Court Opinion

ID: 9483863
Source: CourtListenerOpinion
Date Created: 2023-08-05 09:33:15.733455+00
Date Added: 2024-06-11T17:49:52.385156
License: Public Domain

MIKVA, Chief. Judge,
dissenting:
The panel today uses a garden variety comparative hearing, granting a construction permit for a new FM radio station in Richmond, Virginia, to take an important and dangerous incursion into the realm of administrative agency discretion. The panel acts as if this court were a Supreme Federal Communications Commission, mandated to review every jot and tittle of the Commission’s procedures and factual findings. In the process, the panel fails to accord the proper deference due to an agency, and ignores and misinterprets relevant precedent of the Commission and this court. I would uphold the agency determination, and therefore dissent from the court’s decision.
Regrettably, because the panel’s opinion overturns the Commission’s evidentiary procedures and findings, I must necessarily recite the specifics in considerable detail. Weyburn Broadcasting, the unsuccessful and unhappy contestant for the application in question, was one of 35 applicants to seek this license. It was given not one, but two hearings before an administrative law judge. It was given not one, but two hearings before the Commission’s Review Board. Some of these hearings were “paper hearings,” while others involved the taking of live testimony. The Commission itself ultimately affirmed the decision of its Review Board to grant the license to James River, and the court today overturns that decision.
The court now decides that the AU and the Review Board - did not allow enough discovery or enough live testimony on the issues and remands for further proceedings. The initial hearing before the AU was almost five years ago. For this court to add to the unseemly delay in getting this FM facility on the air is most unfortunate. For the court to do so on the basis of challenges to the agency’s factual conclusions is of still greater concern. And for the court to mandate to the Commission how its own precedents are to be aligned is the final assault on the doctrine of deference to agency decisions.
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The panel’s conclusion that the AU erred in granting summary decision is premised on a fundamental misapplication of the FCC’s prior decisions and the precedents of this court. The panel correctly states, Majority op. at 1223, that an applicant is financially qualified if she has “reasonable assurance” of sufficient financial resources to build the station, and to operate it for the first three months without relying on station revenue. Financial Qualification Standards for Aural Broadcasting Applicants, 69 F.C.C.2d 407, 408 (1978) (emphasis added). Having laid out this general definition, the panel ignores a long line of FCC decisions, cited by the AU below and raised again by the agency before this court, holding that a projection of total prosecution expenses need not be taken into account in determining the applicant’s financial ability to construct and operate the proposed station where an applicant has shown itself willing and able to pay such expenses on a current basis. See Port Huron Family Radio, Inc., 5 F.C.C.R. 4562, 4563 (1990); Northampton Media Associates, 3 F.C.C.R. 5164, 5167 (Rev.Bd.1988), review denied, 4 F.C.C.R. 3858 (1989), aff'd on other grounds, Northampton Media Associates v. F.C.C., 941 F.2d 1214 (D.C.Cir.1991); Muncie Broadcasting Corp., 54 Rad. Reg.2d 42, 46-47 (1983); Zia Tele-Communications, Inc., 50 F.C.C.2d 182, 187-89 (Rev.Bd.1974). The AU found that James River was willing and able to pay prosecution expenses on an ongoing basis, and that such expenses should therefore not be considered in resolving the financial qualification issue.
Notwithstanding the agreed-upon definition of “financially qualified” just stated, and the AU’s findings and rationale, the *1236panel rejects the AU’s resolution of the financial qualification issue by focusing almost exclusively on prosecution expenses, such as legal costs and hearing fees, rather than construction and operation costs. For instance, the panel concludes that James River did not have a workable financial plan because the plan did not include legal costs, and because the Drs. Charity and Ms. McDaniel had no meeting of the minds on the costs of prosecuting the application. Majority op. at 1229. The opinion goes to some lengths to explain why this Court's decision in Northampton Media Associates, 941 F.2d 1214 (D.C.Cir.1991), does not relieve an applicant of the responsibility to assure itself of reliable financial support. That straw man is functionless. The AU never concluded, and the Commission does not argue, that James River did not have an obligation to assure itself that it was financially qualified. Rather, the FCC maintains that prosecution expenses need not be considered in the agency’s calculus because they were being paid on an ongoing basis — a position squarely consistent with agency practice. The majority is correct that the FCC may take such expenses into account in some circumstances, see Majority op. at 1229 n. 1, but the Commission did not err in choosing not to do so in this case.
