Radio Athens, Inc.,(WATH) v. FCC

Decision Date09 July 1968
Docket NumberNo. 21476.,21476.
Citation401 F.2d 398
PartiesRADIO ATHENS, INC., (WATH), Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Valley Broadcasting, Inc., Intervenor.
CourtU.S. Court of Appeals — District of Columbia Circuit

Lauren A. Colby, Washington, D. C., for appellant.

Mr. Joseph A. Marino, Counsel, Federal Communications Commission, with whom Messers. Henry Geller, General Counsel, John H. Conlin, Associate General Counsel, and Mrs. Lenore G. Ehrig, Counsel, Federal Communications Commission, were on the brief, for appellee.

Mr. Grover C. Cooper, Washington, D. C., for intervenor.

Before BASTIAN, Senior Circuit Judge, and LEVENTHAL and ROBINSON, Circuit Judges.

LEVENTHAL, Circuit Judge:

On November 21, 1966, Valley Broadcasting, Inc., filed an application for a new standard broadcast station (WNAL) to be located in Nelsonville, Ohio, requesting operation on 940 kc with 250 watts of power. In a public notice on April 5, 1967, the Federal Communications Commission assigned May 11, 1967, to the Valley application as the cut-off date. The public notice was pursuant to Commission rules1 and advised that an applicant seeking a comparative hearing with any of the listed applications (or with any applications filed before the deadline which were mutually exclusive with the listed applications) must file a "substantially complete" application by May 11. On May 11, appellant, licensee of Radio Station WATH, Athens, Ohio, filed an application for a construction permit to increase the power of its station, operating on 970 kc, from one to five kilowatts. This application is concededly mutually inconsistent with Valley's application.

On June 2, the Commission wrote appellant that there were errors in its engineering data and that an amendment to the application ought to be filed,2 and on June 9 appellant sent the Commission the necessary amended engineering statement. On June 12, the Commission returned appellant's application with a letter explaining that it was "not acceptable for filing." The consequence of rejecting the application was to cause appellant to miss the cut-off date for a comparative hearing with Valley, since consideration of the proposed construction permit would now require a new and necessarily tardy application.

The authority by which the Commission rejected appellant's application was Rule 1.566(a) which provides, in pertinent part:

Applications which are determined to be patently not in accordance with the Commission\'s rules, regulations, or other requirements, unless accompanied by an appropriate request for waiver, will be considered defective and will not be accepted for filing or if inadvertently accepted for filing will be dismissed.3

The patent defect found after the application had been pending for about a month, and after the engineering flaw had been noted and corrected,4 consisted of an alleged violation of the Commission's duopoly rule. That rule provides, in part:

No license for a standard broadcast station shall be granted to any party (including all parties under common control) if: (a) Such party directly or indirectly owns, operates, or controls one or more standard broadcast stations and the grant of such license will result in any overlap of the predicted or measured 1 mv/m ground-wave contours of the existing and proposed stations. * * *5

The Commission's letter of June 12 rejecting appellant's application explained that the multiple ownership violation was established by Commission records and the overlap violation was revealed by the application.

The Commission records referred to indicated that A. H. Kovlan owned 70% of the stock of Radio Athens and that he was its president and one of five directors. In addition, Commission files indicated that Kovlan owned 32.5% of the stock of Radio Mid-Pom, Inc., and was its treasurer and one of four directors. That company is the licensee of Station WMPO, Middleport-Pomeroy, Ohio. The application revealed that the proposed power increase of WATH would increase the overlap with WMPO beyond the 1 mv/m contours. These facts, claims the Commission, show that the application was patently in violation of the duopoly rule rendering the application defective and justifying its rejection.

