Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-00-01400/USCOURTS-caDC-00-01400-0/pdf.json

Parties Involved:
Celtronix Telemetry, Inc.
Appellant
Federal Communications Commission
Appellee

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 18, 2001 Decided November 16, 2001

Nos. 00-1400 & 00-1401

Celtronix Telemetry, Inc.,

Appellant/Petitioner

v.

Federal Communications Commission, et al.,

Appellee/Respondents

Appeal from and Petition for Review of an Order

of the Federal Communications Commission

Richard S. Myers argued the cause and filed the briefs for

appellant/petitioner.

Stewart A. Block, Counsel, Federal Communications Commission, argued the cause for appellee/respondents. With

him on the brief were Jane E. Mago, General Counsel,

Daniel M. Armstrong, Associate General Counsel, Catherine

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G. O'Sullivan and Andrea Limmer, Attorneys, U.S. Department of Justice.

Before: Ginsburg, Chief Judge, Henderson, Circuit Judge,

and Williams, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

Williams.

Williams, Senior Circuit Judge: In 1994 the Federal Communications Commission auctioned off a group of Interactive

Video and Data Service ("IVDS") licenses. In 1997 it

changed the rules governing grace periods for winning bidders who made late installment payments. Celtronix, a winning bidder for such a license, alleges that the change was

unlawfully retroactive. We affirm the Commission's decision.

* * *

In a June 1994 auction Celtronix (then known as Community Teleplay, Inc.) won an IVDS license for the NorfolkVirginia Beach Metropolitan Service Area. As a small business, Celtronix was allowed to pay its winning bid in installments over the term of the license. 47 C.F.R. s 1.2110(d)

(1994). The regulation provided that any payment would be

in default after 90 days delinquency, but allowed a licensee to

request a three-to-six-month grace period. Id.

s 1.2110(d)(4)(i), (ii). In considering whether to grant the

grace period, the Commission could consider the licensee's

payment history, the reasons for default, the licensee's financial condition, and other circumstances. Id. Though its

regulations were not exactly clear on the availability of additional grace periods, the Commission issued a public notice

claiming discretion to "extend or grant additional grace periods where circumstances warrant." Public Notice, "Wireless

Telecommunications Bureau Staff Clarifies 'Grace Period'

Rule for IVDS 'Auction' Licensees Paying By Installment

Payments," 10 FCC Rcd 10724 (1995).

In 1997 the Commission changed its grace period rule in

the Third Report and Order and Second Further Notice of

Proposed Rule Making, 13 FCC Rcd 374 (1997) ("Grace

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Period Order"). Under the new regulation, a licensee who

missed a payment would automatically have 90 extra days to

do so without being considered delinquent. 47 C.F.R.

s 1.2110(f)(4)(i) (1998). This came at the price of a 5% late

fee on the amount past due. Id. Failure to make payment at

the end of the first 90-day period would result in a second

automatic 90-day grace period and a 10% late fee. Id.

s 1.2110(f)(4)(ii). (Formerly, there had been an interest

charge, amortized over the term of the license.) Any licensee

failing to make payment after 180 days delinquency (or failing

to pay the late fee) would then be in default. Id.

s 1.2110(f)(4)(iii), (iv).1

Celtronix filed a petition for reconsideration of the Grace

Period Order in January 1998 and, in July of that year, an

emergency motion for stay pending review of the petition.

But in September 1998, just before the final date on which

Celtronix's license would have been permanently defaulted,

the Commission announced a notice of a proposed rulemaking

aimed at introducing new flexibility for spectrum occupied by

IVDS licensees; to reflect the change it immediately redesignated the service as the "218-219 Mhz Service." Amendment

of Part 95 of the Commission's Rules to Provide Regulatory

Flexibility in the 218-219 MHz Service, Order, Memorandum

Opinion and Order and Notice of Proposed Rulemaking, 13

FCC Rcd 19064 p 16 (1998). For the duration of that rulemaking the Commission suspended all installment payments

for licensees who were paid up through March 16, 1998 or had

properly filed grace period requests. Id. p 13.

