American Broadcasting Co. v. United States

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Citation110 F. Supp. 374
Decision Date05 February 1953


G. B. Zorbaugh, New York City, Cravath, Swaine & Moore, New York City (Alfred McCormack, George B. Turner and Charles Myneder, New York City, of counsel), for American Broadcasting Co., Inc.

Cahill, Gordon, Zachry & Reindel, New York City (Paul W. Williams, Gustav B. Margraf, Thomas E. Ervin and Dudley B. Tenney, New York City, of counsel), for National Broadcasting Co., Inc.

Rosenman, Goldmark, Colin & Kaye, New York City (Ralph F. Colin, Max Freund and Andrew J. Schoen, New York City, of counsel), for Columbia Broadcasting System, Inc.

Newell A. Clapp, Acting Asst. Atty. Gen., Myles J. Lane, U. S. Atty. for Southern Dist. of New York, and Nathan Skolnik, Asst. U. S. Atty., New York City, James E. Kilday and William J. Hickey, Special Assts. to the Atty. Gen., for the United States.

Benedict P. Cottone, Gen. Counsel, and J. Roger Wollenberg, Asst. Gen. Counsel, Washington, D. C., Daniel R. Ohlbaum, Erich Saxl and Richard T. Conway, Washington, D. C., for Federal Communications Commission.

Before CLARK, Circuit Judge, and LEIBELL and WEINFELD, District Judges.

LEIBELL, District Judge.

These three actions were instituted in August 1949 to enjoin and set aside an order of the Federal Communications Commission adopting certain interpretative rules of the Commission in relation to "giveaway" programs on radio and television.1 Jurisdiction of this three-judge court is based on the provisions of the Federal Communications Act, 47 U.S.C.A. § 402(a) and the United States Judiciary and Judicial Procedure Act, T. 28 U.S.C. §§ 1336, 1398 and 2284. The right to a judicial review of the action of the Federal Communications Commission is also asserted by the plaintiffs under Section 10 of the Administrative Procedure Act. 5 U.S.C.A. § 1009.

The report of the Commission, released August 19, 1949, is entitled "In the Matter of Promulgation of Rules Governing Broadcast of Lottery Information" and states in its opening paragraphs that:—

"The Commission has this day determined to adopt the attached interpretative rules, set forth in the appendix to this Report, to be designated as Sections 3.192, 3.292 and 3.692. These rules set forth for the guidance of all broadcast licensees and other interested persons the Commission's interpretation of Section 1304 of the United States Criminal Code (18 U.S.C. § 1304) prohibiting the broadcast of any lottery, gift enterprise, or similar scheme which the Commission intends to follow in licensing proceedings in determining whether an applicant for a station license or renewal thereof is qualified to operate his station in the public interest. A Notice of Proposed Rule Making concerning this subject was issued by the Commission on August 5, 1948 and a Supplemental Notice of Proposed Rule Making was issued on August 27, 1948. Interested parties were afforded an opportunity to file briefs or statements setting forth why they believed the rules should or should not be adopted and oral argument on the matter was held before the Commission en banc on October 19, 1948."

The subsequent legal proceedings are summarized in the brief of defendants' counsel, in the American Broadcasting case, as follows:—

"The Commission's order provided that it would go into effect on October 1, 1949. On August 31, 1949, plaintiff filed its complaint in this action. On September 19, 1949, Judge Rifkind convened a statutory court consisting of Judge Clark, Judge Leibell and himself, and on September 23, 1949, having heard a motion by plaintiff for a temporary restraining order, Judge Rifkind issued a restraining order and set down the application for an interlocutory injunction for hearing before the three-judge court at a later date. That application, however, did not come on for hearing because, following Judge Rifkind's issuance of a temporary restraining order, the Commission on its own motion postponed the effective date of its proposed rules until 30 days after final decision in this and the co-pending actions.
"Following a number of discussions between counsel for the Commission and counsel for plaintiffs in the several actions, it was agreed that the cases could be and should be presented to the Court in a form not requiring a decision on questions of fact. For that purpose, amended complaints were prepared in the several actions and the amended complaint in the present action was filed on September 22, 1952. On the same day plaintiff moved on the complaint, a supporting affidavit and a stipulation with defendants' counsel, for summary judgment, and defendants filed a cross-motion for an order dismissing the complaint or, in the alternative, for summary judgment."

