FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: MAGNACOM WIRELESS, LLC, 

Debtor,

No. 05-35839 DONALD A. THACKER,

Appellant, D.C. No.  CV-04-05681-FDB v.

OPINION FEDERAL COMMUNICATIONS

COMMISSION; UNITED STATES OF

AMERICA,

Appellees. 

Appeal from the United States District Court

for the Western District of Washington

Franklin D. Burgess, District Judge, Presiding

Argued and Submitted

June 7, 2007—Seattle, Washington

Filed September 17, 2007

Before: Betty B. Fletcher, Harry Pregerson, and

Sandra S. Ikuta, Circuit Judges.

Opinion by Judge Ikuta

12463
COUNSEL

Donald B. Verrilli, Jr. and William M. Hohengarten, Jenner

& Block, LLP, Washington, D.C., for the plaintiff-appellant.

John S. Riper and Joseph M. Campos, Stanislaw Ashbaugh,

LLP, Seattle, Washington, for the trustee. 

Peter D. Keisler, Assistant Attorney General, John McKay,

United States Attorney, William Kanter, and H. Thomas

Byron III, Department of Justice, Civil Division, Washington,

D.C., for the defendants-appellees. 

OPINION

IKUTA, Circuit Judge: 

This appeal requires us to consider the effect of the Federal

Communications Commission’s (“FCC”) cancellation of

licenses held by a licensee in bankruptcy proceedings. Donald

Thacker, in his capacity as trustee to the bankruptcy estate of

Magnacom Wireless, LLC (“Magnacom”), appeals the district

court’s decision to deny his claim to the proceeds from the

FCC’s auction of new licenses for the radio spectrum previ12466 IN RE: MAGNACOM WIRELESS
ously covered by Magnacom’s cancelled licenses. We conclude that the FCC’s cancellation of Magnacom’s licenses

extinguished Magnacom’s interest in those licenses and the

underlying spectrum. Such cancellation did not result in any

traceable proceeds, and did not constitute a lien-enforcement

remedy. Therefore, Magnacom is not entitled to such proceeds. We have jurisdiction under 28 U.S.C. § 158(d)(1) and

affirm the decision of the district court.

I.

Under the terms of the Communications Act of 1934

(“Act”), the FCC grants licenses for use of the radio spectrum.

The licenses give licensees the right to use segments of the

spectrum in various geographic areas for specified terms, in

accordance with FCC provisions. See 47 U.S.C. § 3011 Pursuant to the Act, the licenses do not give licensees an ownership

interest in the spectrum. Id.

Beginning in 1994, the FCC began selling the licenses

based on a competitive bidding process. See id. § 309(j). With

exceptions not relevant to the instant case, all proceeds from

these auctions are deposited into the U.S. Treasury. Id.

§ 309(j)(8). As part of this new market-driven licensing process, the Act requires the FCC to “ensure that small businesses, rural telephone companies, and businesses owned by

members of minority groups and women are given the opportunity to participate in the provision of spectrum-based services. . . .” Id. § 309(j)(4)(D). To fulfill this mandate, the FCC

1

47 U.S.C. § 301 states: 

It is the purpose of this chapter, among other things, to maintain

the control of the United States over all the channels of radio

transmission; and to provide for the use of such channels, but not

the ownership thereof, by persons for limited periods of time,

under licenses granted by Federal authority, and no such license

shall be construed to create any right, beyond the terms, conditions, and periods of the license. 

IN RE: MAGNACOM WIRELESS 12467
earmarks certain blocks of spectrum for auction to small,

entrepreneurial companies known as “designated entities.” 47

C.F.R. § 1.2110(a). Other license purchasers must pay the

entire bid price at the time of the successful bid, but the FCC

allows designated entities to pay only a down payment and

then complete their purchase by making installment payments

during the term of the license. 47 C.F.R. § 1.2110(g). FCC

regulations condition these licenses upon “the full and timely

performance of the licensee’s payment obligations under the

installment plan.” 47 C.F.R. § 1.2110(g)(4); see also 47

C.F.R. § 1.2110(g)(4)(iv). Thus, in relation to designated entities, the FCC plays the dual role of regulator and creditor. 

