Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-94-01439/USCOURTS-caDC-94-01439-0/pdf.json

Parties Involved:
Federal Communications Commission
Appellee
Press Broadcasting Company
Appellant
Rainbow Broadcasting, Inc.
Intervenor for Appellee

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 17, 1995 Decided July 21, 1995

No. 94-1439

PRESS BROADCASTING COMPANY, INC.,

APPELLANT

v.

FEDERAL COMMUNICATIONS COMMISSION,

APPELLEE

RAINBOW BROADCASTING, LTD.,

INTERVENOR

On Appeal from Orders of the

Federal Communications Commission

Harry F. Cole argued the cause for the appellant.

James M. Carr, Counsel, Federal Communications Commission, argued the cause for the appellee.

On brief were Christopher J. Wright, Deputy GeneralCounsel, and Daniel M. Armstrong, Associate

General Counsel, Federal Communications Commission. Laurence N. Bourne, Counsel, Federal

Communications Commission, entered an appearance.

Margot Polivy and Katrina Renouf were on brief for the intervenor.

Before: SILBERMAN, HENDERSON and RANDOLPH, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: This case is the latest in a decade-long series

of disputes over a permit the Federal Communications Commission (FCC or Commission) awarded

to Rainbow Broadcasting, Inc. (Rainbow) to construct a television station in Orlando, Florida. At

issue is the FCC's reversal of its Video Services Division decision and the extension of Rainbow's

construction permit over the objection of Press Broadcasting Company, Inc. (Press) that improper

ex parte contacts influenced the proceeding. Press now petitions for review, renewing its challenge

to the ex parte contacts and arguing that the Commission's decision was arbitrary and capricious.

Althoughwe conclude that theCommission's decisionwas not tainted by the contacts, we believe that

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substantial and material questions regarding Rainbow require reconsideration. We therefore grant

Press's petition and remand the matter to the Commission.

I. BACKGROUND

The FCC awarded the construction permit to Rainbow in 1984 following a competitive

proceeding with two other applicants. Rainbow delayed the start of construction pending a lengthy

and ultimately unsuccessful challenge to the license adjudication in this court and the Supreme Court

that lasted through 1990 based on the FCC's policy of giving preference in license adjudications to

minority applicants. WinterParkCommunications, Inc. v. FCC, 873 F.2d 347 (D.C. Cir. 1989), aff'd

sub nom. Metro Broadcasting, Inc. v. FCC, 497 U.S. 547 (1990). The permit expired in April 1988

during the pendencyofthe litigation,Joint Appendix (JA) 19, and theCommission cancelled it in June

1988. See JA 20. The FCC reinstated the permit after Rainbow explained the ongoing litigation but

did so on the condition that Rainbow file a formal application for extension of time. Id. The FCC

explained "[s]ince the pendency of an appeal does not operate as an automatic stay, you should have

filed an application ... for additional time within which to construct." Id. Rainbow subsequently

applied for and received four extensions at six-month intervals. JA 21 (July 1988 application); JA

33 (May 1989 application); JA 36 (November 1989 application); JA 40 (May 1990 application).

The Supreme Court denied rehearing of the minority preference case in August 1990, ending

the litigation. 497 U.S. 1050 (1990). Rainbow did not begin construction of the station but instead

started another round of litigation, suing Guy Gannett Publishing Company (Gannett), the owner of

the transmission tower it planned to use. Rainbow claimed that it had the exclusive right to use the

tower's top television broadcasting space, which Gannett had also rented to Press. See Rey v. Guy

Gannett Publishing Co., 766 F. Supp. 1142, 1143 (S.D. Fla. 1991). Soon afterward, Rainbow asked

the FCC for a fifth extension of its construction permit on the ground that "[a]ctual construction has

been delayed by a dispute with the tower owner which is the subject of legal action in the United

States District Court for the Southern District of Florida." JA 45. The Commission in February 1991

granted an extension through August 5, 1991. JA 64.

Unaware that Rainbow's application for an extension had been granted, Press filed an

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1Press further notes, and the Commission does not dispute, that Cook is the stepdaughter of

Vernon Jordan, who directed President Clinton's transition team. 

