Lorain Journal Company v. FCC, No. 18955

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtBAZELON, , and WRIGHT and LEVENTHAL, Circuit
Citation351 F.2d 824
PartiesThe LORAIN JOURNAL COMPANY, Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Elyria-Lorain Broadcasting Company, Intervenor. W.W.I.Z., INC., and Sanford A. Schafitz, Appellants, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Elyria-Lorain Broadcasting Company, Intervenor.
Docket Number18957.,No. 18955
Decision Date08 September 1965

351 F.2d 824 (1965)

The LORAIN JOURNAL COMPANY, Appellant,
v.
FEDERAL COMMUNICATIONS COMMISSION, Appellee,
Elyria-Lorain Broadcasting Company, Intervenor.

W.W.I.Z., INC., and Sanford A. Schafitz, Appellants,
v.
FEDERAL COMMUNICATIONS COMMISSION, Appellee,
Elyria-Lorain Broadcasting Company, Intervenor.

Nos. 18955, 18957.

United States Court of Appeals District of Columbia Circuit.

Argued May 12, 1965.

Decided September 8, 1965.


351 F.2d 825

Mr. Clair L. Stout, Washington, D. C., with whom Mr. L. Adrian Roberts, Washington, D. C., was on the brief, for appellant in No. 18,955.

Mr. Carl L. Shipley, Washington, D. C., with whom Mr. Thomas A. Ziebarth, Washington, D. C., was on the brief, for appellants in No. 18,957.

Mr. John H. Conlin, Associate General Counsel, Federal Communications Commission, with whom Messrs. Henry Geller, General Counsel, and Ernest O. Eisenberg, Counsel, Federal Communications Commission, were on the brief, for appellee. Messrs. Daniel R. Ohlbaum, Deputy General Counsel, and Howard Jay Braun, Counsel, Federal Communications Commission, also entered appearances for appellee.

Mr. Marcus Cohn, Washington, D. C., with whom Mr. Stanley S. Neustadt, Washington, D. C., was on the brief, for intervenor. Mr. Stanley B. Cohen, Washington, D. C., also entered an appearance for intervenor.

Before BAZELON, Chief Judge, and WRIGHT and LEVENTHAL, Circuit Judges.

351 F.2d 826

LEVENTHAL, Circuit Judge:

These consolidated cases involve appeals1 by The Lorain Journal Company (Journal)2 in Case No. 18,955, and by W.W.I.Z., Inc. (WWIZ, Inc.) and Sanford A. Schafitz (Schafitz) in Case No. 18,957, from the decision of the Federal Communications Commission (Commission) of March 25, 1964, denying both the application of WWIZ, Inc. filed July 5, 1961, for renewal of license of Station WWIZ, Lorain, Ohio, and an application filed June 5, 1961, for transfer of control of WWIZ, Inc. from Schafitz to Journal. They also appeal from the Commission's order of September 16, 1964, denying appellants' petitions for rehearing and reconsideration.

The Commission concluded that the activities of Schafitz and Journal, recounted in detail in the Commission's findings of fact, had resulted in a transfer of actual control of WWIZ, Inc. to Journal without the prior consent of the Commission, and that Schafitz' filing of misinformation and withholding of information in regard to these matters had constituted a clear breach of his duties and responsibilities to the Commission.3 We are of the opinion that the Commission's conclusions were amply supported by underlying findings of fact, in turn predicated upon substantial evidence of record. We summarize these findings though our condensation loses much of the flavor of the transactions imparted by the Commission's extended development.

In September 1958, Schafitz was advised by Harry Horvitz, Journal's president, that Journal desired to obtain an interest in Station WWIZ, for which Schafitz had received a construction permit on May 7, 1958.4 There was some discussion concerning purchase of the entire station, which Schafitz valued at $125,000. But Horvitz did not press for this since he believed it might prejudice a then-pending effort by Mansfield Journal Company to acquire the assignment of license of Station WCLW at Mansfield, Ohio,5 and because he did not wish to afford Elyria-Lorain Broadcasting Company, an unfriendly competitor,6 an opportunity to force a lengthy Commission hearing on a transfer of control of WWIZ. A hearing would have delayed any payment to Schafitz whose interest in the transaction was whetted by his immediate need for $55,000 to put his Station WXTV, Youngstown, on the air. Since Horvitz was unwilling to pay $55,000 for a minority interest, they reached an understanding that Schafitz would organize