In its final order on the 218-219 Mhz Service, Amendment

of Part 95 of the Commission's Rules to Provide Regulatory

Flexibility in the 218-219 MHz Service, Report and Order

and Memorandum Opinion and Order, 15 FCC Rcd 1497

(1999) ("218-219 MHz Service Order"), the Commission dismissed Celtronix's grace period requests and its emergency

stay motion, saying that parties that had properly filed grace

__________

1 The current version of the rule provides that the grace period

shall be a quarter year, rather than 90 days, but is otherwise similar

in substance. 47 C.F.R. s 1.2110(g)(4)(i) (2000).

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period requests had already received "an extended grace

period." Id. p p 45, 133. It also provided three options for

licensees in Celtronix's situation: (1) reamortization and the

resumption of installment payments; (2) amnesty, under

which the licensee could return the license, have its debt

forgiven, and receive a partial refund of prior payments; and

(3) prepayment of the entire amount. Id. p 34. Additionally,

the Commission provided that the former 5-year term would

be extended to 10 years. Id. p p 25-32.

Celtronix sought reconsideration of the 218-219 MHz Service Order in December 1999. While that was pending, the

Commission denied Celtronix's petition for reconsideration of

the Grace Period Order. Amendment of Part 1 of the

Commission's Rules--Competitive Bidding Procedures, Order

on Reconsideration of the Third Report and Order, Fifth

Report and Order, and Fourth Further Notice of Proposed

Rule Making, 15 FCC Rcd 15293, p 27 (2000). Then, in

December 2000, the Commission denied reconsideration of

the 218-219 MHz Service Order, and reaffirmed that IVDS

licensees must decide among the three options of amnesty,

resuming repayment, or prepayment of the entire amount.

See Amendment of Part 95 of the Commission's Rules to

Provide Regulatory Flexibility in the 218-219 MHz Service,

Second Order on Reconsideration, 15 FCC Rcd 25020, p p 1,

34 (2000). It rejected Celtronix's proposal of a fourth option

under which licensees could disaggregate, i.e., could retain

part of their 218-219 Mhz spectrum for a given market and

return the rest to the Commission. Id. at p p 14-20.

Celtronix chose to return the license to the Commission for

amnesty, subject to its claim for a disaggregation alternative.

It filed a petition for reconsideration of this order, which is

still pending before the Commission.

As to the Grace Period Order, Celtronix filed a petition for

review under s 402(a) of the Communications Act (No. 00-

1401) and an appeal under s 402(b) (No. 00-1400). Since

these jurisdictional provisions are mutually exclusive, see

Freeman Engineering Associates, Inc. v. FCC, 103 F.3d 169,

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177 (D.C. Cir. 1997), and because Celtronix's case falls into

none of the categories in s 402(b)(1) through (8), we dismiss

appeal No. 00-1400 and take jurisdiction for No. 00-1401

under s 402(a).

There is another jurisdictional concern. Given Celtronix's

election of amnesty in the event that its disaggregation

proposal does not prevail (either by Commission change of

heart or by judicial reversal of the Commission), there is a

distinct chance that Celtronix would not benefit from a victory here; absent disaggregation, it would simply take its

amnesty and depart. But we do not see this possibility as

impairing its standing. Compare a standard two-issue case:

If a plaintiff presents two or more alternative grounds as

routes to its hoped-for ultimate victory, a court does not lose

jurisdiction over the second claim once it has ruled in the

plaintiff's favor on the first claim; victory on the first claim

doesn't moot the second. Air Line Pilots Ass'n Int'l v. UAL

Corp., 897 F.2d 1394, 1397 (7th Cir. 1990). Conversely, if a

party must prevail on both of two theories to achieve a

meaningful win (e.g., knock out a regulation), its loss on the

first does not moot the second. Worldcom, Inc. v. FCC, 246

F.3d 690, 695 (D.C. Cir. 2001). For both situations, the

continued exercise of jurisdiction by the court is based on a

practical consideration: Disposition of both bases has the

potential of achieving judicial economies, as higher-level review might remove the first basis for the outcome. See id.

