Opinion ID: 399258
Heading Depth: 1
Heading Rank: 3

Heading: rko's lack of candor

Text: 31 The Commission found that three instances demonstrated RKO's lack of candor before the agency during a period from 1975 to 1977. First, RKO failed to inform the FCC that there was a factual basis to the allegations first made against General Tire by Community in late 1975. Decision PP 197-205. Second, RKO failed to report the initiation of a formal SEC investigation of General Tire in February 1976. Id. at PP 206-12. Finally, RKO failed to concede that it had inaccurately reported trade and barter revenues when pressed to do so by Community in April 1977, despite the indication in General Tire's 1976 Annual Report that there might be some problems with these accounts. Id. at PP 213-18.
32 The record fully supports the Commission's finding that RKO did not display full candor before the Commission during the period from late 1975 to July 1976. Uncontroverted documentary evidence shows that General Tire responded to the initial phase of the SEC's inquiry regarding overseas operations in May 1975. Special Report at 30, J.A. 1270. As the SEC investigation progressed, RKO's competitors began pressing the FCC to reopen the Boston proceeding, alleging facts that were similar or identical to the admissions later made by General Tire in the consent decree and its Special Report. 35 RKO's first response was to seek an extension of time in which to respond, citing the need to consult with persons who may have knowledge of the pertinent facts. RKO Motion for Extension of Time, December 12, 1975, J.A. 582-83. More than a month later, in January 1976, RKO clearly decided to stonewall the opposition and the FCC. This seems the only explanation for RKO's decision to file a document opposing the suggestion that the Boston proceeding be reopened on the ground that there is no factual or legal foundation for this pyramid of charges, that the charges, as we show below, are groundless, and that other charges were essentially unsupported. 36 33 RKO contends that these statements were technically correct. 37 Brief for Appellant RKO (RKO Brief) at 33. It adds that because the burden lay on Community to establish grounds for reopening the proceeding, 38 RKO's pleadings in context merely claimed that this burden had not been met. Both arguments are irrelevant, because the question before the FCC was not so much what RKO said as what it had failed to say. 34 Section 1.65 of the Commission's Rules requires applicants to inform the Commission within thirty days whenever there has been a substantial change regarding any matter that may be of decisional significance in a Commission proceeding involving the pending application. 47 C.F.R. § 1.65 (1979). This requires that an applicant inform the Commission of all facts, whether requested in (renewal) Form 303 or not, that may be of decisional significance so that the Commission can make a realistic decision based on all relevant factors. Southern Broadcasting Co., 38 F.C.C.2d 461, 464 (Rev.Bd.1972) (emphasis in original). Unlike a private party haled into court, or a corporation such as General Tire facing an investigation by the SEC, RKO had an affirmative obligation to inform the Commission of the facts the FCC needed in order to license broadcasters in the public interest. As a licensing authority, the Commission is not expected to play procedural games with those who come before it in order to ascertain the truth, FCC Brief at 60, and license applicants may not indulge in common-law pleading strategies of their own devise. 35 The Decision and the record on which it is based demonstrate irrefutably that RKO did not meet these standards, and that RKO's conduct thus threatened the integrity of the Commission's processes. RKO General, Inc., 82 F.C.C.2d 291, 306 (1980). In spite of an SEC investigation that was rapidly gathering steam, and in spite of the fact that its qualifications as a licensee were at issue before the FCC, RKO failed to come forward with a candid statement of relevant facts. RKO did not inform the FCC that the SEC had issued a formal order of investigation in February 1976, even though this suggested the seriousness of the charges against General Tire. 39 RKO did not advise the FCC of the SEC's preliminary findings until May 14, 1976, despite the fact that General Tire had advised its stockholders of these preliminary findings in February when it released its 1975 Annual Report. 