The panel’s attack on the other alleged errors in the AU’s resolution of the financial qualification issue is equally misplaced. None of the issues bears on James River’s financial qualification, except insofar as they are germane to James River’s ability and willingness to pay prosecution expenses — the threshold issue, discussed below, that the panel completely fails to address. The proceeds of the stock sales were never intended to cover construction and operation costs, and are therefore irrelevant to financial qualification. Whether the stock subscriptions were timely paid is relevant only to the misrepresentation issue, also discussed below. The cash payment of the hearing fee involves a prosecution expense that was undeniably paid, and is therefore similarly irrelevant to financial qualification. The source of the funds used to pay the hearing fee, like the possible existence of a loan from the Charitys to Ms. McDaniel, is relevant only to a real party-in-interest issue involving the Drs. Charity. But the only real party-in-interest issue raised by Weyburn was with respect to Mr. Fish. Thus, these final two points are not pertinent to any of the issues raised in this appeal. I recite all of this evidentiary trivia not only because it forms the gravamen of the majority’s decision, but also because it vivifies the nit-picking that forms my objection to the decision.
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As discussed above, prosecution expenses are generally not taken into account in determining an applicant’s financial qualification if the applicant has shown itself willing and able to pay such expenses on an ongoing basis. The panel provides virtually no basis for rejecting the AU’s finding that James River satisfied this threshold condition, and that prosecution expenses should therefore be excluded from the financial qualification inquiry. In its detailed exegesis of the six “reversible errors” committed by the AU, the panel offers only two points that are even relevant to this inquiry. The panel states that “the corporation’s bills went unpaid and its attorney withdrew for non-payment," Majority op. at 1230, and that there was some evidence that the Drs. Charity’s “interest was waning” with respect to the continued prosecution of the application. Id. at 1231.
The contention that the AU’s treatment of these issues did not meet the standard of reasoned decisionmaking set out in the Administrative Procedure Act (“APA”) distorts the record and stands the principles of judicial deference embodied in the APA on their head. The AU made the following findings on remand with respect to the payment" of legal fees:
[Although legal fees have not always been paid promptly, the applicant has paid its prosecution expenses. Moreover, at the time counsel withdrew from the case ... the James River account was in arrears for only a two month period and by only $7,853.50. The de minimis amount in arrears pales into insignificance when measured by the fact *1237that James River had paid over $150,000 in legal fees to date.
Supplementary Order, 5 F.C.C.R. 3812, 3814 (AU 1990).
The record establishes that James River did not borrow money from its source of financing for construction and initial operating expenses ... to pay its legal fees. Rather, it paid its legal fees on an on-going basis from either the principal’s own or the corporation’s accounts. Thus, the money available for construction and initial operation, the legal standard for being financially qualified, has never been adversely affected. Although during part of the year 1986 certain legal fees were not paid on a timely basis, the fact is that by December of 1985 $4,629 of a total bill of $5,274.88 was paid bringing the account close to current; and repeatedly thereafter, the account has been brought current usually within a month or two of billing. Furthermore, the account is now and has been for several months current and the applicant has paid over $150,000 in legal fees to date, proving its financial mettle.
Memorandum Opinion and Order, 90M-1738, at 2 (AU June 20, 1990). The AU reviewed the entire history of the legal fees payments and concluded that the facts did not indicate an unwillingness or inability to pay prosecution expenses on an ongoing basis. The panel might disagree with the AU’s conclusion. But it strains credulity to maintain that the AU’s finding is unsupported by substantial evidence on the record, manifests a lack of reasoned deci-sionmaking, or is otherwise arbitrary and capricious. The panel offers no convincing reason not to accord the customary judicial deference due agency findings of fact and agency interpretations of their own regulations and precedents.
The panel’s contention that further hearing is required to resolve the question of whether the Drs. Charity’s “interest was waning,” Majority op. at 1231, suffers from the same fundamental failure to defer to the Commission’s findings when supported by substantial record evidence. The panel acknowledges that “[t]he AU and the Commission are responsive to the question whether the Charitys remained financially able to meet their commitment....” Id. Thus, the panel concedes that the AU adequately considered the collapse of the medical building and the Bank of Virginia letter of assurance. Further hearing is nonetheless required, the panel concludes, because “the Charitys’ willingness to [meet their financial commitment] remains in greater doubt.” Id.
The panel cannot seriously suggest that a hearing is required whenever there is any smidgeon of evidence that an investor’s “interest was waning,” especially when that investor has already laid out over $150,000 in prosecution expenses. The AU’s decision that the Charitys were willing to pay prosecution expenses is amply supported on the record in this case. As to the temporary withdrawal of counsel, the slender reed upon which the panel rests its remand, the AU found that the Drs. Charity were not immediately aware of the situation because they were deliberately insulated from the day-to-day affairs of the proposed station in accordance with James River’s representation that Ms. McDaniel would exercise sole control over the proposed station. Supplementary Summary Decision, 5 F.C.C.R. at 3814. In any event, counsel reinstated himself, and the prosecution expenses were current at the critical times.
