Kay v. F.C.C.

• Decision Date: 01 February 2005
• Docket Number: No. 04-1045.,No. 02-1175.,02-1175.,04-1045.
• Citation: 396 F.3d 1184
• Parties: James A. KAY, Jr., Appellant v. FEDERAL COMMUNICATIONS COMMISSION, Appellee
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1184

396 F.3d 1184

James A. KAY, Jr., Appellant v. FEDERAL COMMUNICATIONS COMMISSION, Appellee

No. 02-1175.

No. 04-1045.

United States Court of Appeals, District of Columbia Circuit.

Argued December 6, 2004.

Decided February 1, 2005.

Appeals of Orders of the Federal Communications Commission.

Barry Richard argued the cause for appellants. With him on the briefs were Elliot H. Scherker. Robert J. Keller, and Aaron P. Shainis.

Roberta L. Cook, Counsel, Federal Communications Commission, argued the cause for appellee. With her on the brief were John A. Rogovin, General Counsel, Austin C. Schlick, Deputy General Counsel, and Daniel M. Armstrong, Associate General Counsel. Jane E. Mago, Assistant General Counsel, entered an appearance.

Before: EDWARDS, SENTELLE, and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge.

These are consolidated appeals from orders of the Federal Communications Commission sanctioning James A. Kay, Jr., and Marc D. Sobel for intentionally trying to mislead the Commission, and for engaging in an unauthorized transfer of control of Sobel's land mobile service facilities. Kay and Sobel argue that the administrative record does not contain substantial evidence to support the orders.

I.

Since the early 1980's Kay has provided two-way radio mobile service in the Los Angeles area through a sole proprietorship — Lucky's Two-Way Radio. He held many land mobile licenses pursuant to Part 90 of the Commission's rules, 47 C.F.R. § 90.1 et seq., including 34 licenses in the 800 MHz band. Sobel also was involved in the land mobile business in and around Los Angeles. He too held licenses for commercial land mobile radio stations, including 15 licenses on the 800 MHz band.

In the early 1990's the Commission received information that Kay might have been evading certain regulatory restrictions by conducting business under other names. One of the names was "Marc Sobel dba Airwave Communications." Other information suggested additional violations. The Commission may require licensees to submit written statements of fact bearing on the question whether their licenses should be revoked. 47 U.S.C. § 308(b). To that end, the Commission's Wireless Telecommunications Bureau sent Kay a letter in January 1994 requesting several categories of information, including the identity of the stations for which Kay held licenses and the stations Kay managed. Kay's lawyer responded with a series of demands and complaints, but supplied none of the information the Bureau sought.

In December 1994 the Commission issued an order designating issues for a hearing, including: (1) whether Kay had violated § 308(b) by failing to provide the information requested; (2) whether he had willfully violated Commission rules governing station construction and operation; (3) whether he had abused the Commission's processes by filing applications in multiple names to avoid complying with the channel sharing and recovery rules; and (4) whether, in view of the evidence adduced on those issues, Kay was fit to be a licensee. The order identified 164 call signs subject to the hearing, eleven of which were held in Sobel's name.

About one month later, in January 1995, Kay filed a sixteen-page motion with the administrative law judge assigned to the case. Among other things, the motion requested deletion of Sobel's call signs from the hearing designation order. Kay's motion stated:

James A. Kay, Jr. is an individual. Marc Sobel is a different individual. Kay does not do business in the name of Marc Sobel or use Sobel's name in any way. As shown by the affidavit of Marc Sobel attached as Exhibit II hereto, Kay has no interest in any of the licenses or stations held by Marc Sobel. Marc Sobel has no interest in any of the licenses or stations authorized to Kay or any business entity in which Kay holds an interest. Because Kay has no interest in any license or station in common with Marc Sobel and because Sobel was not named as a party to the instant proceeding, the presiding officer should either change the [Order] to delete the reference to the stations identified as stations 154 through 164 ... or should dismiss the [Order] with respect to those stations.

In a signed affidavit accompanying his motion, Kay declared under penalty of perjury that the statements in the motion were "true and correct."

Sobel's affidavit, attached to the motion, stated:

I, Marc Sobel, am an individual, entirely separate and apart in existence and identity from James A. Kay, Jr. Mr. Kay does not do business in my name and I do not do business in his name. Mr. Kay has no interest in any radio station or license of which I am the licensee. I have no interest in any radio station or license of which Mr. Kay is the licensee. I am not an employer or employee of Mr. Kay, am not a partner with Mr. Kay in any enterprise, and am not a shareholder in any corporation in which Mr. Kay also holds an interest. I am not related to Mr. Kay in any way by birth or marriage.

