Morris Communications, Inc. v. F.C.C.

• Decision Date: 12 May 2009
• Docket Number: No. 08-1080.,08-1080.
• Citation: 566 F.3d 184
• Parties: MORRIS COMMUNICATIONS, INC., Appellant v. FEDERAL COMMUNICATIONS COMMISSION, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

566 F.3d 184

MORRIS COMMUNICATIONS, INC., Appellant v. FEDERAL COMMUNICATIONS COMMISSION, Appellee.

No. 08-1080.

United States Court of Appeals, District of Columbia Circuit.

Argued March 24, 2009.

Decided May 12, 2009.

On Appeal of an Order of the Federal Communications Commission.

Frederick M. Joyce argued the cause for the appellant.

Ronald E. Quirk Jr. entered an appearance.

Maureen K. Flood, Counsel, Federal Communications Commission, argued the cause for the appellee. Matthew B. Berry, General Counsel, Jacob M. Lewis, Associate General Counsel, and Richard K. Welch, Acting Deputy Associate General Counsel, Federal Communications Commission were on brief. Daniel M. Armstrong, Associate General Counsel, and Joseph R. Palmore and James M. Carr, Counsel, Federal Communications Commission, entered appearances.

Before GINSBURG, HENDERSON and KAVANAUGH, Circuit Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.

KAREN LeCRAFT HENDERSON, Circuit Judge:

Morris Communications, Inc. (Morris), a family-owned mobile, paging and communications service provider, appeals the Federal Communications Commission (FCC or Commission) order denying its requests to waive the automatic cancellation of its nine specialized mobile radio (SMR) licenses. For the reasons set forth below, we affirm the Commission's order.

I.

On April 15, 1996, the FCC notified Morris that it had successfully bid for nine 900 MHz SMR licenses covering certain areas in the southeast United States. FCC Announces Winning Bidders in the Auction of 1, 020 Licenses to Provide 900 MHz SMR in Major Trading Areas, 11 F.C.C.R. 18,599, 18,611-22 (Apr. 15, 1996). Morris chose to pay its winning bids in quarterly installments, which made the licenses "conditioned upon the full and timely performance of [Morris's] payment obligations under the installment plan." 47 C.F.R. § 1.2110(d)(4) (1994). Indeed, Morris's licenses expressly stated that "authorization is conditioned upon the full and timely payment of all moneys due pursuant to sections 1.2110 and 90.812 of the Commission's rules and the terms of the Commission's installment plan.... Failure to comply with this condition will result in the automatic cancellation of this authorization." E.g. Morris Commc'ns, Inc., License KNNY352 at 7 (Oct. 16, 1996).

For five years Morris made the quarterly payments either on time or within the two consecutive 90-day automatic grace periods authorized by 47 C.F.R. § 1.2110(g).¹ On July 31, 2001, however, Morris failed to make the installment payment on each of its nine licenses. It also failed to make payment plus late fees by the end of the two 90-day grace periods, that is, January 31, 2002. Earlier in January 2002, the FCC began outsourcing its loan servicing to a private vendor, Colson Services Corporation (Colson). Colson had notified Morris by letter in early January that it was taking over the FCC's loan servicing and that Morris was to send all payments to Colson. It enclosed a form that required Morris to designate an employee responsible for bill handling. Morris returned the form, designating its controller as the responsible employee. Colson sent the January 31, 2002 installment payment notices to Morris but without addressing them to the controller and the notices did not reach Morris's controller until February 4, 2002 — four days after the payments were due. Morris remitted the full amount owed to the FCC on February 5, 2002.

On April 26, 2002, the FCC notified Morris that "an Event of Default ha[d] occurred," that "the License[s] automatically cancelled by operation of the Rules and [that] the Commission [wa]s commencing debt collection procedures." Letter from Mark Reger, CFO, FCC, to Morris Communications, Inc. at 1 (Apr. 26, 2002). The letter further noted that "all of [Morris's] obligations ... ha[d] been accelerated." Id. at 2. On May 2, 2002, Morris requested a waiver from the automatic cancellation rule. In its request, Morris explained the circumstances leading up to its late February 5, 2002 installment payments and asked the Commission to review its request "as expeditiously as possible." Letter from Frederick M. Joyce and Marianne Roach Casserly, Attorneys, Alston & Bird LLP, to Mark Reger, CFO, FCC, at 5 (May 2, 2002) (Waiver Request). On May 6, 2002, Morris again wrote to the Commission, "request[ing] that the Commission stay the effectiveness of the decisions set forth in [the Commission's] letters dated April 26, 2002." Letter from Frederick M. Joyce and Marianne Roach Casserly, Attorneys, Alston & Bird LLP to Mark Reger, CFO, FCC, at 1 (May 6, 2002) (Request for Stay).

