shareholders in 1984, Mr.

Yandell did not receive any of these notices, and at least one was returned to the company marked

"Unable to deliverno forwarding address." In 1987, Florida Cellular reached a settlement with the

attorney it had hired to prepare and file its Metropolitan Service Area applications whereby the

attorney agreed to prepare and file 125 applications for the Rural Service Areas on behalf of the

company.

Many of the notices that Florida Cellular sent to its shareholders in 1988 involved the

company's intent to file applications for the Rural Service Areas. These notices also apprised the

shareholders of the Commission's new rules for the filing of these applications, including the rule

prohibiting the ownership of interests in competing applicants.

The Maryland 2 market, comprised ofmuch ofsouthernMaryland and the Eastern Shore, was

among the Rural Service Areas for which Florida Cellular filed an application. Kudzu Cellular

Partnership ("Kudzu"), a company in which Mr. Yandellowned a 57 interest, also filed an application

for this area. When the lottery was conducted on November 22, 1989, Florida Cellular was selected

asthe tentative selectee. Following its selection, Florida Cellular updated its shareholder mailing list

and obtained Mr. Yandell's new address. In a letter dated December 21, 1989, the company notified

its shareholders, including Mr. Yandell, that it had been selected in the lottery for the Maryland 2

market. Mr. Yandell thereafter notified the company of his interest in Kudzu.

Before the Commission issued its public notice designating Florida Cellular as the tentative

selectee for the Maryland 2 market, counselfor Mr. Yandell and Florida Cellular informally disclosed

Mr. Yandell's dual interests to the Commission. On March 26, 1990, the Commission issued the

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public notice naming Florida Cellular asthe tentative selectee for the Maryland 2 market, and, on that

same date, a Commission staff member apparently notified the company that, in the absence of a

petition to deny Florida Cellular's application, Mr. Yandell's dual interest would likely not be

disqualifying provided that he was removed from one of the applications.

Florida Cellular, claiming that the multiple ownership violation was inadvertent and minor,

subsequently petitioned the Commission for a waiver of 47 C.F.R. § 22.922, which would permit the

company to repurchase Mr. Yandell'sstock and bring its application into compliance with 47 C.F.R.

§ 22.921. Before the Commission acted on this petition, a losing applicant, JAJ Cellular Partnership

("JAJ"), filed a petition to deny the application, claiming that the proposal to repurchase the stock

might allow Mr. Yandell to realize a substantial profit. In response to JAJ's petition, Florida Cellular

submitted an executed agreement that allowed the company to repurchase Mr. Yandell's stock at his

original purchase price.

The Mobile Services Division of the Commission's Common Carrier Bureau dismissed the

applications of both FloridaCellular and Kudzu on January18, 1991. The decision stated that Florida

Cellular's application was defective at the time it wasfiled and noted that such a defective application

could not be amended to bring it into compliance with Commission rules. Florida Cellular Mobile

Communication Corp., 6 F.C.C.R. 354, 355 (Mob. Serv. Div. 1991). Florida Cellular filed a petition

for reconsideration claiming that "a policy decision ... to reject all non-wireline [Rural Service Area]

applicationsthat violate anyrule, without independentlyconsidering the facts of each case[, a]lthough

administratively convenient, ... would be wholly arbitrary and contrary to the public interest." App.

at 130. The Commission, noting that "[a] rule such as Section 22.921 could not be efficiently applied

if a fact-specific analysis of intent were required in particular cases," Florida Cellular Mobil

Communications Corp., 6 F.C.C.R. 6910, 6910 (1991), denied the company's petition for

reconsideration. On December 1, 1992 the Commission denied the company's second petition for

reconsideration, stating that "[Florida Cellular's] responsibility to keep its stockholders advised of

matters that could lead to violation of Section 22.921, and Yandell's responsibility to comply with

Section 22.921 each establish a dutywhich, with reasonable exercise of diligence, could have avoided

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violation of Section 22.921 and application dismissal." Florida Cellular Mobile Communications

Corp., 7 F.C.C.R. 7856, 7857 n.6 (1992). Following the Commission's denial of its second petition

for reconsideration, Florida Cellular filed this appeal.

