Trinity Broadcasting of Florida, Inc. v. Federal Communications Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 29, 2000 Decided May 5, 2000

No. 99-1183

Trinity Broadcasting of Florida, Inc. and

Trinity Christian Center of Santa Ana, Inc., d/b/a

Trinity Broadcasting Network,

Appellants

v.

Federal Communications Commission,

Appellee

Colby May, National Minority Television, Inc.,

Intervenors

Consolidated with

99-1184, 99-1186

Appeals of an Order of the

Federal Communications Commission

Timothy B. Dyk argued the cause for appellants and

intervenors supporting appellants. With him on the briefs

were Howard A. Topel, Kathryn R. Schmeltzer and Lawrence

D. Rosenberg. Barry H. Gottfried entered an appearance.

William H. Crispin, Dean R. Brenner and Katherine

Connor Linton were on the brief of amici curiae Members of

Congress, Senator John Ashcroft and Congressman Randy

Cunningham.

Jordan W. Lorence was on the brief of amici curiae

Evangelical Association of Pastors & Layman, et al.

Joel Marcus, Attorney, Federal Communications Commis-

sion, argued the cause for appellee. With him on the brief

were Christopher J. Wright, General Counsel, and Daniel M.

Armstrong, Associate General Counsel. C. Grey Pash, Jr.,

Counsel, entered an appearance.

Before: Edwards, Chief Judge, Tatel and Garland, Circuit

Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Tatel, Circuit Judge: This case presents a recurring ques-

tion of administrative law: What constitutes sufficiently fair

notice of an agency's interpretation of a regulation to justify

punishing someone for violating it? The Federal Communica-

tions Commission interpreted its now-superseded minority

preference regulation as requiring not only that a majority of

an applicant's board of directors be minorities, but also that

an applicant demonstrate actual control by minorities. Act-

ing on this interpretation, the Commission denied appellants'

application to renew a commercial television broadcast license

as a sanction for their earlier claim to a minority preference

based on a majority-minority board. Although we defer to

the Commission's interpretation of its regulation as requiring

actual minority control, we find that neither the regulation

nor the Commission's related statements gave fair notice of

that requirement. We therefore vacate the Commission's

denial of appellants' license renewal application.

I

"Congress found that 'the effects of past inequities stem-

ming from racial and ethnic discrimination have resulted in a

severe underrepresentation of minorities in the media of mass

communications.' " Metro Broad., Inc. v. FCC, 497 U.S. 547,

566 (1990) (quoting H.R. Conf. Rep. No. 97-765 at 43 (1982)),

overruled by Adarand Constructors, Inc. v. Pena, 515 U.S.

200, 227 (1995). In 1971, minorities owned not a single

television station anywhere in the United States. Id. at 553.

Having found that "the viewing and listening public suffers

when minorities are underrepresented among owners of tele-

vision and radio stations," the Federal Communications Com-

mission has undertaken various measures "to encourage mi-

nority participation in the broadcast industry." Id. at 554.

Congress also acted to promote minority ownership, directing

the Commission to:

establish rules and procedures to ensure that, in the

administration of any system of random selection under

this subsection used for granting licenses or construction

permits for any media of mass communications, signifi-

cant preferences will be granted [to certain applicants to

increase diversification of ownership]. To further diver-

sify the ownership of the media of mass communications,

an additional significant preference shall be granted to

any applicant controlled by a member or members of a

minority group.

Pub. L. No. 97-259, s 115(c)(1), 96 Stat. 1087 (1982), (codified

at 47 U.S.C. s 309(i)(3)(A)).

Responding to this directive, the Commission issued a

regulation granting preferences to minority applicants in

lotteries for low-power and translator television station licens-

es. 47 C.F.R. s 1.1622(b). Low-power and translator televi-

sion stations operate "on UHF channels at much lower power

than full service (conventional) television stations." Neigh-

borhood TV Co., Inc. v. FCC, 742 F.2d 629, 631 (D.C. Cir.

1984). Section 1.1622(b) of the Commission's regulations

granted lottery preferences to "[a]pplicants, more than 50%

of whose ownership interests are held by members of minori-

ty groups." 47 C.F.R. s 1.1622(b)(1). In a statement ex-

plaining section 1.1622(b), the Commission provided several

entity-specific definitions of this standard. With respect to

"stock corporations," the Commission said: "If a majority of

the voting shares are held by minorities, the corporation is

entitled to a minority preference." Public Notice, Mimeo No.

