537 U.S. 293 (2003), 01-653, FCC. v. NextWave Personal Communications Inc.

Docket Nº:Nos. 01-653, 01-657
Citation:537 U.S. 293, 123 S.Ct. 832, 154 L.Ed.2d 863, 71 U.S.L.W. 4085
Case Date:January 27, 2003
Court:United States Supreme Court

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537 U.S. 293 (2003)

123 S.Ct. 832, 154 L.Ed.2d 863, 71 U.S.L.W. 4085







Nos. 01-653, 01-657

United States Supreme Court

January 27, 2003 [*]

Argued October 8, 2002.



Pursuant to provisions of the Communications Act of 1934 authorizing the , Federal Communications Commission (FCC) to award spectrum licenses , to small businesses through competitive bidding, and to allow them to pay for the licenses in installments,' the FCC auctioned off certain broadband personal communications services licenses to respondents (hereinafter NextWave). NextWave made a down payment on the purchase price, signed promissory notes for the balance, 'and executed agreements giving the FCC a first lien on, arid security interest in, NextWave's rights and interest in the licenses, which recited that they were conditioned upon the full and timely payment of all monies due the FCC, and that failure to comply with this condition would result in their automatic cancellation. NextWave eventually filed for Chapter 11 bankruptcy protection and suspended payments to all creditors, including the FCC, pending confirmation of its reorganization plan. The FCC objected to the plan, asserting that NextWave's licenses had been canceled Automatically when the company missed its first payment deadline, and announced that NextWave's licenses were available for auction. The Bankruptcy Court invalidated the cancellation of the licenses as a violation of various Bankruptcy Code provisions, but the Second Circuit reversed, holding that exclusive jurisdiction to review the FCC's regulatory action lay in the courts of appeals. After the FCC denied NextWave's petition for reconsideration of the license cancellation, the District of Columbia Circuit held that the cancellation violated 11 U.S.C. § 525(a), which provides: "[A] governmental unit may not ... revoke ... a license ... to ... a debtor ... solely because such ... debtor ... has not paid a debt that is dischargeable in the case."


Section 525 prohibits the FCC from revoking licenses held by a bankruptcy debtor upon the debtor's failure to make timely payments to the FCC for purchase of the licenses. It is undisputed that the FCC

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is a "governmental unit" that has "revoke[d]" a "license," and that NextWave is a "debtor" under the Bankruptcy Act Pp. 301-308.

(a) The Court rejects petitioners' argument that the FCC did not revoke Next Wave's licenses "solely because" of nonpayment under § 525(a). The fact that the FCC had a valid regulatory motive for its action is irrelevant. Section 525 means nothing more or less than that the failure to pay a dischargeable debt must alone be the proximate cause of the cancellation, whatever the agency's ultimate motive may be. Pp. 301-302.

(b) The FCC's contention that regulatory conditions like full and timely payment are not properly classified as "debts" under § 525(a)fails. Under the Bankruptcy Code, "debt" means "liability on a claim," § 101(12), and "claim," in turn, includes any "right to payment," § 101(5)(A). The plain meaning of a "right to payment" is nothing more ,, nor less than an enforceable obligation, regardless of the Government's ; objectives in imposing the obligation. E.g., Pennsylvania Dept. of Public Welfare v. Davenport, 495 U.S. 552, 559. Also rejected is petitioners' argument that Next Wave's obligations are not "dischargeable" under § 525(a) because it is beyond the bankruptcy courts' jurisdictional . authority to alter or modify regulatory obligations. Dischargeability is not tied to the existence of such authority. The Bankruptcy Code states that confirmation of a reorganization plan discharges the debtor from any debt that arose before the confirmation date, 11 U.S.C. § 1141(d)(l)(A), and the only debts it excepts from that prescription are those described in § 523, see § 1141(d)(2). Ohio v. Kovacs, 469 U.S. 274, : 278.; Petitioners' contention that the D. C. Circuit has no power to modify or discharge a debt is irrelevant to whether that court can set aside agency action that violates § 525, which is all that it did when it prevented the FCC from canceling licenses because of failure to pay debts dischargeable by bankruptcy courts. Pp. 302-304.

(c) Finally, this Court's interpretation of § 525 does not, as petitioners contend, create a conflict with the Communications Act by obstructing the functioning of that Act's auction provisions. Nothing in those provisions demands that cancellation be the sanction for failure to make agreed-upon periodic payments or even requires the FCC to permit payment to be made over time. What petitioners describe as a conflict boils down to nothing more than a policy preference on the FCG's part for (1) selling licenses on credit and (2) canceling licenses rather than asserting security interests when there is a default. Such administrative preferences cannot be the basis for denying NextWave rights provided by a law's plain terms. P. 304.