III. DISCUSSION

Florida Cellular advances three arguments to support its contention that the Commission

improperly dismissed its application. First, Florida Cellular asserts that the Commission's application

of its multiple ownership rules was arbitrary and capricious. Second, the company contends that the

Commission's refusal to grant a waiver to Florida Cellular constituted an abuse of discretion. And

finally, the company contendsthat the Commission denied it due process oflaw. We will first discuss

the appropriate standard of review to be applied, and then we will address each of these arguments

in turn.

A. The Standard of Review

Typically, we approach decisions based on an agency'sinterpretation of its governing statute

and its regulations with all due deference. See Udall v. Tallman, 380 U.S. 1, 16-17 (1985). Florida

Cellular suggests that the court should apply heightened scrutiny to the Commission's actions under

review in this case because the Commission has changed its rules and policies regarding multiple

ownership interestsincompeting cellular applicants. The company implies that these changes indicate

"that the agency has not really taken a "hard look' at the salient problems, and has not genuinely

engaged in reasoned decision-making." Greater Boston Television Corp. v. FCC, 444 F.2d 841, 851

(D.C. Cir. 1970), cert. denied, 403 U.S. 923 (1971) (footnote omitted).

If an agency is to function effectively, however, it must have some opportunity to amend its

rules and regulations in light of its experience. As this court has recently stated, "the fact that an

agency rule represents a change in course simply requires courts to make sure that prior policies are

being deliberately changed, not casually ignored, and that the agency has articulated permissible

reasons for that change." Clinton Memorial Hosp. v. Shalala, 10 F.3d 854, 859 (D.C. Cir. 1993)

(citations and internal quotation marks omitted).

When the Commission adopted the new rules that were to govern the licensing process for

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the Rural Services Areas, it issued a report explaining the reasons behind these changes. According

to the report, the Commission "concluded, after carefully reviewing all comments filed in this

proceeding and our experiencesinprocessing the approximately 100,000 [Metropolitan Service Area]

applications, that prohibiting non-wireline partial settlements would be in the public interest."

Cellular Amendment, 64 Rad. Reg. 2d at 1385. This report describes a number of problems in the

processing of the Metropolitan Service Area applications that could be traced to the partial

settlements. These problems included increased litigation and subsequent delay of construction

authorizations, the filing of applications by non-bona fide applicants, and the filing of petitions to

deny the winning application, questioning whether a winning applicant was the real party in interest.

Id.

As far as the multiple ownership rules were concerned, the report states:

The 17 exception provided a basisinmanymarketsfor hundreds of applicantsto enter

partial settlements or alliances and then, if they became tentative selectee, to dilute

their interests pursuant to the agreements that they signed with marketeers of

applications. Parties filed petitions to deny alleging that such tentative selectees were

not the real party in interest in their applications. Those petitions delayed the

authorizations. Therefore, consistent with our ban on non-wireline partial settlements,

we find no justification for retention of the multiple ownership exception for the

non-wireline applicants.

Id. at 1387 (footnotes omitted). This analysis demonstrates that the Commission did not "casually

ignore" its prior policy concerning partial settlements, multiple ownership interests, and

pre-authorization transfers of interests in cellular applications, but instead, deliberately changed it.

Furthermore, the avoidance of the processing problems and service delays caused by these factors

is certainly a permissible reason for the change, especially given this Court's prior admonition "that

it is high time to move cellular telephone services from the FCC's regulatory process to the

marketplace. To ignore this point would be to ignore Congress' fundamental mandate to the FCC

to make communications systems available to the public." MCI Cellular Tel. Co. v. FCC, 738 F.2d

1322, 1328-29 (D.C. Cir. 1984) (citing 47 U.S.C. § 151 et seq. (1988)).

