Opinion ID: 185900
Heading Depth: 2
Heading Rank: 1

Heading: Auction Violations

Text: Biltmore claims that both Liberty’s failure timely to file the family certification and its entering into the loan agreement with Cumulus disqualify it from the auction.
Biltmore argues that both the July 9 Notice and the Commission’s regulations require that Liberty’s application  Intervenor Orion also argues the Commission arbitrarily and capriciously refused to determine whether the Cumulus loan amounted to a change in ownership that would disqualify Liberty under 47 U.S.C. § 309(l )(2). Because no party raises this argument, it is not properly before the court, and we shall not consider it. See Lamprecht v. FCC, 958 F.2d 382, 389 (D.C. Cir. 1992) (‘‘Except in extraordinary cases TTT intervenors may only join issue on a matter that has been brought before the court by another party’’). 8 be dismissed for failure to file the required family certification. The July 9 Notice stated that ‘‘Bidders must certify TTT compliance with the Commission’s policies relating to media interests of immediate family members,’’ 14 F.C.C. Rcd. at 10641, and 47 C.F.R. § 73.5002(b) requires that the short form application contain ‘‘all required certifications, information and exhibits, pursuant to the provisions of 47 C.F.R. 1.2105(a) and any Commission public notices.’’ Regarding the effect of an applicant’s failure to submit required information, 47 C.F.R. § 1.2105(b) provides two different sanctions. First, § 1.2105(b)(1) states: Any short-form application TTT that does not contain all of the certifications required pursuant to this section is unacceptable for filing and cannot be corrected subsequent to the applicable filing deadline. The application will be dismissed with prejudice and the upfront payment, if paid, will be returned. Other omissions are not subject to such Draconian treatment, however. Section 1.2105(b)(2) provides: ‘‘The Commission will provide bidders a limited opportunity to cure defects specified herein (except for failure to sign the application and to make certifications) and to resubmit a corrected application.’’ The Commission’s grace is not unlimited; if the applicants ‘‘fail to correct defects in their applications in a timely manner as specified by public notice,’’ then they ‘‘will have their applications dismissed without opportunity for resubmission.’’ § 1.2105(b)(3). As for the July 9 Notice, it states only that ‘‘[f]ailure to submit required information by the resubmission date will result in dismissal of the application and  Liberty responds with the claim that it was not subject to this filing requirement because ‘‘there could be no certification of compliance as to interests which were nonexistent.’’ We shall not consider this attempt by intervenor Liberty obliquely to appeal the Commission’s decision that Liberty was required to file the certification. To contest this aspect of the Commission’s decision, Liberty should have filed a conditional cross-appeal. See generally 15A Charles A. Wright et al., Federal Practice & Procedure § 3902, at 78-79 (1992) (collecting cases). 9 inability to participate in the auction. See 47 C.F.R. § 1.2105(b).’’ 14 F.C.C. Rcd. at 10697. The Commission argues that neither 47 C.F.R. § 1.2105(b) nor the Notice requires Liberty’s disqualification: The regulation applies by its terms only to ‘‘the certifications required pursuant to this section.’’ Because the family certification was required by the July 9 Notice rather than by § 1.2105, according to the Commission, the disqualification provided in § 1.2105(b)(1) does not apply to the omission of that certification. Rather, the applicable provisions are the more forgiving §§ 1.2105(b)(2)-(3), which afford an applicant the opportunity to make corrections before the Commission dismisses its application with no opportunity for resubmission. The parenthetical exception in subsection (b)(2) taking ‘‘failure to TTT make certifications’’ out of the class of ‘‘defects’’ curable under that subsection does not apply to the family certification, the Commission’s argument suggests, because the ‘‘certifications’’ in question are only those implicated in subsection (b)(1), namely ‘‘the certifications required pursuant to’’ § 1.2105. As for the July 9 Notice, the Commission contends it simply is not clear enough to require Liberty’s automatic disqualification for failure to submit the family certification: Although the Notice stated that a bidder that failed to submit ‘‘required information’’ before the auction would be ‘‘[unable] to participate