Court Opinion

ID: 4245835
Source: CourtListenerOpinion
Date Created: 2018-02-16 16:00:42.437019+00
Date Added: 2024-06-11T07:48:07.542768
License: Public Domain

United States Court of Appeals
          FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 11, 2017           Decided February 16, 2018

                         No. 16-1248

     EDWARD R. STOLZ, II, D/B/A ROYCE INTERNATIONAL
               BROADCASTING COMPANY,
                       APPELLANT

                               v.

          FEDERAL COMMUNICATIONS COMMISSION,
                      APPELLEE

    ENTERCOM COMMUNICATIONS CORP. AND ENTERCOM
                  LICENSE, LLC,
                  INTERVENORS

               On Appeal From Orders of the
            Federal Communications Commission

       Dennis J. Kelly argued the cause and filed the briefs for
appellant.

       William J. Scher, Counsel, Federal Communications
Commission, argued the cause for appellee. With him on the
brief were Howard J. Symons, General Counsel at the time the
brief was filed, David M. Gossett, Deputy General Counsel,
and Richard K. Welch, Deputy Associate General Counsel.
Jacob M. Lewis, Associate General Counsel, entered an
                              2

appearance.

       Michael E. Dash, Jr., Carrie A. Ward, Dennis P.
Corbett, and Jessica DeSimone Gyllstrom were on the brief for
intervenors Entercom Communications Corp. and Entercom
License, LLC, in support of appellee.

      Before: MILLETT, Circuit Judge, and EDWARDS and
WILLIAMS, Senior Circuit Judges.

       Opinion for the Court filed by Circuit Judge MILLETT.

        MILLETT, Circuit Judge: Edward Stolz agreed to sell a
radio station he owned to Entercom Communications
Corporation and, upon approval by the Federal
Communications Commission (“FCC”), to transfer the
station’s broadcast license to Entercom. Implementation of the
agreement soon broke down, and Stolz and Entercom have
spent the ensuing two decades clashing before the FCC and
state and federal courts. This long-running dispute should
draw closer to a conclusion today as we deny Stolz’s appeal
and dismiss as moot his central claim challenging Entercom’s
legal eligibility to acquire the station.

                              I

                              A

        Congress invested the FCC with exclusive authority to
grant, deny, and approve the transfer of broadcast licenses to
operate radio stations. 47 U.S.C. §§ 301, 303, 307–310. As a
result, when a broadcast station owner wants to transfer
ownership of a station to a third party, the FCC must approve
the assignment of the station’s broadcast license to the new
owner. Id. § 310(d). The FCC may approve assignments only
“upon finding * * * that the public interest, convenience, and
necessity will be served thereby.” 47 U.S.C. § 310(d). That
                                3

public interest includes “promoting diversity of program and
service viewpoints” and “preventing undue concentration of
economic power.” FCC v. National Citizens Committee for
Broadcasting, 436 U.S. 775, 780 (1978).

        To that end, the FCC limits the number of radio stations
that a single entity can own within a local market. 47 C.F.R.
§ 73.3555(a). As relevant here, in a market with 45 or more
radio stations, a single entity can only be licensed to operate up
to “8 commercial radio stations in total and not more than 5
commercial stations in the same service (AM or FM).” Id.
§ 73.3555(a)(1)(i). In a market that contains 30 to 44 radio
stations, a single entity may not hold licenses for “more than 7
commercial radio stations in total and not more than 4
commercial stations in the same service (AM or FM).” Id.
§ 73.3555(a)(1)(ii).

        In 2002, the FCC completed a comprehensive review
of its media ownership rules. See IN THE MATTER OF 2002
BIENNIAL REGULATORY REVIEW, Report and Order, 18 FCC
Rcd. 13620 (2003) (“2002 Order”). Among other things, the
2002 Order retained the FCC’s prior numerical limits on radio
station ownership, but changed how the FCC would determine
the size of a local market, and thus what ownership limits
would apply to a given entity within that market. Id. at 13724
¶ 273-274. Those same rules also apply to the assignment or
transfer of broadcast licenses. Id. at 13724 ¶ 273 n.572.