The rule changes that the Commission made in this case were a reasonable response to the

problems that the Commission experienced in processing applications and granting licenses for the

Metropolitan Service Areas. Such changes do not indicate that the Commission acted with the kind

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of "mindless inconsistency and equivocation that signals arbitrariness." Telocator Network of Am.

v. FCC, 691 F.2d 525, 540 (D.C. Cir. 1982). Therefore, we reject Florida Cellular's suggestion that

the rule changes make it appropriate to apply "heightened scrutiny" to the Commission actions that

the company is challenging on this appeal.

B. The Commission's Dismissal of Florida Cellular's Application

Florida Cellular raises a number of points in arguing that the Commission's dismissal of its

application was arbitrary and capricious. Florida Cellular contends that the Commission cannot

reasonably read itsrulesin such a way that the Commission can hold the company responsible for Mr.

Yandell's actions. This argument simply misconstrues the motive behind the Commission's actions

in this case. The Mobile Services Division dismissed Florida Cellular's application after finding that

the company had filed a defective application. See Florida Cellular Mobile Communication Corp.,

6 F.C.C.R. at 355. It was the applicant's responsibility to ensure that the application it submitted was

complete and complied with the FCC substantive and procedural rules. When the application was

submitted, an authorized representative of Florida Cellular was required to certify to the following:

I hereby certify, under penalties of perjury, this application for an initial

cellular authorization is complete in every respect and contains all of the information

required by FCC Form 401 and the Commission's cellular application rules. I

acknowledge that if, upon Commission inspection, this certification is shown to be

incorrect, this application shall be dismissed without further consideration.

47 C.F.R. § 22.923(b)(7) (1993). The Commission also stated that Florida Cellular could have

avoided a violation of § 22.921 and application dismissal if it had exercised reasonable diligence in

performing itsresponsibility to keep itsstockholders advised of mattersthat could lead to violations.

See Florida Cellular Mobile Communications Corp., 7 F.C.C.R. at 7857 n.6. Although Mr.

Yandell's dual interests caused the violation, the Commission could properly dismiss the application

for Florida Cellular's failure to file an application that complied with the FCC rules, an act that was

the company's responsibility to perform.

Florida Cellular also alleges that the Commission acted arbitrarily and capriciously because

the Commission dismissed the company's application without considering "what sanction is most

appropriate, given the facts ofthe case and the purpose that the rule isintended to serve." Appellant's

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Br. at 32. We must reject this argument. When reviewing agency decisions, this court does not

require agencies to justify their actions as the "most appropriate" under the circumstances. Under

the Administrative Procedure Act, we must affirm an agency's orders unless they are arbitrary,

capricious, an abuse of discretion, or not in accordance with the law. 5 U.S.C. § 706(2)(A) (1988).

The scope of review under this standard is "narrow," and a reviewing court is not to substitute its

judgment for that of the agency. Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463

U.S. 29, 43 (1983). The court's duty is to ensure that the Commission has "examined the relevant

data and articulated a satisfactory explanation for its action," id. at 43, based on the materials that

were before the Commission at the time its decision was made.

In this case the Commission decided to dismiss an application that it found to be

"unacceptable for filing" because a shareholder's dual ownership interests in competing applicants

violated the FCCrules. On a number of prior occasions when the Commission has promulgated "hard

look" rules for the purposes of expediting the processing of applications and of providing a quick,

simple method of selecting a prospective licensee, we have upheld the Commission's dismissal of an

application that violated one of the FCC's technical rules as a proper exercise of the Commission's

discretion. See Moving Phones Partnership L.P. v. FCC, 998 F.2d 1051, 1057 (D.C. Cir. 1993)

(upholding the FCC's dismissal of applications for cellular licenses because applying partnerships

included aliens among their general partners in violation of the Communications Act), cert. denied,

62 U.S.L.W. 3640 (U.S. Mar. 28, 1994) (No. 93-1074); Russian River Vintage Broadcasting v.

FCC, 5 F.3d 1518, 1521 (D.C. Cir. 1993) (upholding FCC's dismissal of application for FM radio

station license for failure to provide verifiable transmitter site information); Malkan FM Assocs. v.