6030 at 4 (released August 19, 1983). Of particular signifi-

cance to this case, the Commission said that for "non-stock

corporations" (for instance non-profit corporations), "[i]f a

majority of the governing board ... are minorities, the entity

is entitled to a minority preference." Id. See also Random

Selection Lotteries, 93 F.C.C.2d 952, 977 (1983) ("We agree

... that nonstock corporations ... should be judged as to

minority status on the basis of the composition of the

board.").

Limited to lotteries for low-power/translator television

station licenses, section 1.1622 did not address minority un-

derrepresentation in the lucrative full-power, commercial

television station market. A Commission advisory commit-

tee exploring the causes of underrepresentation in that mar-

ket concluded that minority broadcasters faced serious

shortages of capital. See Strategies for Advancing Minori-

ty Ownership Opportunities in Telecommunications 19

(May 1982). To address this problem, the committee sug-

gested that the FCC encourage partnerships between mi-

nority entrepreneur broadcasters and established broadcast-

ers. Id. at 24. The advisory committee warned, however,

that the Commission's multiple ownership regulation--which

limited the number of commercial broadcast licenses in

which a particular entity could have an interest--posed a

significant barrier to such partnerships. Because estab-

lished broadcasters holding the maximum permissible num-

ber of licenses would be unable to have "interests" in addi-

tional licenses, minority entrepreneurs with whom they

formed partnerships would be ineligible for television licens-

es. The advisory committee recommended that the Com-

mission grant "waivers or expansion of multiple ownership

and diversification requirements to established entrepre-

neurs who participate in telecommunications ventures with

minorities.... For example, FCC policies should allow an

established entrepreneur to acquire an equity interest in a

minority-controlled property that otherwise would exceed

multiple ownership limits...." Id. at 32.

In 1985, the Commission took a step toward facilitating the

partnerships the advisory committee had recommended. It

granted an exception to the multiple ownership limits for

"minority-controlled" broadcast stations. As amended, the

regulation stated:

No license for a ... TV broadcast station shall be

granted, transferred or assigned to any party (including

all parties under common control) if the grant, transfer

or assignment of such license would result in such party

or any of its stockholders, partners, members, officers or

directors, directly or indirectly, owning, operating or

controlling, or having a cognizable interest in, either:

(i) more than fourteen (14) stations in the same ser-

vice, or

(ii) more than twelve (12) stations in the same service

which are not minority-controlled.

47 C.F.R. s 73.3555(d)(1) (1990). In other words, section

73.3555 essentially limited broadcasters to having interests in

twelve licenses, except that they could have interests in two

additional licenses for "minority-controlled" stations. In lan-

guage central to this case, section 73.3555 continued: " '[M]i-

nority-controlled' means more than 50 percent owned by one

or more members of a minority group." Id.

s 73.3555(d)(3)(iii). Although section 73.3555 provided no

further definition of "minority-controlled," it concluded with

this note: "The word 'control' as used herein is not limited to

majority stock ownership, but includes actual working control

in whatever manner exercised." Id. s 73.3555 note 1.

Congress has since eliminated the multiple ownership lim-

its. See Telecommunications Act of 1996, Pub. L. No. 104-

104, s 202(c)(1)(A), 110 Stat. 56. But because the events

leading up to this case occurred during the period section

73.3555 was in effect, that section controls the disposition of

this case, as all parties agree.

Created by Dr. Paul Crouch in 1973, appellant Trinity

Christian Center of Santa Ana, Inc., d/b/a Trinity Broadcast-

ing Network ("TBN"), is a non-profit "electronic evangelical

ministry." Crouch serves as TBN's President. TBN pro-

duces its own religious programming, which it uses as the

core of its twenty-four hour broadcast. Its broadcasts also

include religious programs produced by other ministries--"a

wide variety of Protestant and Episcopalian denominations,

as well as Catholic, Seventh Day Adventist, and Messianic

Jewish programs." Reaching viewers throughout the coun-

try, TBN's programming is broadcast on TBN's own commer-

cial and translator television stations and on stations operated

by smaller non-profit corporations like appellant Trinity

Broadcasting Florida, Inc. ("TBF"), which Crouch created to

carry TBN programming.

Pearl Jane Duff, an African American minister, started as a

volunteer at TBN but was quickly hired as a salaried employ-

ee. She became Crouch's assistant in 1981 and has worked at

TBN in that capacity ever since. Shortly after Duff began

working for TBN, she was appointed to the boards of TBN

and TBF. She remained on those boards until resigning in

the summer of 1984.

