Edge Broadcasting Co. v. US

• Decision Date: 23 February 1990
• Docket Number: Civ. A. No. 88-693-N.
• Citation: 732 F. Supp. 633
• Parties: EDGE BROADCASTING COMPANY, t/a Power 94, Plaintiff, v. UNITED STATES of America and Federal Communications Commission, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

732 F. Supp. 633

EDGE BROADCASTING COMPANY, t/a Power 94, Plaintiff, v. UNITED STATES of America and Federal Communications Commission, Defendants.

Civ. A. No. 88-693-N.

United States District Court, E.D. Virginia, Norfolk Division.

February 23, 1990.

Conrad M. Shumadine, Walter D. Kelley, Jr. and Cecelia A. Wikenheiser, Willcox & Savage, P.C., Norfolk, Va., and Wayne G. Souza, Lyle, Siegel, Crowshaw & Beale, P.C., Virginia Beach, Va., for plaintiff.

John R. Bolton, Asst. Atty. Gen., Theodore C. Hirt and Margaret H. Plank, Attys., Dept. of Justice, Nancy Stanley, Atty., Federal Communications Com'n, Washington, D.C., Henry Hudson, U.S. Atty., and Michael Rhine, Asst. U.S. Atty., Norfolk, Va., for defendants.

FRANK A. KAUFMAN, Senior District Judge.^*

Edge Broadcasting Corporation (Edge), a corporation with its principal place of business in Virginia Beach, Virginia, has, since 1988, operated the 100,000 watt radio station WMYK-FM known as "Power 94." That station is licensed by the Federal Communications Commission (FCC) to Elizabeth City, North Carolina, and broadcasts from Moyock, North Carolina, which is located approximately three miles south of the border between Virginia and North Carolina. Power 94 is one of twenty-four commercial radio stations serving the Hampton Roads, Virginia metropolitan area. According to Arbitron survey estimates,¹ approximately 92.2% of the persons who comprise Power 94's listening audience reside in Virginia, and approximately 7.8% reside in North Carolina. Although the station's signal reaches nine counties in North Carolina, fewer than 2% of all North Carolinians reside in those counties.

Edge challenges the constitutionality of two provisions of the federal lottery statute, namely, 18 U.S.C. §§ 1304 and 1307, which provide in pertinent part as follows:

§ 1304. Whoever broadcasts by means of any radio station for which a license is required by any law of the United States, or whoever, operating any such station, knowingly permits the broadcasting of, any advertisement of or information concerning any lottery, gift enterprise, or similar scheme ... shall be fined not more than $1,000 or imprisoned not more than one year, or both.

§ 1307. An exemption from criminal liability under section 1304 is granted for (a) ... an advertisement, list of prizes, or information concerning a lottery conducted by a State acting under the authority of state law—

. . . . .

(2) broadcast by a radio or television station licensed to a location in that state or an adjacent State which conducts such a lottery.

Corresponding regulations embodying the same substantive restrictions on lottery advertising as those statutory provisions are contained in 47 C.F.R. Part 73.1211. Those regulations also state that the FCC "may revoke any station license ... (6) for violation of section 1304." An additional statute also provides for a civil forfeiture penalty not to exceed $1,000 in the event of a section 1304 violation. 47 U.S.C. § 503(b)(1)(E).

The State of North Carolina does not sponsor a lottery, and its statutes make participation in and advertising of nonexempt raffles and lotteries a misdemeanor. N.C.Gen.Stat. §§ 14.289 and 14.291 (1983). On the other hand, the Commonwealth of Virginia is authorized by Virginia statute to sponsor a lottery, Va.Code Ann. § 58.1-4001 (1987), and since 1988, has conducted a series of lottery games.

In 1988, the Commonwealth paid $1,285,141 in advertising costs to the media. In 1989, the Virginia Lottery Board estimated that those expenditures would reach in that year $2.3 million, including advertising over seven Hampton Roads radio stations. In addition, certain private businesses, located in the Hampton Roads area, include references in their own radio advertising to their status as lottery ticket outlets. According to Arbitron estimates, 38% of all radio listening in the area reached by Power 94 is directed to Virginia stations which include in their programs broadcasts of lottery advertising.

In addition to radio advertising, the Lottery Board purchases advertising space in the Hampton Roads area's two large newspapers, both of which also circulate in the North Carolina counties reached by Power 94's signal. Further, the Board presently spends nearly half of its advertising budget on television time, including purchases of time on four Hampton Roads television stations which reach the nine North Carolina counties served by Power 94 as well as additional areas of that state. Arbitron surveys estimate that 64% of all television viewing in those nine North Carolina counties is directed to Virginia television stations which carry such lottery advertising.