"informal objection" with the Commission arguing that the dispute over the tower did not prevent

Rainbow from beginning construction. JA 67. When it learned that the FCC had approved

Rainbow's application, Pressfiled a petition for reconsideration. JA 95. The FCC did not rule on the

petition. The Florida district court denied Rainbow's motion for an injunction in the tower dispute

in June 1991. Rey, 766 F. Supp. at 1143. The district court denied the motion based in part on its

conclusion that Rainbow had not demonstrated irreparable harm inasmuch as it "has yet to obtain

financing, has not selected or purchased an antenna, has not selected a wave guide, has not selected

a transmitter, has not obtained building plans for a broadcast building and has not gone on the air."

Id. at 1148. Rainbow then filed for a sixth extension in June 1991, promising to begin construction

immediately and to commence operation by December 31, 1992. JA 116. Rainbow began

construction ofitstransmitter building in July 1991 and continued construction through and after the

August 5th expiration of its previous extension. JA 128-29.

Rainbow completed construction of the transmitter building in November 1991. Id. During

the same month, Rainbow petitioned the FCC for permission to assign its permit to a new Rainbow

group reorganized to provide additional financing. JA 132. Press again objected, arguing that

Rainbow had misrepresented the nature of the tower litigation and was not financially qualified to

construct the station. JA 143-44. Nothing happened for nearly eighteen months. In March 1993 the

FCC's Video Services Division wrote Rainbow to inquire as to the status of the project, noting

Rainbow's earlier commitment to complete construction by December 1992. JA 168. Rainbow

responded that it could not use its new capital until the Commission approved its petition to transfer

the permit to the new ownership group. JA 170. On June 18, 1993 the Video Services Division

finally granted Press's objections and cancelled Rainbow's permit. JA 13-14.

The ex parte contacts arose from attempts to reverse the cancellation. The first contact

involved Antoinette Cook, senior counsel to the Subcommittee on Communications of the United

States Senate Committee on Commerce, Science and Transportation.1In re Rainbow Broadcasting

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2Polivy told investigators from the FCC inspector general's office that she had asked Cook to

investigate the permit cancellation and that she knew Cook as a former client and as a friend. JA

336. 

3Before the meeting, Gordon expressed his concern to Pendarvis and Kreisman that holding

the meeting without informing Press's counsel would be an ex parte violation. JA 337. Pendarvis

believed the meeting was not restricted because Press had filed only an informal objection to

Rainbow's application. JA 338. 

Co., 9 F.C.C.R. 2839, 2843 (1994). In late June 1993, at the request of Rainbow's counsel, Margot

Polivy, Cook telephoned Roy Stewart, the chief of the FCC Mass Media Bureau (which includes the

Video Services Division).2Id. at 2843. Cook asked Stewart to explain whether the cancellation was

consistent with the FCC policy encouraging minority ownership of broadcast stations. Id. Stewart

promised to look into the matter and get back to her. JA 298-99.

The second ex parte contact occurred a few days later on July 1, 1993 at a meeting in

Stewart's office involving Polivy, Rainbow president JosephRey and a number of FCC officials. The

FCC attenders were Stewart, Video Services Division chief Barbara Kreisman, Television Branch

chief Clay Pendarvis and Paul Gordon, a Television Branch lawyer with responsibility for the

Rainbow matter. JA 333. Polivy had previously attempted to discuss the permit with Gordon but

he had refused to do so, telling her that he could not discuss the merits of the case because it was

restricted under the Commission's ex parte rules. JA 337.3 During the meeting, the participants

discussed the substance of the cancellation, JA 333, and, according to Press, the FCC participants

advised Rainbow how to obtain favorable reconsideration. At the end of the meeting, Stewart

advised Polivy to file a petition for reconsideration of the cancellation and to serve Press with a copy.

JA 338.