Just as the contingent character of the ruling on the second

issue in the above cases does not spell mootness, so too the

fact that here Celtronix's ultimate success may depend on the

outcome of pending administrative litigation should not be

seen as rendering the harm inflicted on it by the Commission's grace period decision too "conjectural" for purposes of

standing. City of Los Angeles v. Lyons, 461 U.S. 95, 102

(1983). Otherwise, a party requiring victory on two fronts in

two fora could easily lose his chance for review on the first

claim to be put forward for adjudication, see 28 U.S.C. s 2344

(requiring petition for review to be filed within 60 days), thus

destroying his chance of prevailing, regardless of the merits.

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* * *

Celtronix argues that the new grace period rule, 47 C.F.R.

s 1.2110(g)(4), violates the Administrative Procedure Act,

which limits "rules" to agency prescriptions of "future effect."

5 U.S.C. s 551(4); see Bowen v. Georgetown University

Hospital, 488 U.S. 204, 216-25 (1988) (Scalia, J., concurring);

Bergerco Canada v. U.S. Treasury Department, 129 F.3d 189,

192-93 (D.C. Cir. 1997) (treating Justice Scalia's concurring

opinion as substantially authoritative, though noting that

"[t]he Bowen majority, to be sure, neither embraced nor

rejected Justice Scalia's view"). To a large extent Celtronix

invokes the criteria applied in Landgraf v. USI Film Products, 511 U.S. 244 (1994), a case that explored the question of

what sort of retroactivity was subject to the longstanding

presumption against retroactive statutes. Id. at 263-80.

Here, of course, there is no issue of intent at all: the

Commission indisputably intended its new grace period rule

to apply to payment delays occurring after the rule's adoption

but in connection with previously issued licenses. Nonetheless, the tests formulated in Landgraf are indeed pertinent to

the APA issue. See, e.g., Bergerco Canada, 129 F.3d at 193;

DIRECTV v. FCC, 110 F.3d 816, 825-26 (D.C. Cir. 1997).

According to Justice Scalia, a retroactive rule forbidden by

the APA is one which "alter[s] the past legal consequences of

past actions." Bowen, 488 U.S. at 219. In Landgraf, the

Court said that retroactivity occurred where a statute "would

impair rights a party possessed when he acted, increase a

party's liability for past conduct, or impose new duties with

respect to transactions already completed." 511 U.S. at 280.

It seems impossible to characterize the rule change here as

"alter[ing] the past legal consequences" of a past action. It

altered the future effect of the initial license issuance, to be

sure, but that could not be viewed as "past legal consequences." Nor could the change be said to impair rights

possessed by Celtronix when it acted, as it could have had no

grace period rights before it "acted" to acquire the license,

and any payment delay covered by the new rule, i.e., any

delay not already excused, necessarily occurred after the rule

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change. If the rule could be viewed as "impos[ing] new

duties" at all (in the sense of making the duty to pay

installments more stringent), it would run afoul of Landgraf's

concept only if it imposed them with regard to a "transaction[ ] already completed." That would be so if the "transaction" at issue were the issuance of the license itself, as

Celtronix urges, rather than the delay in payments.

The examples used in the cases make clear that we should

focus on the payment delays and not on initial issuance of the

license. As Justice Scalia noted in Landgraf, a new ban on

gambling would not involve retroactivity in its application to

existing casinos (which presumably would have been licensed

by a state), because the "relevant retroactivity event is the

primary activity of gambling, not the primary activity of

constructing casinos." Landgraf, 511 U.S. at 293 n.3 (Scalia,

J., concurring). Similarly, Justice Scalia made clear in Bowen that there would be no violation of the APA's insistence on

rules of "future effect" if the Secretary there had promulgated new reimbursement formulas for future services, even

though the hospitals in question were operating under longterm contracts negotiated in reliance on a prior, more generous rule. 488 U.S. at 220.