Magnacom, one such designated entity, was created for the

purpose of obtaining licenses to the spectrum in order to provide personal communications services. In September 1996,

Magnacom purchased a number of radio spectrum licenses

from the FCC under an installment payment plan. Magnacom

made down payments of ten percent of the purchase price for

licenses to use “C block” spectrum segments and twenty percent of the purchase price for licenses to use “F Block” segments. In total, Magnacom paid approximately $7 million on

a purchase price of approximately $55 million. For each

license, Magnacom signed the FCC’s standard promissory

note and security agreement (the “Security Agreement”),

promising to pay the rest of the purchase price in quarterly

installments throughout the ten-year license term. 

In the Security Agreement, Magnacom acknowledged: (1)

it possessed no underlying right to the spectrum;2 (2) the

FCC’s security interest in the licenses did not derogate from

the FCC’s regulatory authority over the licenses;3 (3) the

2

“Debtor understands and acknowledges that it holds a mere conditional

license to use the Spectrum with no ownership interest in the Collateral (or

any underlying right to use the Spectrum) . . . .” Security Agreement ¶ 2.

3

“Debtor further understands and acknowledges that it is giving a security interest to the Commission in the Collateral only to assist the Commis12468 IN RE: MAGNACOM WIRELESS
licenses would be automatically cancelled if an event of

default occurred;4 (4) Magnacom would not be entitled to any

proceeds from the sale of new licenses following cancellation;5

and (5) the Security Agreement would be subject to the Act,

FCC regulations, and federal law.6

Not long after purchasing its licenses, Magnacom began to

experience financial difficulties. In an attempt to meet its

sion in protecting its ability to enforce the Commission’s regulations

which condition holding the license in compliance with all then-applicable

orders and regulations of the Commission, including, but not limited to,

full and timely payment of all payments under the Installment Payment

Plan. To that end, and not in derogation of any of the Commission’s regulatory authority over the License, Debtor hereby acknowledges that the

Commission has a first security interest in the Collateral . . . .” Security

Agreement ¶ 2. 

4

“If an Event of Default shall occur, the Commission shall thereafter

have the following rights and remedies (to the extent permitted by applicable law) in addition to the rights and remedies relating to the Note, all such

remedies being cumulative, not exclusive, and enforceable alternatively,

successively or concurrently at such time or times as Commission deems

expedient: (a) the License shall be automatically canceled pursuant to 47

C.F.R. § 1.2110.” Security Agreement ¶ 8. 

5

“Debtor hereby acknowledges the Commission’s authority, pursuant to

the Communications Act of 1934, as amended, and the Commission’s

orders and regulations then-applicable to such licenses, to conduct another

public auction or assign the License in the event that the Commission

rescinds, cancels, or revokes the License for any default under this Agreement . . . . Debtor further acknowledges that in the event that the Commission rescinds, cancels, or revokes the License for any default under this

Agreement . . . Debtor has no right or interest in any moneys or evidence

of indebtedness given to the Commission by a subsequent licensee of the

Spectrum and that all such moneys or evidence of indebtedness are, and

shall remain, the full property of the federal Treasury, pursuant to Section

309(j) of the Communications Act of 1934, as amended, and thenapplicable commission orders and regulations.” Security Agreement ¶ 8.

6

“This Agreement shall be governed by and construed in accordance

with Communications Act of 1934, as amended, then-applicable Commission orders and regulations, as amended, and federal law.” Security Agreement ¶ 12. 

IN RE: MAGNACOM WIRELESS 12469
installment payment obligations, Magnacom restructured its

debt by returning some licenses to the FCC, modifying other

licenses, and using the resulting down payment credits to prepay for other licenses. Following this restructuring, Magnacom held eighteen licenses subject to the installment payment

requirements and owed the FCC approximately $48 million.

Despite this restructuring, Magnacom’s financial difficulties

continued. 

On October 28, 1998, the day before Magnacom would

have defaulted on its remaining installment payments, Magnacom filed a voluntary petition for relief under Chapter 11. In

response, on April 21, 1999, the FCC asked the bankruptcy

court for relief from the automatic stay imposed by 11 U.S.C.

§ 362. The bankruptcy court granted the request. In May

1999, the court lifted the stay on the FCC and ruled that “the

FCC may pursue immediately any and all of its remedies,

including its right to cancel the Defaulted Licenses if such

licenses have not already [been] canceled as a matter of law.”

Thereafter, the FCC cancelled the licenses. On July 12, 1999,

Magnacom’s bankruptcy case was converted from Chapter 11

to Chapter 7. 

In January 2000, the FCC filed a proof of claim as an unsecured creditor to obtain the approximately $48 million dollars

that the Magnacom bankruptcy estate still owed for the nowcancelled licenses. With the acquiescence of Magnacom’s

trustee, the court approved the FCC’s proof of claim. 

