Damsky v. Fed. Commun Comm'n, 99-1018

Citation199 F.3d 527
Decision Date07 January 2000
Docket NumberNo. 99-1018,99-1018
Parties(D.C. Cir. 2000) Heidi Damsky, Appellant v. Federal Communications Commission, Appellee Homewood Radio Co. LLC, Intervenor
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

[Copyrighted Material Omitted]

Appeal of an Order of the Federal Communications Commission

Lauren A. Colby argued the cause and filed the briefs for appellant.

Pamela L. Smith, Counsel, Federal Communications Commission, argued the cause for appellee. On the brief were Christopher J. Wright, General Counsel, Daniel M. Arm-strong, Associate General Counsel, and Gregory M. Christopher, Counsel.

Stephen Diaz Gavin and Janet Fitzpatrick were on the brief for intervenor.

Before: Williams, Sentelle and Randolph, Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Sentelle, Circuit Judge:

Appellant Heidi Damsky appeals from an order of the Federal Communications Commission ("FCC" or "Commission") finding her financially unqualified to receive an FM station construction permit and finding that an applicant that subsequently obtained the permit as part of a settlement agreement did not make disqualifying misrepresentations to the Commission. Damsky also argues that an intervening change in law entitled her to participate in an auction for the already-issued permit. Upon review of the relevant law and the record, we hold that the Commission did not err in affirming the Administrative Law Judge's financial qualification findings. We also hold that Damsky is not entitled to an auction because the Commission adequately explained why the statutory settlement provisions and Commission policy permitted the negotiated outcome obtained here. Therefore, we affirm the Commission's decision based on the aforementioned considerations and do not need to reach the misrepresentation issue raised by Damsky.

I. Background

In 1988, Heidi Damsky, the appellant, and twelve other applicants filed mutually exclusive applications for a permit to construct a new FM broadcast station in Homewood, Alabama. The Mass Media Bureau designated all applications for comparative hearing. As a result of a 1992 hearing, an Administrative Law Judge found that Damsky failed to establish her financial qualifications and dismissed her application. See In re Heidi Damsky, 7 F.C.C.R. 5244 pp 180-83 (1992) ("Initial Decision"). The Commission affirmed the ALJ's determination. See In re Heidi Damsky, 13 F.C.C.R. 11688 pp 24-32 (1998) ("Memorandum Opinion and Order").

By the time of the 1992 hearing, the applicant pool had narrowed to include Damsky and two others. The two remaining applicants, WEDA, Ltd. ("WEDA") and Homewood Partners, Inc. ("HPI"), entered into a settlement agreement contingent on Damsky's disqualification. Upon affirming Damsky's disqualification, the Commission granted the permit to the resulting entity, intervenor Homewood Radio Company ("Homewood Radio"). See Memorandum Opinion and Order, 13 F.C.C.R. 11688 pp 4, 7, 24-32. In addition to affirming the ALJ's financial disqualification findings, the Commission addressed two other challenges now properly raised and argued by Damsky on appeal. First, the Commission rejected Damsky's claim that HPI had made disqualifying misrepresentations to the Commission. See id.pp 12-23.Second, the Commission rejected Damsky's claim that a recent Commission order required it to award the permit through a competitive auction in which Damsky could participate. See In re Heidi Damsky, 14 F.C.C.R. 370 pp 9-14 (1999) ("Further Petition for Reconsideration"); see also In re Heidi Damsky, 13 F.C.C.R. 16352 (1998) ("Petition for Reconsideration").

A. Background on Financial Qualifications

At the time the parties filed their applications, the Commission resolved competing applications though an evidentiary hearing process that assessed applicants' basic and comparative qualifications. Each broadcast applicant had to establish, among other things, that it was financially qualified to cover certain construction and operating costs. See 47 U.S.C. § 308(b) (1994); CHM Broad. Ltd. Partnership v. FCC, 24 F.3d 1453, 1455 (D.C. Cir. 1994). The financial qualification form in effect when the parties here made their filings required each applicant to certify with "reasonable assurance" that it had net liquid assets on hand or had funding obtainable from committed sources sufficient to construct and operate the requested facilities for three months without revenues. See In re Revision of Application for Construction Permit for Commercial Broadcast Station (FCC Form 301), 50 Rad. Reg. 2d 381 (P & F) (1981) ("Form 301"). The form clearly indicated that an applicant had to be prepared to document certification compliance upon request. See id. If the Commission questioned an applicant's financial qualifications, the applicant had to demonstrate its "reasonable assurance" by showing that, "prior to certification, it engaged in serious and reasonable efforts to ascertain predictable construction and operation costs" and that it confirmed the availability of net liquid assets, either on hand or from committed sources, sufficient to construct and operate the station for three months without revenue. In re Northampton Media Assocs., 4 F.C.C.R. 5517 pp 13-15 (1989), aff'd sub nom. Northampton Media Assocs. v. FCC, 941 F.2d 1214, 1217 (D.C. Cir. 1991). After questioning and investigating Damsky's financial qualifications, the ALJ found that Damsky failed to make either of the two showings required to establish a "reasonable assurance."