Celtronix claims to have had a "vested right" to keep

requesting additional grace periods and to force the Commission to consider any unique circumstances. To this end, it

cites Landgraf's statement that the judicial clear statement

rule would apply where a statute would otherwise "impair

rights a party possessed when he acted." 511 U.S. at 280.2

But Celtronix never explains where this vested right came

from. The pre-auction license system offered no vested right

__________

2 The passage cited by Celtronix in fact makes no reference to

"vested" rights, but other parts of the opinion do. See 511 U.S. at

268-69 & n.23 (quoting "vested rights" language from Justice

Story's opinion in Society for Propagation of the Gospel v. Wheeler,

2 Gall. 105, 22 F. Cas. 756, 767 (No. 13,156) (CC NH 1814), and

from Sturges v. Carter, 114 U.S. 511, 519 (1885)); id. at 275 n.29;

see also id. at 290-94 (Scalia, J., concurring) (critiquing "vested

rights" usage).

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to any specific terms. Rather, it is undisputed that the

Commission always retained the power to alter the term of

existing licenses by rulemaking. See, e.g., United States v.

Storer Broadcast Co., 351 U.S. 192, 205 (1956); National

Broadcasting Co. v. United States, 319 U.S. 190, 225 (1943);

Committee for Effective Cellular Rules v. FCC, 53 F.3d 1309,

1319-20 (D.C. Cir. 1995); WBEN, Inc. v. FCC, 396 F.2d 601,

617-18 (2d Cir. 1968).

The introduction of auctions made no change in this aspect

of the licensing regime. In fact, Congress provided both that

the Commission would retain its authority "to regulate or

reclaim spectrum licenses," 47 U.S.C. s 309(j)(6)(C), and that

nothing in the use of auctions would "be construed to convey

any rights ... that differ from the rights that apply to other

licenses...." Id. s 309(j)(6)(D).

Of course the grace period change may have altered the

value of the rights Celtronix acquired by its winning bid and

commitment to make the required payments. This sort of

retroactivity--characteristic of a rule having exclusively "future effect" but affecting the desirability of past transactions--has become known as "secondary retroactivity." See

Bowen, 488 U.S. at 219-20 (Scalia, J., concurring). Under

our authority to set aside rules that are arbitrary and capricious, we review such rules to see whether they are reasonable, "both in substance and in being made retroactive."

U.S. Airwaves, Inc. v. FCC, 232 F.3d 227, 233 (D.C. Cir. 2000)

(emphasis added).

Here it's easy to find the rule reasonable in both respects.

The Commission merely replaced the possibility of two (or

maybe more) three-month grace periods, available only on a

successful appeal to the Commission's discretion, with the

assurance of two 90-day periods subject to 5% and 10%

penalties on the delayed payments. Looking at licensees as a

class, there is no reason to think the change disadvantageous.

Indeed, the Commission described the change as a "liberalization." Grace Period Order, p 108. Nor does Celtronix suggest that the rule change would inflict material injuries on

any set of licencees (such as ones whose circumstances made

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receipt of Commission grace especially likely) that would

offset its beneficial effects, or indeed that the Commission has

ever exercised its discretion favorably. Moreover, it seems

utterly improbable that the old grace provisions could have

induced reliance, either in the form of higher bids by licensees at the bidding stage (as the change is so trivial and likely

beneficial), or of any different conduct thereafter (as both old

and new rule provide substantially equal motivations to avoid

default). See Bergerco, 129 F.3d at 195. In sum, when one

considers both the interests of licensees generally and of the

Commission, the rule change's harms (the amorphous injury

to hypothetical successful pleaders for discretionary grace,

and the penalty fees) seem outweighed by its benefits (the

certainty and clarity for all concerned and the elimination of a

possibly long and costly decisionmaking process under vague

criteria). So, at least, the Commission could reasonably have

concluded.

Celtronix also urges a somewhat makeshift argument that

the FCC's rule change was a breach of contract, citing United

States v. Winstar Corp., 518 U.S. 839 (1996). But there the

government had contractually bound itself to bear the risk of

specified regulatory change adverse to certain firms that had

acquired failed saving and loan associations in reliance on that

promise. Id. at 868-71. Here, far from there being any such

promise, there was, as we've noted, a long tradition of Commission authority to change rules governing already-issued

licenses and congressional provision for the application of the

prior understandings to licenses acquired by auction.

* * *

The order of the Commission is

Affirmed.

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