It is with increasing frequency that we have been called upon to review the draconian effects generated by Commission use, in combination, of the cut-off rule and the rule authorizing dismissal of an application containing a patent non-conformance with other Commission rules.6 We have taken occasion to acknowledge and approve the device of cut-off as a reasonable and necessary limitation on the statutory right to a comparative hearing.7 There must be some point in time when the Commission can close the door to new parties to a comparative hearing or, at least hypothetically, no licenses could ever be granted.8 Similarly, we have approved the Commission's power pursuant to its rules to reject applications that are patently defective.9 The Commission will not be required to keep on file applications that cannot be granted, and such requests for facilities can be amended10 or even returned to the applicant for alteration and refiling.11

We are concerned, however, when these two rules, quite different in the purposes they are legitimately designed to advance, are applied so as to deprive a potential broadcaster from a comparative hearing on a timely-filed, substantially complete application. There is a palpable public interest in assuring that the limited remaining broadcast facilities go to the best qualified applicant, and the comparative hearing has evolved as a fair and meaningful procedure for selecting the applicant who is best qualified.12 There is also an interest in procedures and administrative techniques that enable the Commission to handle its work load efficiently, and with optimum use of limited administrative resources. Perhaps the Commission can accommodate the various interests by adopting administrative expedients that, for example, explicitly require all applications to be letter-perfect when filed. The prevailing Commission rules, however, did not give such notice of a fault-free approach as to make the shunting aside of appellant's application, without a hearing, consonant with elemental fairness and the spirit of the legislative requirement of hearing.

The Commission rule against multiple ownership, invoked here to dismiss the application as "patently" defective, applies by its terms to persons who "own, operate, or control" overlapping facilities. In our view, such a rule cannot be said to apply on its face, without the need for hearing, to disqualify one who owns less than 1/3 of the stock of a close corporation, even though he is an officer and one of four directors.13 These interests may well permit a conclusion that there is control in fact.14 But such a rule by itself does not advise a person that such interests constitute control as a matter of law, so that an application will be "patently" violative of Commission rules and subject to rejection unless accompanied by a request for waiver.

The Commission argues that whatever ambiguity there was in its multiple ownership rule was cured by the expansive construction that rule has been given — a construction the Commission contends established that the rule is operative in any case of cross interest, whether or not the interest is tantamount to ownership, operation, or control. As evidence of this construction, we are referred15 to five Commission decisions which we shall now discuss.

In Macon Broadcasting Co., 10 F.C.C. 444 (1945), a Macon, Georgia, radio station was granted a construction permit but as a condition of the grant, the two majority stockholders were ordered to divest themselves of "any connection with" another competing Macon, Georgia station. In Minnesota Broadcasting Corp., 13 F.C.C. 672 (1949), the Commission emphasized its rigid policy against allowing "any common ownership between broadcast stations in the same city in the interest of promoting and maintaining full competition. * * *" Latter emphasis added. These opinions do not fairly advise a reasonable applicant that the construction of a per se doctrine against any common ownership interest would reach interests of stations in different cities.

In Shenandoah Life Ins. Co., 19 Pike & Fischer R.R. 1 (1959), the Commission declined to grant a request for waiver of the rule filed by a Roanoke, Virginia, station desiring to elect as a director a Mr. Saunders who was also a director of a bank which owned a majority of the stock of another Roanoke station. The Commission referred to —

the long-standing policy * * * promulgated under said rules, against permitting any degree of cross-interest, direct or indirect, in two or more stations in the same broadcast service serving substantially the same area.

This brings us to the next Commission citation, Carolina Broadcasting Service, 25 Pike & Fischer R.R. 515 (1963). In that case, the Commission ordered a licensee to rectify, within 45 days, a violation of the duopoly rule held to exist where: a Mr. Lamm was a 1/3 owner and director of Station WMPM, Smithfield, North Carolina; Mr. Lamm also was a salesman for Station WCKB, Dunn, North Carolina, and did some announcing at WCKB's auxiliary studio in Smithfield; and Station WMPM was the only station licensed to serve Smithfield. The Commission noted: "With only minor variations based upon exceptional circumstances, the Commission has consistently refused to permit any degree of common ownership between stations in the same service in the same city." It explained: "A basic reason for this policy is to insure that full competition will be maintained between such stations." And in the course of the opinion, in holding that Mr. Lamm's "dual position as outlined above" violated the duopoly rule, it was observed that, "In the past, we have often conditioned grants of...

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