Rainbow filed its petition the next day. JA 194. One month later Stewart, acting for the Mass

Media Bureau, granted the petition as well as an eight-month extension to construct the station. JA

16-18. Press filed an "emergency petition" to vacate Stewart's action, arguing that the ex parte

contacts had tainted the adjudication. JA 236. The Mass Media Bureau recused itself and reassigned

the matter to the FCC's Office of General Counsel, which forwarded the matter to the full FCC for

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4

In the interim, Press filed two mandamus petitions with this court. We denied both petitions

but partially granted Press's request for subpoenas to obtain information regarding the ex parte

contacts. In re Press Broadcasting Company, Inc., No. 93-1684 (D.C. Cir. December 8, 1993); 

In re Press Broadcasting Company, Inc., No. 93-1867 (D.C. Cir. March 4, 1994); In re Press

Broadcasting Company, Inc., No. 93-1867 (D.C. Cir. June 2, 1994). 

de novo review.49 F.C.C.R. at 2840 n.5.

TheCommission grantedRainbow's petitionsto extend its constructiondeadline and to assign

its permit, filed in June and November 1991 respectively. The Commission's action effectively

vacated the Video Services Division's cancellation of the permit. It agreed with Press that the

contacts were improper and violated its ex parte rules, id. at 2843, but concluded that the violation

was "mitigated by Rainbow's sincere belief that the contact was permissible." Id. at 2845. On the

merits, the Commission concluded that Rainbow was presumptively entitled to a period of 24 months

to construct its station under 47 C.F.R. § 73.3598. The FCC reasoned that Rainbow had only 10

months to construct between the Supreme Court's denial of rehearing in August 1990 and the filing

of its sixth extension application. Id. The FCC explained that the lengthy period during which the

sixth extension petitionwas pending, fromJune 1991 on,should not count against Rainbow inasmuch

as an applicant cannot rely on construction occurring after its permit expiresto support an extension

petition. Id.

In response to Press's claims that Rainbow had misrepresented the nature of the tower

litigation and was financially unqualified, the FCC concluded "no substantial and material question

offact had been raised asto whether Rainbow made misrepresentationsto the Commission regarding

the nature of the tower dispute," id. at 2847, and that "Press has not made a prima facie case that

Rainbow lacked the requisite assurance of financing." Id. at 2848. Finally, the Commission granted

Rainbow's assignment application. Id.

II. DISCUSSION

Press contendsthat the ex parte contactsindeliblytainted the FCC's adjudicationofRainbow's

permit and that the Commission's decision on the merits was arbitrary and capricious. The ex parte

contacts require us to consider two discrete questions: whether (1) the contacts so tainted the FCC

as to make its adjudication unfair and (2) the Commission reasonably determined that Rainbow

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5

47 C.F.R. § 1.1208 prohibits ex parte presentations in restricted proceedings. The regulation

defines "restricted" proceedings to include, when formally opposed or set for hearing, "[a]ny

adjudicative proceeding, including any proceeding conducted pursuant to ... section 316

(modification of construction permits or licenses) of the Communications Act." 

6Rainbow contends that Press as intervenor has no standing to challenge the Commission's

actions regarding its permit. The argument has no merit. As the FCC properly noted, nothing in

its precedent supports that interpretation, 9 F.C.C.R. at 2844 & n.24, and we necessarily

recognized Press's standing in our disposition of its earlier mandamus petitions. Indeed, the initial

cancellation of Rainbow's permit occurred in the process of granting Press's objections. JA 15. 

"sincerely believed" that the contacts were permissible. Although we conclude that the contacts did

not taint the Commission's de novo review, we believe that the FCC's finding with respect to

Rainbow's conduct was unreasonable and remand for further proceedings.

A. Ex Parte Contacts

The FCC agreed with Press that Rainbow violated the Commission's ex parte rules, finding

that Press's February 1991 petition to reconsider the grant of Rainbow's fifth extension application

had restricted the proceedings under Commission regulations.59 F.C.C.R. at 2844.6 The issue for

the court is thus "whether, as a result of improper ex parte communications, the agency's

decisionmaking process was irrevocably tainted so as to make the ultimate judgment of the agency

unfair, either to an innocent party or to the public interest that the agency was obliged to protect."