        The 2002 Order included a grandfathering provision to
prevent existing license holders from having to “divest their
current interests in stations * * * to come into compliance with
the new ownership rules.” 18 FCC Rcd. at 13808 ¶ 484. The
grandfathering provision also established “processing
guidelines” to “govern pending and new commercial broadcast
applications for the assignment or transfer” of radio licenses
“as of the adoption date of this Order.” Id. at 13813 ¶ 498.
Pending assignment applications that had not yet been “act[ed]
                                4

on” by the “Commission prior to the adoption date of the
Order” were made subject to the 2002 Order’s new market
definitions. Id. at 13814 ¶ 498.

                                B

         Appellant Edward R. Stolz, II, who does business under
the name Royce International Broadcasting Company, owned
radio station KUDL (FM) in Sacramento, California and held
an FCC broadcast license for the station. This regulatory saga
starts in February 1996 when Stolz signed a letter of intent to
sell the radio station’s assets and to transfer the FCC license to
Entercom.1 Business relations between the two soured,
however, before the sale and license transfer were completed.

        Entercom sued Royce International in California state
court seeking to enforce the agreement. In April 2002, the
California Superior Court ordered specific performance of the
radio station’s sale and directed Stolz to sign a license transfer
application to be submitted to the FCC.

        In November 2002, Entercom filed the necessary
license transfer application with the FCC. Stolz did not sign it
though. Instead, Stolz filed a petition with the FCC asking it
to deny the application. Stolz argued that the FCC’s
methodology for measuring the size of the Sacramento local
media market was flawed and that, if an accurate standard were
employed, market concentration rules would bar Entercom
from acquiring any more radio stations in that market
(including, specifically, KUDL).

        In May 2003, the FCC’s Media Bureau granted the
license application and assigned the KUDL (FM) broadcast
license to Entercom, finding that the transfer was permissible
       1
           Both Entercom Communications and its wholly owned
subsidiary Entercom License are intervenors in this case. We refer
to the two entities collectively as “Entercom.”
                               5

and in the public interest. Letter to Andrew S. Kersting, Esq.,
and Brian M. Madden, Esq., FCC File No. BALH-
20021120ACE, Ref. 1800B3-BSH (May 12, 2003). Under
FCC regulations, the Media Bureau’s decision was not the last
agency word. FCC regulations allowed Stolz to seek review of
the Bureau’s decision by the FCC itself. See 47 C.F.R. § 1.115.

       Within a month of the Media Bureau’s decision, the
FCC adopted the 2002 Order. The Order redefined the
Sacramento local market along the lines for which Stolz had
been arguing. As a result, if the 2002 Order were applied to
Entercom’s license application, the transfer would have to be
denied because Entercom already held the maximum number
of broadcast licenses permitted within the Sacramento market.
Stolz promptly petitioned the Media Bureau for
reconsideration, arguing that the transfer application was still
“pending” and thus subject to the 2002 Order’s new local-
market definition. After a two-year delay, the Bureau denied
reconsideration.

       Stolz then sought review by the full FCC. The FCC
inexplicably delayed ten years before finally affirming the
Bureau’s decision in September 2015.              Stolz sought
reconsideration by the FCC, arguing that this court’s
intervening decision in Kidd Communications v. FCC, 427
F.3d 1 (D.C. Cir. 2005), rendered the involuntary transfer
unlawful. The full FCC denied the petition for reconsideration,
reasoning that Stolz should have raised his arguments under
Kidd earlier by seeking to reopen briefing on his petition to the
full FCC.
                                 6

                                II

                                 A

        We have exclusive jurisdiction over appeals from FCC
decisions granting or denying the assignment of a radio
broadcast license. 47 U.S.C. § 402(b)(3) & (b)(6). We dismiss
Stolz’s appeal in part as moot and deny it in part.

