Opinion ID: 427192
Heading Depth: 3
Heading Rank: 1

Heading: The Tribunal's 0 Award

Text: 53 The Tribunal gave two reasons for denying the Devotional Claimants an award. First, it found that devotional programming had no marketplace value (one of the three primary criteria) because its producers had to pay broadcasters to air it. In the Tribunal's words: 54 We regard it as a fundamental distinction the practice of these syndicator claimants to buy time on television stations to broadcast their programs, while other syndicated programs are purchased by the stations. 55 47 Fed.Reg. 9,896 (1982) (emphasis added). Second, and subordinately, the Tribunal found that the Devotional Claimants are not harmed by cable retransmission of their programming (another of the Tribunal's original criteria), and indeed may benefit from it because the expanded viewing audience could provide a source of additional donations: 56 Although, as discussed elsewhere, we have not found the evidence on the harm criteria to provide much assistance in allocating royalty shares, cable carriage may well benefit these claimants because the expanded carriage provides greater exposure and the potential of increased contributions from viewers. The record establishes that these claimants rely upon direct contribution for the support of the programs and other activities. 57 Id. Although the Tribunal's explanations appear at first blush to be perfectly reasonable, they take on an air of unexplained arbitrariness when measured against the evidentiary record of the 1979 proceeding and the Tribunal's dissimilar treatment of claimants which, in several respects, seem similarly situated to the Devotionals. 58 We begin by reiterating that there is nothing necessarily irrational about the Tribunal's fundamental distinction; the fact that CBN, PTL, and OTGH pay broadcasters to air devotional programming provides, as a matter of logic, the basis for a reasonable inference that their programming is without recognizable market value. But while we do not criticize the Tribunal's abstract logic, the Tribunal completely fails to acknowledge (much less discuss) record evidence suggesting factual weaknesses in its neat conclusion. For example, nowhere does the Tribunal discuss the contention--repeatedly pressed by the Devotional Claimants--that their payments to broadcasters reflect a conscious, self-inflicted cost of commercial-free formatting rather than any external indication of market worthlessness. See, e.g., Tribunal Summary of PTL's Evidentiary Position, 47 Fed.Reg. 9,890-91 (1982) (Religious programmers choose not to mix advertising with their programming in order to retain freedom of expression); CBN Exhibit 1, JA 450-51 (Interspersing such programs with product commercials would be as offensive and out of place as billboards in a church or synagogue). Nor does the Tribunal acknowledge the merits of a counterargument, also pressed repeatedly by the Devotional Claimants, that the market value of their programming is reflected in the value viewers place on it in that they are willing to pay to support it [through donations]. Tribunal Summary of CBN Evidentiary Position, 47 Fed.Reg. 9,890 (1982); cf. Tribunal Summary of PTL Evidentiary Position, id., at 9,891 (making same point to proffer evidence of quality). These failures, by themselves, may not necessarily vitiate the Tribunal's fundamental distinction--[s]ubstantial evidence is not lacking merely because the agency chooses one conclusion from evidence that arguably supports 'two inconsistent conclusions.'  NAB v. CRT, 675 F.2d at 367 (quoting Consolo v. FMC, 383 U.S. 607, 620, 86 S.Ct. 1018, 1026, 16 L.Ed.2d 131 (1966)). But the Tribunal's conspicuous failure to discuss these relevant aspects of the Devotional Claimants' case makes it difficult for us to appraise the reasonableness of the Tribunal's response to the record evidence. 59 Moreover, troubling indications of arbitrariness arise when, in considering the cases of Public Broadcasting Service (PBS) and National Public Radio (NPR), the Tribunal felt free to make awards to claimants regardless of commercial marketplace factors. 47 Fed.Reg. 9,893 (1982) (making 5.25% Phase I award to PBS); id. at 9,894 (As with our review of the PBS claim, some customary guides to judging the marketplace value of program product are not useful. The record supports a finding that the programming has a special appeal, which justifies an award) (making .25% Phase I award to NPR). And even more specific indications of arbitrariness are suggested by the Tribunal's Phase II recognition (albeit only on the order of a .1% award) to Mutual of Omaha for Wild Kingdom--despite the Tribunal's acknowledgment that Mutual of Omaha barters its program to broadcasters (i.e., receives no money for it), uses the program as an advertising vehicle, and receives some benefit from cable retransmission. Id. at 9890, 9896. Measured in light of these awards, the Tribunal's fundamental distinction begins to take on the texture of quicksilver. 