In 2001, while the FCC’s claim against the bankruptcy

estate was pending, the FCC auctioned licenses to the spectrum segments formerly licensed to Magnacom. See Public

Notice, C and F Block Broadband PCS Spectrum Auction

Scheduled for December 12, 2000, 15 F.C.C.R. 19485 (2000).

The new licenses offered by the FCC for auction did not have

the same terms as the cancelled Magnacom licenses. Among

other things, the new licenses were for a new ten-year term

ending in 2011 (Magnacom’s licenses had been set to expire

12470 IN RE: MAGNACOM WIRELESS
in 2006 and 2007) and had different build-out construction

deadlines. In addition, the FCC would not accept installment

payments for the licenses. As it turned out, market conditions

had changed since the time Magnacom had won its licenses

at auction. The winning bidders in the 2001 auction paid a

total purchase price of $287 million, substantially more than

Magnacom had paid for licenses to the same spectrum segments. Pursuant to 47 U.S.C. § 309(j)(8), the proceeds of the

auction were deposited into the U.S. Treasury. 

In light of the subsequent sale of new licenses, on February

12, 2003, Magnacom’s trustee filed a motion to reconsider the

FCC’s allowed claim against Magnacom’s bankruptcy estate.

In his motion, the trustee opposed the FCC’s unsecured claim

on the ground that the reauctioned licenses were sold for a

substantially higher price than was required to cover Magnacom’s default. Despite the FCC’s opposition, the bankruptcy

court granted this motion on September 2, 2003, holding that

the FCC was not entitled to any distribution from the estate.

On December 19, 2003, the trustee filed a complaint

against the FCC in bankruptcy court, seeking the return of any

proceeds from the auction of the new licenses that exceeded

the amount Magnacom owed to the FCC. The bankruptcy

court dismissed the complaint for failure to state a claim upon

which relief could be granted. The trustee appealed this decision to the district court, which affirmed the decision on June

22, 2005. The trustee now appeals the decision of the district

court. 

II.

We review a dismissal for failure to state a claim pursuant

to Federal Rule of Civil Procedure 12(b)(6) de novo. Pack v.

United States, 992 F.2d 955, 957 (9th Cir. 1993). Limiting our

review to the content of the trustee’s complaint, “[a]ll allegations of material fact are taken as true and construed in the

light most favorable to the nonmoving party.” Id. Likewise,

IN RE: MAGNACOM WIRELESS 12471
“[w]e review the district court’s decision on an appeal from

a bankruptcy court de novo.” Richmond v. United States, 172

F.3d 1099, 1101 (9th Cir. 1999) (quotation marks omitted). 

III.

The principal issue in this appeal is the legal effect of the

FCC’s cancellation of Magnacom’s licenses. It is undisputed

that Magnacom’s licenses were cancelled following the bankruptcy court’s original decision to lift the stay. What the parties debate is the effect of this cancellation. Magnacom’s

trustee argues that the cancellation and subsequent spectrum

auction is subject to Bankruptcy Code and Uniform Commercial Code (“UCC”) rules that give the Magnacom estate entitlement to surplus proceeds. The FCC argues that under

applicable statutes and regulations, once the licenses were

cancelled, they ceased to exist and any right in the underlying

spectrum was extinguished. Therefore, the proceeds from the

auction of the new licenses were not property of the bankruptcy estate. 

[1] The plain language of the Act supports the FCC’s position. Under 47 U.S.C. § 301, licenses “provide for the use” of

the spectrum, “but not the ownership thereof.” In other words,

licensees have a property interest only in the use of the spectrum, not in the underlying spectrum itself. Moreover, § 301

provides that the property interest created by a license is limited to “the terms, conditions, and periods” of the license

itself. Id. Consistent with the Act, the Security Agreement

states that licenses are extinguished upon non-payment, and

convey no rights to the underlying spectrum. See Security

Agreement, ¶ 2; see also 47 C.F.R. § 1.2110(g)(4)(iv) (“If an

eligible entity obligated to make installment payments fails to

pay the total Required Installment Payment . . . it shall be in

default, its license shall automatically cancel, and it will be

subject to debt collection procedures.”). Because licenses

“provide for the use” of the spectrum and convey no ownership interest “beyond the terms, conditions, and periods of the

12472 IN RE: MAGNACOM WIRELESS
license,” 47 U.S.C. § 301, it follows that once the licenses are

cancelled for nonpayment, the licenses cease to exist along

with any interest in the spectrum for which the license was

issued. See FCC v. NextWave Pers. Commc’ns Inc., 537 U.S.