Specifically, the ALJ found that Damsky failed to show prior to the certification that she engaged in "serious and reasonable efforts" to formulate cost figures because she only offered a general $300,000 "ballpark" cost estimate based on a conversation with her consulting engineer. See Initial Decision, 7 F.C.C.R. 5244 pp 6-9, 181. The Commission affirmed the ALJ's findings and conclusions. See Memorandum Opinion and Order, 13 F.C.C.R. 11688 pp 1, 30. Likewise, the ALJ and Commission both agreed that Damsky failed to show that she had sufficient committed funding available since she based her financial backing on a casual assurance from her husband that the couple had the assets to cover the $300,000 project. See Initial Decision, 7 F.C.C.R. 5244 pp 10-24 182-83; Memorandum Opinion and Order, 13 F.C.C.R. 11688 p 31. The ALJ and Commission found that while the record showed that Damsky's husband preferred to obtain a loan rather than liquidate, neither Damsky nor her husband provided any assurance about the availability of such a loan contemporaneous with the certification. See Initial Decision, 7 F.C.C.R. 5244 pp 182-83; Memorandum Opinion and Order, 13 F.C.C.R. 11688 p 32.

B. Challenge with Regard to HPI

In the order affirming Damsky's disqualification, the Commission also accepted the Homewood Radio settlement agreement. Throughout the permit application process, Damsky challenged the corporate structure of HPI, one of the settling parties, as violating FCC rules and alleged that HPI had made various disqualifying misrepresentations to the FCC. The resulting inquiry primarily focused on whether two of the five HPI principals impermissibly acquired their ownership interests prior to the filing of HPI's amended application. Two checks formed the heart of the debate. Apparently, two "investors" gave the three original partners two $1200 checks marked respectively "20% Interest Radio" and "Ownership 20% of Homewood Partners." The agency inquiry focused on whether the checks constituted an ownership interest or a loan. Although conflicting documentary evidence existed, the ALJ evaluated all of the evidence and resolved the issue in HPI's favor by deeming the payments loans. See In re Heidi Damsky, 9 F.C.C.R. 4011 pp 61-68 (1994) ("Supplementary Initial Decision"). The Commission affirmed the ALJ's findings. See Memorandum Opinion and Order, 13 F.C.C.R. 11688 pp 13-23.

C. Background on Auction Provisions

While exceptions to the ALJ's decision were pending, this court held in Bechtel v. FCC, 10 F.3d 875 (D.C. Cir. 1993), that the "integration of ownership with management" criteria used in FCC comparative hearings was arbitrary and capricious and therefore unlawful. See id. at 878. In response to Bechtel, the Commission froze all ongoing comparative cases, including this case, pending the development of a new regulatory structure. See Memorandum Opinion and Order, 13 F.C.C.R. 11688 p 3. However, the Commission also created an exception to the freeze policy. The exception allowed a frozen case to be adjudicated to completion if the parties to the comparative proceeding reached a settlement agreement even if the settlement were contingent on the resolution of specific basic qualifying issues. See Modification of FCC Comparative Proceedings Freeze Policy, 9 F.C.C.R. 6689 (1994). The agreement resulting in Homewood Radio's receipt of the construction permit constituted such a settlement.

However, while the parties here were negotiating for settlement, Congress amended § 309(j) of the Communications Act to require the Commission to grant construction permits through a competitive bidding system. See 47 U.S.C. § 309(j) (Supp. III 1997). Since the mandatory competitive bidding system applied to applications filed after July 1, 1997, newlyenacted § 309(l) covered the applications filed in this case because the filings occurred before July 1, 1997. Subsection 309(l)(1) states that the Commission "shall ... have the authority" to resolve the pre-July 1, 1997 filings through competitive bidding. In addition, subsection 309(l)(3) required the Commission to "waive any provisions of its regulations necessary to permit such persons to enter an agreement to procure the removal of a conflict between their applications during the 180-day period beginning on the date of August 15, 1997." Here, the settlement...

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