PATCO v. Federal Labor Relations Auth., 685 F.2d 547, 564 (D.C. Cir. 1982) (footnote omitted).

We conclude the FCC's adjudication was not so tainted in light of the Mass Media Bureau's recusal

and the full Commission's de novo review.

We have previously recognized that an improper attempt to influence an adjudication is not

a concern ifit does not reach the ultimate decision maker. "[J]udicial evaluation of the pressure must

focus on the nexus between the pressure and the actual decision maker." ATX, Inc. v. United States

Dep't of Transp., 41 F.3d 1522, 1527 (D.C. Cir. 1994) (emphasisin original); see also Peter Kiewit

Sons' Co. v. United States Army Corps of Eng'rs, 714 F.2d 163, 170-71 (D.C. Cir. 1983). We agree

with the FCC that Rainbow's contacts extended only to persons who played no role in the

Commission's ultimate decision. See 9 F.C.C.R. at 2839 n.1 ("[O]ur decision is based on an

independent review of the record in this proceeding and has been undertaken without participation

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7Press argues that FCC chairman Hundt should have recused himself in light of his public

comments at a 1994 conference of the National Urban League that Vernon Jordan had "been

invaluable to me during my tenure as Chairman of the FCC" and "provides strong and thoughtful

counsel." JA 461. We agree with the Commission that these comments provide no evidence that

Hundt discussed the Rainbow matter with Jordan. 

8The chief of the Video Services Division, Barbara Kreisman, told the FCC inspector general

that "as a result of the meeting ... she was concerned about two things mentioned by Rainbow in

the meeting: the time period given Rainbow to construct and the money spent to date by

Rainbow." JA 339. Gordon also stated that he based the letter reversing the permit cancellation

on Stewart's comments at the meeting. JA 338. 

9ATX specifically considered the impact of congressional ex parte interference in the

administrative process. See 41 F.3d at 1528 ("We are concerned when congressional influence

shapes the agency's determination of the merits.") The same analysis is appropriate here in light

of Cook's staff position with the Senate subcommittee. See JA 294, 297. 

by the Chief, Mass Media Bureau, or his staff, who are recused from this matter."); id. at 2843 n.19

("Chairman Hundt did not join the Commission until November of 1993, and therefore is not tainted.

Neither Commissioner Quello nor Commissioner Barrett nor their staffs were contacted byRainbow

or anyone acting ofRainbow's behalf concerning this case.").7 Accordingly, in the absence of a nexus

between Rainbow's attempt to influence and the Commission, we conclude that the agency's

decisionmaking process was not irrevocably tainted.

We note that the record comes close to establishing that ex parte contacts impermissibly

"intruded into the calculus of consideration of the individual decisionmaker" irrespective of the lack

of contact between Rainbow and the fullCommission in two ways. Kiewit, 714 F.2d at 170 (internal

quotation marks omitted). First, the record suggests that Rainbow's ex parte meeting with FCC staff

mayhave assisted it in developing the argument, ultimately found persuasive by theCommission, that

Rainbow had not received a 24-month construction period. The proposition apparently first arose

at the ex parte meeting between Rainbow and the FCC officials.8 Although the evidence establishes

that the participants discussed the "substance" of the matter, JA 33, it does not establish conclusively

that the FCC staff assisted Rainbow in preparing its "best" case to present to the Commission.

Second, we held in ATX that "[i]fthe decisionmaker were suddenlyto reverse course or reach

a weakly-supported determination ... we might infer that pressure did influence the final decision."

41 F.3d at 1529.9 The Mass Media Bureau's quick reinstatement of Rainbow's permit on the basis

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of flawed reasoning, as discussed infra, falls squarely within the holding of ATX and we might well

have granted Press's petition without remand had the adjudication stopped there. The Bureau's

recusal and Commission's de novo review of the matter ultimately defeats the inference of improper

influence, however, because Press did not establish any contact between Rainbow and the FCC

decision makers.

