Bechtel v. F.C.C.
| Decision Date | 31 January 1992 |
| Docket Number | Nos. 91-1112,91-1116,s. 91-1112 |
| Citation | 957 F.2d 873 |
| Parties | Susan M. BECHTEL, Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Anchor Broadcasting Limited Partnership, Intervenor. GALAXY COMMUNICATIONS, INC., Appellant, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Appellees, Anchor Broadcasting Limited Partnership, Intervenor. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Appeal from Orders of the Federal Communications Commission.
Barry D. Wood, with whom Ronald D. Maines, Washington, D.C., was on the brief, for appellant Galaxy Communications, Inc., in 91-1116.
Gene A. Bechtel, Washington, D.C., for appellant Susan M. Bechtel in 91-1112.
David Silberman, Counsel, F.C.C., with whom Robert L. Pettit, Gen. Counsel, and Daniel M. Armstrong, Associate General Counsel, Washington, D.C., were on the brief, for appellee in 91-1112 and 91-1116.
Lewis I. Cohen and Roy W. Boyce, Washington, D.C., were on the brief for intervenor Anchor Broadcasting Limited Partnership in both cases.
Before WALD, SILBERMAN, and HENDERSON, Circuit Judges.
Opinion for the Court filed by Circuit Judge SILBERMAN.
Two unsuccessful applicants for a new FM radio station appeal an FCC grant of the license to their competitor Anchor Broadcasting Limited Partnership. One key criterion upon which the Commission relied to award the license to Anchor was Anchor's degree of "integration" of ownership into management. Galaxy Communications, Inc.'s primary challenge is to the bona fides of Anchor's integration proposal, whereas Susan M. Bechtel contends that regulatory changes since 1965, when the Commission first formally adopted the integration criterion, have made its continuing use arbitrary and capricious. We reject Galaxy's claims but think the Commission is obliged openly to confront Bechtel's challenge. We therefore remand to the Commission so that it may do so.
In considering competing applications for a radio license, the FCC is charged with determining which of the competing applications would best serve "the public interest, convenience, and necessity." 47 U.S.C. § 309(a). The Commission has long structured these determinations according to its 1965 Policy Statement on Comparative Broadcast Hearings, 1 F.C.C.2d 393 (1965) (1965 Policy Statement ). In the 1965 Policy Statement, the Commission defined the public interest in terms of two broad objectives: providing the "best practicable service to the public" and securing the "maximum diffusion of control of the media of mass communications." Id. at 394. The 1965 Policy Statement set forth a list of six principal factors (not necessarily exclusive) that it said furthered these objectives. See id. at 394-99.
Two of these factors, integration of ownership into management and efficient use of frequency, or comparative coverage, are implicated in this case. By integration, the FCC means the full-time participation by owners of a radio station in its management. For purposes of calculating the degree of credit an applicant gets for integration, the FCC measures the percentage of total ownership in the hands of full-time managers. See id. at 395. Comparative coverage, on the other hand, focuses on the engineering proposals for the station itself. See id. at 398-99. Normally, the FCC will prefer an applicant whose proposed signal will reach a larger geographic area or a larger listening population. See, e.g., Susan S. Mulkey, 4 F.C.C.R. 5520, 5523 (1989).
In recent years, the FCC has permitted applicants to gain full credit for integration notwithstanding the presence of passive owners so long as those owners are sufficiently insulated from station business and "have no authority to control the licensee." Anax Broadcasting Inc., 87 F.C.C.2d 483, 488 (1981). See generally Attribution of Ownership Interests, 97 F.C.C.2d 997, 1021 (1982), on reconsideration, 58 Rad.Reg.2d (P & F) 604, 613-20 (1985), further clarified, 1 F.C.C.R. 802 (1986). This permits applicants to attract capital from passive investors without sacrificing the opportunity to gain full integration credit.
In this case, four applicants filed mutually exclusive proposals for a new, low power, FM commercial radio license to serve approximately 35,000 people in Selbyville, Delaware, and Ocean City, Maryland. The successful partnership, Anchor, consists of four partners, three limited and one general, all of whom own equal shares and have been close friends for 25 years. All four are black. None has ever resided in the service area of the proposed station, and none has any prior experience operating a radio station. The general partner, Dr. Herman Stamps, is a retired dentist who has not worked since his retirement. For the past several years, he has traveled abroad several times a year and maintained three residences along the eastern seaboard, as well as a yacht. Dr. Stamps testified that if awarded the license, he would move his permanent residence to Selbyville and work full time during the week at the station as its general manager. In addition, he and his partners pledged in writing that the limited partners would exercise no control over the operations of the station and would not participate in its management. Under Anchor's engineering proposal, the Selbyville station would reach 33,350 people over 920 square kilometers.
