Reuters Ltd. v. F.C.C., s. 84-1567

• Decision Date: 13 March 1986
• Docket Number: Nos. 84-1567,84-1568,s. 84-1567
• Parties: REUTERS LIMITED, Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Associated Information Services Corp., Intervenor. REUTERS LIMITED, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, Associated Information Services Corp., Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 946

781 F.2d 946

251 U.S.App.D.C. 93

REUTERS LIMITED, Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Associated

Information Services Corp., Intervenor.

REUTERS LIMITED, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of

America, Respondents, Associated Information

Services Corp., Intervenor.

Nos. 84-1567, 84-1568.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 31, 1985.

Decided Jan. 24, 1986.

As Amended Jan. 24 and March 13, 1986.

Kenneth E. Hardman, with whom John F. Noble, Washington, D.C., was on the brief, for appellant in No. 84-1567 and petitioner in No. 84-1568.

Roberta L. Cook, Counsel, F.C.C., with whom J. Paul McGrath, Asst. Atty. Gen., Dept. of Justice, Jack D. Smith, Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, F.C.C., Catherine G. O'Sullivan and Edward T. Hand, Attys., Dept. of Justice, Washington, D.C., were on brief, for appellee in No. 84-1567 and respondents in No. 84-1568.

Paul J. Berman, with whom Jonathan D. Blake, Washington, D.C., was on brief, for intervenor in Nos. 84-1567 and 84-1568.

Before MIKVA and STARR, Circuit Judges, and McGOWAN, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge STARR.

STARR, Circuit Judge:

A precept which lies at the foundation of the modern administrative state is that agencies must abide by their rules and regulations. We have frequently been called upon to apply that venerable principle of law and common sense, and the appeal before us today fits squarely into that long line of cases. We hold that the Federal Communications Commission improperly breached this fundamental precept of administrative law in what turns out to have been a misguided effort to achieve a fair resolution of a dispute between two competing license applicants.

The warring contestants are Reuters Limited, who appeals from the FCC's adverse action, ¹ and Associated Information Services Corporation, the successful intervenor. The regulatory prize in question consists of thirteen microwave radio station licenses which had officially been granted to Reuters but which, in the face of Associated's strenuous protests, were rescinded by the Commission.

The background of the dispute can be briefly stated. Following a lengthy period when its earlier applications lay dormant at the Commission, Reuters filed new applications, pursuant to the Commission's order, for microwave radio licenses for a single channel in each of thirteen cities across the Nation. The applications were duly accepted for filing and listed on a Public Notice dated August 12, 1983. In the following month, on September 23, 1983, the Commission's Private Radio Bureau approved all thirteen applications.

On that same day, as coincidence would have it, Associated submitted thirty-nine applications for each of the available channels in the same thirteen cities for which Reuters had applied the preceding month. Associated's applications, as it turned out, were misfiled, having been submitted to the Commission's offices in Washington, D.C., whereas applicable FCC rules required that such applications be filed 80 miles to the north at the FCC's offices in Gettysburg, Pennsylvania. Thus it was that Associated's competing applications were not effectively filed until five days later--on September 28, 1983--when its thirty-nine applications found their way to Gettysburg. As a result, at the time of the grant to Reuters, no competing applications had been effectively filed. In due course, on October 12, 1983, the FCC mailed Reuters the thirteen licenses which bore the following words: "Effective Date--September 23, 1983."

With its competitor thus in possession of the thirteen licenses, Associated vehemently protested the grant. Associated contended that the Commission acted improperly in granting the licenses prior to the expiration of sixty days following the date on which new applications were accepted. In Associated's view, the Commission had represented quite clearly in a rulemaking proceeding that a full sixty-day period for filing applications would be allowed. Associated had specifically relied, it maintained, upon the Commission's statements to that effect in timing its thirty-nine applications. As Associated therefore saw it, the Private Radio Bureau had jumped the gun in issuing Reuters the thirteen licenses before the requisite sixty days had expired.