in the auction,’’ it did not state that such an omission was incurable if it came to light after the auction was held. Because the Notice did not directly speak to Liberty’s situation, the Commission goes on, disqualifying Liberty based upon the Notice would deprive it of fair warning that its application might be disqualified without an opportunity to correct it, contrary to the rule we endorsed in High Plains Wireless, L.P. v. FCC, 276 F.3d 599, 607 (2002) (‘‘That the rule did not afford adequate notice reflexive bidding was unlawful is itself sufficient justification for the Commission not to penalize [the bidder]’’). We give ‘‘controlling weight’’ to the Commission’s interpretation of its own regulation ‘‘unless it is plainly erroneous or 10 inconsistent with the regulation.’’ Id. at 606. Here the Commission’s interpretation does not fall below that standard. The Commission is, of course, correct in pointing out that the family certification is not among those required pursuant to § 1.2105, the omission of which incurably disqualifies the applicant as specified in § 1.2105(b)(1). It was not unreasonable for the Commission to treat the omission of a certification required only by a public notice as a ‘‘defect[ ]’’ other than ‘‘failure to TTT make [a] certification[ ]’’ as that term is used in § 1.2105(b), and thus to provide the opportunity for correction that § 1.2105(b)(2) allows for such a defect. We also agree with the Commission that it should not – more properly, that it need not – disqualify Liberty after the auction on the basis of an omission that, according to the Notice, would disqualify an applicant if discovered prior to the auction. Biltmore’s arguments to the contrary notwithstanding, neither McKay v. Wahlenmaier, 226 F.2d 35 (D.C. Cir. 1955), nor Superior Oil Co. v. Udall, 409 F.2d 1115 (D.C. Cir. 1969), requires a different conclusion. In each case we reversed the Secretary of the Interior’s award of a lease based upon an incurably defective application. Indeed, in those cases the Secretary had awarded the lease after finding specifically that the defect was incurable. See McKay, 226 F.2d at 40 (‘‘The Secretary found that his application was defective and that it was filed in an inherently unfair situation which would have caused it to be rejected had the real situation been disclosed before the drawing’’); Superior Oil, 409 F.2d at 1119 (quoting the Secretary, ‘‘the deficiency in Union’s bid cannot be waived, nor can it be supplied after the time for receipt of the bids’’). In this case the Commission made the opposite finding: Because the family certification was not required by § 1.2105, the omission could be cured. Hence, McKay and Superior Oil are not controlling.
Section 1.2105(b)(2) provides that ‘‘[m]ajor amendments cannot be made to a short-form application after the initial filing deadline,’’ and states that such amendments include 11 ‘‘changes in an applicant’s size which would affect eligibility for designated entity provisions.’’ Similarly, the July 9 Notice, citing this provision, stated that ‘‘[a]s described more fully in the Commission’s Rules, after the TTT short-form filing deadlineTTTT [a]pplicants will not be permitted to make major modifications to their applications (e.g., TTT change bidding credits).’’ 14 F.C.C. Rcd. at 10644. Biltmore claims that because Liberty’s amendment (after the filing deadline) of its short form application to reflect the loan from Cumulus affected its eligibility for a bidding credit, the change was a ‘‘major amendment’’ and therefore untimely. Further, it argues, allowing the change in bidding credits would affect the integrity of the auction by altering one of its ‘‘core circumstances.’’ The Commission responds that the new entrant bidding credit does not depend upon an applicant’s ‘‘size’’ but upon its other attributable media interests; the ‘‘size’’ criterion applies only to the ‘‘small business bidding credit,’’ which is based upon the bidder’s revenues. See 47 C.F.R. §§ 90.810, 90.814. The Commission points out that the definition of a ‘‘major amendment’’ in the regulation, which predates the introduction of the new entrant bidding credit, refers only to certain changes in ownership, certain changes in size, and changes in the intended service areas. 