Shurberg Broadcasting of Hartford, Inc. v. F.C.C.
| Decision Date | 16 June 1989 |
| Docket Number | No. 84-1600,84-1600 |
| Citation | 278 U.S.App.D.C. 24,876 F.2d 902 |
| Parties | , 57 USLW 2571 SHURBERG BROADCASTING OF HARTFORD, INC., Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Astroline Communications Co., Intervenor. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
June 16, 1989.
Order Denying Rehearing En Banc
June 16, 1989.
Wald, Chief Judge, dissented and filed opinion on original submissions.
Wald, Chief Judge, dissented from denial of suggestions for rehearing en banc, and filed statement in which Circuit Judges Robinson, Mikva, Edwards & Ruth B. Ginsburg joined.
Appeal from an Order of the Federal Communications Commission.
Harry F. Cole, Washington, D.C., was on the brief for appellant.
C. Grey Pash, Jr., Counsel, F.C.C., with whom Jack D. Smith, Gen. Counsel, and Daniel M. Armstrong, Associate Gen. Counsel, F.C.C., Washington, D.C., were on the brief, for appellee.
Lee H. Simowitz, with whom Thomas A. Hart, Jr., Washington, D.C., and Merilyn M. Srailman were on the brief, for intervenor Astroline Communications Co.
Andrew Jay Schwartzman, Washington, D.C., was on the brief for amici curiae Dept. of Communications of the Capital Region Conference of Churches, et al., urging affirmance.
David Honig, was on the brief for amici curiae Nat. Black Media Coalition, et al., urging affirmance.
Before WALD, Chief Judge, and SILBERMAN, Circuit Judge, and MacKINNON, Senior Circuit Judge.
Opinion PER CURIAM.
Separate Opinions filed by Circuit Judge SILBERMAN and Senior Circuit Judge MacKINNON.
The opinions by Judges Silberman and MacKinnon in some respects differ in analysis. However, both conclude that the FCC's minority distress sale program unconstitutionally deprives Alan Shurberg and Shurberg Broadcasting of their equal protection rights under the Fifth Amendment because the program is not narrowly tailored to remedy past discrimination or to promote programming diversity. Specifically, the program unduly burdens Shurberg, an innocent nonminority, and is not The cause is remanded to the Federal Communications Commission for further proceedings not inconsistent with this opinion.
reasonably related to the interests it seeks to vindicate.
Judgment accordingly.
Alan Shurberg, a long-time resident of the Hartford, Connecticut area, and Shurberg Broadcasting Company of Hartford, Inc., have been trying since 1982 to replace Faith Center, Inc., as the licensee of Channel 18 in Hartford. Shurberg appeals from an FCC Memorandum Opinion and Order granting Faith Center permission to sell its broadcast properties to a minority-controlled enterprise pursuant to the Commission's distress sale policy. After Faith Center's second unsuccessful attempt at a distress sale, Shurberg sought to file with the FCC a construction application that was mutually exclusive of Faith Center's renewal application and to have his application set for comparative hearing with Faith Center's renewal application. As the FCC could grant either Shurberg's request for comparative consideration or Faith Center's petition for permission to assign its broadcast license to a third distress sale buyer--intervenor Astroline Communications Company Limited Partnership ("Astroline")--but not both, the FCC considered the two requests together. Deciding in favor of Faith Center, the FCC gave slightly greater weight to its distress sale policy than to the statutory policy favoring competition in licensing. Faith Center, Inc., 99 F.C.C.2d 1164, 1170 (1984). The Commission also held that the racial preference embodied in the distress sale policy did not violate the Constitution because the policy was meant to remedy past discrimination and to promote diversity of ownership and programming. Id. at 1170-72. And the Commission sustained the bona fides of Astroline's minority status, dismissing Shurberg's contention that Astroline's purported minority ownership was a sham. Id. at 1172-73.
Our resolution of Shurberg's appeal in this matter has been delayed for some time. After oral argument in this case, developments in a related case, Steele v. FCC, 770 F.2d 1192 (D.C.Cir.1985), led us to ask the FCC if it still fully supported the constitutionality of its distress sale policy. The Commission acknowledged that it had doubts and requested that we remand in order for it to reconsider the matter fully. In the midst of that reexamination, however, Congress passed and the President signed a continuing resolution forbidding, inter alia, the expenditure of funds for reconsideration of the distress sale policy. The Commission promptly terminated its proceedings and reinstated the policy, and therefore we must now consider Shurberg's challenges.
