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Parties Involved:
BDPCS, Inc.
Petitioner
Federal Communications Commission
Respondent
United States of America
Respondent

Document Text:

Notice: This opinion is subject to formal revision before publication in the

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the Clerk of any formal errors in order that corrections may be made

before the bound volumes go to press.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 6, 2003 Decided December 16, 2003

No. 00–1369

BDPCS, INC.,

PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND

UNITED STATES OF AMERICA,

RESPONDENTS

–————

On Petition for Review of an Order of the

Federal Communications Commission

–————

Jane Michaels argued the cause for petitioner. With her

on the briefs were Elizabeth A. Phelan, Michael D. Hays,

Christina H. Burrow, and Stuart M. Gerson.

Stanley R. Scheiner, Counsel, Federal Communications

Commission (FCC), argued the cause for respondents. With

him on the brief were John A. Rogovin, General Counsel,

FCC, and Daniel M. Armstrong, Associate General Counsel,

FCC, Peter D. Keisler, Assistant Attorney General, U.S.

 Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.

USCA Case #00-1369 Document #791750 Filed: 12/16/2003 Page 1 of 11
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Department of Justice, and Thomas M. Bondy and H. Thomas Byron, III, Attorneys, U.S. Department of Justice.

Before: RANDOLPH and ROBERTS, Circuit Judges, and

WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROBERTS.

ROBERTS, Circuit Judge: Petitioner BDPCS, Inc. was the

high bidder on several licenses in a Federal Communications

Commission spectrum auction, but, at the appointed hour,

was unable to make the required down payments. The

Commission’s Wireless Telecommunications Bureau promptly

declared BDPCS to have defaulted on the licenses, set them

for reauction, and, consistent with FCC auction rules, assessed a default penalty. BDPCS now appeals from a final

order of the Commission dismissing in part and denying in

part BDPCS’s application for review of the default penalty

order. We conclude that the Commission acted within the

bounds of reasonableness and therefore deny the petition for

review.

I.

In 1996, the FCC auctioned the so-called ‘‘C block’’ of

spectrum, distributing 493 geographic licenses to provide

wireless personal communications services. Consistent with

a congressional mandate to distribute spectrum licenses to

small businesses, see 47 U.S.C. § 309(j)(3)(B), the Commission limited the C block auction to businesses falling beneath

certain revenue and asset thresholds, see 47 C.F.R. § 24.709

(1996). Winning C block bidders were required only to make

a down payment of five percent of their winning bid within

five days of the close of the auction, and a second five-percent

payment after the Commission officially awarded the license.

Id. § 24.711(a)(2). The remaining 90 percent of the winning

bids could be paid in installments over the term of the license.

Id. §§ 1.2110(e), 24.711(b).

The C block auction rules, though, were not all carrot and

no stick. In order to deter insincere bidding, the auction

rules set out penalties for bidders who withdrew high bids

during an auction or defaulted on winning bids after the

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auction’s close. A bidder who withdrew a high bid during an

auction was subject to a ‘‘withdrawal penalty’’ — ‘‘a penalty

equal to the difference between the amount bid and the

amount of the winning bid.’’ Id. § 24.704(a)(1). If the ultimate winning bid exceeded the high bid of the withdrawing

bidder, no withdrawal penalty would be assessed. Id. A

winning bidder who defaulted after the close of an auction

was subject to a ‘‘default penalty’’ — equal to the withdrawal

penalty ‘‘plus an additional penalty equal to three (3) percent

of the subsequent winning bid.’’ Id. § 24.704(a)(2). If the

winning bid on reauction exceeded the defaulting bidder’s, the

additional penalty would be three percent of the defaulting

bidder’s winning bid. Id.

BDPCS was the high bidder for 17 C block licenses with

bids totaling nearly $874 million. Pursuant to C block auction rules, BDPCS thus owed its initial five-percent down

payment ($43.7 million) within five business days. Id.