In stark contrast to this view, Reuters maintained that the Commission's rules governing microwave radio licenses expressly permitted licenses to be awarded after the expiration of thirty days following an application. At the time the Private Radio Bureau acted on Reuters' application, two critical factors were present: first, more than thirty days had expired from the initial date for accepting applications, as provided by the Commission's rules; and second, no competing applications were on file as of the date of the grant. In Reuters' view, therefore, Associated's complaints were belied by the Commission's express rules which spoke with crystalline clarity to the question at hand.

With the issue thus joined, the Private Radio Bureau resolved the dispute in favor of Associated. Rejecting outright Associated's broad contention that the Commission's rules and pronouncements did not admit of a license grant prior to expiration of the sixty-day period, the Bureau nonetheless concluded that Associated's applications were, in fact, mutually exclusive to those of Reuters inasmuch as the former's applications were on file in Gettysburg prior to the time the licenses were actually issued by and mailed from the Commission. While thus rejecting the thrust of Associated's arguments, the Bureau set aside Reuters' thirteen licenses and designated Associated's applications as mutually exclusive.

Reuters appealed to the full Commission. Invoking the FCC's rules with respect to the effective dates of licenses, Reuters maintained that the Private Radio Bureau had expressly designated an effective date for the licenses of September 23, 1983, not the date of mailing. As it had before the Bureau, Reuters won the specific legal battles but lost the war. Specifically, the FCC agreed that the Bureau could lawfully issue a license any time after thirty days following the Commission's announced date on which applications would be received. So too, the Commission rejected Associated's argument that the FCC's more recent pronouncements in its rulemaking proceeding had altered the long-standing rules governing the timing of license grants. Reuters likewise won the point that the effective date of its licenses was September 23, 1983, as opposed to a date tied to the later mailing of the licenses by the FCC, and that Associated's applications were not effectively filed until they reached Gettysburg, five days after the effective date of Reuters' licenses.

But Reuters' arguments, tied in lawyerly fashion to the Commission's pertinent rules, in the end fell short. The Commission concluded that considerations of fairness required evisceration of the Reuters license grants and that Associated be permitted to stand alongside Reuters as a full competitor for these licenses.

Both to understand the Commission's rationale and to set the stage for our resolution of this appeal, we pause to enter the somewhat labyrinthine paths of the Commission's rules and pronouncements which guided these two contenders along rather different roads in the application process. It will be recalled that Reuters' applications lay dormant at the Commission for some considerable period prior to the events which generated the case at hand. The reason for this period of Commission in-action, it would appear, was regulatory uncertainty over the uses to which microwave radio stations could properly be put. As we understand it, the Commission had for some time harbored rather restrictive views about such usages, but this regulatory narrowness was under assault from various quarters, including those anxious to employ such stations in the purveying of video entertainment programming, as opposed to the traditional use of these frequencies for point-to-point internal communications relating to the licensee's business. FCC Brief at 4. While the Commission was wrestling internally with these broad questions, Reuters' applications, filed initially in the early weeks of 1980, languished.

At length, the Commission came to rest in the rulemaking proceeding, identified as Docket No. 19671. The Commission's Memorandum Opinion and Order in that docket FCC No. 83-245, 48 Fed.Reg. 32578 (July 18, 1983), opened up these particular channels for point-to-multipoint systems, subject to a two-year period when only applicants seeking to provide data and other information-type services would be licensed in this particular part of the spectrum (2.5 GHz band). To carry out this new approach, the Commission returned all pending applications (including Reuters') and established a new filing period--to begin August 1, 1983--for applicants seeking to employ these channels for data or information distribution services.

In language which was destined to sow seeds of confusion, the rulemaking Memorandum Opinion and Order stated that the Commission would "strictly apply the cutoff procedures detailed in Sec. 1.227(b)(4) of the Commission's Rules." 48 Fed.Reg. 32,578, 32,584 (July 18, 1983). ² This provision, as will be seen from its text as set forth in note 2, listed alternative dates for Commission action. In explaining its invocation of this provision, the Commission stated: "This means that there will be a new 60-day filing period opened up for competing applications for each of the three 2.5 GHz channels in each locale, commencing with the first such application which we accept for filing in each area." Id. The Memorandum Opinion and Order did not refer to the portion of its rules, Section 1.962(f), ³ governing applications for point-to-point microwave...