Bechtel v. F.C.C.
| Decision Date | 17 December 1993 |
| Docket Number | 93-1264 and 93-1265,Nos. 92-1378,s. 92-1378 |
| Citation | 10 F.3d 875 |
| Parties | , 62 USLW 2413, 22 Media L. Rep. 1097 Susan M. BECHTEL, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION, Respondent, Anchor Broadcasting Limited Partnership; Galaxy Communications, Inc., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petition for Review of an Order of the Federal Communications Commission.
Gene A. Bechtel argued the cause for petitioner Susan M. Bechtel in Nos. 92-1378 and 93-1264. With him on the briefs was Harry F. Cole.
Barry D. Wood argued the cause and filed the briefs for petitioner Galaxy Communications, Inc. in No. 93-1265 and entered an appearance for intervenor Galaxy Communications, Inc. in No. 92-1378.
Daniel M. Armstrong, Associate Gen. Counsel, F.C.C., argued the cause for respondent. With him on the brief were Renee Licht, Acting Gen. Counsel, F.C.C., and David Silberman, Counsel, F.C.C. Robert L. Pettit entered an appearance.
John J. Schauble, Jr. and Lewis I. Cohen entered an appearance for intervenor Anchor Broadcasting Ltd. Partnership. Before: WILLIAMS, SENTELLE, and HENDERSON, Circuit Judges.
Opinion for the Court filed by Circuit Judge STEPHEN F. WILLIAMS.
In choosing among mutually exclusive applicants seeking to build and operate a new broadcasting station, the Federal Communications Commission prefers applicants who promise that the station's owners will participate in its management. An applicant who lost because of this policy now attacks it as arbitrary and capricious.
The Commission's preference for the "integration" of ownership and management originated more than 45 years ago in a rather mild form. "Other significant factors being equal," declared one decision, "the Commission is inclined to prefer an applicant who intends to manage and operate the proposed station personally rather than to entrust its operation to employees." Homer Rodeheaver, 12 F.C.C. 301, 307 (1947). In these early days, however, the Commission's focus was not on integration per se, but on whether an applicant would fulfill his promises to the Commission and be responsive to the broadcasting needs of his community. The Commission recognized that integration was not necessarily the most reliable indicator of these things, and it put little weight on integration when it had other reasons to believe that an applicant would be responsible and responsive. See, e.g., Pilgrim Broadcasting Co., 14 F.C.C. 1308, 1349 (1950).
The powerful integration preference that now prevails dates back to a policy statement issued in 1965. See Policy Statement on Comparative Broadcast Hearings, 1 F.C.C.2d 393, 394 (1965) ["1965 Policy Statement "]; Anchor Broadcasting Limited Partnership, 7 F.C.C.Rec. 4566, 4569 n. 6 (1992). The statement declared it "important per se" for station owners to participate in day-to-day station management. 1965 Policy Statement, 1 F.C.C.2d at 396; see also Central Florida Enterprises, Inc. v. F.C.C., 598 F.2d 37, 56 (D.C.Cir.1978) (); Committee for Community Access v. F.C.C., 737 F.2d 74, 82 (D.C.Cir.1984) (same). Three decades later, this case squarely calls into question the validity of continued use of the integration preference.
This litigation arises out of several mutually exclusive applications to construct and operate a commercial FM radio station in Selbyville, Delaware. In 1989 an administrative law judge awarded the necessary permit to Anchor Broadcasting Limited Partnership and rejected the competing applications of Susan M. Bechtel, Galaxy Communications, Inc., and another company. Anchor Broadcasting Limited Partnership, 4 F.C.C.Rec. 5687 (ALJ 1989), modified 5 F.C.C.Rec. 2432 (Rev.Bd.1990). Bechtel's application received little attention because, alone among the four applicants, she did not propose to integrate ownership and management of the new station, and neither the ALJ nor the FCC's Review Board had authority to discard or modify the Commission's integration policy. Even when the case reached the Commission itself, her arguments were ignored; the Commission said that attacks on the integration preference "would more appropriately be considered in a rule making proceeding". Anchor Broadcasting Limited Partnership, 6 F.C.C.Rec. 721, 724 n. 4 (1991).
That theory did not fare well on review in this court. We noted that an agency relying on a previously adopted policy statement rather than a rule must be ready to justify the policy "just as if the policy statement had never been issued", Bechtel v. F.C.C., 957 F.2d 873, 881 (D.C.Cir.1992) ["Bechtel I "] (quoting Pacific Gas & Elec. Co. v. FPC, 506 F.2d 33, 38-39 (D.C.Cir.1974)), and explained that the Commission's broad discretion to choose between rulemaking and adjudication did not justify its applying an undefended policy in adjudications simply on the basis of a hypothetical future rulemaking. Id. We therefore remanded the case to the Commission for it to address Bechtel's challenge. Id. at 881-82.