351 F.2d 827
a corporation in which Journal would hold the preferred stock and 45% of the common stock. The corporation was organized following the plan outlined by Journal's attorney

On September 18, 1958, pursuant to such plan, Schafitz filed with the Commission an application seeking assignment of the WWIZ construction permit from himself to a corporation (WWIZ, Inc.) in which he was, so far as the Commission was advised, to be the 100% stockholder. Asked by the form for a "full narrative statement of the circumstances leading to the assignment (or transfer) and the reasons therefor" and for a table showing the disposition of the stock before and after the assignment he replied:

This is an application to change from an individual permittee to a corporation permittee. All of the stock of the corporation is held by the present permittee, Sanford A. Schafitz. No other stockholders or persons are involved in the ownership of the new corporation. The assignee is WWIZ, Inc., an Ohio corporation. It is authorized for 200 shares, of which 110 will be issued to Sanford A. Schafitz, and 90 will remain in the Corporation.
The purpose of the assignment to a corporation is to take advantage of its legal rights and privileges which are well known to the law.

Shortly after the Commission approved the assignment to WWIZ, Inc., on October 15, 1958, Schafitz acquiesced in changes in the charter and by-laws demanded by Horvitz which effectively deprived Schafitz of majority control by vesting certain key decision-making authority in a two-thirds majority vote of the common stock and in a three man board of directors consisting of Horvitz, Schafitz and Wickens, referred to below; by requiring on all checks a cosignature representing Journal's interests; and by converting the preferred to a $100 par 6% cumulative participating preferred which gave Journal dividends each year of $1200 plus 72.5% of all other dividends declared. In addition to these legal changes, WWIZ books were kept by Journal staff and at the offices of Journal.

The Commission stated that it considered the Examiner's contrary findings as to transfer of control to be lacking in major aspects. It examined at length and in depth the three factors emphasized by the Examiner as indicating that the developments only constituted steps of a minority owner to safeguard its investment:

(a) The first was the fact that Wickens, the third director, was a responsible attorney and not a mere creature of Journal. The Commission noted that in fact, Wickens' participation in the affairs of the Corporation was pro forma, since Horvitz obtained Schafitz' agreement in advance to any proposals he desired; and moreover emergence of Wickens as director tended to complete the pattern of Schafitz' divestiture of control, since normally a majority owner would select his own counsel as director, while Wickens had been a total stranger to Schafitz prior to his being designated at Horvitz' suggestion as statutory agent, but had done legal work for Journal in the past and listed Journal as one of his representative clients in the Martindale-Hubbell Law Directory.

(b) While the Examiner found that the keeping of the books by the Journal staff saved WWIZ, Inc. trouble and expense and was merely a device to enable a substantial minority owner to keep close scrutiny of controlling owner's management, the Commission concluded that the arrangements went beyond normal business practice for mere minority protection and resulted in control passing to Journal by means of its hold on the corporation's pursestrings. The Commission emphasized that the co-signature requirement provided Horvitz with constant information as to receipts and expenditures; in practice the Journal staff withheld checks for unusual expenditures pending Horvitz' approval; this was in

351 F.2d 828
a background whereby Journal actually provided the initial operating capital of WWIZ, Inc., starting with $5,000 advanced on October 22, 1958, shortly after Schafitz orally agreed to the Horvitz changes; and Journal in essence paid the costs of station construction by reimbursements to Schafitz

(c) The Examiner found that actual conduct of business and broadcast operations remained with Schafitz. This was true for the first six months of operations, but subsequently, the Commission noted, Schafitz gave the station only half his time, for about five months, less thereafter, and no time whatever by May 1960. As appellee aptly remarks, Schafitz acted like a man who had relinquished control and was awaiting a propitious time to sell out his stock holdings, while Horvitz' attitude was that of a proprietor steadfastly attending to business.

We have carefully examined the Commission's consideration of the Examiner's views because of the claim of appellant...