40 RKO did not advise the FCC until May 1976 that General Tire's own internal investigation demonstrated that many of the SEC concerns were valid, even though Community had submitted General Tire's 10-K Report the previous March. 41 RKO never once attempted to amend or supplement its earlier pleadings with the FCC, despite a growing awareness of the facts that General Tire would later admit in its Special Report. These instances involve a lack of candor through omission. Whether or not RKO would have had an obligation to come forward with these facts under other circumstances, 42 it could not have doubted their relevance once the filings and petitions of the intervenors put these questions before the Commission. We need not decide whether RKO's pleadings were affirmatively misleading-it is enough to find that they did not state the facts. 36 The record suggests that RKO had ample motive for its failure to act with total candor during this period. There are numerous indications that General Tire initially decided to oppose the SEC investigation 43 and did not begin to cooperate with that agency until sometime in the spring of 1976. Clearly, it would have been pointless for General Tire to resist the SEC inquiry at one level while RKO came forward with damaging evidence against General Tire before the Commission. See Decision P 202. But such conjecture is not relevant, because the documents speak for themselves. It is also unnecessary to show that RKO officials had actual knowledge in early 1976 of the improprieties and illegalities to which General Tire later admitted, or that RKO officials willfully intended to misrepresent these facts to the FCC. Whether RKO sought to protect its parent, or whether the parent withheld information from the subsidiary in order to protect itself, the result is the same. We cannot improve on the language of FCC counsel: It is obvious that where a complete disclosure of facts will militate against the interests of this organization, the Commission will be deprived of that information. It is irrelevant where in the RKO-General Tire organizational structure this breakdown in candor first occurs. In the end, RKO, as the public trustee, is responsible for the reliability of the information and representations furnished by it to the Commission. FCC Brief at 70; see Decision P 122 n.248.
37 RKO objects to the FCC's finding on a variety of grounds. First, it contends that there is not a shred of evidence that ... the Commission was in fact 'misled'  by RKO. RKO Brief at 33. Such an argument has no pertinence to this appeal, as the Supreme Court observed forty years ago: 38 The fact of concealment may be more significant than the facts concealed. The willingness to deceive a regulatory body may be disclosed by immaterial and useless deceptions as well as by material and persuasive ones. We do not think it is an answer to say that the deception was unnecessary and served no purpose. 39 FCC v. WOKO, Inc., 329 U.S. 223, 227, 67 S.Ct. 213, 215, 91 L.Ed. 204 (1946). As the Commission correctly emphasizes, it must rely on the applicants who come before it for the truth of their representations; it cannot countenance willingness to mislead simply because there is no evidence that the Commission was in fact misled. 40 Equally unpersuasive is RKO's objection that its decision not to inform the Commission of the SEC investigation was made on advice of counsel. RKO Brief at 38 & n.102. It is true that reliance on counsel may render a severe sanction such as disqualification too harsh in some circumstances. See Asheboro Broadcasting Co., 20 F.C.C.2d 1, 3 (1969); cf. WEBR, Inc. v. FCC, 420 F.2d 158, 167-68 (D.C.Cir.1969). But advice of counsel cannot excuse a clear breach of duty by a licensee. Asheboro, 20 F.C.C.2d at 3. The client becomes fully responsible at some point, and that point is reached more quickly in practice before the FCC than in courts of law. E.g., Wadeco, Inc. v. FCC, 628 F.2d at 128; Lorain Community Broadcasting Co., 18 F.C.C.2d 686, 688 (1969), aff'd sub nom. Allied Broadcasting, Inc. v. FCC, 435 F.2d 68 (D.C.Cir.1970). Similarly, although we agree that legal argument is not testimony by a party or a representation by its counsel as to facts, RKO Brief at 34, we cannot excuse the calculated omissions in RKO's legal pleadings on this basis. In modern America, parties communicate with administrative agencies almost exclusively through lawyers, but this is all the more reason why we cannot assume that RKO did not know what its lawyers were saying-particularly when the number of pleadings and other opportunities for dissembling were as great as recounted above. It is not credible that lawyers were running the strategy of RKO and General Tire to the exclusion of all the corporate chiefs. 