        Stolz’s central argument on appeal is that the FCC
should have applied the 2002 Order’s new local-market
definition to Entercom’s license transfer application because
this case was still pending within the administrative process at
the time the 2002 Order took effect. The parties do not dispute
that, had the 2002 Order’s market definition been applied,
Entercom’s application would have been denied because it
would at the time have owned too many radio stations within
the Sacramento market. Under the regulatory scheme that
predated the 2002 Order, by contrast, Entercom could obtain
the KUDL license without exceeding the local-market
ownership rule. See 47 C.F.R. § 73.3555(a)(1)(ii) (2001).

       As events have unfolded, we need not untangle the less-
than-pellucid definition of “pending” administrative actions to
determine whether the grandfather clause in the 2002 Order
applies to this license transfer application.2 That is because,

        2
           On the one hand, the 2002 Order’s grandfather clause
directs that parties seeking license assignments must be in
compliance with the new rules at the time the assignment application
is “filed.” 18 FCC Rcd. at 13809 ¶ 487. But the 2002 Order
elsewhere states that the new rules apply to applications that have
not yet been “act[ed] on” by the Commission by the date of the 2002
Order’s adoption. Id. at 13814 ¶ 498. Elsewhere the FCC has said
that the new rules do not apply to “a transaction” that was
“consummated” prior to the adoption of the 2002 Order. In the
Matter of Royce Int’l Broad. Co., Assignor and Entercom Commc’ns
                               7

during the pendency of this case, Entercom relinquished its
broadcast license for and ceased to operate one of its
preexisting FM radio stations in the Sacramento market.
Entercom License, LLC, FCC 17M-09, 2017 WL 1088491, at
*1 (March 16, 2017) (“On February 8, 2017, Entercom
forwarded the station license for KDND(FM) * * * and other
KDND instruments of authorization to the Commission for
cancellation[.]”). With that license returned to the FCC,
Entercom now only operates four FM radio stations and one
AM radio station in the Sacramento market. Transcript of Oral
Argument at 8-9, Stolz v. FCC, No. 16-1248 (D.C. Cir. argued
Sept. 11, 2017). That means that even under the 2002 Order’s
new local-market rule, Entercom is eligible to acquire KUDL’s
license without running afoul of market concentration
limitations. Both parties conceded this point at oral argument.
Id. at 9, 10, 19. Accordingly, that portion of Stolz’s appeal is
dismissed as moot.

                               B

        Stolz separately argues that the FCC’s approval of the
transfer is invalid under our decision in Kidd Communications
v. FCC, supra. Stolz reads that decision as broadly barring the
involuntary transfers of licenses that are an outgrowth of state-
court litigation. While we disagree with Stolz’s reading of
Kidd, we are also unpersuaded by the FCC’s invocation of a
procedural bar to even addressing intervening circuit
precedent.

       Our decision in Kidd—a precedential ruling that Stolz
believes proscribes the FCC’s decision in his case—came
down after briefing had been completed on Stolz’s application
for review to the FCC challenging the Media Bureau’s
decision. See 47 C.F.R. § 1.115(d). There of course was no

Corp., Assignee, 30 FCC Rcd. 10556, 10557 ¶ 4 (Sept. 17, 2015)
(citing 2002 Order, 18 FCC Rcd. at 13808).
                               8

possible way for Stolz to have included an argument relying on
Kidd before that precedent actually intervened.

       The FCC disputes none of that. Instead, the FCC
argues that Stolz’s argument about Kidd should have been
presented to the FCC through some supplemental filing rather
than waiting until after the decision issued and then seeking
reconsideration. Stolz’s failure to do so, the FCC insists,
forever forfeited his reliance on intervening circuit precedent.

        That is wrong. We have found no FCC rule permitting,
let alone requiring, supplemental filings after closure of the
pleading cycle. The FCC cites no such rule. Nor does anything
in the FCC’s procedural regulations put claimants on fair
notice that failure to file a nowhere-mentioned-in-the-rules
supplemental document will procedurally forfeit a claim.
Worse still, what the FCC’s regulations do say is that a petition
for reconsideration is exactly the place in which to raise
“events which have occurred or circumstances which have
changed since the last opportunity to present such matters to
the Commissioner.” 47 C.F.R. § 1.106(b)(2)(i); see also 47
C.F.R. § 1.115(c) (“[N]ew questions of fact or law may be
presented to the designated authority in a petition for
reconsideration.”).