In 1980, Crouch formed Translator TV, Inc. ("TTI"), prede-

cessor to intervenor National Minority Television, Inc., a non-

profit, non-stock religious broadcast corporation. Crouch

explained his creation of TTI as follows: In a conversation

with Richard Wiley, former Chairman of the FCC, Wiley

"impressed upon me very strongly that the emerging policy of

the FCC was to foster the integration of minorities into

broadcasting. He encouraged me to ... begin thinking of

directions that TBN could take as our network grew to assist

in the implementation of this emerging policy." According to

Crouch, he "conceived of the idea to organize a new company

that would integrate minorities into broadcasting and further

promote the emerging policy Mr. Wiley spoke to me

about.... I felt that TTI would both help to implement the

FCC's minority ownership policy and hopefully allow TBN to

develop, as new affiliates, stations that TTI might acquire."

Two of TTI's three board members were minorities: Duff

served as Vice President and Secretary, and Phillip Espinoza,

an Hispanic pastor, served as Chief Financial Officer.

Crouch, a non-minority and President of TTI, served as the

third board member.

Focusing on the translator television market, TTI filed

seventeen applications for FCC permits to construct transla-

tor television stations to rebroadcast TBN programming.

The Commission, however, had frozen all new translator

television applications, so it took no action on TTI's. When

the Commission promulgated section 1.1622(b)(1)'s minority

preference for translator television licenses, TTI amended its

pending applications and filed certifications with the FCC

claiming entitlement to minority preferences based on its

majority-minority board. Because translator television sta-

tion license applications were still frozen, the Commission had

no occasion to assess TTI's eligibility for a minority prefer-

ence. TTI held no other licenses and conducted very little

business while waiting for the Commission to act on its

applications, functioning for all intents and purposes as a part

of TBN: TTI maintained no separate bank account, it had no

accountant or lawyer of its own, and its board conducted its

annual meetings jointly with TBN's affiliates.

Meanwhile, the Commission had promulgated section

73.3555, the minority exception to the high-power multiple

ownership limit. At that time, Crouch and TBN held licenses

for twelve high-power stations. TBN's counsel, intervenor

Colby May, advised Crouch that TBN could acquire interests

in two additional stations as long as those stations were

"minority-controlled." May testified that he thought TTI was

minority-controlled because a majority of its board members

were minorities, and he so advised Crouch.

Deciding to broaden its focus from translator television to

commercial television, TTI changed its name to National

Minority Television, Inc. ("NMTV") and applied for a license

for a commercial high-power station in Odessa, Texas.

NMTV was the first minority broadcaster to claim section

73.3555's minority exception to the multiple ownership limit.

In an attachment to its Odessa application entitled "Broad-

cast Interests and Statement of Compliance with Rule

73.3555(d)," NMTV asserted that issuing it the license was

consistent with the multiple ownership regulation: "[W]hile

one of NMTV's principals, Paul F. Crouch, presently has an

interest in 12 commercial television facilities ... a majority of

its directors are minorities, and NMTV is therefore minority

controlled and in compliance with rule 73.3555(d)(1)." The

application did not mention that NMTV board member Duff

was employed by TBN, or that she had previously served on

TBN's board.

An attorney in the Commission's Mass Media Bureau as-

signed to review NMTV's application contacted May, asking

for more detail about NMTV. May explained that Trinity

would provide NMTV's financing and programming and that

Duff worked for Trinity. "Concerned" about the overlap

between Trinity and NMTV, the Commission attorney went

to his supervisor, who asked May for NMTV's bylaws. May

testified that the supervisor "was interested in determining

that NMTV's affairs were governed by the majority vote of

its directors, and that unanimous votes were not required."

After May provided the requested information, the Mass

Media Bureau and ultimately the Commission approved the

application.

Having obtained the Odessa license and acting on May's

advice, NMTV began observing more of the formalities of a

corporate entity. See Trinity Broad. of Florida, Inc., 14

F.C.C.R. 13570, 13591 p 56 (1999) ("Trinity"). It opened its

own bank accounts, began paying TBN for accounting and

legal services, and conducted regular board meetings. Id. at

13591 pp 56-57. NMTV also applied for a second license,

this one for a station in Portland, Oregon. Like the Odessa

application, the Portland application asserted that granting

NMTV the license would not violate the multiple ownership

regulation because NMTV was minority-controlled. Again,

the Commission approved the application. The Portland and

Odessa licenses gave Crouch interests in fourteen stations,

the limit under the multiple ownership rules.