§ 24.711(a)(2).1

 On the fifth day, however, BDPCS found

itself without financing and unable to make the down payment. Instead of $43.7 million, BDPCS sent the Commission

an ‘‘Emergency Petition For Waiver’’ seeking a thirty-day

extension of the down payment deadline. BDPCS’s petition

cited ‘‘the unexpected inability to obtain a bridge loan’’ from

US West, one of the Baby Bell companies, as the cause of its

failure to pay. In re BDPCS, Inc., Emergency Petition For

Waiver of BDPCS, Inc., May 15, 1996, at 2. BDPCS stated

that its parent company had made arrangements for US West

to fund BDPCS’s down payment obligations until BDPCS’s

anticipated public offering. Id. at 3. These financing arrangements suddenly collapsed, according to BDPCS, on May

2, four days before the close of the C block auction.2

 And

1 C block auction rules required an upfront payment to participate in the auction, which would be credited to the initial down

payments on licenses, or refunded in the event that a bidder won no

licenses. See id. §§ 1.2106, 24.711(a)(1). BDPCS made an upfront

payment of $7 million and thus the balance due on its initial down

payment was actually $36.7 million.

2 For its part, US West characterized BDPCS’s description of the

negotiations as ‘‘inaccurate’’ and denied having ‘‘any obligation to

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despite what it describes as herculean efforts to find a new

source of funding (making ‘‘every effort to raise the necessary

funds through numerous contacts with different entities’’)

BDPCS could not come up with the goods. Id. at 6. BDPCS

needed more time.

The Commission’s Wireless Telecommunications Bureau

(WTB) was unmoved. Noting the important role that down

payment obligations play in ‘‘ensur[ing] that an applicant is

financially qualified to satisfy its obligations as a licensee,’’

the WTB denied BDPCS’s waiver petition. See In re Emergency Petition for Waiver of Deadline for Submission of

Down Payment for the Broadband PCS C Block Auction

Filed by BDPCS, Inc., Order, 11 F.C.C.R. 22,450, 22,452 ¶ 7

(1996). By the end of May, the WTB had denied BDPCS’s

request for reconsideration, see In re Emergency Petition for

Waiver of Deadline for Submission of Down Payment for the

Broadband PCS C Block Auction Filed by BDPCS, Inc.,

Order on Reconsideration, 11 F.C.C.R. 12,165 (1996), and the

Commission had announced that BDPCS’s licenses would be

reauctioned, see Public Notice, 18 Defaulted PCS Licenses to

be Reauctioned, 11 F.C.C.R. 22,204 (1996).

After the July 1996 reauction, the WTB tabulated BDPCS’s

default penalty in accordance with Rule 24.704(a)(2). See In

re BDPCS, Inc., Order, 11 F.C.C.R. 14,399 (1996).3

 For each

of the 17 licenses, the WTB first calculated the withdrawal

penalty — the difference between the amount bid by BDPCS

and the winning bid on reauction — and then added three

percent of the lower of BDPCS’s winning bid or the winning

fund any of BDPCS’s down payment obligations to the FCC.’’

Letter to Reed Hundt, FCC Chairman, from Solomon D. Trujillo,

US West President & CEO, at 1–2 (quoted in In re Emergency

Petition for Waiver of Deadline for Submission of Down Payment

for the Broadband PCS C Block Auction Filed by BDPCS, Inc.,

Order, 11 F.C.C.R. 22,450, 22,451 n.7 (1996)).

3 Recall that because BDPCS defaulted after the close of the

auction, it owed a default penalty, rather than simply the withdrawal penalty (which would have applied had BDPCS withdrawn its

high bids before the auction’s close). See 47 C.F.R. § 24.704(a).

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bid on reauction. BDPCS incurred withdrawal penalties for

the eight licenses for which the winning bid at reauction was

lower than BDPCS’s winning bid, penalties totaling

$42,765,088.50.4

 See id. at 14,404 Attachment A. The WTB

then tacked on the three-percent default penalty for all 17

licenses — $24,930,564.73 — bringing the grand total to

$67,695,653.23. Id. The Commission then credited BDPCS

for its $7 million upfront payment, leaving a balance due of

$60,695,653.23. Id. at 14,402 ¶ 6.

After the WTB denied reconsideration, see In re BDPCS,

Inc., Order, 12 F.C.C.R. 6606 (1997), BDPCS applied to the

Commission for review of the WTB’s default payment order.

BDPCS’s application repeated the arguments it had made

before the WTB on reconsideration: BDPCS was unable to

make its down payment only because ‘‘US West abruptly

refused to go forward with the bridge loan,’’ and, in any

event, ‘‘the assessment of such a large default payment on a

small entrepreneurial company is inequitable and contrary to

the public interest,’’ because ‘‘the Treasury ha[d] been made

whole’’ by the reauction of the BDPCS licenses. In re

BDPCS, Inc., Application for Review of BDPCS, Inc., June

19, 1997, at 5, 4, 1. BDPCS requested that the default

penalty be reduced either to the $7 million upfront payment,

or to the three-percent charge of $24.9 million. Id. at 1, 4.