60 Tell-tale indicators of capriciousness become more apparent when we turn, as the Tribunal did not, to the benefit to cable systems criterion: the criterion which, in discussing the Joint Sports Claimants' presentation, the Tribunal included as among the marketplace considerations we have found most persuasive and useful. 47 Fed.Reg. 9,892 (1982). In its analysis of the Devotional Claimants' presentations, however, the Tribunal felt it unnecessary to discuss what appears to be at least noteworthy record evidence of benefit to cable operators. See, e.g., Letter from Ronald Roe, Hampton Roads Cablevision, to Pat Robertson, CBN (Jan. 6, 1982) (your program [700 Club ] has attracted a very loyal and dedicated audience that appears to be gradually increasing all the time); Testimony of Walter Richardson, Vice President of Affiliate Marketing, PTL, Transcript (Tr.) 6922, JA 1674 (31 cable affiliates specifically subscribe to PTL satellite service); Testimony of Stanley Ditchfield, former CBN Executive, JA 459 (identifying apparently extensive cable retransmission of CBN-owned station KXTX-TV, which devoted 18.5% of its operating time to CBN programming); id., at 458 (indicating notable percentage of stations qualifying as FCC specialty stations that carried CBN programming); Testimony of former FCC cable TV attorney and present MPAA attorney, Tr. 9844, JA 2171 (Q: There is a benefit [to cable systems from carrying a specialty station] or they wouldn't carry it, is that correct? A: Of course). While we do not necessarily interpret this evidence to require an award to the Devotional Claimants, the evidence does seem similar to that upon which the Tribunal appears to have elsewhere based awards. See, e.g., 47 Fed.Reg. 9,893 (1982) (crediting testimony of individuals in cable industry regarding JSC's claim to benefit); id. (identifying cultivation by PBS of target audience to be of benefit to cable); see generally Decision at 9,896 (awarding SIN 0.7% despite serious evidentiary deficiencies); id. at 9,90 0 (justifying 0.25% award to NPR based on slight benefit from carriage by cable). In the absence of any discussion of this apparently relevant evidence, the Tribunal's non-award to the Devotional Claimants suggests an element of arbitrariness in the Tribunal's decisionmaking. 61 Finally, we come to the Tribunal's harm criterion and, specifically, to the Tribunal's conclusions that Devotional Claimants (1) may well benefit (a negative harm) from cable retransmission; (2) cannot claim harm for any interest involving their satellite services; and (3) are not harmed due to fractionalization of their local audiences. Although we do not find implausible the Tribunal's supposition that cable retransmission may well benefit the Devotional Claimants' contribution base, we are troubled by the unexplained vengeance with which the Tribunal seems to have applied this factor to CBN, PTL, and OTGH. At the outset, we note that the Tribunal did not determine the actual extent to which these claimants might be benefitted; accordingly, the Tribunal's notable reliance on this plausible--yet unquantified--presumption of benefit seems to run counter to the very reason given by the Tribunal for discounting use of the harm criterion in general. See 47 Fed.Reg. 9,896 & n. 477 (1982) (downplaying harm criterion in 1979 Decision because none of the parties have been able to provide proof of harm with that degree of precision that an administrative agency might desire). Indeed, the Devotional Claimants introduced evidence into the record (not discussed by the Tribunal) to suggest that the net benefit from cable to their fundraising efforts may be relatively moderate. See, e.g., Tribunal Summary of PTL Evidentiary Position, 47 Fed.Reg. 9,891 (1982) (stations which know their signals are being retransmitted by cable charge PTL higher broadcasting rates); Tribunal Summary of CBN Evidentiary Position, id. at 9,890 (overexposure by cable importation damages local donors' willingness to contribute because they feel CBN is wasting money on duplicative programming). Even more troublesome, however, is the unevenness with which the Tribunal's presumption of benefit seems to have been applied. For example, the Tribunal made Phase I awards to PBS and NPR without any discussion of these claimants' on-the-air fundraising, and made a Phase II award to Mutual of Omaha after affirmatively noting that Mutual of Omaha received some [advertising] benefit from distant carriage. Id. at 9,896. The reasons why the benefit from cable factor completely forecloses the Devotional Claimants from any award are never presented. Given that the single most important piece of evidence in the record, MPAA's Nielsen Report, recorded a small (but measurable) 1% viewing rating for devotional series, id., at 9,881, we think that a more adequate explanation for a complete non-award was necessary. 