The Commission then launched a rulemaking proceeding that sought comment on modification or elimination of the integration test. Notice of Proposed Rule Making, 7 F.C.C.Rec. 2664, 2665-66 pp 14-15 (1992). On remand in Bechtel's own case, however, it neglected Bechtel I 's mandate to "demonstrate why its focus on integration is still in the public interest, if indeed the Commission concludes that it is", and to respond to Bechtel's claim that "her proposal ... would serve the public interest better than her competitors' integrated proposals." Bechtel I, 957 F.2d at 880. Instead, the Commission narrowed the issue to consideration of whether post-1965 regulatory changes had removed the basis for the policy, and put the burden on Bechtel to show that they had clearly done so. Anchor Broadcasting Limited Partnership, 7 F.C.C.Rec. 4566, 4567 p 12 (1992) ["First Remand Order "]. Concluding that she had not met that burden, it reaffirmed the prior order.
In a later case involving attacks on the integration policy--attacks that the Commission had brushed off without a word of justification--another panel of this court noted the gap between the Bechtel I remand and the Commission's performance. See Flagstaff Broadcasting Found. v. F.C.C., 979 F.2d 1566, 1571 (D.C.Cir.1992). The Commission responded by modifying its first remand order and producing the decision now before us. Anchor Broadcasting Limited Partnership, 8 F.C.C.Rec. 1674, 1675 p 12 (1993) ["Second Remand Order "]. Bechtel has appealed from this modified decision, and Galaxy Communications (another disappointed applicant) has intervened in Bechtel's appeal pursuant to 28 U.S.C. Sec. 2348. 1
We agree with Bechtel that continued application of the integration preference is arbitrary and capricious, and therefore unlawful. See 5 U.S.C. Sec. 706 (1988). Accordingly, we reverse the Commission's decision and remand this case to the Commission. On remand, the Commission should conduct a proceeding in which it considers Bechtel's application (and any other application properly before it) under standards free of the integration preference.
Policy statements are exempt from the Administrative Procedure Act's notice-and-comment requirements, see 5 U.S.C. Sec. 553(b), and hence may take effect without the rigors--and presumed advantages--of that process. The price to the agency is that the policy "is subject to complete attack before it is finally applied in future cases". Pacific Gas, 506 F.2d at 39; Panhandle Producers & Royalty Owners Ass'n v. Economic Regulatory Admin., 822 F.2d 1105, 1111 (D.C.Cir.1987). Sooner or later the agency must meet its obligation to respond to criticisms. American Mining Congress v. Mine Safety & Health Admin., 995 F.2d 1106, 1111 (D.C.Cir.1993).
This does not mean that policy statements have no effect. Although the agency must respond to challenges and be ready to consider "the underlying validity of the policy itself", Pacific Gas, 506 F.2d at 39; see also Panhandle, 822 F.2d at 1110; Guardian Fed. Sav. & Loan Ass'n v. FSLIC, 589 F.2d 658, 666 (D.C.Cir.1978), it need not repeat itself incessantly. When a party attacks a policy on grounds that the agency already has dispatched in prior proceedings, the agency can simply refer to those proceedings if their reasoning remains applicable and adequately refutes the challenge. But the agency must always stand ready "to hear new argument" and "to reexamine the basic propositions" undergirding the policy. McLouth Steel Products Corp. v. Thomas, 838 F.2d 1317, 1321 (D.C.Cir.1988); see also FCC v. WNCN Listeners Guild, 450 U.S. 582, 603, 101 S.Ct. 1266, 1278, 67 L.Ed.2d 521 (1981).
As summarized in the Second Remand Order, the Commission attributes three basic advantages to integration, which can be described under the headings "incentives", "interest", and "information". First, owner-managers--because of their direct financial and legal stake in the station's performance--have better incentives than mere employee-managers, and hence stations run by integrated owners are more likely to respond to community needs and to comply with Commission rules. Second, integrated owners are more likely than absentee owners to have an active interest in the operation of their stations, and an interested owner tends to improve performance. Third, on-site owners are better positioned than absentee owners to gather relevant information about whether the station is fully satisfying community needs and complying with Commission rules. Second Remand Order, 8 F.C.C.Rec. at 1676 p 15; see also 1965 Policy Statement, 1 F.C.C.2d at 395-96. Finally, recognizing that the integration credit is by no means a...
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