B. Rainbow's Conduct

Although it recognized that Rainbow's ex parte contacts violated its rules, the Commission

declined to disqualify or sanction Rainbow. It explained "recognizing that Rainbow's counsel

apparently sincerely believed that the proceeding was not restricted and has advanced a plausible

argument in support of that belief, we conclude that no sanction should be imposed." 9 F.C.C.R. at

2843. Press contends that the notion that Rainbow and its counsel "sincerely believed" the matter

to be unrestricted is contrary to the facts of the case and we agree. The record establishes that

Rainbow could not reasonably have believed the proceeding to be unrestricted because the FCC had

repeatedly informed Rainbow's counsel that it considered the adjudication to be restricted within the

meaning of its ex parte rules.

In October 1991 the Commission provided Polivy with a copy of itsresponse to a letter from

George Daniels, a Florida resident who had written the FCC in support of Rainbow. See JA 127

(Daniels letter). The FCC informed Daniels that it had handled his letter "in keeping with the

Commission's ex parte rules, which deal with communications relative to the outcome of all

"restricted' proceedings under consideration by the Commission." JA 124 (emphasis added). The

letter left no roomfor doubt that the FCC considered its ex parte rules applicable to the adjudication.

Similarly, Gordon, an FCC lawyer, repeatedly informed Polivy that he considered the proceeding

restricted, as described by the FCC inspector general:

The attorney in the MMB [Mass Media Bureau] Television Branch with primary

operating responsibility for the matter was Paul Gordon. He advised that prior to the

June 18, 1993 letter [cancelling Rainbow's permit], Margot Polivy, Rainbow's

attorney, would call him from time to time and try to discuss the merits of the

proceeding. Mr. Gordon believed that the proceeding was restricted and he would

cut her off when she got beyond a discussion of the status of the matter and told her

he couldn't discuss the merits because it was a restricted proceeding. She believed

that it was not a restricted proceeding because Press had no standing to oppose the

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Rainbow application.

JA 337.

Gordon described the contacts in more detail under oath:

She [Polivy] would call me up, say, what's going on with this and she would talk with

me about the merits, and I would cut her off and say this is, you know, an ex parte

communication, I considered it restricted. Uh, and she said that she didn't consider

it restricted ... and I said, well, you may say that but, you know, I, I'm working under

the assumption that it's a restricted, uh, case, uh, so that was both before and after the

June 18th letter.

JA 285.

The FCC concluded that Rainbow may have believed that the ex parte restrictions did not

apply because FCC precedent did not clearlyestablishwhether Press'sinformal objection and petition

for reconsideration were sufficient to make the proceeding restricted. 9 F.C.C.R. at 2843-45. Even

assuming the uncertaintyofFCCprecedent, however, theCommission'srepeated notice to Polivythat

it considered the proceedings restricted should have cautioned Rainbow about any belief to the

contrary.

We further conclude that substantial and material questions offact exist regarding Rainbow's

representations, contained in itsJanuary 1991 extension request, about itsfinancialqualifications and

failure to construct. Rainbow stated that it required an extension because "[a]ctual construction has

been delayed by a dispute with the tower owner which is the subject of legal action in the United

States District Court for the Southern District of Florida." JA 45 (citation omitted). In Press's view

the statement was grossly inaccurate because Rainbow had initiated the tower litigation and was in

no way precluded from beginning construction by its pendency. The issue is material because the

tower dispute was Rainbow's sole basis for its petition. See id. Although we have recognized that

questions of misrepresentation are ordinarily within the province of the Commission, American

Message Centers v. FCC, 50 F.3d 35, 41 (D.C. Cir. 1995), the FCC's conclusion that no material

question of fact existed because "Rainbow did not ... represent to the Commission that the tower

dispute precluded it from constructing," 9 F.C.C.R. at 2847, is so flatly inconsistent with the clear

import of Rainbow's representation as to require further proceedings.

The same is true of Rainbow's representations regarding its financial qualifications. The

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district court in the tower litigation found that "Rainbow ... has not obtained any financing

commitment for the project." 766 F. Supp. at 1145. The FCC nonetheless concluded that Press had

not raised a question requiring hearing because the testimony in the tower litigation had represented

only "predictive judgmentsnot factual statementsas to obstacles Rainbow would face." 9

F.C.C.R. at 2848. But the district court's conclusion was not predictiveit found that Rainbow had

no financing whatsoever. 766 F. Supp. at 1145. As Press further noted in its opposition, Rey

testified that he had no written loan agreements and had only spoken about potential loans with one

person. JA 144 n.2. We will thus remand all three questions regarding Rainbow's conduct to the

Commission for further consideration.