The stipulation in each action provided that all the allegations of the amended complaint be taken as admitted by the defendants and that either plaintiff or defendants may rely upon facts set forth in the amended complaint in the companion actions and upon any of the affidavits filed in either of said companion actions by either plaintiff or defendants therein.

The three-judge court was thereafter reconstituted by the designation of Judge Weinfeld in place of Judge Rifkind, who had resigned as a District Judge. The motions in the three actions were consolidated for argument and were argued on December 15th, 1952.

The Pleadings and Motions.

The amended complaint of the American Broadcasting Company alleges jurisdictional facts and specifies the statutes under which the action is brought; it recites the adoption of the Rules by the Commission, the institution of the action, the parties thereto, the plaintiff's extensive broadcasting and television business and its large investment in broadcasting facilities for radio and television programs. Paragraphs 11 and 12 of American's amended complaint alleges:—

"11. Plaintiff has expended substantial sums of money in building up among the public, advertisers and broadcasting stations a valuable reputation and good will for the broadcasting stations it owns and operates and for the programs broadcast by its stations and furnished to affiliated stations for broadcasting by them. From time to time, plaintiff broadcasts programs having as the central feature the conduct of a contest in which prizes are awarded to the successful contestants. Such programs, or some of them, are within the terms of the Rules defining the types of programs which the Commission `will in any event consider' as violations of Section 1304 of the Criminal Code, although none of such programs constitutes, or has been held by any court to constitute, a lottery, gift enterprise or similar scheme in violation of said Section. Such programs have not tended to demoralize or degrade the listening and viewing public but on the contrary have provided information and entertainment for the public. Many persons listen to, view and enjoy such programs although for one reason or another they are not eligible to win a prize. Such programs are highly popular, have contributed substantially to the reputation of and good will of plaintiff's stations and those affiliated with it and have produced substantial revenues and profits for plaintiff.
"12. Among such programs which are or may be within the terms of the Rules, and which we are informed and believe the Commission considers as coming within the Rules, are the following:
"`Stop The Music' (radio show)
"`Stop The Music' (television show)"

The amended complaint further alleges that unless the Commission's Order and the Rules be permanently enjoined and set aside, plaintiff's applications for renewal licenses for its broadcasting stations and for permits or licenses to extend its system will automatically be denied and its investments will be destroyed; or in any event plaintiff will be forced to discontinue the broadcasting of programs which may be within the Commission's Rules and plaintiff will suffer irreparable injury; that the Order and Rules are beyond the jurisdiction and authority of the Commission, violate the provisions of the Administrative Procedure Act, and are illegal and void; that the Rules are in violation of certain provisions of the Constitution of the United States and of the amendments thereto.

The prayer for relief asks that a three-judge court be constituted to hear and determine the action; that plaintiff be granted an interlocutory injunction; and that upon final hearing and determination of this action, the court "enter a decree permanently enjoining, setting aside and annulling said Order of the Commission adopted August 18, 1949, and the Rules adopted thereby".

Annexed to the amended complaint of the American Broadcasting Company is a description of its "Stop The Music" program—the radio version and the television version. The contestants are of two kinds: telephone participants and studio participants. The telephone participants are selected by lot or chance from telephone directories. The telephone participant is not required to be listening at his radio to the broadcast at the time he is called. If the telephone participant fails to identify the melody, a studio participant is given an opportunity to do so. The prizes are furnished by the manufacturer, in return for a brief advertisement of his product. Those who are selected from the television audience express in advance, through postcards, their desire to participate. From the cards received a random selection is made and the participants are telephoned.

An affidavit of G. B. Zorbaugh, Secretary and Acting General Attorney for American, is submitted in support of American's motion for a summary judgment. Annexed to it are many exhibits which are also annexed to the affidavits submitted by National or Columbia. They will be...

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