Edge estimates that it derives more than 95% of its local advertising revenues from sources in the State of Virginia, and alleges that its fear of being subjected to section 1304's criminal penalties has caused it to refrain from broadcasting any advertisements promoting the Virginia lottery. Power 94 has not sold advertising time to the State of Virginia for the broadcast of lottery promotions or to private businesses for advertising of their status as lottery outlets. As a result, Edge estimates that it has lost, and will continue to lose, advertising revenues totalling in the millions of dollars. To date, Edge has not been threatened with prosecution under section 1304. Specifically, in this case, plaintiff seeks a declaratory decree that sections 1304 and 1307 together with the corresponding FCC regulations, as applied to Edge, violate the First Amendment, and the Equal Protection Clause of the Fourteenth Amendment, of the Constitution of the United States, and further seeks injunctive protection against enforcement of those statutes and regulations.

After alternate motions to dismiss and for summary judgment filed by the United States pursuant to Rules 12(b) and 56 of the Federal Rules of Civil Procedure were denied by this Court, counsel for both sides submitted this case for a decision by this Court on agreed facts, and presented written and oral legal arguments. For the reasons stated infra, this Court concludes that plaintiff is entitled to the relief it seeks in this case.

I.

The prohibition in sections 1304 and 1307 against the radio broadcast of lottery advertising and information by licensees located in non-lottery states is part of a comprehensive scheme of federal legislation regulating interstate transportation and mailing of lottery information. More than 100 years ago, Congress enacted a complete ban on the importation, mailing and advertisement of lotteries, Ex parte Rapier, 143 U.S. 130, 133, 12 S.Ct. 374, 374, 36 L.Ed. 93 (1892), and extended that prohibition to radio broadcasting by the Communications Act of 1934,²FCC v. American Broadcasting Co., 347 U.S. 284, 289, 74 S.Ct. 593, 597, 98 L.Ed. 699 (1954).

"The right of free speech does not include ... the right to use the facilities of radio without a license. The licensing system established by Congress in the Communications Act of 1934 was a proper exercise of its power over commerce." National Broadcasting Co. v. United States, 319 U.S. 190, 227, 63 S.Ct. 997, 1014, 87 L.Ed. 1344 (1943). Although, as Justice White has written, "broadcasting is clearly a medium affected by a First Amendment interest," Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 386, 89 S.Ct. 1794, 1804, 23 L.Ed.2d 371 (1968), the Supreme Court has indicated that Congress possesses greater latitude to regulate broadcasting than other forms of communication. For example, in Bolger v. Youngs Drug Products Corp., 463 U.S. 60, 74, 103 S.Ct. 2875, 2884, 77 L.Ed.2d 469 (1983), Justice Marshall observed: "Our decisions have recognized that the special interest of the federal Government in regulation of the broadcast media does not readily translate into a justification for regulation of other means of communication." (Footnote and citations omitted). And in FCC v. American Broadcasting Co., 347 U.S. at 289, 74 S.Ct. at 597, the Supreme Court specifically extended to radio coverage the power of Congress constitutionally to restrict the interstate dissemination of lottery materials recognized in Ex parte Rapier, 143 U.S. at 133, 12 S.Ct. at 374. See also New York State Broadcasters Ass'n, Inc. v. United States, 414 F.2d 990, 996 (2d Cir.1969), cert. denied, 396 U.S. 1061, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970).

II.

Section 1304's language prohibiting the broadcast of "any advertisement ... or information" concerning lotteries by stations licensed to locations in non-lottery states is so broad that it seemingly reaches noncommercial as well as commercial speech. "The Constitution ... accords a lesser protection to commercial speech than to other constitutionally guaranteed expression." Central Hudson Gas & Electric Corp. v. Public Service Comm'n, 447 U.S. 557, 562-63, 100 S.Ct. 2343, 2349-50, 65 L.Ed.2d 341 (1980).

As Justice Scalia has recently written, commercial speech only enjoys "`a limited measure of protection, commensurate with its subordinate position in the scale of First Amendment values,' and is subject to `modes of regulation that might be impermissible in the realm of noncommercial expression.' Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447, 456 98 S.Ct. 1912, 1918, 56 L.Ed.2d 444 (1978)." Board of Trustees of the State Univ. of New York v. Fox, ____ U.S. ____, ____, 109 S.Ct. 3028, 3033, 106 L.Ed.2d 388, 402 (1989). In contrast, content-based restrictions on noncommercial speech meet First Amendment standards "only in the most extraordinary circumstances." Bolger, 463 U.S. at 65, 103 S.Ct. at 2879. In Bolger, Justice Marshall noted that when such restrictions have been upheld, they have fallen into a few "specialized and limited categories" such as "libel," "obscenity," or "fighting words." Id. at 65, n. 7, 103 S.Ct. at 2879, n. 7.³ Thus, at the outset, the question arises as to whether section 1304 bars only communication which does "no more than...