CHM Broadcasting Ltd. Partnership v. F.C.C., s. 92-1263

• Decision Date: 17 October 1994
• Docket Number: 92-1271,Nos. 92-1263,s. 92-1263
• Citation: 24 F.3d 1453
• Parties: CHM BROADCASTING LIMITED PARTNERSHIP, Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Beaumont Skywave, Inc., Intervenor. TEXAS COMMUNICATIONS LIMITED PARTNERSHIP, Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Beaumont Skywave, Inc., CHM Broadcasting Limited Partnership, Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1453

24 F.3d 1453

306 U.S.App.D.C. 345

CHM BROADCASTING LIMITED PARTNERSHIP, Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Beaumont Skywave, Inc., Intervenor.

TEXAS COMMUNICATIONS LIMITED PARTNERSHIP, Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee,

Beaumont Skywave, Inc., CHM Broadcasting Limited

Partnership, Intervenors.

Nos. 92-1263, 92-1271.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 12, 1993.

Decided June 14, 1994.

Rehearing and Suggestion for Rehearing In Banc Denied Oct. 17, 1994. ^*

On Appeal from Orders of the Federal Communications Commission.

Michael J. Hirrel, Washington, DC, argued the cause, for CHM Broadcasting Ltd. Partnership, the appellant in No. 92-1263 and the intervenor in No. 92-1271.

Stephen Diaz Gavin, Washington, DC, argued the cause, for Texas Communications Ltd. Partnership, the appellant in No. 92-1271.

Gregory Christopher, Counsel, F.C.C., Washington, DC, argued the cause, for appellee. On brief were, Renee Licht, Acting Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, and Robert L. Cook, Counsel, F.C.C., Washington, DC.

On brief, was Donald J. Evans, Washington, DC, for intervenor Beaumont Skywave, Inc. James A. Kline, Washington, DC, also entered an appearance.

Before WILLIAMS, SENTELLE and HENDERSON, Circuit Judges.

Opinion for the court filed by Circuit Judge KAREN LeCRAFT HENDERSON.

Opinion concurring in part (Texas Communications Limited Partnership ) and dissenting in part (CHM Broadcasting) filed by Circuit Judge STEPHEN F. WILLIAMS.

KAREN LeCRAFT HENDERSON, Circuit Judge:

In choosing the licensee to operate a Beaumont, Texas FM radio station, the Federal Communications Commission (FCC) designated three mutually exclusive applicants, CHM Broadcasting Limited Partnership (CHM), Texas Communications Limited Partnership (Texas Ltd.) and Beaumont Skywave, Inc. (BSI), for a comparative hearing in which an administrative law judge (ALJ) considered which applicant would best serve the public interest. ¹ The ALJ denied Texas Ltd.'s application because its proposed transmitter site constituted an air hazard. Texas Communications Ltd. Partnership, 5 F.C.C.R. 1592, 1598 (ALJ 1990). The ALJ rejected Texas Ltd.'s and BSI's claim that CHM was financially disqualified and awarded the license to CHM after concluding that its application surpassed BSI's. Id. at 1600-01.

Both BSI and Texas Ltd. filed exceptions to the ALJ's decision. The FCC Review Board affirmed the ALJ's finding that Texas Ltd.'s proposed tower constituted an air hazard but reversed his finding that CHM was financially qualified. Texas Communications Ltd. Partnership, 5 F.C.C.R. 5876, 5876-79 (Rev.Bd.1990). Accordingly, the Review Board awarded the license to the remaining applicant, BSI. Id. at 5879.

After the Review Board denied the requests of CHM and Texas Ltd. for reconsideration, see Texas Communications Ltd. Partnership, 6 F.C.C.R. 1260 (Rev.Bd.1991), the applicants sought review from the FCC. The FCC also denied their requests for reconsideration. Texas Communications Ltd. Partnership, 6 F.C.C.R. 5191 (1991) (Commission Order I ); Texas Communications Ltd. Partnership, 7 F.C.C.R. 3186 (1992) (Commission Order II ). In addition, the FCC dismissed Texas Ltd.'s request to reopen the record so that the Commission could reexamine BSI's qualifications. Commission Order II, 7 F.C.C.R. at 3188.

CHM seeks review of the FCC's determination that CHM was financially disqualified from securing the license. Texas Ltd. seeks review of the FCC's determination that its proposed transmitter site would create an air hazard. Texas Ltd. also appeals the FCC's denial of its request to reopen the record to add issues regarding BSI's applicant qualifications. We deny the petitions of both CHM and Texas Ltd.