293, 307-08 (2003) (describing cancellation as “eliminating

the licenses”). Thus, under the plain language of the statute

and applicable regulations, once an FCC license is cancelled,

a licensee no longer has any right derived from that license

and therefore has no entitlement to the proceeds from the auction of a new license.7

[2] There is one wrinkle to this analysis, but it does not

change the result in this case. Section 525 of Title 11 states

that “a governmental unit may not . . . revoke . . . a license

. . . to . . . a person that is . . . a debtor under this title . . .

solely because such . . . debtor . . . has not paid a debt that

is dischargeable in the case under this title . . . .” 11 U.S.C.

§ 525.8 Applying § 525 in a factual situation similar to ours,

7The FCC explained its position on this issue in an opinion letter that

addresses precisely the circumstance presented in this case: 

[I]t is our understanding that, where there is collateral in goods

or other tangible property, the proceeds from the liquidation of

collateral would be applied to debts (and other costs) due. In the

case of FCC licenses that are cancelled and reauctioned, however, there is no liquidation of the collateral by the FCC and no

proceeds from the resale of the defaulted license because the

license is canceled and, in effect, disappears. 

Leonard J. Kennedy, Esq., 11 F.C.C.R. 21572, 21576 (OGC/WTB 1996)

(citation omitted). This opinion letter does not have the force of law and

is not entitled to any Chevron deference. See Christensen v. Harris

County, 529 U.S. 576, 587 (2000). We find its analysis persuasive

because, as explained above, licenses provide only for the use of the spectrum and convey no ownership interest beyond the license term. Once the

licenses are cancelled for nonpayment, the licenses cease to exist. 

8The full text of 11 U.S.C. § 525(a) reads: 

Except as provided in the Perishable Agricultural Commodities

Act, 1930, the Packers and Stockyards Act, 1921, and section 1

of the Act entitled “An Act making appropriations for the DepartIN RE: MAGNACOM WIRELESS 12473
the Supreme Court held that the FCC’s regulatory authority to

cancel licenses did not trump the provision of § 525; rather,

the FCC was precluded from cancelling a license solely

because of the licensee’s failure to pay on a debt dischargeable in bankruptcy. NextWave, 537 U.S. at 304. Thus, the

FCC’s decision to cancel Magnacom’s licenses for nonpayment would be subject to challenge under § 525. 

[3] NextWave is not applicable here, however, because

Magnacom’s trustee does not challenge the FCC’s cancellation of the licenses and does not seek relief based on § 525.

Magnacom’s trustee did not object to the FCC’s motion for

relief from the automatic stay to allow the FCC to cancel the

licenses. Nor does the trustee now argue that the FCC’s cancellation of the licenses violated § 525; in his opening brief

trustee explicitly accepts the FCC’s cancellation, stating that

“Magnacom is not trying to recover its licenses or set aside

their transfer to new licensees.” Section 525 is not applicable

when, as here, an entity does not challenge the cancellation of

its license.9

ment of Agriculture for the fiscal year ending June 30, 1944, and

for other purposes,” approved July 12, 1943, a governmental unit

may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a

grant to, discriminate with respect to such a grant against, deny

employment to, terminate the employment of, or discriminate

with respect to employment against, a person that is or has been

a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor

has been associated, solely because such bankrupt or debtor is or

has been a debtor under this title or a bankrupt or debtor under

the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the

debtor is granted or denied a discharge, or has not paid a debt that

is dischargeable in the case under this title or that was discharged

under the Bankruptcy Act. 

9Besides noting that both Magnacom and the bankruptcy court had previously given their consent to the cancellation of the licenses, the bank12474 IN RE: MAGNACOM WIRELESS
IV.

Although the plain language of the statute and applicable

regulations indicate that Magnacom had no entitlement to proceeds from a new auction, the trustee argues that cancellation

did not eliminate the bankruptcy estate’s right to collect surplus proceeds from the auction of new licenses covering the

same spectrum. The trustee asserts that both the Bankruptcy

Code and the UCC provide independent bases for the return

of “surplus proceeds” from the second auction. 