The ALJ certified the matter to the Commission and the Commission deleted Sobel's licenses from the Kay proceeding. Kay Modified HDO, 11 F.C.C.R. 5324, 1996 WL 229849 (1996). Thereafter, on June 11, 1996, the Bureau sent a § 308(b) letter of inquiry to Sobel, asking him for information about his business relationship with Kay. Sobel Order, 17 F.C.C.R. 1872, 1873 ¶ 4, 2002 WL 91443 (2002). In his response, dated July 3, 1996, Sobel attached a "Radio System Management and Marketing Agreement." The Management Agreement, originally executed by Sobel and Kay in October 1994 and re-executed on December 30, 1994, set out the terms under which Kay had been managing, during the previous three years, fifteen of Sobel's stations, licensed on the 800 MHz band. (Kay had given the Bureau a copy of the same agreement on March 24, 1995, in response to the Bureau's discovery request seeking all management agreements to which Kay was a party.)

By early 1997, Sobel had 13 license applications pending with the Commission. Rather than grant any of them, the Commission designated them, and the licenses Sobel already held, for a hearing to determine whether Sobel had transferred control of the stations named in the Agreement to Kay, in violation of § 310(d) of the Communications Act, 47 U.S.C. § 310(d). Marc Sobel, 12 F.C.C.R. 3298, 3300, 1997 WL 60921 (1997). Section 310(d) provides that no "station license, or any rights thereunder, shall be transferred ... to any person except upon application to the Commission and upon finding by the Commission that the public interest, convenience and necessity will be served thereby." The Commission later added another issue: whether Sobel had misrepresented facts or lacked candor in the affidavit he submitted in support of Kay's January 1995 motion to remove Sobel's licenses from the Kay hearing. Marc Sobel, FCC 97M-82 (released May 8, 1997).

Sobel's hearing, in which Kay intervened, was the first to be completed. See Marc Sobel, 12 F.C.C.R. 22879, 1997 WL 733963 (ALJ 1997). ALJ Frysiak determined that Sobel had illegally transferred control of the stations identified in the Management Agreement. The evidence showed that Kay was managing the stations; that Kay had prepared Sobel's license applications; that Kay provided all the money and equipment to build the stations; that Kay's employees were involved in nearly all aspects of the day-to-day operation of the stations; that Kay paid all the expenses of the stations; that the revenues from operations went into Kay's bank accounts; that Sobel received none of the operating revenues; and that Kay had an option to purchase each of the stations at any time for $500 each. 12 F.C.C.R. at 22901. ALJ Frysiak also found that, in light of this evidence, Sobel's statement in his affidavit that Kay had "no interest" in any of his radio stations or licenses was "intended to mislead and deceive the Commission with respect to Kay's actual role in the affairs of Sobel's 800 MHz stations." The evidence also showed that Sobel, in response to problems identified in his applications, provided the Commission with customer invoices for the stations listed in the Agreement. On the invoices, Kay had masked out the name and address of "Lucky's Two Way Radio" — a name under which Kay conducts business. ALJ Frysiak found that both Sobel and Kay thought it crucial to withhold this information, which would have revealed to the Commission that Kay and Sobel were "not as independent of one another as Sobel has claimed." Id. at 22902, 22898-99. The ALJ concluded that all of Sobel's licenses designated for the hearing should be revoked and that his applications should be denied.

Nearly two years after the ALJ's decision in Sobel's case, ALJ Chachkin issued his decision in Kay's case. James A. Kay, Jr., FCC 99D-04, 1999 WL 700534, ¶ 223 (ALJ, released Sept. 10, 1999). ALJ Chachkin accepted the ruling in the Sobel case that Kay had participated in an unauthorized transfer of control of Sobel's stations. But he found "entirely credible" Kay's and Sobel's testimony that they had not intended to deceive the Commission about their business arrangement. ALJ Chachkin also accepted as "entirely reasonable and credible" Kay's testimony that when his motion stated he had no "interest" in Sobel's "licenses or stations," he meant that he had no "ownership interest" in any "station license" held by Sobel. He discounted the findings in the Sobel hearing, believing them "tainted" because the Bureau had "deliberately concealed" from ALJ Frysiak the fact that Kay had produced the Agreement in March 1995, in response to a discovery request. Id. at ¶¶ 168-69, 210.

The Commission considered the Sobel and Kay cases concurrently and issued decisions in both cases on the same day. For reasons we will discuss in a moment, the Commission found that Sobel had engaged in an unauthorized transfer of control of the stations listed in...