FCC, 935 F.2d 1313, 1320 (D.C. Cir. 1991) (upholding FCC's dismissal of an application for FM

radio station license for failure to comply with antenna height limits). The Commission's rules and

orders put the applicants on notice that their applications would be subject to dismissal for failure to

comply with the FCC procedural and substantive rules. See supra at 3-4. Therefore, we find that

the Commission did not act arbitrarily or capriciously in dismissing Florida Cellular's application for

itsfailure to complywith the Commission's "hard look" cellular application rules concerning multiple

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ownership interests. Because the dismissal was neither arbitrary nor capricious, the decision to

dismiss was one properlywithin the Commission's discretion, and we willnotsubstitute our judgment

to determine whether this sanction was the "most appropriate."

Florida Cellular also arguesthat its application should be reinstated because the Commission

"gave no notice that applications would be subject to dismissal as unacceptable for filing for minor

passive shareholders' unintentional multiple application interests." Appellant's Br. at 34. What this

court hasstated in addressing similar argumentsin the context of applicationsfor licensesto build and

operate FM radio stations applies here with equalforce. In Glaser v. FCC, 20 F.3d 1184, 1186 (D.C.

Cir. 1994), the court stated that "[t]here can be no doubt of the FCC's authority to impose strict

proceduralrulesin order to cope with the flood of applicationsit receives or expectsto receive." See

also JEM Broadcasting Co. v. FCC, No. 93-1099, slip op. at 15-16 (D.C. Cir. May 6, 1994).

However, when the Commission does impose such strict procedural rules, "fundamental fairness ...

requires that an exacting application standard, enforced by the severe sanction of dismissal without

consideration on the merits, be accompanied by full and explicit notice of all prerequisites for such

consideration." Salzer v. FCC, 778 F.2d 869, 871-72 (D.C. Cir. 1985). As far as the cellular

applications are concerned, the Commission promulgated a rule prohibiting multiple ownership

interests in competing applicants, including ownership interests of less than 17. The notices that

Florida Cellular sent to its shareholders indicate conclusively that the company had actual notice of

this rule. See supra at 6. The Commission's rules and orders also provided notice that applications

would be subject to dismissal for failure to comply with the FCC rules and regulations. As the court

stated in JEM Broadcasting, Florida Cellular "was entitled to no more than this clear and explicit

notice." Slip op. at 17. The Commission need not supply a separate "shopping list" specifying that

each separate rule violation may lead to dismissal. It is enough that the FCC rules are clearly spelled

out and applicants are on notice that their applications are subject to dismissal for failure to comply

with these rules.

C. The Commission's Refusal to Grant Florida Cellular a Waiver

Florida Cellular next argues that the Commission abused its discretion when it denied the

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company's request for a waiver of 47 C.F.R. § 21.922 that would have permitted the company to

repurchase Mr. Yandell's shares. Generally, "[w]hen an applicant seeks a waiver of a rule, it must

plead with particularity the facts and circumstances which warrant such action." Rio Grande Family

Radio Fellowship, Inc. v. FCC, 406 F.2d 664, 666 (D.C. Cir. 1968). When such a request is "stated

with clarityand accompanied bysupporting data, [it is] notsubject to perfunctorytreatment, but must

be given a "hard look.' " WAIT Radio v. FCC, 418 F.2d 1153, 1157 (D.C. Cir. 1969). However, a

party challenging the Commission's refusal to grant a waiver "must show that the agency's reasons

for declining the waiver were "so insubstantial as to render that denial an abuse of discretion.' "

Thomas Radio Co. v. FCC, 716 F.2d 921, 924 (D.C. Cir. 1983) (quoting Sudbrink Broadcasting,

Inc. v. FCC, 509 F.2d 418, 422 (D.C. Cir. 1974)). Furthermore, the FCC rules provide:

Waivers will not be granted except upon an affirmative showing:

(i) That the underlying purpose of the rule will not be served, or would be

frustrated, by its application in a particular case, and that grant of the waiver is

otherwise in the public interest; or

(ii) That the unique facts and circumstances of a particular case render

application of the rule inequitable, unduly burdensome or otherwise contrary to the

public interest. Applicants must also show the lack of a reasonable alternative.