The trustee’s argument under the Bankruptcy Code is as

follows. Once Magnacom entered bankruptcy, its interests in

the licenses, as well as the proceeds of those licenses, became

property of the bankruptcy estate. 11 U.S.C. § 541(a)(1),

(a)(6). The term “proceeds” includes all funds “traceable to”

or “substituted for” the original property. See 11 U.S.C.

§ 541(a)(6). Because Magnacom’s licenses gave it the exclusive right to use a portion of the spectrum, the FCC’s cancellation of the Magnacom licenses freed up that portion of the

spectrum. As a result, the trustee argues, the FCC was enabled

to sell new licenses, and the proceeds from the sale of the new

ruptcy court also rested its conclusion that § 525 was not applicable on the

alternative basis that Magnacom was in Chapter 7 bankruptcy not Chapter

11 bankruptcy, unlike the debtor in NextWave, 537 U.S. at 297. Because

debts of corporations are not dischargeable under Chapter 7 bankruptcy,

§ 525 would not be applicable in Magnacom’s Chapter 7 case. See 11

U.S.C. § 727(a) (“The court shall grant the debtor a discharge, unless . . .

the debtor is not an individual.”); see also NLRB v. Better Bldg. Supply

Corp., 837 F.2d 377, 378 (9th Cir. 1988) (“Partnerships and corporations

may not discharge their debts in a liquidation proceeding under Chapter

7 of the Code.”). On this record, however, it is unclear whether the FCC

cancelled the licenses while Magnacom’s proceedings were in Chapter 11

or Chapter 7. Magnacom remained in Chapter 11 bankruptcy proceedings

after the bankruptcy court lifted the stay, and the record does not reflect

the date that the FCC cancelled the licenses. However, given the fact that

§ 525 is ultimately not relevant to the trustee’s claim, we need not reach

the bankruptcy court’s alternative holding. 

IN RE: MAGNACOM WIRELESS 12475
licenses are traceable proceeds of the cancelled Magnacom

licenses, and thus property of the bankruptcy estate. 

[4] We are unpersuaded by the trustee’s argument based on

the Bankruptcy Code. This argument is based on the premise

that Magnacom retained an interest in the spectrum after the

FCC cancelled its licenses, a premise we have already

rejected. If a bankruptcy estate includes a valuable property

interest that is sold, or swapped for a different piece of property, the proceeds remain part of the estate. See Catalano v.

Comm’r, 279 F.3d 682, 686 (9th Cir. 2002). Thus, if the FCC

had sold Magnacom’s licenses, the Magnacom estate might

have rights to proceeds from such a sale. Alternatively, if

Magnacom retained rights to the spectrum covered by its

licenses, the Magnacom estate might have rights to proceeds

from the sale of new licenses to use the underlying spectrum.

However, in this case, Magnacom’s property—the licenses—

were extinguished and had no value once they were cancelled

by the FCC. And as we have previously noted, Magnacom

had no interest in the underlying spectrum or any subsequent

licenses for the spectrum. See 47 U.S.C. § 307(a). When the

property of an estate no longer exists and has not been disposed of in any way that generated proceeds, the trustee has

no remedy. See generally 44 GEORGE GLEASON BOGERT ET AL.,

THE LAW OF TRUSTS AND TRUSTEES § 921 (6th ed. 2007). Here

the licenses were extinguished and were simply not disposed

of in any way. 

[5] It is true that the FCC had to cancel Magnacom’s

licenses before the FCC could sell new licenses for the underlying spectrum. However, this fact alone does not give

Magnacom any rights to proceeds from the new licenses. A

creditor’s lawful extinction of a property right in the bankruptcy estate does not give the trustee in bankruptcy rights to

other property created by that creditor. See In re Gull Air,

Inc., 890 F.2d 1255, 1262 (1st Cir. 1989) (“[W]hen a debtor’s

proprietary interest expires by operation of an express condition, the Bankruptcy Code does not preserve that interest and

12476 IN RE: MAGNACOM WIRELESS
prevent termination.”). Therefore, the FCC’s sale of new

licenses for the use of spectrum segments to which Magnacom had no rights did not generate any proceeds traceable to

Magnacom’s licenses. 

We are also unpersuaded by the trustee’s UCC argument.