41 RKO's most persuasive objection to the FCC finding that it lacked candor is that the finding was made without giving RKO formal notice and a hearing on the charge. The FCC acknowledges a technical failure to issue such a formal designation order, FCC Brief at 113 n.234, and admits that (i)n the normal case a hearing probably would have been warranted. Id. at 97. Ordinarily, such an admission would constitute grounds for reversal, for courts have stated time and again that reasonable notice of a charge and an opportunity to be heard in defense before punishment is imposed are 'basic in our system of jurisprudence.'  Groppi v. Leslie, 404 U.S. 496, 502, 92 S.Ct. 582, 586, 30 L.Ed.2d 632 (1972) (quoting In re Oliver, 333 U.S. 257, 273, 68 S.Ct. 499, 507, 92 L.Ed. 682 (1948)). We conclude, however, that RKO's conduct has been so egregious and so conspicuous that we cannot say the FCC's decision was an abuse of its authority. No purpose would have been served in this case by extending administrative proceedings that had already moved well into their second decade. The evidence of RKO's lack of candor was obvious from the documents that RKO itself had submitted to the FCC in this proceeding, as the applicants competing with RKO had been arguing for years. The Commission needed only to draw legal conclusions from facts already known. Lakewood Broadcasting Service, Inc. v. FCC, 478 F.2d 919, 924 (D.C.Cir.1973). In this context, the FCC was not required to designate the candor issue and reopen the proceeding for an evidentiary hearing that would have served no purpose. See, e.g., Independent Bankers Ass'n. of Georgia v. Board of Governors of the Federal Reserve, 516 F.2d 1206, 1220-22 (D.C.Cir.1975); Municipal Light Boards v. FPC, 450 F.2d 1341, 1345 (D.C.Cir.1971), cert. denied, 405 U.S. 989, 92 S.Ct. 1251, 31 L.Ed.2d 445 (1972). This is especially true where RKO itself had urged that there was no need to reopen the proceeding because resolution of Community's claims turns on inferences and legal conclusions to be drawn from facts already before the Commission. See Colorado Radio Corp. v. FCC, 118 F.2d 24, 26 (D.C.Cir.1941) (Appellant took its chance that the Commission, on the existing record, would (find in its favor). Now that the decision has gone against it, the appellant wants a chance to persuade the Commission with a supplemental record. We cannot allow the appellant to sit back and hope that a decision will be in its favor and then, when it isn't, to parry with an offer of more evidence.). 42 In reaching this determination, we start with the emphatic differences between a broadcast applicant before the FCC and one who faces the possibility of punishment. RKO has suffered a hardship as a result of the FCC's action, but it has not been punished; denial of a renewal application is not a penal measure. FCC v. WOKO, Inc., 329 U.S. at 228, 67 S.Ct. at 215. As the Decision explains, the FCC's purpose is not to punish licensees for past wrongs, but to ensure that these fiduciaries of a great public resource will satisfy the highest standards of character commensurate with the public trust that is reposed in them. Id. at P 3; see id. at P 249 & n.477. A broadcast license is less a property right than a privilege, Mansfield Journal Co. v. FCC, 180 F.2d 28, 35 (D.C.Cir.1950), and retention is not automatic but must be earned. 43 In practical terms, this means that proceedings before the Commission are not private law suits, and that the Commission does not function as an umpire blandly calling balls and strikes for adversaries appearing before it. See Scenic Hudson Preservation Conference v. FPC, 354 F.2d 608, 620 (2d Cir. 1965), cert. denied, 384 U.S. 941, 86 S.Ct. 1462, 16 L.Ed.2d 540 (1966). The FCC has an affirmative obligation to license more than 10,000 radio and television stations in the public interest, each required to apply for renewal every three years. FCC Brief at 60 n.114. As a result, the Commission must rely heavily on the completeness and accuracy of the submissions made to it, and its applicants in turn have an affirmative duty to inform the Commission of the facts it needs in order to fulfill its statutory mandate. This duty of candor is basic, and well known. See, e.g., Sea Island Broadcasting Corp. v. FCC, 627 F.2d 240, 243 (D.C.Cir.), cert. denied, 449 U.S. 834, 101 S.Ct. 105, 66 L.Ed.2d 39 (1980); Golden Broadcasting Systems, Inc., 68 F.C.C.2d at 1101-04. The Commission has said before that no specific misrepresentation or lack of candor issues are needed to consider these matters, since the Commission always has authority to deny a license or application where the record reveals such misconduct. Radio Carrollton, 69 F.C.C.2d 1139, 1146 n.20 (1978), aff'd mem. sub nom. Faulkner Radio, Inc. v. FCC, No. 79-1749 (D.C.Cir. October 15, 1980), cert. denied, 450 U.S. 1041, 101 S.Ct. 1758, 68 L.Ed.2d 238 (1981). See Grenco, Inc., 39 F.C.C.2d 732, 737 (1973) (no one is allowed 'one bite' at the apple of deceit). 