47 C.F.R. § 22.19(a)(i)-(ii) (1993).

FloridaCellular argued that the underlying purpose of 47 C.F.R. § 22.922, namely, to prevent

speculation in cellular applications, would not be served by applying the rule in this case because Mr.

Yandell's multiple ownership interests were acquired inadvertently and the repurchase of his stock

was merely an effort to achieve complete compliance with the rules. Opposition to Petition to

Dismiss or Deny of JAJ Cellular Partnership, May 24, 1990, at 11-12 [hereinafter "Opposition"];

Request for Waiver of Section 22.922 of the Commission's Rules, April 24, 1990, at 5 [hereinafter

"Request"]. The company also argued that the inadvertence with which Mr. Yandell acquired the

cross interests would render application of the rule inequitable. Opposition at 12. Finally, the

company stated that the waiver would be in the public interest because it would not delay processing

of Florida Cellular's application and would expedite the initiation of Block A (nonwireline) cellular

service in the Maryland 2 market. Opposition at 12-13; Request at 6-7.

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TheCommission rejected these arguments. In its original order, the Mobile Services Division

simply stated that it would not consider the request for a waiver because the company's arguments

in support of a waiver were insufficient to overcome the Commission's strict policy to comply with

§ 22.921. See Florida Cellular, 6 F.C.C.R. at 355. On Florida Cellular's petition for reconsideration,

the Commission stated that the company's claim that the violation of § 22.921 was inadvertent did

not satisfy either testset out in § 22.19. The Commission first noted that "[Florida Cellular] has made

no showing that it took sufficient affirmative steps to ensure that none of its shareholders had filed

another application." Florida Cellular, 6 F.C.C.R. at 6910. The Commission also found:

if a fact-specific analysis of intent were required in particular cases[, t]his would slow

implementation of service to the public, contrary to the public interest. Moreover,

inadvertent rule violations are hardly unique. Waiving rules for inadvertent violations

would seriouslyundercut generalcompliance and enforcement efforts. Administrative

efficiency and fundamental fairness to those who comply with the provisions of this

rule mandates stringent compliance.

Id. Finally, the Commission stated:

waivers of Section 22.922 generallyinvolve casesin which a carrier would technically

violate the rule prohibition by its engagement in a legitimate business transaction

totally unrelated to the filing of the cellular application, a situation not presented

here.... The subject case does not present a factual predicate for such a waiver.

Id. Although the Commission did amend its rules to prevent speculation in cellular applications, it

also acted to prevent the delay associated with multiple ownership interests and pre-authorization

transfers of cellular applications. It is clear from the orders that the Commission refused to grant

Florida Cellular a waiver to promote thissecond rationale. As we have found that "the avoidance of

the processing problems and service delays caused by [partial settlements, multiple ownership

interests, and pre-authorization transfers] is certainly a permissible reason for the [policy] change,"

supra at 10, the Commission was justified in relying on this rationale to deny Florida Cellular's

petition for a waiver.

The analysis within the Commission's order denying Florida Cellular's petition for

reconsideration shows that the Commission did not subject the company's waiver request to

"perfunctory treatment." Instead, the Commission considered Florida Cellular's arguments in light

of the purposes the FCC rules were designed to serve and concluded that the facts did not present

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a situation where it would be appropriate to grant a waiver. The Commission found that granting

waivers for inadvertent violations would hinder the administrative process and would slow the

provision of service to the public. Given the fact that the cellular licensing process was streamlined

to prevent the administrative delays that ultimately resulted in service delays, we cannot say that the

Commission's reasons for denying the waiver in this case were "so insubstantial as to render that

denial an abuse of discretion."

D. Florida Cellular's Due Process Claims

Florida Cellular contends that the Commission denied it due process of law by irrebuttably

presuming that the company controlsthe actions of itsshareholders and that the company acted with

speculative intent, and by holding the company vicariously liable for the acts of a shareholder without

control. These arguments must also be rejected.