The trustee contends that the Security Agreement gave the

FCC a security interest in the licenses that could be enforced

only pursuant to the terms of the UCC. See Security Agreement, ¶ 8(i) (giving the FCC “any remedies of a Secured

Party under the Uniform Commercial Code.”). Article 9 of the

UCC sets forth a secured creditor’s lien-enforcement remedies. Under Article 9 of the UCC (subject to multiple procedural requirements), after a borrower defaults, the secured

creditor may sell its collateral subject to the borrower’s right

to any surplus from the sale. UCC §§ 9-610, 9-615. If a creditor held a security interest in the proceeds of Magnacom’s

licenses, and the licenses had been sold, the creditor would

have owed the Magnacom estate any proceeds beyond what

was necessary to satisfy the debt owed to the creditor. See

MLQ Investors, L.P. v. Pac. Quadracasting, Inc., 146 F.3d

746, 749 (9th Cir. 1998). The trustee contends that the UCC

likewise applies to the FCC’s enforcement of the Security

Agreement and requires the FCC to return the excess proceeds from its auction of new licenses to the bankruptcy

estate. 

If we assume that the UCC is applicable to the Security

Agreement (an issue we do not reach), the UCC would support the trustee’s claim of entitlement to proceeds from the

FCC’s sale of new licenses only if the FCC’s cancellation of

the licenses was a lien-enforcement remedy under the UCC.

The trustee argues that both the applicable regulations and the

Security Agreement make cancellation a lien-enforcement

remedy. We look at both in turn. 

[6] By its terms, the Security Agreement does not make

cancellation a lien-enforcement remedy. However, the trustee

IN RE: MAGNACOM WIRELESS 12477
relies on NextWave Personal Communications, Inc. v. F.C.C.,

254 F.3d 130 (D.C. Cir. 2001), aff’d by, NextWave, 537 U.S.

293, to support this argument. As noted above, NextWave

Personal Communications, Inc. involved a debtor who raised

various challenges to the FCC’s cancellation of its license,

including the ultimately successful argument that § 525 prevented the FCC from cancelling its licenses. In response, the

FCC made a highly technical argument. The FCC first pointed

out that under 11 USC § 362(b)(4), the automatic stay does

not prevent the government from taking certain regulatory

actions. The FCC argued that such allowable regulatory

actions include cancelling a debtor’s licenses. If it interpreted

§ 525 as precluding the FCC from cancelling a debtor’s

licenses, the court would create a conflict with § 362(b)(4).

The court rejected this argument on the ground that

§ 362(b)(4) did not apply to license cancellation in this case.

The court noted the FCC’s concession that “canceling the

licenses and seeking to collect on the debt was ‘tantamount to

. . . foreclosing on collateral.’ ” Id. at 151. Because foreclosure actions are not exempt from the automatic stay under

§ 362(b)(4), the court concluded that it could read § 525 to

prohibit the FCC from cancelling licenses without conflicting

with § 362(b)(4). Id. We do not consider this brief discussion

to be the D.C. Circuit’s reasoned conclusion that cancellation

of an FCC license is a lien-enforcement action. The D.C. Circuit’s suggestion that § 362(b)(4) did not exempt the FCC’s

license cancellation from the automatic stay was based on the

FCC’s concession that its action was “tantamount to foreclosing on collateral.” In our circuit, statements made in passing,

without analysis, are not binding precedent. See, e.g., United

States v. Johnson, 256 F.3d 895, 915 (9th Cir. 2001). Moreover, the D.C. Circuit’s decision was superceded by the

Supreme Court’s analysis in Nextwave, which did not address

the question whether license cancellation constituted lien

enforcement. NextWave, 537 U.S. at 302. Therefore, we reject

the trustee’s argument that under the D.C. Circuit’s NextWave

12478 IN RE: MAGNACOM WIRELESS
decision we must interpret the Security Agreement to make

cancellation a lien-enforcement remedy. 

The trustee also points to regulations governing the licenses

that state that when a licensee misses an installment payment

“it shall be in default, its license shall automatically cancel,

and it will be subject to debt collection procedures.” 47

C.F.R. § 1.2110(g)(4)(iv) (emphasis added). According to the

trustee, the use of “and” suggests that cancellation triggers a

hybrid regulatory and lien-enforcement action that is subject

to typical debtor-creditor law. We read this language in the

opposite way: after non-payment, the license is extinguished

and the debtor will be held accountable for the unpaid

licensee fees. See Leonard J. Kennedy, Esq., 11 F.C.C.R.

21572, 21576. This is exactly how the FCC proceeded in this

case: it took steps to obtain relief from the automatic stay in

order to cancel Magnacom’s licenses, and then proceeded to

enforce its claims as an unsecured creditor in the bankruptcy

proceedings. 