The FCC responded on May 9, 2002, acknowledging receipt of the Waiver Request and informing Morris that "[w]ithin 30 days of this letter we will mail you either a resolution to your item or a letter telling you when you can expect a resolution." Letter from Mark A. Reger, CFO, FCC to Frederick M. Joyce and Marianne Roach Casserly, Attorneys, Alston & Bird LLP, at 1 (May 9, 2002). Thirty days came and went, however, and Morris heard nothing from the Commission. More time elapsed and, even after Morris's repeated telephone calls and written inquiries, the Commission did not respond. Morris continued to make timely payments on its nine licenses until October 29, 2002. At that point, Morris stopped making payments on seven of the nine licenses.

Not having received any reply from the FCC by December 2002, Morris then began construction on the two SMR stations on whose licenses it had continued making payments and notified the FCC of the stations' construction.² Letter from Frederick M. Joyce and Ronald E. Quirk, Jr., Attorneys, Alston & Bird LLP, to William Kunze, Chief, Commercial Wireless Division, Wireless Telecommunications Bureau, FCC (Jan. 14, 2003). Morris also submitted — and the FCC processed — two corresponding Notifications of Buildout. See 47 C.F.R. § 1.946(d) (buildout notification required within 15 days of end of construction period).

On January 21, 2003, Morris filed another Waiver Request with the FCC. In it, Morris asked the FCC for (1) "a one-year extension of time, up to and including December 31, 2003, to fully construct a digital 900 MHz SMR system in all its authorized [Major Trading Areas]," (2) a "waiver of [section] 1.946(e) of the Commission's rules, which states that requests for extension of time to construct must be filed before the expiration of the construction of coverage period," and (3) a one-year forbearance of its installment payment obligations on each of its nine licenses. Morris Commc'ns, Inc., Petition for Rule Waiver at 6 (Jan. 21, 2003). In support of its request, Morris noted "the unique and unusual regulatory uncertainty surrounding [its] licenses" and "the fact that demand for 900 MHz SMR services in the vast majority of these predominantly rural markets simply has not occurred." Id. at 7.

On April 25, 2005, after almost three years of nothing but silence from the Commission, the Auctions and Spectrum Access Division (Division) finally denied both of Morris's waiver requests noting that "Morris ha[d] failed to demonstrate that the underlying purpose of the Commission's payment rule would not be served, or would be frustrated, by its application in this particular case." Ronald E. Quirk, Jr., 20 F.C.C.R. 8176, 8179 (Apr. 25, 2005). The Division also noted that "Morris acknowledges that it is facing financial difficulties and that it cannot ... continue to make its installment payments for these licenses." Id. at 8181. Morris thereafter stopped making installment payments on its remaining two licenses.

On May 25, 2005, Morris appealed the Division's decision to the full Commission. In its application for review, Morris argued, inter alia, that the Division ignored FCC precedent in denying Morris's waiver requests, was equitably estopped from revoking Morris's licenses, did not provide a reasoned explanation for its action and denied Morris procedural due process. While review was pending, Morris offered to negotiate a settlement agreement with the FCC whereby it could retain its nine licenses, fulfill its payment obligations for each license within one year and continue to make its installment payments for each of the licenses until paid in full. The Commission eventually rejected the offer.

In mid-December 2005 Morris asked the Commission for special temporary authority (STA) to operate its two constructed SMR stations for a period of 180 days or until the FCC issued a decision, whichever occurred first. The Commission granted the STA for both stations on December 28, 2005. On June 8, 2006, Morris requested an extension of the STA for an additional 180-day period, which request the FCC appears to have granted.

On February 21, 2008, almost three years after Morris petitioned for review, the Commission issued its decision denying Morris's application for review. Morris Commc'ns, Inc., 23 F.C.C.R. 3179 (Feb. 21, 2008). The Commission determined that "Morris ha[d] failed to show that, by denying its waiver requests, the Division treated it differently than similarly situated entities" and the "Division's denial was therefore not an abuse of discretion." Id. at 3186 ¶ 15. The FCC stated that "the Commission has explained unequivocally that, because parties remain obligated for the full amount of their debt following their default on installment payments, the Commission's acceptance of a payment after such a default does not, by itself, constitute a constructive waiver of the automatic cancellation rule or revive an automatically canceled license." Id. at 3187 ¶ 18. Moreover, the Commission noted that "[t]he Division correctly found Morris's assertion that it was uncertain as to the exact amount owed, and that it received its payment notice late, insufficient by itself to justify a waiver of the installment payment rules" because FCC precedent makes clear that it is "the licensee's responsibility to know the...