        The FCC, for its part, cites to a couple of footnotes in
prior decisions and a 1979 order to demonstrate that, on
occasion, the FCC has entertained such supplemental filings.
That misses the point. The issue here is not whether the FCC
could have entertained such a filing if Stolz had thought to
attempt it. Rather, the issue is whether the FCC gave Stolz fair
notice that he had to plead for an exercise of discretion under
an unwritten rule on pain of forfeiting a claim that the written
rules expressly say could be presented later in a petition for
reconsideration. If an agency wants a procedural requirement
to have the type of claim-foreclosing consequence the FCC
attached here, it needs to be explicit about the rule and upfront
                               9

about consequences of noncompliance. The FCC may not, like
Nero, lay out its procedural requirements in a way that makes
them “harder to read and easier to transgress.” Antonin Scalia,
The Rule of Law as a Law of Rules, 56 U. Chi. L. Rev. 1175,
1179 (1989); see NetworkIP, LLC v. FCC, 548 F.3d 116, 122-
123 (D.C. Cir. 2008) (“‘[T]raditional concepts of due process
* * * preclude an agency from penalizing a private party for
violating a rule without first providing adequate notice of the
substance of the rule.’”) (quoting Satellite Broadcasting Co. v.
FCC, 824 F.2d 1, 3 (D.C. Cir. 1987)).

        It also bears remembering that the reason Stolz waited
ten years to raise his Kidd argument is that it inexplicably took
the FCC ten years to issue its barely four-page decision on
Stolz’s application for review. Of course Stolz could not file a
petition for reconsideration until after the FCC first considered
and decided his application for review. In other words, this is
hardly the case for the FCC to be pointing a non-jurisdictional
timeliness finger at others.

        While Stolz wins that procedural battle, he loses the
war. His reliance on Kidd substantially overreads that case. To
be sure, in Kidd as in this case, a state court ordered the
involuntary filing with the FCC of an application for
assignment of a broadcast license. Kidd, 427 F.3d at 3. But
the similarities end there. The problem in Kidd was that, once
that application was filed, the FCC woodenly granted the
assignment application (i) without ensuring that transfer was in
the “public interest,” as federal law requires, 47 U.S.C.
§ 310(d), and (ii) notwithstanding that the transfer would
enforce the very type of reversionary interest that FCC
regulations expressly prohibit. Kidd, 427 F.3d at 5–6. We held
that the FCC’s asserted desire “to accommodate the [state]
court [order]” for its own sake was unlawful. “[T]he
Commission is not obliged to accommodate a state court’s
decision that is contrary to Commission policy * * * [and] the
public interest determinations [are left] to the Commission.”
                               10

Id. at 6.

        Nothing like that happened here. Contrary to Stolz’s
argument (Br. 23), the dispute in this matter did not involve a
transfer that would have enforced a reversionary interest
prohibited by FCC regulations, as was the case in Kidd.
Furthermore, the California Superior Court did not order the
FCC to grant the transfer application; the court only ordered
Stolz to sign the application with the FCC as his agreement
with Entercom required. The disposition of that application
was left within the exclusive province of the FCC. Nor did the
FCC ground its decision granting the transfer application on
the state court order, as it had in Kidd, 427 F.3d at 6. Instead,
just as Kidd requires, the FCC rested its decision entirely on
federal law, determining that “the public interest, convenience,
and necessity will be served thereby.” See 47 U.S.C. § 310(d).
And in so doing, the FCC’s decision did not contravene any
established policy like the ban on reversionary interests that the
FCC blinked away in Kidd.

                            *****

        Because Stolz’s challenge to the FCC’s application of
the pre-2002 Order’s local-market definition is moot and his
remaining challenge to the FCC decision lacks merit, Stolz’s
appeal is dismissed in part and denied in part.

                                                     So ordered.