Finally, we disagree with the trustee’s reading of NBD Park

Ridge Bank v. SRJ Enterprises, Inc. (In re SRJ Enterprises,

Inc.), 150 B.R. 933, 938 (Bankr. N.D. Ill. 1993), and its progeny to support the argument that because the FCC had a

security interest in the licenses, its cancellation of those

licenses must be deemed to be a lien-enforcement remedy. In

re SRJ Enterprises, Inc. involved a debtor in Chapter 11 bankruptcy proceedings who sold his car dealership and, as part of

the sales price, received a “termination fee” for voluntarily

terminating his Nissan sales franchise. Id. at 935. Nissan

would not have issued a new franchise to the buyer of the

dealership until the debtor terminated the existing franchise.

Id. The court determined that the creditor’s security interest

in “general intangibles” included a security interest in the termination fee received by the debtor. Id. at 939-40. In the

course of reaching this conclusion, the court analogized to

cases allowing lenders to enforce security interests in the proceeds from sales of FCC licenses, even though FCC did not

IN RE: MAGNACOM WIRELESS 12479
allow lenders to take a security interest in the licenses themselves. Id.

These cases do not help the trustee. Unlike our case, the

debtor in In re SRJ Enterprises, Inc. owned a valuable right;

the right to terminate its franchise agreement. The bankruptcy

court merely held that a secured creditor had an interest in the

proceeds derived from exercising that right. Similarly,

secured creditors may take a security interest in the proceeds

derived from licensees’ exercise of their valuable right to sell

or transfer their licenses. By contrast, Magnacom did not own

a termination right or any other valuable right. Any value

stemming from Magnacom’s license was extinguished when

the FCC unilaterally cancelled the license pursuant to its contractual and regulatory rights. Moreover, nothing in In re SRJ

Enterprises, Inc. suggests that the FCC was required to

enforce its security interest in the licenses, rather than merely

cancelling them. 

[7] We conclude that the trustee’s UCC arguments are to no

avail. The FCC had a regulatory and contractual right to cancel Magnacom’s licenses. This right was separate and independent from the FCC’s rights as a secured creditor. Nothing

in the Security Agreement or the applicable regulations indicates that a license cancellation must be viewed as a lienenforcement remedy, and we decline to do so. Because the

FCC’s license cancellation is not a UCC lien-enforcement

remedy, the UCC’s requirements are simply inapplicable.

Therefore, even if the UCC were applicable to the Security

Agreement, it would not entitle Magnacom to proceeds after

its licenses were extinguished.10

10By the same token, the fact that a debtor’s rights to surplus proceeds

are unwaivable under U.C.C. § 9-602(4) is not relevant in this case. The

FCC did not exercise its lien-enforcement remedies and did not sell collateral owned by Magnacom. Therefore, it received no surplus proceeds to

which Magnacom was entitled. 

12480 IN RE: MAGNACOM WIRELESS
[8] In sum, under 47 U.S.C. § 301, once Magnacom’s

licenses were cancelled by the FCC, Magnacom’s licenses

had no value and Magnacom’s interest in the underlying spectrum was extinguished. This valueless asset could not generate any traceable proceeds for purposes of the Bankruptcy

Code. Moreover, nothing in the Security Agreement or applicable law requires us to treat the FCC’s license cancellation

as a lien-enforcement proceeding subject to the UCC. Therefore, Magnacom had no entitlement to the proceeds from any

subsequent sale of new licenses covering the same spectrum.

V.

Finally, the trustee argues that principles of issue preclusion and judicial estoppel barred the FCC from claiming that

Magnacom was not entitled to the proceeds from the sale of

new licenses for the spectrum covered by the Magnacom

licenses. 

The trustee’s issue preclusion argument is based on the

bankruptcy court’s September 2, 2003 order disallowing the

FCC’s unsecured claim against the bankruptcy estate. In its

order, the bankruptcy court indicated that the FCC was not

entitled to recover the $48 million that Magnacom had failed

to pay for the now-cancelled licenses because the FCC’s

claim had been satisfied by the sale of the new licenses. The

court stated that it was “unconvinced by the FCC’s argument

that the claim may not be reconsidered because the licenses

that it subsequently auctioned were different licenses than the

ones previously held by the Debtor . . . . No matter how

labeled, however, the FCC could not have auctioned these

licenses to new users, but for the Debtor’s default.” In re

Magnacom Wireless, LLC, No. 98-39048, at 5-6 (Bankr.

