Telephone and Data Systems, Inc. v. F.C.C.
| Decision Date | 25 March 1994 |
| Docket Number | 93-1192,Nos. 92-1273,s. 92-1273 |
| Citation | 19 F.3d 42 |
| Parties | TELEPHONE AND DATA SYSTEMS, INC., United States Cellular Corporation, Appellants, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, American Cellular Network Corp., doing business as Comsat Cellular Communications, Inc.; and Ellis Thompson Corp., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Alan Y. Naftalin, Washington, DC, argued the cause for appellants. With him on the briefs were Herbert D. Miller, Jr. and Peter M. Connolly.
James M. Carr, Counsel, Federal Communications Commission, Washington, DC, argued the cause for appellee. On the brief were Renee Licht, Acting General Counsel at the time the brief was filed, Federal Communications Commission; Daniel M. Armstrong, Associate General Counsel, Federal Communications Commission; and Sue Ann Kanter and Sara F. Seidman, Counsel, Federal Communications Commission. John E. Ingle, Deputy Associate Counsel; and Roberta L. Cook, Counsel, Federal Communications Commission, entered an appearance.
On the brief of joint intervenors were Louis Gurman, Diane F. Kiechel, Stuart F. Feldstein, and Robert J. Keller. Thomas J. Hutton, Washington, DC, entered an appearance.
Before WALD, EDWARDS, and SENTELLE, Circuit Judges.
Opinion for the Court filed by Circuit Judge SENTELLE.
Telephone and Data Systems, Inc. ("TDS") appeals two orders of the Federal Communications Commission ("the Commission" or "FCC"). 1 The first order denied TDS's application for review of the Common Carrier Bureau's decision to grant Mr. Ellis Thompson a conditional permit to construct and operate cellular communications services in the Atlantic City market. See Ellis Thompson Corp., 7 FCC Rcd 3932 (1992) ("the Atlantic City order"). The second order rejected TDS's petition to deny the application of Metromedia Co. to transfer control of a cellular licensee in Philadelphia to Comcast Cellular Communications, Inc. See Metromedia Co., 8 FCC Rcd 870 (1993) ("the Philadelphia order").
We hold that TDS has standing to challenge the Atlantic City order but not the Philadelphia order. On the merits, we hold that the Atlantic City order departed from Commission precedent without adequate explanation. We therefore vacate the Atlantic City order, and remand the cause for further proceedings.
In 1986, Ellis Thompson entered a Commission lottery for the license to construct and operate a "non-wireline" cellular telephone system in Atlantic City, New Jersey. Before the drawing, Thompson agreed with some one hundred other applicants that the winner would receive 50.01% control of the licensee, while the losers would divide the remainder among themselves. The agreement also provided that "selling control of the licensee" would require approval by a two-thirds supermajority vote. Thompson won the lottery and formed the Ellis Thompson Corporation, of which he is the sole shareholder, to hold his interest in the licensee.
Thompson then entered into an agreement with TDS that gave TDS an option to buy Thompson's interest after the cellular network was completed. As subsequently amended, paragraph 16 of the agreement provided that
[w]ithout the prior consent of [TDS], which consent shall not be unreasonably withheld, no agreement shall be entered into with respect to the System, which relates to the provision of goods or services requiring an aggregate expenditure of $50,000 or more. Any such agreement shall be, by its terms, cancellable [sic] upon sixty (60) days written notice from [TDS] at any time after the exercise of [TDS's] options hereunder.
After the option was given, however, the American Cellular Network Corporation ("Amcell") bought up 36.01% of the minority interests in Thompson's licensee. In 1987, Amcell informed TDS that under the supermajority provision of Thompson's agreement with the other lottery entrants Amcell's consent would be required before TDS could buy the cellular system. Thompson then agreed to a contract with Amcell under which Amcell would construct the Atlantic City system and operate it for at least ten years. In compliance with paragraph 16 of his agreement with TDS, Thompson submitted the Amcell management agreement to TDS for approval. TDS refused to consent, but Thompson signed the Amcell agreement anyway. Thompson also gave Amcell a contingent option to buy his interest if TDS did not or could not exercise its option. Finally, Amcell agreed to indemnify Thompson if the FCC denied his application because it found the management agreement objectionable. Neither the option nor the indemnity agreement was disclosed to the FCC.
Amcell petitioned the Commission's Mobile Services Division to grant Thompson's application to construct the Atlantic City system.
