Capital Cities Communications, Inc. v. F. C. C., s. 75-1503 and 75-1504

• Decision Date: 16 December 1976
• Docket Number: Nos. 75-1503 and 75-1504,s. 75-1503 and 75-1504
• Citation: 180 U.S.App.D.C. 276,554 F.2d 1135
• Parties: , 2 Media L. Rep. 1155 CAPITAL CITIES COMMUNICATIONS, INC., et al., Appellants, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee. *
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1135

554 F.2d 1135

180 U.S.App.D.C. 276, 2 Media L. Rep. 1155

CAPITAL CITIES COMMUNICATIONS, INC., et al., Appellants, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee. ^*

Nos. 75-1503 and 75-1504.

United States Court of Appeals, District of Columbia Circuit.

Argued May 25, 1976.

Decided Dec. 16, 1976.

Joel Rosenbloom, Washington, D. C., with whom Stephen A. Weiswasser and A. Stephen Hut, Jr., Washington, D. C., were on the brief for appellants-petitioners in Nos. 75-1503, 75-1504, 75-2274 and 75-2275. Richard D. Paisner, Washington, D. C., also entered an appearance for appellants-petitioners in Nos. 75-1503 and 75-1504. Marianne K. Smythe, Washington, D. C., also entered an appearance for petitioner in No. 75-2274.

C. Grey Pash, Jr., Counsel, F. C. C., Washington, D. C., with whom Ashton R. Hardy, Gen. Counsel, Daniel M. Armstrong, Associate General Counsel, Diana L. Evans, Counsel, F. C. C., Robert B. Nicholson and Laurence K. Gustafson, Attys., Dept. of Justice, Washington, D. C., were on the brief for appellee-respondent. Barry Grossman, Atty., Dept. of Justice, Washington, D. C., entered an appearance for respondent United States of America in No. 75-2274.

Warren C. Zwicy, Washington, D. C., was on the brief for appellant in No. 75-1545.

John M. Duty and James A. Gammon, Washington, D. C., were on the brief for appellant-petitioner in Nos. 75-1541, 75-1548 and 75-1549.

Joel Rosenbloom, Stephen A. Weiswasser and A. Stephen Hut, Jr., Washington, D. C., filed a brief on behalf of Lin Broadcasting Corp. as amicus curiae in Nos. 75-1503, 75-1504, 75-1541, 75-1545, 75-1548, 75-1549, 75-1552 and 75-1553 urging reversal.

Steven R. Rivkin, Washington, D. C., filed a brief on behalf of Hanson Communications, Inc., as amicus curiae in Nos. 75-2274 and 75-2275 urging reversal.

Before TAMM and MacKINNON, Circuit Judges, and KAUFMAN, ^* United States District Judge for the District of Maryland.

Opinion for the court filed by MacKINNON, Circuit Judge.

Concurring opinion filed by TAMM, Circuit Judge.

MacKINNON, Circuit Judge:

Petitioners-appellants ¹ (hereinafter, "petitioners") seek review of the fees charged by the Federal Communications Commission (FCC) under the authority of 31 U.S.C. § 483a (1970) ² in the Commission's 1970 fee schedule for the grant of applications for the assignment of broadcast licenses or transfer of control or ownership of broadcast licensees. ³ All the fees in question here were assessed (i. e., the grant of authority was made) in that interim period between March 4, 1974, when the Supreme Court decided National Cable Television Association v. United States (NCTA), 415 U.S. 336, 94 S.Ct. 1146, 39 L.Ed.2d 370 (1974), and March 1, 1975, when the 1975 fee schedule became effective. At the time they paid the fees in question petitioners requested either a waiver, stay, or refund of such grant fees paid under the 1970 fee schedule, or that they be allowed to pay at a rate other than that specified by that schedule. The resulting orders ⁴ denying those requests are the subject of this consolidated action.

The petitioners raise two distinct issues. First, they challenge the 1970 fee schedule and the Commission's right to assess assignment or transfer grant fees under it. This issue is fully controlled by our decision in a companion case, National Association of Broadcasters v. FCC, ⁵ also decided this date. As explained in that case, the principles laid down by the Supreme Court in NCTA require invalidation of the entire 1970 fee schedule, because the Commission announced in adopting it that the entire fee schedule was based in part on factors other than "value to the recipient," ⁶ which the Supreme Court held was the only permissible measure. Although the Government argues here that "there really is no question of including public policy factors in the grant fee," Govt. Brief at 26, the Commission's statements upon proposing and adopting the 1970 fee schedule indicated otherwise. National Assn. of Broadcasters, supra, 180 U.S.App.D.C. at ---, 554 F.2d at 1128. Since the Commission did not explicitly exclude that element when it fixed the 1970 assignment and transfer grant fee, we see no reason to exempt this particular fee from our general order to the FCC to recalculate and refund all fees to the extent that they were improperly charged under the 1970 fee schedule. See id., --- - ---, 554 F.2d at 1132-1133.