W.D. Wa. Sept. 2, 2003) (memorandum decision on motion

for reconsideration). However, in ultimately disallowing the

FCC’s claim, the court relied primarily on the FCC’s policy

statement that it would “ ‘forgive any outstanding debt so

long as it has been made whole (penalties and costs included)

IN RE: MAGNACOM WIRELESS 12481
in a subsequent auction.’ ” Id. at 6 (quoting Leonard J. Kennedy, Esq., 11 F.C.C.R. at 21576). The court concluded: 

Although the FCC disputes that it received a $238

million surplus from the subsequent auction of the

licenses, the FCC has conceded that the proceeds

from the subsequent auction exceed the amount of its

claim against the Debtor’s estate. If the Court were

to accept the FCC’s argument, the FCC would

unquestionably receive a substantial windfall. Such

a result would be contrary to the FCC’s position as

stated in the [policy] letter that it would “forgive outstanding debt so long as it has been made whole

(penalties and costs included) in a subsequent auction.” 11. F.C.C.R. at 21576. Prevention of such a

double recovery to the harm of the Debtor’s creditors

and estate, particularly where the claimant has recognized in its own policy statements that such a result

would be inequitable, is precisely the type of circumstance that Fed. R. Civ. P. 60(b)(5) or (6) should be

utilized to prevent. 

Id. at 7-8. 

Moreover, although the bankruptcy court refused to allow

the FCC to proceed against Magnacom, the court expressly

did not conclude that Magnacom was entitled to proceeds

from the FCC’s sale of the new licenses. In this same order,

the court stated that it “recognizes that the part[i]es have

included briefing on issues that are not necessarily before the

Court at this time. For example, the Movants are taking the

position that the estate also has substantial claims against the

FCC for the $238 million surplus. The Court simply concludes that the FCC is not entitled to any further claim against

the estate for the $48,187,219.73.” In a subsequent order, the

bankruptcy court reiterated that it did not reach the issue of

whether Magnacom was entitled to surplus proceeds. The

court concluded that “[t]he issue decided by the Court in its

12482 IN RE: MAGNACOM WIRELESS
September 2, 2003 Decision was whether reconsideration of

the FCC’s claim was proper. The Court made it clear in its

decision that this was the only issue before it, and that it was

not making any rulings on whether the estate had any claim

to the surplus proceeds.” In re Magnacom Wireless, LLC, No.

98-39048, at 6 (Bankr. W.D. Wa. Oct. 5, 2004) (memorandum decision on motion to dismiss complaint). 

[9] Reading the entirety of the bankruptcy court’s order in

context, and giving due weight to the court’s subsequent interpretation of its own order, we must conclude that the court did

not decide the question whether Magnacom was entitled to

proceeds from the sale of the new licenses. Id. at 8. “A party

invoking issue preclusion must show: (1) the issue at stake is

identical to an issue raised in the prior litigation; (2) the issue

was actually litigated in the prior litigation; and (3) the determination of the issue in the prior litigation must have been a

critical and necessary part of the judgment in the earlier

action.” Littlejohn v. United States, 321 F.3d 915, 923 (9th

Cir. 2003). Because the “issue at stake” in this case is not

“identical to an issue raised in the prior litigation” and has not

been adjudicated, issue preclusion does not bar the FCC from

making its arguments here.11

The trustee also argues that the FCC’s claim is barred by

the doctrine of judicial estoppel. “Judicial estoppel is an equitable doctrine that precludes a party from gaining an advantage by asserting one position, and then later seeking an

advantage by taking a clearly inconsistent position.” Hamilton

v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir.

2001). The trustee failed to raise this argument before either

the bankruptcy court or the district court. We, therefore, deem

it waived. See El Paso v. Am. W. Airlines, Inc. (In re Am. W.

Airlines, Inc.), 217 F.3d 1161, 1165 (9th Cir. 2000). 

11We also reject the trustee’s argument that the bankruptcy court’s

October 5, 2004 ruling on this issue confused issue preclusion and claim

preclusion. As our analysis indicates, the bankruptcy court did not reach

the issue of the legal effect of the license cancellation. 

IN RE: MAGNACOM WIRELESS 12483
VI.

In sum, we uphold the bankruptcy court’s dismissal of the

trustee’s claim. The FCC’s license cancellation extinguished

Magnacom’s rights to the underlying spectrum. Magnacom

has no claim to the proceeds of the subsequent auction of new

licenses covering the same spectrum. 

Affirmed. 

12484 IN RE: MAGNACOM WIRELESS