Amcell also proposed that the Commission require, as a condition on the grant, that paragraph 16 of Thompson's agreement with TDS be abrogated. TDS, in opposition, asked the Commission to abrogate the supermajority clause of Thompson's agreement with the minority owners. Each claimed that the other's provision violated section 310 of the Communications Act of 1934, 47 U.S.C. Sec. 310(d) (1988), which prohibits applicants like Thompson from transferring to another de jure or de facto control of their systems without FCC approval. The Mobile Services Division accepted Amcell's proposal but rejected TDS's request. See Ellis Thompson,3 FCC Rcd 3962 (1988).
TDS appealed to the Chief of the Common Carrier Bureau. The Bureau, concluding that paragraph 16 unlawfully interfered with Thompson's ability to conduct the business of his licensee, affirmed both the grant of Thompson's application and the abrogation of the paragraph. See Ellis Thompson, 4 FCC Rcd 2599 (1989). The Bureau also declined to abrogate the supermajority provision, noting that it restricted only Thompson's right to sell and not his right to make daily business decisions. See id. at 2601.
TDS appealed the Bureau's order to the Commission while it simultaneously sued Amcell in the federal district court for the District of Columbia. In that suit, TDS alleged two causes of action relevant here: first, that Amcell had tortiously interfered with TDS's contractual relations with Thompson; and second, that Amcell had tortiously interfered with TDS's prospective business relations with Thompson. The district court dismissed the complaint, holding that because the order of the Common Carrier Bureau had abrogated paragraph 16 and was entitled to res judicata effect, TDS no longer had any contractual interest in the Atlantic City system. On appeal, we held that the district court had erred by dismissing TDS's claim for interference with prospective business relations, which did not depend on the abrogated paragraph 16. However, we upheld the dismissal of the claim of tortious interference with contractual relations. See Telephone & Data Sys., Inc. v. American Cellular Network Corp., 966 F.2d 696, 700 (D.C.Cir.1992).
While the collateral litigation proceeded, TDS applied to the Commission for review of the Common Carrier Bureau's decision. After the pleading deadline, but before the Commission had ruled, TDS filed a "supplement" that notified the Commission of the option and indemnity agreements between Amcell and Thompson; TDS alleged that these agreements, in combination with the management agreement, showed that Amcell enjoyed de facto control of Thompson in violation of Sec. 310(d). TDS requested the Commission to "require Amcell to cease exercising control of Thompson's cellular system and [to] abrogate all of the agreements between Amcell and Thompson under which Amcell has exercised control." In the alternative, TDS made a formal Request for Inquiry Under Sec. 403 of the Act, asking the Commission to investigate Amcell's dealings with Thompson.
The Commission denied TDS's application for review. See Ellis Thompson Corp., 7 FCC Rcd 3932 (1992). It agreed with the Bureau that paragraph 16 infringed Thompson's ability to conduct his business but that the supermajority provision did not. The Commission also rejected TDS's allegations of de facto control, for the six-factor inquiry mandated by Commission precedent showed that Thompson retained sufficient control. Because of that conclusion, the Commission dismissed as moot TDS's request for a Sec. 403 investigation. See 7 FCC Rcd at 3936 n. 4. TDS now appeals the order.
A year before the decision in the Atlantic City proceeding, Metromedia Co. asked the Commission to approve a transfer of AWACS Inc., a Metromedia subsidiary licensed to operate the Philadelphia cellular system, to Comcast Cellular Communications, Amcell's parent corporation. TDS's subsidiary United States Cellular Communications (USCC) and USCC's subsidiary Vineland Cellular Telephone (Vineland) petitioned the Commission to deny Metromedia's request. USCC alleged that Comcast, through Amcell, had taken illegal actions in the Atlantic City market
that showed defects of character warranting denial of the transfer. The Commission, in an order rendered after its order in the Atlantic City proceeding, simply noted that it had there found Amcell blameless and thus denied USCC's petition. See Metromedia Co., 8 FCC Rcd 870, 870 (1993). TDS appeals the Philadelphia order as well.
The Commission argues that TDS lacks Article III standing to obtain review of the two orders. In both instances TDS must show a palpable injury that is fairly traceable to the Commission's conduct and redressable by the relief requested. See Lujan v. Defenders of Wildlife, --- U.S. ----, ----, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351 (1992); Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 3324, 82 L.Ed.2d 556 (1984); Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45 L.Ed.2d...
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