C. The Merits

The FCC granted Rainbow's application to extend its construction permit because in its view

"Rainbow was not afforded the normal 24-month construction period" provided by 47 C.F.R. §

73.3598 and thus did not need to make the showings ordinarily required of applicants byitsregulation

governing permit extensions, 47 C.F.R. § 73.3534. 9 F.C.C.R. at 2846. We agree with Press that

the FCC's action was inconsistent with the plain language of its rules.

The rule providing for a 24-month construction period manifests that the period runs from

the date of the original permit, not of actual construction or of any subsequent extension:

Each original construction permit for the construction of a new TV broadcast station,

or to make changes in an existing station, shall specify a period of no more than 24

months from the date of issuance of the original construction permit within which

construction shall be completed and application for license filed.

47 C.F.R. § 73.3598(a) (emphasis added). Rainbow's original construction permit was issued on

April 22, 1986. JA 19. Thus, Rainbow was unquestionably required to apply and qualify for an

extension. The regulation governing extensions provides:

(b) Applications for extension of time to construct broadcast stations ... will

be granted only if one of the following three circumstances have occurred:

(1) Construction is complete and testing is underway looking toward prompt

filing of a license application;

(2) Substantial progress has been made i.e., demonstration that equipment is

on order or on hand, site acquired, site cleared and construction proceeding toward

completion; or

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(3) No progress has been made for reasons clearly beyond the control of the

permittee (such as delays caused by governmental budgetary processes and zoning

problems) but the permittee has taken all possible steps to expeditiously resolve the

problem and proceed with construction.

47 C.F.R. § 73.3534. The FCC must address whether Rainbow has made the required showing of

progress undersubsections(b)(1) or (b)(2) or of hardship undersubsection (b)(3); that question may

turn on the disputed issue whether the tower litigation precluded Rainbow from beginning

construction. Although the Commission asserts that it has not required a showing in the past, 9

F.C.C.R. at 2846 & n.36, it referenced only a single case which, as Press correctly notes, did not

involve an adjudicatory determination but an administrative extension resulting from a rule

amendment. See WLTK (TV) (TV-8, Inc.), 2 F.C.C.R. 1218 (1987). We conclude that the

Commission's decision arbitrarily relieved Rainbow of its obligations under the regulation.

We finally note that the record isfactually inconsistent with the FCC's determination that "the

period during whichRainbow'ssixth extension application was pending should not be counted as part

of its two-year construction period." 9 F.C.C.R. at 2846. The FCC explained "it would have been

unreasonable to have required Rainbow to make further expenditures and proceed with construction

efforts before the Commission granted itssixth extension request." The record establishes, however,

that Rainbow did not suspend its efforts in the belief that Commission action on its extension

application was necessary for it to proceed.

Rainbow continued construction work on its transmitter building for three months after the

expiration of its permit authority in August 1991 until the building was completed, JA 129, and filed

a supplement to its extension application well after the expiration of its permit, attempting to bring

its tardy efforts to the Commission's attention. Id. Further, Rainbow's April 1993 letter explaining

its subsequent inaction and its July 1993 petition for reconsideration both indicate that Rainbow

believed it was awaiting FCC action on its request to restructure its ownership, not on its petition to

extend its construction permit. See JA 170 ("In the absence of Commission action, Rainbow cannot

use the funds committed to the partnership."); JA 200-01 ("Rainbow's claim ... is that the

Commission's failure to act on its pro forma assignment requests in the normal course ... left the

applicant unable to go forward...."). The FCC's grant of Rainbow's petition was thus based on a

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faulty factual foundation that must be addressed on remand.

For the foregoing reasons, we grant the petition for review and remand to the fullCommission

for it to conduct further proceedings consistent with this opinion.

So ordered.

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