I. CHM'S PETITION FOR REVIEW

An applicant for an FM radio station license must demonstrate to the FCC that it is financially qualified in order to be licensed by the agency. 47 U.S.C. Sec. 308(b). Before 1981, FCC Form 301 (the form on which broadcast applications are filed with the FCC) required applicants to provide the agency with detailed estimates of construction costs and initial operating expenses as well as documentation establishing the applicant's ability to meet the estimated costs and expenses. In 1981, however, the FCC revised Form 301, replacing the requirement of detailed financial documentation with one question:

The applicant certifies that sufficient net liquid assets are on hand or that sufficient funds are available from committed sources to construct and operate the requested facilities for three months without revenue. ___ Yes ___ No

In preparing CHM's application for licensing, CHM general partner Beverly Hatcher completed and signed it, answering "yes" to the financial qualification question.

When CHM filed its application with the FCC on July 10, 1987, it projected that it would need $482,186 to cover its construction costs and expenses for its first three months of operation (start up expenses). CHM outlined two alternative financing plans to provide the capital. The first plan relied on the oral promise of its limited partner, Kent Foster, to provide whatever amount was needed to cover the station's start up expenses. Alternatively, it relied on a loan commitment letter for $350,000 from East Texas State Bank (ETSB) supplemented by Foster's written pledge of a $150,000 loan.

In November 1988, ETSB failed. ² ETSB's successor refused to assume the CHM loan commitment. CHM did not obtain a new loan commitment letter until March 22, 1989, when National Bank of Washington (NBW) agreed to loan CHM $350,000. During the four-month gap when CHM did not have bank financing in place, it did not notify the FCC. By the time of the initial hearing before the ALJ, CHM had obtained the loan commitment from NBW.

The ALJ considered whether CHM had misrepresented its financial qualifications when it filed its application. Although the ALJ found the question "a close one," he ultimately determined that CHM was not guilty of misrepresentation. Joint Appendix (J.A.) at 23 p 60. In reaching the conclusion, the ALJ stated that because "CHM's certification was based partly on a valid bank letter and a timely analysis of the cost of the facility, it is evident that CHM attempted to comply in part. For this reason CHM will not be disqualified." J.A. at 23 p 60. The ALJ further found that CHM was currently financially qualified because the NBW loan combined with Foster's loan would satisfy CHM's start up expenses. J.A. at 22-23 pp 58-59.

In August 1990, while the exceptions of BSI and Texas Ltd. were pending before the FCC Review Board, NBW failed and its successor bank refused to honor its loan commitment to CHM. The Review Board found that CHM could not rely on the ETSB and NBW loan commitment letters to establish its financial qualifications because neither letter was currently valid. J.A. at 26, p 9. The Review Board further found that CHM had failed to show that Foster currently possessed sufficient liquid assets or readily convertible nonliquid assets to meet his promise to fully fund CHM's start up expenses because he was at that time also obligated to finance a number of other FCC applicants. Therefore, the Review Board concluded that CHM was not currently financially qualified. As this conclusion disqualified CHM, the Review Board did not decide whether CHM had misrepresented its financial qualifications when it filed its application. J.A. at 27 p 15.

CHM sought reconsideration and moved to amend its application to include two new bank letters it had obtained to replace the NBW letter. The Review Board denied both the petition for reconsideration and the motion to amend. J.A. at 29 p 4.

CHM appealed to the FCC. The FCC agreed with the Review Board that CHM was not currently financially qualified. The FCC held that CHM could not rely on any of the loan commitment letters it obtained after ETSB failed because: (1) it had never filed an amendment to its application to include the post-ETSB commitment letters as part of its financial proposal; and (2) even if it had sought to amend, CHM had not shown good cause to amend.

CHM sought reconsideration of its financial qualifications arguing that it was relying solely on Foster's finances to fund its start up expenses. Therefore, CHM argued, ETSB's failure and CHM's subsequent financing arrangements with other banks had no effect on its financial qualifications. The FCC declined to reconsider.

The FCC first found that at the time CHM submitted its application and signed its financial certification, it could not rely exclusively on Foster's financing because Hatcher did not "take steps" to verify Foster's oral promise of funds before she signed the financial certification. J.A. at 37 p 7. Specifically, Hatcher neither requested nor reviewed a financial statement from Foster. In addition, she had no actual knowledge of his assets, liabilities and overall ability to fulfill his promise of financing. The FCC concluded that because CHM did not have reasonable assurance that Foster alone could fund its start up expenses, the ETSB letter was an essential element of its financial proposal. J.A. at 37 p 7.

Regarding the ETSB letter, the FCC noted it had made special inquiry of CHM about the continuing viability of its financial certification on May 30, 1989, as a result of BSI's petition questioning CHM's financial qualifications. Although the inquiry occurred six months after ETSB failed, CHM did not inform the FCC at that time that it had replaced the ETSB loan commitment letter with the NBW letter. The FCC found that CHM could rely on the NBW letter only if it showed good cause to amend its application, J.A. at 37 p 8, and that CHM had not shown good cause because it had not shown that it acted with due diligence in substituting the NBW letter for the ETSB letter. In addition, the FCC...