Communications Satellite Corp. v. F. C. C.

• Citation: 198 U.S.App.D.C. 60,611 F.2d 883
• Decision Date: 14 October 1977
• Docket Number: No. 75-2193,75-2193
• Parties: COMMUNICATIONS SATELLITE CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, American Broadcasting Companies, Inc., et al., the European Broadcasting Union, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 883

611 F.2d 883

198 U.S.App.D.C. 60

COMMUNICATIONS SATELLITE CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents American Broadcasting Companies, Inc., et al., the European Broadcasting Union, Intervenor.

No. 75-2193.

United States Court of Appeals District of Columbia Circuit.

Argued Jan. 27, 1977.

Decided Oct. 14, 1977.

Lloyd N. Cutler, Washington, D. C., with whom J. Roger Wollenberg, Sally Katzen, Robert B. McCaw, Marianne K. Smythe, William H. Berman and Lawrence M. DeVore, Washington, D. C., were on the brief, for petitioner.

John E. Ingle, Counsel, F.C.C., Washington, D. C., with whom Ashton R. Hardy, Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, F.C.C., Barry M. Grossman and Michael Pugh, Attys., Dept. of Justice, Washington, D. C., were on the brief, for respondents.

Howard Monderer, Washington, D. C., was on the statement in lieu of brief, for intervenor NBC, Inc.

Joseph M. Kittner and Norman P. Leventhal, Washington, D. C., were on the statement in lieu of brief for intervenors American Broadcasting Companies, Inc., et al.

Joseph DeFranco, New York City, was on the statement in lieu of brief for intervenor CBS, Inc.

Robert D. Hadl, Washington, D. C., entered an appearance for intervenor The European Broadcasting Union.

Before Mr. Justice CLARK, ^* of the Supreme Court of the United States, and MacKINNON and ROBB, Circuit Judges.

Opinion for the court filed by MacKINNON, Circuit Judge.

MacKINNON, Circuit Judge:

The Communications Satellite Corporation (COMSAT) was created by the Communications Satellite Act of 1962, 76 Stat. 719, 47 U.S.C. §§ 701-744 (1970), for the purpose of developing a profitable commercial international telecommunications technology using earth satellites to relay signals. The corporation was not to "be an agency or establishment of the United States Government," 47 U.S.C. § 731, yet it was subject to the regulation of the President, NASA, and the FCC in important specified respects. 47 U.S.C. § 721. As a communications common carrier, COMSAT was placed under the supervisory authority of the Federal Communications Commission (FCC) in order to guarantee that the rates it charged its customers (all common carriers) were "just and reasonable." 47 U.S.C. § 721(c)(2).

In June of 1964, COMSAT conducted the only public offering in its career. It sold 50 million shares of common stock to the public at large, at $20 per share. ¹ This 200 million dollar capitalization (less underwriting expenses) was initially devoted to COMSAT's pursuit of an international satellite system, but COMSAT was soon able to carry on its international satellite activities (INTELSAT) with less than the 200 million dollars that had been raised. A domestic satellite venture to be carried on by a separate corporate subsidiary, COMSAT General, was approved by the FCC in 1972. ² It was to this subsidiary that COMSAT devoted the funds not required for INTELSAT. COMSAT General's operations are not at issue here; the proceedings on review before this court concern only COMSAT's rates for international satellite telecommunications (INTELSAT) operations.

On May 28, 1965, COMSAT filed with the FCC its first set of rates for international telecommunications services, pursuant to 47 U.S.C. § 204. Protracted hearings, stays, and delays followed, ³ culminating in the 1975 decision which is the subject of the present review before this court, Communications Satellite Corp., 56 FCC2d 1101 (1975). In that decision, the FCC decided to consider only COMSAT's future rates, setting a maximum rate of return that COMSAT may earn and requiring COMSAT to file appropriately lowered rates. COMSAT was permitted to retain the revenues derived from the rates that it had charged in the past. Pursuant to a stay order issued by this court on June 16, 1976, lower rates consistent with the Commission's decision have not been collected, but the excess payments have been escrowed by COMSAT to protect the interests of the rate payers.

COMSAT has appealed the FCC's decision to this court. Several broadcasting companies have intervened. Jurisdiction is vested in this court by 47 U.S.C. § 402(a) (Supp. V 1975) and 28 U.S.C. § 2342(1) (Supp. V 1975):

The court of appeals has exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or to determine the validity of . . . all final orders of the Federal Communications Commission made reviewable by section 402(a) of title 47 . . . .