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The panel’s treatment of the misrepresentation issue suffers from the same lack of deference pervasive in their opinion. Ms. McDaniel did tell three substantially different stories regarding payment for her stock, and a reading of the cold record provides some support for the panel’s concern that Ms. McDaniel was dishonest, rather than simply confused or forgetful. However, this Court does not review the Commission’s findings of fact de novo. The misrepresentation issue is a factual question on which the FCC is entitled to substantial deference, especially in light of-the need in this instance to assess the credibility of witnesses. The AU found that
*1238McDaniel and William D. Bayliss, James River’s Secretary and local lawyer, were unsure of when stock was paid for as well as other corporate niceties. There is no evidence of deliberate falsification or lack of candor. It is clear to the Presiding Judge who observed the demeanor of McDaniel and Bayliss and upon review of the deposition and hearing testimony that the failure to recall precisely all the details attendant to the formation of the corporation can be ascribed solely to the loss of memory of events 3 or more years vintage. Benns has offered no evidence of intentional deception and the Presiding Judge finds the complete absence of such evidence.
Memorandum Opinion and Order, 90M-1737, at 4 (ALJ June 20, 1990) (emphasis added). The panel, which never saw Mr. Bayliss or Ms. McDaniel, must have a different “appellate” position as to the witnesses’ demeanor. Furthermore, the panel’s contention that the Commission “has failed to come to grips with the scope of the misrepresentation issue,” Majority op. at 1232, is based on the inaccurate and misleading assertion that the AU responded to the issue only with respect to the willingness and ability to pay for the stock. The panel simply ignores the AU finding, quoted above, that goes directly to the issue of intent to deceive.
The “Catch-22” that the panel discerns in the AU’s refusal to allow a misrepresentation issue is a complete mirage. The panel implies that Weyburn was unable to establish an intent to deceive because no evidence was allowed on the issue. But at the time the AU made his final decision, he had before him three separate depositions and a transcript from live testimony delivered in his presence. Weyburn was given ample opportunity to adduce evidence of an intent to deceive. The AU did not act irrationally or abuse his discretion in concluding that the discrepancies in Ms. McDaniel’s explanation of the stock transactions did not demonstrate the requisite intent to deceive. The AU made findings based on eyeball testimony that ought not be cavalierly trumped by an appellate court’s suspicions.
Finally, contrary to the panel’s conclusion, the stock subscriptions are of little consequence to the financial qualification of James River. As discussed earlier, I do not believe that the AU erred in finding that prosecution expenses were paid on an ongoing basis; whether the very modest proceeds of the arguably unpaid stock subscriptions were actually available does not disturb this finding. The proceeds are even more insignificant with respect to the availability of construction and initial operation costs, which were estimated in the hundreds of thousands of dollars and which were guaranteed by loan assurances that the panel opinion does not assail.
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The final grounds upon which the panel rests its remand is the Commission’s refusal to allow a real party-in-interest issue with respect to Mr. Fish. The panel incorrectly states that the FCC’s sole rationale was that Ms. McDaniel had de jure control over James River. Majority op. at 1233. In fact, the AU squarely addressed the question of whether Mr. Fish exercised de facto control. Weyburn’s claim that Mr. Fish was in actual control of the application was founded on the fact that he paid some of the bills for prosecution expenses, that he held promissory notes against Ms. McDaniel, and that he took an active role in obtaining the bank letter from Fleet National Bank (there was conflicting testimony on this last point). The AU reasonably found that Mr. Fish did not play a substantial role in the day-to-day affairs of James River, and that the facts raised by Wey-burn did not establish that Mr. Fish exercised or even attempted to exercise control over the prosecution of James River’s application. The precedents cited by the panel, Majority op. at 1233-1234, from which they claim the Commission has strayed in this ease, involve considerable additional indicia of control beyond mere payment of expenses. Moreover, the prior cases involved control-by a third party over the applicant’s account, not over a personal account used to pay prosecution costs. The latter sort of control is completely consistent with an arrangement whereby *1239non-voting participants in the application agree to pay a portion of the applicant’s prosecution expenses.
The panel’s opinio'n reviews the FCC’s proceedings in this case with a fine tooth comb — making judgments about the credibility of witnesses we have never seen, chastising the agency for failing to allow more discovery or more hearings, and refusing to defer to agency findings that are reasonable and supported by substantial record evidence. If the panel’s exacting standard were systematically imposed by this court, the Commission would be compelled to hear all witnesses, and designate all issues, all of the time. Summary adjudication of issues would become impossible. How the Commission would handle its case load (and how we would handle our reviewing case load) would be a serious concern. We have been told many times by the Supreme Court, and have many times reminded parties before us, that our role is far more limited. We ought to let administrative agencies be administrative agencies. I dissent.