The Commission did not immediately act on BDPCS’s

application for review. In October 1998, BDPCS filed a

supplement to its application, raising several new arguments

to support its position that ‘‘BDPCS has no outstanding

financial obligation to the FCC’’ and that ‘‘BDPCS is entitled

to a reimbursement of its $7 million upfront payment.’’ Letter to Magalie Roman Salas, Secretary of FCC, from Leonard

J. Kennedy, Counsel for BDPCS, at 1, 3 (First Supplement).

BDPCS acknowledged that the supplement had not been

4 For the nine other licenses, the winning bids at reauction

exceeded BDPCS’s winning bid by a total of $73,418,392.50. See In

re BDPCS, Inc, Order, 11 F.C.C.R. at 14,404 Attachment A. Thus,

in the aggregate, winning bidders at the reauction of the 17 licenses

offered $30,653,304 more than BDPCS.

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timely filed and requested that the Commission exercise its

discretion to consider its arguments, but did not otherwise

offer any excuse for the pleading’s tardiness or for the fact

that its arguments had not been first presented to the WTB.

Id. at 1–2 n.2. Less than two months later, BDPCS followed

with a second supplemental pleading. This pleading ostensibly requested a waiver of the default penalty — the same

relief requested in BDPCS’s initial Application for Review —

but, this time, presented as reasons for granting the waiver

yet more new arguments that the default penalty was invalid

or unenforceable.

In July 2000, the Commission denied all of BDPCS’s requests for relief, rejecting on the merits BDPCS’s initial

application for review and the waiver request presented in

the Second Supplement, and dismissing all the other legal

arguments raised in the First and Second Supplements as

procedurally barred. See In re BDPCS, Inc., Memorandum

Opinion and Order, 15 F.C.C.R. 17,590, 17,611 ¶¶ 38–41

(2000) (Order). The Commission agreed with the WTB that

the sudden collapse of BDPCS’s financing arrangements did

not warrant a waiver or reduction of the default penalty. Id.

at 17,605–07 ¶¶ 27–31. The Commission took special note of

the fact that ‘‘BDPCS ha[d] admitted that four days prior to

the close of the auction, it began to experience financial

difficulties, and yet it remained active in the auction.’’ Id. at

17,605 ¶ 28. BDPCS, the Commission concluded, ‘‘should

have been cognizant of the risk that it was assuming by not

withdrawing.’’ Id. at 17,607 ¶ 31.

Concerning the legal arguments first raised in the First

and Second Supplements, the Commission found that they

were untimely and had not been first presented to the WTB,

as required by Commission rules. See id. at 17,596 ¶ 10 (citing

47 C.F.R. § 1.115). The Commission therefore concluded

that BDPCS’s supplements to its Application for Review were

‘‘procedurally deficient and warrant[ed] dismissal on their

face.’’ Id. at 17,597 ¶ 10; see also id. at 17,611 ¶ 41 (‘‘It is

FURTHER ORDERED that the First Supplement TTT and

the Second Supplement TTT ARE DISMISSED.’’). The Commission then considered and rejected BDPCS’s supplemental

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legal arguments on their merits, ‘‘assum[ing] that the First

and Second Supplements TTT were timely filedTTTT’’ Id. at

17,597 ¶ 10; see id. at 17,597–604 ¶¶ 10–25, 17,608–11 ¶¶ 32–37

(consideration of BDPCS’s substantive claims on their merits). This timely petition for review followed.

II.

BDPCS has two central arguments on appeal. First,

BDPCS argues that the Commission erred by not granting a

waiver to reduce or eliminate the default penalty assessed by

the WTB. Alternatively, BDPCS contends that although the

First and Second Supplements were procedurally defective,

the Commission nevertheless considered the arguments

raised there on their merits, and the arguments are therefore

preserved for judicial review. We are unpersuaded by these

contentions and deny the petition for review.