The scope of our review is in keeping with the Administrative Procedure Act: conclusions by the Commission will not be set aside unless arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; ⁴ findings of fact will not be upset if supported by substantial evidence. ⁵

I. THE NECESSITY FOR A PRELIMINARY DECISION

Initially a question of procedure is raised concerning the Commission's decision. The rate proceeding was exceptionally drawn out, commencing in June of 1965, ⁶ postponed ⁷ and then resumed ⁸ in 1971, suspended again in 1974, ⁹ and taken up again for the last time in September of 1974. ¹⁰ The 1965 order required that the hearing examiner bypass an initial decision, certifying the record directly to the Commission, but it did provide that the Chief of the Common Carrier Bureau should prepare and issue a recommended decision. (J.A. 124; 38 FCC 1286, 1296). The 1971 resumption order reversed the procedure ordered in 1965: the hearing examiner was to prepare an initial decision but the Chief of the Common Carrier Bureau was not. (J.A. 129-130; 27 FCC2d 930-931). The final order modifying the procedure occurred in 1974. The Commission had interrupted the proceedings earlier that year in the hopes of accommodating a negotiated settlement. (J.A. 135, 45 FCC2d 286). When that did not materialize, it was considered crucial, in order to avoid adding to the already extensive delay, that all intermediate opinions be omitted, and the Commission so ordered. The hearing before the administrative law judge was ordered resumed, and a timetable for finishing imposed:

We believe that it is reasonable to require that cross-examination herein be resumed no later than the first week in September, 1974 and that all remaining testimony be completed and the record closed within approximately 3 months thereafter, i. e. no later than December 1, 1974. In this connection, perhaps it is unnecessary to call attention to the powers entrusted to the presiding judge to require, among other things, that testimony be submitted in writing and that cross-examination be limited to that "required for a full and true disclosure of facts." 5 U.S.C. 556(d). Upon the closing of the record we shall require the judge to certify the record to the Commission for final decision by it. In our opinion this is required under the circumstances of this case for due and timely execution of our functions. Finally, we believe that all proposed findings and briefs and replies should be submitted by no later than February 1, 1975, thereby permitting the Commission sufficient time to have such oral argument as it may deem necessary or desirable and to render its final decision by April 1, 1975. The Commission requests all parties to cooperate fully in adhering to the schedule we have set forth herein.

(J.A. 138-139; 48 FCC2d 86, 87-88).

COMSAT challenges this procedure bypassing an initial decision by the administrative law judge. The Communications Act and the Administrative Procedure Act are both cited by COMSAT as requiring that the administrative law judge conducting the hearing is obliged to file an "initial, tentative, or recommended decision," unless the Commission finds on the record "that due and timely execution of its functions imperatively and unavoidably" require that the record be certified to the Commission without initial decision. 47 U.S.C. § 409 (1970); 5 U.S.C. § 557(b)(2) (1970).

At the start, it should be noted that COMSAT was afforded a full adversary hearing, with the right of cross-examination as described in the Commission's order quoted above. What COMSAT did not obtain was the right to object to specific recommendations that might have been made by the administrative law judge. Had COMSAT requested a rehearing under 47 U.S.C. § 405 (1970), of the Communications Act, it would have had an opportunity to rebut specific findings, but it made no such request. However, this is not a case like Pacific Gas Transmission Co. v. FPC, 175 U.S.App.D.C. 366, 536 F.2d 393, Cert. denied, 429 U.S. 999, 97 S.Ct. 527, 50 L.Ed.2d 610 (1976), where the statute requires the filing of a petition for rehearing as an exhaustion prerequisite to challenging a Commission order. Hence, while there is no adequate reason given to explain why COMSAT did not seek rehearing if it were truly concerned about its inability to respond to specific findings, and there is no proffer by COMSAT of any information that had not been brought out over the long course of the administrative hearing, that situation does not preclude COMSAT from asserting a right to an initial decision.

An initial decision by the administrative law judge, however, is not required for all Commission determinations. The Administrative Procedure Act calls for an initial decision "when a hearing is required to be conducted in accordance with section 556 of this title." 5 U.S.C. § 557(a) (1970). Section 556, by its own terms, applies "to hearings required by section 553 or 554 of this title to be conducted in accordance with this section." 5 U.S.C. § 556(a) (1970). Section 553 specifies "When rules are required by statute to be made on the record after opportunity for an agency hearing, sections 556 and 557 of this title apply instead of this subsection."

Hence, the requirement for an initial decision is imposed in the present case only if the Commission's action can be termed adjudication, ¹¹ or if the Satellite Act or the ...