44 Ultimately, of course, the procedures of the Commission must be measured against the demands of due process as well as the statutory requirements of the Communications Act. But it is a truism that due process standards in this context are fluid rather than fixed. In WJR, The Goodwill Station, Inc. v. FCC, 337 U.S. 265, 69 S.Ct. 1097, 93 L.Ed. 1353 (1949), a unanimous Court held that the FCC was not required to provide oral argument before ruling that a radio station's petition in a pending proceeding did not state facts sufficient to raise legal issues concerning the possible modification of that station's license rights. (T)he right of oral argument as a matter of procedural due process varies from case to case in accordance with differing circumstances, as do other procedural regulations. Id. at 276, 69 S.Ct. at 1103. Subsequent cases have never departed from this proposition. See, e.g., Goldberg v. Kelly, 397 U.S. 254, 268 n.15, 90 S.Ct. 1011, 1020, n.15, 25 L.Ed.2d 287 (1970); Joint Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 163, 71 S.Ct. 624, 644, 95 L.Ed. 817 (1951) (Frankfurter, J., concurring) (The Court has responded to the infinite variety and perplexity of the tasks of government by recognizing that what is unfair in one situation may be fair in another.). 45 Section 4(j) of the Communications Act, as amended, 47 U.S.C. § 154(j) (1976), empowers the FCC to conduct its proceedings in such a manner as will best conduce to the proper dispatch of business and to the ends of justice. In FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 138, 60 S.Ct. 437, 439, 84 L.Ed. 656 (1940), the Court held that Congress in that section had explicitly and by implication delegated to the FCC the power to resolve subordinate questions of procedure. The Court upheld that delegation in light of the established principle that agencies should be free to fashion their own rules of procedure and to pursue methods of inquiry capable of permitting them to discharge their multitudinous duties. Id. at 143, 60 S.Ct. at 441. In FCC v. Schreiber, 381 U.S. 279, 292, 85 S.Ct. 1459, 1468, 14 L.Ed.2d 383 (1965), the Court reiterated these observations in deciding whether a district court could substitute its own rules for the FCC's procedures governing public disclosure of its investigations. The delegated power, of course, may not be exercised arbitrarily, but its exercise may not be impeached merely because reasonable minds might differ on the wisdom thereof. The Court also rejected the standard of review applied by the court of appeals: The question for decision was whether the exercise of discretion by the Commission was within permissible limits, not whether the District Judge's substituted judgment was reasonable. Id. at 291, 85 S.Ct. at 1468 (emphasis by the Court). Cf. Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 524, 98 S.Ct. 1197, 1202, 55 L.Ed.2d 460 (1978). 46 It is true that these recognitions of the FCC's discretion over certain questions of procedure have been cited most frequently to support agency control over dockets and hearing formats. When a statute dictates that parties receive notice and a hearing, of course, the provision of those basic procedural rights is not left to be decided by administrative flexibility or discretion. For that reason, RKO contends that Section 309 of the Act, 47 U.S.C. § 309 (1976), requires a hearing prior to the denial of a renewal application even when there are no substantial or material questions of fact. RKO Brief at 15-23. See Gottfried v. FCC, 655 F.2d 297, 310 (D.C.Cir.1981); United States v. FCC, 652 F.2d 72, 88-92 (D.C.Cir.1980). But such a literal approach to the words of the Act cannot govern this case, in which RKO had already been the subject of FCC proceedings that had lasted for years. The question is not whether RKO was entitled to a hearing under Section 309, but whether during the course of agency proceedings in which this candor issue arose in the most obvious and unavoidable manner, the Commission was required to call a halt to its proceedings, designate the issue formally, and begin again. 