62 Before discussing the Devotional Claimants' satellite and fractionalization arguments, it is necessary to identify briefly why the Devotional Claimants may be, at least on a conceptual level, less fundamentally distinct than the Tribunal seems to have supposed. We start from the observation that these claimants, like others, are copyright holders who attempt to exploit the economic value of their works. To be sure, their marketing strategies (and long-range aspirations) differ from those of most other claimants: rather than sell their programs to broadcasters for the programs' advertising values, the Devotional Claimants buy television time and use the value of their programs to solicit contributions from viewers. It may well be that, as a factual matter, cable retransmission will affect these two marketing systems differently; and we do not discount the possibility that the economic benefit of cable to the Devotional Claimants' system may outweigh its economic harms. But in making this determination, it is certainly the Tribunal's obligation to consider all legally-cognizable evidence of economic harm placed before it by the parties. 63 This observation becomes important in evaluating the Tribunal's treatment of CBN's and PTL's argument that cable harms their satellite programming services. Specifically, these Devotional Claimants maintained that the availability of their programs on cable made it difficult (1) for CBN and PTL to place their satellite networks with other, competing cable systems (which may have felt, for instance, that their area already had enough PTL), and consequently (2) made it that much less likely for their programs to be shown during prime time, when viewership and potential contributions are at their maximum (CBN and PTL can almost never afford to buy prime time for their programs from commercial broadcasters, but both claimants schedule their own programs during prime time on their satellite networks). To both of these arguments, the Tribunal responded: 64 Whatever the situation may be, we hold that any harm suffered by a satellite network, whether or not the harm can be linked to distant signal importation, is not a harm for which the Tribunal can provide compensation under the provisions of Section 111 of the Copyright Act. 65 47 Fed.Reg. 9,896 (1982). We think that the Tribunal's interpretation of the Act was partly, but not entirely, correct. To the extent that the Tribunal refused to recognize general revenue loss from these claimants' inabilities to place their satellite networks--beyond the specific, marginal loss of prime time contributions from their copyrighted programs--we agree. As CBN itself admits, The distribution process focuses on harm to copyright owners in their capacity as copyright owners, not on injury to broadcasters ... who may incidentally be copyright owners .... CBN Reply Brief at 29. By the same reasoning, the Act does not envision royalty fee distribution to satellite network owners for harm to their networks, simply because these owners may incidentally hold valid copyrights to some of their networks' programming. But to the extent that the Devotional Claimants can prove (to the Tribunal's satisfaction) that cable retransmission has measurably diminished their ability to exploit the contribution potential of their particular works, whether by satellite or otherwise, we see no reason why such an opportunity loss would fall outside the scope of section 111 of the Act. See House Report at 90 (emphasizing desire to compensate copyright holders for cable's adverse effects on owner's ability to exploit work in distant markets). Although it appears to us that proving such an attenuated loss would be extremely difficult, competent evidence of such a harm would not be beyond the power of the Tribunal to evaluate. 66 Similarly, we find the Tribunal authorized to consider evidence of economic harm due to fractionalization--the splitting of a program's local audience because of distant signal importation of other programs. In response to an argument by OTGH that fractionalization of its audience by cable importation forces it to pay more for station time (allegedly because the station loses some of the lead time value of OTGH to the next program), the Tribunal responded: 67 We have also not found convincing the theory advanced by OTGH that we should distribute royalty fees to compensate it for alleged harm resulting from fractionalization of its audience because of distant signal importation of other programs. 68 47 Fed.Reg. 9,896 (1982). To the extent the Tribunal's decision reflects an evaluation of OTGH's evidence of loss, it stretches our tolerance of even those vague or summary findings sanctioned in NAB v. CRT, 675 F.2d at 376 n. 10. To the extent the Tribunal's decision reflects its rejection of OTGH's entire theory of harm, we find it difficult to reconcile with the Tribunal's original explanation of harm announced in its 1978 determination: It is also our opinion, as reflected in the record, that there is a further adverse economic impact on a copyright owner from the importation of competing distant works into the aggrieved party's local community. 