Appellant Galaxy is a corporation owned entirely by Alexander Soroka, a retired employee of Westinghouse with no previous broadcasting experience. He is chairman and president of the corporation, and Gregory Walls, who is the controller of a broadcasting company, serves as secretary-treasurer and a director. Mr. Soroka moved to Selbyville around the time he filed his application and claimed 100% integration credit based on his promise to spend at least 40 hours per week working as the full-time general manager of the station. Mr. Soroka denied that his son, a radio engineer, or Mr. Walls would exert substantial influence on his operation of the station. Galaxy's engineering proposal would serve a population of 39,753 over 1,192 square kilometers.
The other appellant, Susan M. Bechtel, whose husband is an experienced communications attorney, lives in Potomac, Maryland, but has vacationed in the proposed service area--where she has a summer house--for approximately 40 years. She, like Dr. Stamps and Mr. Soroka, has no broadcasting experience, but she did not propose to manage the day-to-day operations of the station herself and so did not claim integration credit; rather, she stated that she would hire an experienced general manager to run the station under her general supervision. Ms. Bechtel would consult with her husband and with other friends who are experienced broadcasters. Under her engineering proposal, the station would serve 40,465 people over 1,200 square kilometers. 1
Although Bechtel was clearly superior to Anchor regarding comparative coverage, serving approximately 21% more people, the ALJ thought Bechtel entitled to only a " 'very slight' " preference, because the absolute number of people involved was small and the service area was already well served by five or more stations. See Anchor Broadcasting Limited Partnership, 4 F.C.C.R. 5687, 5691 (ALJ 1989) (quoting Resort Broadcasting Co., Inc., 41 F.C.C.2d 640, 647 (Rev.Bd.1973)). This factor was overwhelmed by the 100% integration credits awarded to both Anchor and Galaxy. The Administrative Law Judge (ALJ) found that the evidence in the record suggested that the principals of both applicants would follow through on their promises to move to Selbyville and work full time at the station, without communication from or control by their passive investors or family members. See id. at 5691-92. The resulting tie between Anchor and Galaxy was broken in Anchor's favor largely because Anchor's owners were black. 2 See id. at 5692.
The Review Board reversed the ALJ's award of the station to Anchor, awarding it instead to Galaxy. See Anchor Broadcasting Limited Partnership, 5 F.C.C.R. 2432 (Rev.Bd.1990). The Board found that Anchor had failed to carry its burden to establish the reliability of its integration proposal. Dr. Stamps' pledge to move to Selbyville and work full time at the station was thought difficult to reconcile with evidence of his ownership of several homes, his unwillingness to commit to selling any of them, and his lack of a home in Selbyville. See id. at 2437. The Board also said that "the record here is decidedly unpersuasive that Anchor's limited partners intended to be barred absolutely from substantive communications about station management, or are likely to remain wholly insulated in practice." Id. at 2436. Portions of the record indicated that the three limited partners had been "keenly active" with respect to a previously applied-for FM facility, and one had manifested a lack of awareness of the provision in the limited partnership agreement prohibiting communications with Dr. Stamps about station business. Id. at 2436-37. The Board also pointed to passages from the record that suggested some of Dr. Stamps' responses to questions about insulation were crafted for hearing purposes only. 3 See id. at 2437. The Review Board noted Ms. Bechtel's "unorthodox exceptions" regarding the continued viability of the integration criterion but did not address them, saying only that it lacked authority to grant the relief she sought. Id. at 2439 n. 3.
The Commission reversed the Review Board and reinstated Anchor as the victorious applicant, determining that the record as a whole adequately supported the ALJ's conclusion that the limited partnership was bona fide and that the partners understood their various promises and obligations and intended to fulfill them. See Anchor Broadcasting Limited Partnership, 6 F.C.C.R. 721, 722 (1991). The Commission addressed and rejected Ms. Bechtel's...
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