47 We conclude that such an approach in this case would not have promoted the proper dispatch of business and the ends of justice. At some point in any administrative process, someone must determine whether the remaining issues are factual or legal, and whether hearings that have already been held must be supplemented by further proceedings. The initial answer must come from the agency, subject always to judicial review, but courts may defer to agency expertise and discretion here no less than on questions of docket management and the need for oral argument. Our decisions show the inherent difficulty of defining this administrative discretion. Compare Radio Athens, Inc. (WATH) v. FCC, 401 F.2d 398, 401 (D.C.Cir.1968) (elemental fairness used to judge whether FCC application requirements were sufficiently clear to obviate need for hearing on incomplete submission) with Ranger v. FCC, 294 F.2d 240 (D.C.Cir.1961) (where application fails in material respects to comply with FCC rules concerning application contents, agency can reject application without hearing). Nevertheless, in appropriate situations, agency resolution of subordinate questions of procedure will be respected. In Ranger, we held that Section 309 requires a hearing only if, with the required information before it, the FCC still cannot make a determination as to whether granting the application would be in the public interest. Id. at 242. We thereby recognized the FCC's authority to determine without an evidentiary hearing whether applicants had submitted the required information. Cf. Guinan v. FCC, 297 F.2d 782, 785 (D.C.Cir.1961) (FCC need not designate comparative hearing once it has been established that one of the competing applicants is basically unqualified because of frequency interference). The Commission's discretion should also be respected in this case, in which RKO has obviously failed to supply the information required for consideration of its merit in the public interest. 48 We find a compelling if imperfect analogy between this case and historical exceptions to the general principle that punishment can only follow a determination of guilt after trial or plea-exceptions such as the power summarily to punish for contempt of court. Bell v. Wolfish, 441 U.S. 520, 536 n.17, 99 S.Ct. 1861, 1872 n.17, 60 L.Ed.2d 447 (1979). 49 Where the contempt is committed directly under the eye or within the view of the court, it may proceed upon its own knowledge of the facts, and punish the offender, without further proof, and without issue or trial in any form. 50 In re Savin, 131 U.S. 267, 277, 9 S.Ct. 699, 701, 33 L.Ed. 150 (1889) (quoting Ex parte Terry, 128 U.S. 289, 309, 9 S.Ct. 77, 81, 32 L.Ed. 405 (1888)). In these extraordinary situations, (t)here is no need of evidence or assistance of counsel before punishment, because the court has seen the offense. Such summary vindication of the court's dignity and authority is necessary. Cooke v. United States, 267 U.S. 517, 534, 45 S.Ct. 390, 394, 69 L.Ed. 767 (1925). The rule is as old as Blackstone, see 4 W. Blackstone, Commentaries  282- 285, and continues to have vitality in this day. E.g., Roadway Express, Inc. v. Piper, 447 U.S. 752, 765, 100 S.Ct. 2455, 2463, 65 L.Ed.2d 488 (1980). Modern jurisprudence may reveal a greater sensitivity for the notice and hearing requirements of due process than did an earlier age, of course. See Taylor v. Hayes, 418 U.S. 488, 498, 94 S.Ct. 2697, 2703, 41 L.Ed.2d 897 (1974). Nevertheless, the cases continue to suggest the existence of a dividing line between events that take place before the judge's own eyes, id. at 499, 94 S.Ct. at 2703, or in the face of the court, Ex parte Terry, 128 U.S. at 313, 9 S.Ct. at 82, and situations in which some essential elements of the offense are not personally observed by the judge, so that he must depend upon statements made by others for his knowledge about these essential elements .... Johnson v. Mississippi, 403 U.S. 212, 215, 91 S.Ct. 1778, 1779, 29 L.Ed.2d 423 (1971). There is no doubt here as to which side of that line RKO's conduct falls. The Commission has drawn legal conclusions after comparing what RKO said in its earlier pleadings-and what it did not say-with RKO's subsequent admissions, such as General Tire's Special Report. RKO does not for a moment contend that it has in fact been candid with the Commission, nor do we see how it possibly could. No evidence remains to be introduced; no witnesses have been denied a chance to speak. There are no further issues to try. The FCC has not assumed the answers to any questions of fact, but has simply examined uncontested and uncontestable documents that are in the record at RKO's own election. 