45 Fed.Reg. 63,035 (1980). Our inability to tell which of these two possibilities the Tribunal meant to express only highlights the reason we are forced to remand this aspect of the Decision back to the agency.2. Miscellaneous Challenges 69 We do not base our remand on any of the other various legal and procedural challenges advanced by the Devotional Claimants on appeal. First, we reject the contention that all bona fide copyright owners whose works were retransmitted by cable are entitled to an award as a matter of law. As we stated in our decision in NAB v. CRT, the Act envisions the need for copyright holders to qualify for distribution of the Fund. 675 F.2d at 380. In light of Congress' evident intent to leave the development of particular, limiting standards for distribution to the Tribunal, House Report at 97, we have affirmed the Tribunal's five allocational factors as a reasonable interpretation of legislation by the agency charged by Congress with its enforcement. NAB v. CRT, 675 F.2d at 380; see generally FEC v. Democratic Senatorial Campaign Comm., 454 U.S. 27, 39, 102 S.Ct. 38, 46, 70 L.Ed.2d 23 (1981). It is for the Tribunal, and not each claimant, to determine in the final analysis whether (and to what extent) a particular claim satisfies these allocational criteria. 70 Nor do we find that the Tribunal was locked into making an award to the Devotional Claimants in Phase II, after having initially granted a 70% Phase I distribution to the Motion Picture Association of America and other program syndicators including claimants for syndicated religious programs .... 46 Fed.Reg. 58,545 (1981) (emphasis added). Although we remanded such a change of course (concerning an award to NPR) in NAB v. CRT, we emphasized in that decision that our remand was based entirely on the fact that the Tribunal's rescission of NPR's Phase I allocation occurred in procedurally infirm proceedings that violated the Tribunal's own public meeting requirements. See 675 F.2d at 384-85. No such procedural irregularity occurred in the Tribunal's 1979 Decision. Although, as we have emphasized, the Tribunal's explanation for its non-award to the Devotional Claimants in Phase II was inadequate, the Tribunal was not legally foreclosed from reevaluating the Phase I record for Phase II purposes. See 47 Fed.Reg. 9,895 (highlighting differences between Phase I and Phase II proceedings). If on remand, however, the Tribunal continues to maintain its current Phase II non-award, it must adequately explain why it [chose] to reject the reasoning of its initial decision, National Association of Food Chains, Inc. v. ICC, 535 F.2d 1308, 1318 (D.C.Cir.1976), especially in light of the Tribunal's Phase II award to MPAA based entirely on MPAA's Phase I evidence, see 47 Fed.Reg. 9,895. 71 The Devotional Claimants assert that other procedural irregularities occurred in the 1979 proceeding. In general, they maintain that the Tribunal failed to determine that its awards were made to proven copyright owners and, in particular, that the Tribunal allocated royalty fees to claimants which failed to satisfy the Tribunal's minimal filing requirements, see 37 C.F.R. Sec. 302.3 (1982). Although these assertions correctly indicate that several technical filing imperfections surfaced fairly late in the 1979 proceeding, we do not interpret the Tribunal's decision as having overlooked these problems. Rather, the Tribunal stated that it had applied its rules (albeit flexibly) in light of the record evidence; specifically, the Tribunal found that evidence in this record establishes that programs of each of the claimants with defective claims were carried as distant signals, and further stated that it had not awarded cable fees to claimants which did not submit adequate entitlement justification. 47 Fed.Reg. 9,895, 9,987 (1982). Although the Devotional Claimants suggest certain theoretical difficulties with the Tribunal's approach, see, e.g., JA 1633-34 (suggesting that 20% of movies may potentially now be in the public domain), there is substantial evidence in the record to support the Tribunal's conclusion that its awards went only to bona fide copyright owners, see, e.g., Record of Proceeding, Jan. 19, 1982, at 58-60 (supporting reasonableness of MPAA's assumption that, in the absence of any claims of fraud, syndicators or producers were copyright owners or represented rightful owners). Finally, we reject OTGH's claim that the Tribunal's proceedings took longer than the one-year time period statutorily imposed by 17 U.S.C. Sec. 804(e) (Supp. V 1981). The Tribunal rendered its final 1979 Determination on March 2, 1982--precisely one year after the effective date of its Federal Register notice announcing that proceedings had begun. See supra, pages 1300-1301. OTGH indicates that [s]omebody at the Office of the Federal Register was more efficient than the Tribunal expected and the notice (with a stated effective date of March 2, 1981) was actually published on February 26, 1981. OTGH Brief at 13-14. But we decline to hold that Congress' one-year period of decisionmaking was violated by the efficiency of the Office of the Federal Register; it is to the specified effective date of the Tribunal's 1981 Notice that we give legal significance. Cf. Interstate Natural Gas Association of America v. FERC, 716 F.2d 1 at 9 (D.C.Cir.1983) (Natural Gas Policy Act became law on November 9, 1978 but with an effective date of December 1, 1978). 72 For the reasons discussed above, the petitions of CBN, PTL, and OTGH are granted in part and denied in part, and the Tribunal's Decision remanded for further proceedings consistent with this opinion.