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108 practice notes
  • Brennan v. Gilles & Cotting, Inc., No. 73-2471
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • 18 Octubre 1974
    ...the grounds for their rejection of an administrative judge's disposition of a case. See Lorain Journal Co. v. FCC, 122 U.S.App.D.C., 127, 351 F.2d 824, 828 (1965). Since the administrative judge in the instant case rested his decision on the 'access' principle, the Commission must explain i......
  • Time Warner Entertainment Co., L.P. v. F.C.C., Nos. 93-1723
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 17 Julio 1995
    ...826 F.2d 1101, 1107-08 (D.C.Cir.1987), cert. denied, 490 U.S. 1039, 109 S.Ct. 1942, 104 L.Ed.2d 413 (1989); Lorain Journal Co. v. FCC, 351 F.2d 824, 831 (D.C.Cir.1965), cert. denied, 383 U.S. 967, 86 S.Ct. 1272, 16 L.Ed.2d 308 (1966) (Commission enjoys broad discretion in selecting C. Citie......
  • Bilingual Bicultural Coalition on Mass Media, Inc. v. F.C.C., Nos. 75-1855
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 16 Septiembre 1977
    ...See FCC v. WOKO, Inc., 329 U.S. 223, 227, 67 S.Ct. 213, 91 L.Ed. 204 (1946). 57 Lorain Journal Co. v. FCC, 122 U.S.App.D.C. 127, 133, 351 F.2d 824, 830 58 Nondiscrimination in the Employment Policies and Practices of Broadcast Licensees, 60 F.C.C.2d 226, 249-52 (1976). We commented hopefull......
  • National Broadcasting Co., Inc. v. F. C. C., No. 73-2256
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 11 Julio 1975
    ...CAB, 161 U.S.App.D.C. 319, 326, 495 F.2d 145, 152 (1974). 66 Id. at 327, 495 F.2d at 153. Lorain Journal Co. v. FCC, 122 U.S.App.D.C. 127, 351 F.2d 824 (1965), cert. denied, 383 U.S. 967, 86 S.Ct. 1272, 16 L.Ed.2d 308 67 Greater Boston Television Corp. v. FCC, 143 U.S.App.D.C. 383, 395, 444......
  • Request a trial to view additional results
108 cases
  • Brennan v. Gilles & Cotting, Inc., No. 73-2471
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • 18 Octubre 1974
    ...the grounds for their rejection of an administrative judge's disposition of a case. See Lorain Journal Co. v. FCC, 122 U.S.App.D.C., 127, 351 F.2d 824, 828 (1965). Since the administrative judge in the instant case rested his decision on the 'access' principle, the Commission must explain i......
  • Time Warner Entertainment Co., L.P. v. F.C.C., Nos. 93-1723
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 17 Julio 1995
    ...826 F.2d 1101, 1107-08 (D.C.Cir.1987), cert. denied, 490 U.S. 1039, 109 S.Ct. 1942, 104 L.Ed.2d 413 (1989); Lorain Journal Co. v. FCC, 351 F.2d 824, 831 (D.C.Cir.1965), cert. denied, 383 U.S. 967, 86 S.Ct. 1272, 16 L.Ed.2d 308 (1966) (Commission enjoys broad discretion in selecting C. Citie......
  • Bilingual Bicultural Coalition on Mass Media, Inc. v. F.C.C., Nos. 75-1855
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 16 Septiembre 1977
    ...See FCC v. WOKO, Inc., 329 U.S. 223, 227, 67 S.Ct. 213, 91 L.Ed. 204 (1946). 57 Lorain Journal Co. v. FCC, 122 U.S.App.D.C. 127, 133, 351 F.2d 824, 830 58 Nondiscrimination in the Employment Policies and Practices of Broadcast Licensees, 60 F.C.C.2d 226, 249-52 (1976). We commented hopefull......
  • National Broadcasting Co., Inc. v. F. C. C., No. 73-2256
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 11 Julio 1975
    ...CAB, 161 U.S.App.D.C. 319, 326, 495 F.2d 145, 152 (1974). 66 Id. at 327, 495 F.2d at 153. Lorain Journal Co. v. FCC, 122 U.S.App.D.C. 127, 351 F.2d 824 (1965), cert. denied, 383 U.S. 967, 86 S.Ct. 1272, 16 L.Ed.2d 308 67 Greater Boston Television Corp. v. FCC, 143 U.S.App.D.C. 383, 395, 444......
  • Request a trial to view additional results

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