In doing so, however, we take this opportunity to make several specific observations about the 1970 assignment or transfer grant fee. First, the record leaves us unclear as to the services that the Agency relies upon to justify the imposition of this fee. ⁷ The Government appears to believe that the justification for charging this fee is that "without suffering even the inconvenience of facing competing applicants, the assignee or transferee assumes control of an ongoing broadcast station and succeeds to the 'preferred position' described by the Supreme Court in (Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 400, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1969))." Govt. Brief at 22. It is not obvious to us how such services differ in nature from those involved in the annual grant to an established station of authority to operate, for which the Commission also assessed a fee every year against all stations (and thus presumably against the transferred or assigned stations during the year of the transfer or assignment). In addition, the lack of "inconvenience of . . . competing applicants" referred to in the quoted statement, supra, does not seem to be in any way related to the costs of the services furnished by the Commission. If anything, the absence of competing applicants would keep Commission costs at a minimum and tend to reduce the fee.

Second, we find the Commission's use of the consideration for the transfer (or the gross revenues of the station) as a measure of the fee to be not in accord with our decision, expressed in a companion case, that the proper standard is not value derived by the recipient but rather value conferred on the recipient. ⁸ In our view, this standard requires the fee assessed to bear a reasonable relationship to the cost of the services rendered to identifiable recipients. This standard is not met where the persons who receive essentially the same physical services from the agency are charged a grossly variable fee solely for the reason that some are larger or have more income than others. If the cost to the agency of the services rendered in approving the transfer of a station for a consideration of $1 million are approximately the same as the costs in approving the transfer of a station for $2 million, the fee charged for performing the service cannot be doubled in the latter instance. The same rule would apply if the fee were based on average gross revenues. See note 3 supra. Such a fee structure would not comply with section 483a because it would not take into consideration the cost to the Government and would on this record not appear to bear any reasonable relation to the cost of the value conferred by the agency.

However, the statutory requirement that fees should be "fair and equitable" does leave some room for considerations of administrative convenience, and may authorize a higher fee to the extent that it can be shown that approval of transfers or assignments of applicants with larger operations (financially speaking) entail more work for the agency. See National Cable Television Assn. v. FCC, 180 U.S.App.D.C. --- at --- - ---, 554 F.2d 1094 at 1108-1109 (1976). As we point out in that case, however, it is highly unlikely that Commission costs would rise in a straight line corresponding to higher incomes of the applicants. On remand, the Commission should accordingly alter the measure of the fees in question here and recalculate and collect a new fee for the services at issue, under the proper standard, setting out its explanation for the basis and measure of the new fee clearly and in detail in its order.

The other issue raised by petitioners is one of timing. The 1975 fee schedule was adopted on January 15, 1975, but was not made effective until March 1, 1975. 50 F.C.C.2d 906, 924 (1975). Under this arrangement, several of petitioners were granted authority to transfer or assign after the 1975 fee schedule (which assessed substantially lower fees) was adopted but nevertheless had to pay the higher 1970 rate because the effective date of the new fee schedule had been delayed beyond the date of the grant. They contend that the Commission's action in not making the schedule effective immediately created an arbitrary disparity between themselves and other broadcasters who, though their applications for authority to transfer or assign were pending before the Commission at the same time, were not granted that authority until after March 1, 1975.

Initially, we note that this issue may be mooted by the illegality of the 1970 fee, the recalculation of which we today order. We therefore will remand this issue for reconsideration by the Commission after they have made the necessary adjustments in the 1970 fee schedule. In doing so, we observe that, while the FCC technically has the authority under section 4(d) of the Administrative Procedure Act, 5 U.S.C. § 553(d) (1970), to delay the effective date of a newly adopted rule, this delay is not mandatory where "good cause" exists. 5 U.S.C. § 553(d)(3) (1970). In light of the Commission's past practice in this regard ⁹ and the possibility that similarly situated applicants may have been treated discriminatorily by the agency's action in delaying the effective date, ¹⁰ "good cause" for making the new fee schedule immediately effective may well exist in this situation.

This is not to say, of course, that the mere fact that an applicant who received his grant of authority on February 28, 1975, paid a higher fee for the same service than one who received it on March 1, 1975, is enough to require a...