A. Waiver Requests.

Our review of an agency’s denial of a waiver is extremely

limited; we vacate such denials only when ‘‘the agency’s

reasons are so insubstantial as to render that denial an abuse

of discretion.’’ Mountain Solutions, Ltd. v. FCC, 197 F.3d

512, 517 (D.C. Cir. 1999) (internal quotation marks omitted).

The Commission’s rules allow the grant of a waiver only

upon a showing that enforcement of the rule would not serve

the rule’s underlying purpose or otherwise would be inequitable, and that a waiver would be in the public interest. 47

C.F.R. §§ 24.819(a)(1)(i), (ii) (1996). Tellingly, the Commission’s rules never compel the Commission to grant a waiver.

Here, the Commission concluded that the abrupt collapse of

BDPCS’s financing did not constitute adequate grounds for a

waiver. See Order, 15 F.C.C.R. at 17,605–07 ¶¶ 28–31. The

Commission noted that the purpose of the default penalty

rule — ‘‘central to the integrity of the Commission’s auction

process’’ — was to encourage bidders ‘‘to make certain of

their qualifications and financial capabilities before the auction so as to discourage default and avoid delays in the

deployment of new services to the public.’’ Id. at 17,606

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¶¶ 29, 30. BDPCS frustrated this objective when it continued

to participate actively in the C block auction even after it had

become aware that its financing was, at the very least,

seriously imperiled. Id. at 17,607 ¶ 31. This course of conduct, the Commission concluded, was exactly ‘‘the sort our

rules are intended to deter.’’ Id. The Commission thus

denied the waiver request, rejecting outright BDPCS’s argument that such a waiver would serve the public interest. Id.

The Commission did not abuse its discretion in denying the

waiver request. Far from it. As the Commission pointed

out, BDPCS’s behavior in the auction is exactly the kind of

conduct the default penalty rule was designed to deter.

Enforcement of the default penalty rule was appropriate, to

borrow from Voltaire, ‘‘pour encourager les autres.’’ Before

the auction had closed, BDPCS knew its financing arrangements were in jeopardy. It could have withdrawn its bids

then, subject only to the possibility of a withdrawal penalty.

BDPCS chose another course; it not only remained in the

auction, but it submitted ever-higher bids on at least one

license, see id., and did so resting only on the unsecured hope

that the ability to pay would materialize in the end. In short,

BDPCS gambled and lost. Its argument that it should not

now be made to pay thus rings quite hollow.

B. Arguments Raised in Supplemental Pleadings.

BDPCS next contends that even if the Commission dismissed the new arguments raised in the First and Second

Supplements as procedurally defective, they are nevertheless

preserved for judicial review because the Commission also

rejected those arguments on their merits — erroneously, says

BDPCS. BDPCS is half right, but unfortunately for BDPCS

it is the other half that matters here.

Section 405 of the Communications Act precludes judicial

review of ‘‘questions of fact or law upon which the Commission, or designated authority within the Commission, has been

afforded no opportunity to pass.’’ 47 U.S.C. § 405(a)(2). We

thus generally lack jurisdiction to review arguments that have

not first been presented to the Commission. See, e.g., Washington Ass’n for Television & Children v. FCC, 712 F.2d 677,

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680–81 (D.C. Cir. 1983). Conversely, our jurisdiction is preserved so long as the Commission has been afforded a ‘‘fair

opportunity’’ to pass on the arguments in question. See

Omnipoint Corp. v. FCC, 78 F.3d 620, 635 (D.C. Cir. 1996)

(citing Washington Ass’n for Television & Children, 712 F.2d

at 680–82). Here, the Commission not only enjoyed a fair

opportunity to review the arguments in BDPCS’s First and

Second Supplements, it actually did review them. So BDPCS

is right when it says that we have jurisdiction to review those

arguments.

But that jurisdiction does not aid BDPCS here. While the

Commission did address and reject BDPCS’s arguments on

their merits, it also dismissed those arguments as procedurally barred. See Order, 15 F.C.C.R. at 17,596–97 ¶ 10, 17,611

¶ 41. When an agency offers multiple grounds for a decision,

we will affirm the agency so long as any one of the grounds is

valid, unless it is demonstrated that the agency would not

have acted on that basis if the alternative grounds were

unavailable. See Mail Order Ass’n of Am. v. U.S. Postal

Serv., 2 F.3d 408, 434 (D.C. Cir. 1993); see also SEC v.