254 F.3d 130, affirmed.

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Scalia, J., delivered the opinion of the Court, in which Rehnquist, C. J., and O'Connor, Kennedy, Soutee, Thomas, and Ginsburg, JJ., joined, and in which Stevens, J., joined as to Parts I and II, Stevens, J., filed an opinion concurring in part and concurring in the judgment, post, p. 308. Breyer, J., filed a dissenting opinion, post, p. 310.

Acting Solicitor General Clement argued the cause for petitioner Federal. Communications Commission in No. 01-653. With him on the briefs were Deputy Solicitor General Wallace, Jeffrey A. Lamken, William Kanter, Jacob M. Lewis, John A. Rogovin, Daniel M. Armstrong, and Joel Marcus. Jonathan S. Franklin argued the cause for, petitioners Arctic; Slope Regional Corp. et al. in No. 01-657. With him on the briefs was Lorane F. Hebert.

Donald B. Verrilli, Jr., argued the cause for respondents in both cases. With him on; the briefs were Ian Heath Gershengorn, William M. Hohengarten, Thomas G. Hungar, Douglas R. Cox, Miguel A. Estrada, G. Eric Brunstad, Jr., and Deborah L. Schrier-Rape,

Laurence H. Tribe argued the cause and filed a brief for Creditors NextWave Communications, Inc., as amici curiae urging affirmance. With him on the brief were Charles Fried and Elizabeth Warren.[†]

JUSTICE SCALIA delivered the opinion of the Court.

In these cases, we decide whether § 525 of the Bankruptcy Code, 11 U.S.C. § 525, prohibits the Federal Communications Commission (FCC or Commission) from revoking licenses held by a debtor in bankruptcy upon the debtor's failure to make timely payments owed to the Commission for purchase of the licenses.

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In 1993, Congress amended the Communications Act of 1934 to authorize the FCC to award spectrum licenses "through a system of competitive bidding." 48 Stat. 1085, as amended, 107 Stat. 387, 47 U.S.C. § 309(j)(1). It directed the Commission to "promote economic opportunity and competition" and "avoid excessive concentration of licenses" by "disseminating licenses among a wide variety of applications, including small businesses [and] rural telephone companies." § 309(j)(3)(B). In order to achieve this goal, Congress directed the FCC to "consider alternative payment schedules and methods of calculation, including lump sums or guaranteed installment payments . . . or other schedules or methods . . . ." § 309(j)(4)(A).

The FCC decided to award licenses for broadband personal communications services through simultaneous, multiple-round auctions. In re Implementation of Section 309(j) of the Communications Act — Competitive Bidding, 9 FCC Rcd. 2348, PP54, 68 (1994). In accordance with §§ 309(j)(3)(B) and (4)(A), it restricted participation in two of the six auction blocks (Blocks "C" and "F") to small businesses and other designated entities with total assets and revenues below certain levels, and it allowed the successful bidders in these two blocks to pay in installments over the term of the license. 47 CFR § 24.709(a)(1) (1997).

Respondents NextWave Personal Communications, Inc., and NextWave Power Partners, Inc. (both wholly owned subsidiaries of NextWave Telecom, Inc., and hereinafter jointly referred to as respondent NextWave), participated, respectively, in the FCC's "C-Block" and "F-Block" auctions. NextWave was awarded 63 C-Block licenses on winning bids totaling approximately $ 4.74 billion, and 27 F-Block licenses on winning bids of approximately $ 123 million. In accordance with FCC regulations, NextWave made a downpayment on the purchase price, signed promissory notes for the balance, and executed security agreements that the FCC

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perfected by filing under the Uniform Commercial Code. The security agreements gave the Commission a first "lien on and continuing security interest in all of the Debtor's rights and interest in [each] License." Security Agreement between NextWave and FCC P1 (Jan. 3, 1997), 2 App. to Pet. for Cert. 402a. In addition, the licenses recited that they were "conditioned upon the full and timely payment of all monies due pursuant to . . . the terms of the Commission's installment plan as set forth in the Note and Security Agreement executed by the licensee," and that "failure to comply with this condition will result in the automatic cancellation of this authorization." Radio Station Authorization for Broadband PCS (issued to NextWave Jan. 3, 1997), 2 App. to Pet. for Cert. 388a.

After the C-Block and F-Block licenses were awarded, several successful bidders, including NextWave, experienced difficulty obtaining...

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