16 F.C.C. Rcd. 12061 ¶ 25. Because the loan from Cumulus did not effect a change in Liberty’s ownership or size, the Commission argues, its resulting loss of eligibility for a new entrant bidding credit is not a ‘‘major amendment’’ and therefore does not disqualify it from the auction. As for the July 9 Notice, the Commission argues that it purported merely to restate the regulation. To the argument that the integrity of the auction was undermined by Liberty’s loss of the bidding credit, the Commission responds that whereas a post-auction increase in bidding credits may change the ‘‘core circumstances’’ of an auction, a post-auction reduction in such credits does not.  Liberty adopts the Commission’s position but also claims that, because the July 9 Notice specified that attributable interests were to be ‘‘determined as of the short form TTT filing deadline – August 12 The Commission’s interpretation of § 1.2105 is neither plainly erroneous nor inconsistent with the regulation. The provision describing major amendments certainly addresses the small business bidding credit, and the Commission reasonably so interpreted it. Whether the provision also applies to other bidding credits, such as that for new entrants, is not clear on the face of the regulation. Although Biltmore argues that for purposes of the new entrant credit we should construe ‘‘changes in size’’ to include the number of media interests attributable to an applicant, we do not think that is the only permissible construction of the regulation. On the contrary, we think the Commission’s narrower interpretation of the regulation is quite reasonable. Nor does the July 9 Notice, which specifically referred to § 1.2105 as authority for the proposition that ‘‘changes in bidding credits’’ are major amendments, require (or perhaps even allow) the Commission to treat as a major amendment a change that § 1.2105 does not define as such. Biltmore argues that the Commission’s prior determinations limit its discretion to find that a change in the new entrant credit is not a major amendment. In Two Way Radio of Carolina, Inc., 14 F.C.C. Rcd. 12035, ¶ 8 (1999), the Commission held that modification of an applicant’s small business status does not constitute a minor change under our competitive bidding rules, and that providing Two Way Radio with more favorable financial benefits after the close of the auction, based on information not available to other bidders during the auction, would adversely affect the integrity of the auction process. The rationale for the holding was that ‘‘other bidders placed bids based upon their understanding of the specific bidding credit and the type of installment payment plan to which Two 20, 1999,’’ 14 F.C.C. Rcd. at 10639, whereas the loan from Cumulus was effective after that date, Liberty should not have been denied the bidding credit. Because no party appealed that determination, however, Liberty’s claim is not properly before the court. See p. 8, above, at n.. 13 Way Radio, as well as other bidders, were entitled.’’ Id. ¶ 9. See also Clearcall, Inc., 12 F.C.C. Rcd. 965 (WTB 1997). The Commission’s rationale seems at first blush to apply with equal force to the new entrant credit. The Commission, however, distinguishes this precedent by pointing out that the proposed amendment in Two Way Radio would have increased the applicant’s bidding credit, while this case involves an amendment that decreases the applicant’s bidding credit. In its Order the Commission stated that it ‘‘fail[ed] to see how [Liberty’s] mistake would have deprived the other auction participants of information as to Liberty’s valuation of the frequency, or would have otherwise influenced their bidding strategies.’’ 16 F.C.C. Rcd. 12061, ¶ 39. Nor do we see any such problem. Indeed, it is not clear to us – and the Commission does not explain – why even a post hoc increase in bidding credits would raise a question about the integrity of an auction. But the Commission is under no obligation in this case to justify its holding in Two Way Radio, whereas Biltmore has the burden of persuading us that Liberty’s post-auction loss of the bidding credit was, as the Commission said of the change in Two Way Radio, prejudicial to other bidders. To the extent Biltmore claims it was prejudiced because, if it had ‘‘known that it was bidding with cheaper dollars than Liberty, it might very well have been willing to press the bidding higher,’’ it makes no sense: Liberty’s cost could not rationally affect Biltmore’s willingness to pay. Accepting for the sake of the argument Biltmore’s suggestion that Liberty might ‘‘not have bid as high as it did if it had known that it was paying full dollars,’’ we see only that Liberty’s error may have been costly to it, not that it could ‘‘adversely affect the integrity of the auction process,’’ Two Way Radio, 14 F.C.C. Rcd. ¶ 8.