51 Because the Commission had so perfect a knowledge of the RKO misconduct that was evident from the documents directly before it, we cannot say that the Commission's action was erroneous. Forty years ago, in FCC v. Pottsville Broadcasting Co., Justice Frankfurter reflected on the movement for administrative regulation. He observed: 52 Perhaps the most striking characteristic of this movement has been the investiture of administrative agencies with power far exceeding and different from the conventional judicial modes for adjusting conflicting claims-modes whereby interested litigants define the scope of the inquiry and determine the data on which the judicial judgment is ultimately based. Administrative agencies have power themselves to initiate inquiry, or, when their authority is invoked, to control the range of investigation in ascertaining what is to satisfy the requirements of the public interest .... These differences in origin and function preclude wholesale transplanation of the rules of procedure, trial, and review which have evolved from the history and experience of courts. 53 309 U.S. at 142-43, 60 S.Ct. at 441. The cases upholding summary punishment for in-court contempts without the need for formal notice or a separate hearing a fortiori support the disqualification of RKO. As we explained above, this case does not involve punishment at all, but the renewal of a public trust. 44 54 Our decision to affirm the FCC's action should not be read to include situations not covered by this unique record. The Commission concedes that this case is unprecedented, FCC Brief at SA-1, and we expect that successors if any will be rare. Before the FCC can take action of this sort in the future, we believe that at least three conditions must be met in order to protect the parties. First, not only must the misconduct occur directly before the agency, but it should be of such a blatant and unacceptable dimension that its existence cannot be denied. The FCC has satisfied itself that this is the case with regard to RKO, whose lack of candor is abundantly clear. Decision P 196. Second, although formal notice may not always be necessary, it should be evident that the party has some form of actual notice of the conduct said to be at issue, and must not be prejudiced by surprise. Finally, the party must be given an opportunity to speak in (its) own behalf in the nature of a right of allocution. Groppi v. Leslie, 404 U.S. at 504, 92 S.Ct. at 587. The procedure adopted by the FCC in this case satisfies these requirements, at least insofar as the Boston renewal is concerned. RKO does not contend that it was prejudiced by the lack of notice, for it undoubtedly had actual notice of the candor issue, as the pleadings filed prior to the Commission's decision demonstrate. 45 See Harbenito Broadcasting Co. v. FCC, 218 F.2d 28, 31 (D.C.Cir.1954). If it is clear that the parties understand exactly what the issues are when the proceedings are had, they cannot thereafter claim surprise or lack of due process because of alleged deficiencies in the language of particular pleadings. Kuhn v. CAB, 183 F.2d 839, 842 (D.C.Cir.1950). RKO does not contend that it was denied any opportunity to present for the Commission's determination any matter of fact or law, or that the Commission has not given all matters submitted by RKO due and full consideration. See WJR v. FCC, 337 U.S. at 284, 69 S.Ct. at 1107. RKO had a full opportunity to speak in its own behalf, and exercised it in pleadings, proffers of proof, and oral argument before the Commission. 46 We cannot say that the FCC abused its discretion by not giving RKO a formal hearing on issues arising from RKO's conduct during the initial proceeding. 47 Section 309 was not intended by Congress to reward delay and concealment that disserves the public interest. Congress did not intend by this section of the statute to require the formality of Commission consideration of and (re) hearing on an application in which the signatory obviously fails in major material respects to abide the regulations. Ranger v. FCC, 294 F.2d at 243. Cf. Storer Broadcasting Co. v. FCC, 351 U.S. 192, 205, 76 S.Ct. 763, 771, 100 L.Ed. 1082 (1956) (We do not think Congress intended the Commission to waste time on applications that do not state a valid basis for a hearing.). The FCC's denial of the Boston license renewal must therefore be affirmed. 55