Florida Cellular claimsthat one due process violation occurred when the Commission denied

Florida Cellular a meaningful opportunity to be heard with regard to whether the company had a

specific intent to violate the FCC's multiple ownership rules. However, Florida Cellular failed to cite

any authority for the proposition that an agency may only act to correct a violation of its rules upon

a finding that the party acted with specific intent to violate the rule. This due process argument

simply restatesin constitutional termsthe notice argument that we rejected supra at III.B. This claim

must failfor the same reasons. See supra at 13-14; see also JEM Broadcasting Co. v. FCC, No. 93-

1099, slip op. at 16-17 (D.C. Cir. May 6, 1994).

Florida Cellular contends that another due process violation occurred when the Commission

held the company vicariously liable for Mr. Yandell's dual interests. The company argues that it

violates due process to hold an entity responsible for a violation unless the entity knew of the

violation, participated in it, ratified it, or controlled the actions which resulted in the violation.

Nevertheless, the Commission did not find Florida Cellular completely blameless for the violation.

At least one notice that the company sent to Mr. Yandell was returned to the company marked

"Unable to deliverno forwarding address." Therefore, the company should have been aware that

it had lost contact with Mr. Yandell. It is also undisputed that the company was able to locate Mr.

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Yandell's proper address when it updated itsshareholderslist after it won the lotteryfor the Maryland

2 market. In light of these facts, the Commission could conclude that the company's failure to

exercise due diligence in keeping track of its shareholders was at least partly to blame for the rules

violation that resulted in the dismissal of Florida Cellular's application.

On a number of occasions this court has found that the Commission could properly require

an applicant to show that it acted with due diligence before allowing the applicant to file an

amendment to bring a license application into compliance with FCC rules. See Ponchartrain

Broadcasting Co. v. FCC, 15 F.3d 183, 184 (D.C. Cir. 1994); Marin TV Servs. Partners, Ltd. v.

FCC, 936 F.2d 1304, 1306 (D.C. Cir. 1993); Royce Int'l Broadcasting Co. v. FCC, 820 F.2d 1332,

1336 (D.C. Cir. 1987). We find that, for due process purposes, the Commission may also properly

dismiss an application that does not complywith FCC rules when the applicant'slack of due diligence

was at least partly to blame for the failure to comply. We therefore reject Florida Cellular's second

due process argument.

Finally, Florida Cellular claimsthat the Commission should not have dismissed its application

because Mr. Yandell was not a "party to the application," and therefore the company was not in

violation of the multiple ownership rule. The court is foreclosed from considering this argument,

however, because Florida Cellular did not raise it before the Commission. See 47 U.S.C. § 405

(1988) ("The filing of a petition for reconsideration shall not be a condition precedent to judicial

review of any such order ... except where the party seeking such review ... (2) relies on questions of

fact or law upon which the Commission ... has been afforded no opportunity to pass."); see also

Russian River Vintage Broadcasting, 5 F.3d at 1521; Alianza Federal de Mercedes v. FCC, 539

F.2d 732, 739 (D.C. Cir. 1976) ("The Commission must be given a fair opportunity to pass on a novel

legal or factual argument, either initially or on a petition for reconsideration, before it can be brought

before a reviewing court.") (footnote omitted).

IV. CONCLUSION

The Commission rules for the nonwireline Rural Service Area licensing process clearly

prohibited multiple ownership interestsin competing applicants. The Commission's rules and orders

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also provided adequate notice that applications would be subject to dismissal for failure to comply

with the FCC rules. The application that Florida Cellular submitted for the Maryland 2 market did

not comply with the FCC'srules prohibiting multiple ownership interestsin competing applicantsfor

the same Rural Service Area license. Therefore, because the Commission may properly exercise its

discretion to dismiss an application for failure to comply with a clearly stated rule, the Commission's

orders dismissing Florida Cellular's application and denying Florida Cellular's petition for waiver are

Affirmed.

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