Shurberg argues that: the FCC's decision is inconsistent with the governing statute, regulations, and judicial precedents, which he asserts required the Commission to consider his competitive application; the FCC's proceedings were marred by ex parte contacts and other irregularities; the distress sale policy unconstitutionally discriminated against him on the basis of race. I discern no substantive or procedural flaw in the FCC's action in this case that would require reversal if the agency's distress sale policy were constitutional. I nevertheless vote to overturn the Commission's decision because I have concluded, for the reasons set forth below, that the distress sale policy, as applied to bar Shurberg's opportunity to compete for the license, is unconstitutional.
As a general rule, a licensee whose qualifications to hold a broadcast license come into question may not assign or transfer that license until the FCC has resolved its doubts in a noncomparative hearing. This policy is premised on the notion that "a licensee ... has nothing to assign or transfer unless and until he has established his own qualifications...." Northland Television, Inc., 42 Rad.Reg.2d (P & F) 1107, 1110 (1978); see also Jefferson Radio Co.
v. FCC, 340 F.2d 781, 783 (D.C.Cir.1964). The distress sale policy is an exception to that general rule, developed initially as a way of avoiding time-consuming hearings when expeditious action to oust the licensee was desirable--for example, when the licensee was bankrupt or disabled. See Statement of Policy on Minority Ownership of Broadcasting Facilities, 68 F.C.C.2d 979, 983 (1978) ("1978 Policy Statement"); see generally Stereo Broadcasters, Inc. v. FCC, 652 F.2d 1026, 1028-29 (D.C.Cir.1981). The policy allows one whose license has been designated for revocation hearing, or whose renewal application has been designated for hearing, to assign his license to an FCC-approved assignee. See id.
In 1978, the FCC expanded the applicability of the distress sale policy. It would continue to be available "in circumstances similar to those now obtaining," but, in addition,
in order to further encourage broadcasters to seek out minority purchasers, [the FCC would] permit licensees whose licenses have been designated for revocation hearing, or whose renewal applications have been designated for hearing on basic qualification issues ... to transfer or assign their licenses at a "distress sale" price to applicants with a significant minority ownership interest, assuming the proposed assignee or transferee meets our other qualifications.
1978 Policy Statement, 68 F.C.C.2d at 983 (footnote omitted). A holder whose license the FCC indicated it might terminate or refuse to renew due to basic qualification issues would be eligible, with FCC approval, to sell its assets and transfer its license to a qualified minority enterprise. 1 Licensees have a substantial incentive to exercise this option, because once a license has been designated for a revocation hearing, a licensee may not transfer the license other than through a distress sale. See Northland Television, Inc., 42 Rad.Reg.2d at 1110. The licensee may either gamble that he will prevail in the noncomparative hearing or make an early exit via a distress sale, which will allow him to salvage some portion of the license's value. The distress sale price, to be approved, must be no higher than seventy-five percent of the station's and license's combined fair market value. This cap ensures the distress sale will involve a substantial loss for the licensee--and a substantial discount for the purchasers. See Grayson Enterprises, Inc., 47 Rad.Reg.2d (P & F) 287, 293 (1980). 2
This case has a long and complicated procedural history that reaches back to a period before the proceedings on Faith Center's Hartford license and forward beyond the time of oral argument here. In addition to the Hartford license, Faith Center also held broadcast licenses for three California stations. In 1978, the FCC designated Faith Center's renewal application for its San Bernardino station for hearing because of allegations of fraud in Faith Center's over-the-air solicitation for funds and failure to cooperate with an FCC investigation. In 1980, the Administrative Law Judge in the San Bernardino proceeding dismissed Faith Center's renewal application because of Faith Center's refusal to cooperate in the proceeding. The Commission affirmed that decision, as did this court. Faith Center, Inc., 82 F.C.C.2d 1 (1980), reconsid. denied, FCC 81-235 (1981), aff'd mem., Faith Center, Inc. v. FCC, 679 F.2d 261 (1982), cert. denied, 459 In December 1980, the FCC designated Faith Center's renewal application for its WHCT-TV Channel 18 license in Hartford for noncomparative hearing. Faith Center had filed a renewal application in 1977, but it had been held in deferred status pending the outcome of the San Bernardino proceedings. After the San Bernardino proceedings were dismissed, the...
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