Chenery Corp., 318 U.S. 80, 88 (1943). So, although we have

jurisdiction to review the merits of BDPCS’s substantive

arguments, BDPCS — to prevail — must also circumvent

each of the two independent procedural grounds upon which

the Commission dismissed those same arguments. This

BDPCS cannot do.

We review an agency’s dismissal of pleadings on procedural

grounds under the familiar standards of the Administrative

Procedure Act, setting aside such dismissals only if they are

‘‘arbitrary, capricious, an abuse of discretion, or otherwise not

in accordance with law.’’ 5 U.S.C. § 706(a)(2). Citing this

Court’s decision in Graceba Total Communications v. FCC,

115 F.3d 1038 (D.C. Cir. 1997), BDPCS seems to assert that

the Commission’s consideration of the merits of its supplemental arguments has the effect of abrogating the dismissal,

on procedural grounds, of those same arguments. This mischaracterizes our holding in Graceba. There, the Commission had rejected Graceba’s constitutional objection to an

FCC order as untimely, but went on to consider (briefly) the

merits of the argument. See id. at 1040–41. We found that

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the Commission’s consideration of Graceba’s argument was

sufficient to satisfy the exhaustion requirements of Section

405, thus preserving our jurisdiction to review Graceba’s

substantive claims. Id. at 1041. Rather than opine on the

merits, we remanded the case to the Commission for a fuller

consideration of Graceba’s constitutional claim. Id. at 1041–

42. Critically, though, we remanded on the merits only after

we had held that the Commission’s dismissal of the argument

as untimely was improper. Id. at 1040–41. It is only because

we had found error in the Commission’s procedural ground

that we could grant relief on the merits.

Missing from BDPCS’s citations to authority is any case in

which we granted relief on the merits, notwithstanding the

fact that the Commission had properly dismissed the pleading

on procedural grounds. BDPCS points to our decision in

Office of Communication of the United Church of Christ, Inc.

v. FCC, 911 F.2d 803, 809 (D.C. Cir. 1990), but that case

offers no assistance to its cause. There, the FCC had

dismissed the petitioner’s challenge on procedural grounds,

but nevertheless considered the merits of the argument.

Just as in Graceba, we concluded that the Commission’s

consideration of the merits preserved our jurisdiction under

Section 405. Id. at 809. We moved immediately to the

merits and rejected the petitioner’s argument. Id. at 812.

That consideration of the merits, however, did not sub silentio undermine the force of the Commission’s procedural dismissal. If we had concluded that the petitioner had the

better of the argument on the merits, we then would have had

to confront the Commission’s procedural ground, and, if the

petitioner were ultimately to be granted relief, to find it

invalid. Our conclusion that the petitioner’s claim failed on

the merits, however, rendered unnecessary further discussion

of the Commission’s procedural ground.

Here, we can find no error in the Commission’s procedural

rulings. BDPCS concedes that the arguments in the First

and Second Supplements were not timely raised to the Commission and never had been presented to the WTB. On the

timeliness issue, this Court has held often enough that the

Commission does not abuse its discretion when it ‘‘decline[s]

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to entertain a late-filed petition in the absence of extenuating

circumstances prohibiting a timely filing.’’ 21st Century Telesis Joint Venture v. FCC, 318 F.3d 192, 200 (D.C. Cir. 2003).

In fact, we have gone so far as to discourage the Commission

from entertaining late-filed pleadings ‘‘in the absence of extremely unusual circumstances.’’ Id. at 199–200. Here, we

need not question whether the circumstances presented by

BDPCS are adequately ‘‘extenuating’’ because BDPCS has

never presented any excuse for its failure to raise its arguments in a timely manner. It follows that the Commission

did not abuse its discretion by dismissing the untimely arguments.

If that were not sufficient, there remains the second procedural basis for the Commission’s dismissal — BDPCS’s failure to present the supplemental arguments to the WTB.

This is an equally open-and-shut case: the Commission’s

rules do not permit the Commission to grant an application

for review ‘‘if it relies on questions of fact or law upon which

the designated authority has been afforded no opportunity to

pass.’’ 47 C.F.R. § 1.115(c). The Commission abuses its

discretion when it arbitrarily violates its own rules, not when

it follows them.

Because we uphold the Commission’s order on these procedural grounds, we have no occasion to reach the merits of

BDPCS’s arguments on the invalidity of the WTB’s default

payment order.

The petition for review is denied.

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