Shortly after acquiring the Portland license, NMTV sold

the Odessa license, freeing it to purchase another station,

which it attempted to do by bidding on a license for a

bankrupt Wilmington, Delaware station. In its application to

the FCC for approval of the Wilmington purchase, NMTV

asserted, as it had in the Odessa and Portland applications,

that approving its license acquisition would not violate the

multiple ownership limits because, since minorities constitut-

ed a majority of its board, it was minority-controlled. A

petition filed by a challenger to NMTV's application asserted

that Crouch and TBN (not a minority-controlled corporation)

actually controlled NMTV and that Crouch had therefore

violated the multiple ownership regulation by having interests

in more than twelve stations, none of which was minority-

controlled. Before the FCC could resolve the question of

NMTV's minority status, NMTV withdrew its application

because its authorization from the Delaware bankruptcy court

to purchase the license had expired.

The question of NMTV's minority status arose again, this

time in the proceedings that led to the Commission's denial of

the commercial television license renewal at issue in this case.

When TBN's Florida affiliate, TBF, filed an application to

renew its license for WHFT, Channel 45, a commercial televi-

sion station in Miami, a competitor for the license asserted, as

had the party opposing the Delaware license, that Crouch had

violated the multiple ownership regulation by exerting control

over NMTV. The Commission issued a Hearing Designation

Order, instructing an Administrative Law Judge to deter-

mine, among other things, whether Crouch and TBN "exer-

cised de facto control over" NMTV, whether Crouch and TBN

abused the FCC's processes "by using NMTV to evade the

provisions" of the multiple ownership regulation, and whether

TBF "is qualified to remain a Commission licensee" in light of

any evidence adduced on the preceding two questions. Hear-

ing Designation Order, 8 F.C.C.R. 2475, 2481 p 48 (1993).

Examining Crouch's and TBN's conduct from 1987 to 1991

(the period during which TBF held the Miami license), the

ALJ concluded that TBN and Crouch exercised de facto

control over NMTV and that NMTV was therefore not "mi-

nority-controlled." Trinity Broad. of Fla., Inc., Initial Deci-

sion of Administrative Law Judge, 10 F.C.C.R. 12020 (1995).

The ALJ also ruled that "NMTV, Crouch and TBN abused

the Commission's processes" not only by creating NMTV as a

"sham corporation" to evade the multiple ownership regula-

tion, but also by repeatedly concealing material facts from the

Commission that would have demonstrated that TBN con-

trolled NMTV--primarily Duff's employment relationship

with TBN and the extensive interrelationship between TBN

and NMTV. Id. at 12061 pp 329-30 & n.47. The ALJ

concluded that Crouch's conduct in connection with TTI and

TTI's representations in its low power applications also sup-

ported an abuse of process finding. Id. at 12060 pp 325-26.

The Commission's Mass Media Bureau Trial Staff thought

section 73.3555's actual control requirement insufficiently

clear to justify denying TBF's license, but the ALJ disagreed,

finding that because of TBN's and Crouch's "willful" and

"egregious" misconduct, TBF was unqualified to hold the

Miami license. Id. at 12062 pp 331, 333.

By a three to two vote, the Commission upheld the ALJ's

abuse of process determination with respect to NMTV's high-

power Odessa and Portland television station applications.

Trinity, 14 F.C.C.R. 13570. Ruling that section 73.3555

required de facto minority control, the Commission found that

TBN, not NMTV's minority board, actually controlled NMTV.

"Commission rules and precedent have always given fair

notice that de facto control is required to take advantage of

the special provision concerning minority ownership in the

multiple ownership rules." Id. at 13602 p 86. "[T]he princi-

pals knew," the Commission concluded, "that, because of the

relationship between NMTV and TBN, their claim of minority

control was at best doubtful and at worst false." Id. at 13601

p 83. This "serious abuse of process with respect to NMTV's

full power applications" warranted denying TBF's license

renewal application. Id. at 13601 p 85, 13610 pp 100-01. In

view of that conclusion, the Commission addressed only brief-

ly the ALJ's abuse of process determination with respect to

the low-power/translator television license applications, re-

versing the ALJ because "applicants may well have been

confused ... that the exercise of de facto control by nonmi-

norities subverted the purposes of the minority ownership

policy...." Id. at 13601 p 85. Dissenting from the high-

power abuse of process determination and the denial of TBF's

renewal application, two commissioners disagreed with the

majority that section 73.3555 provided fair notice: "[Section

73.3555] certainly did not make clear that a de facto control

showing was necessary...." Id. at 13632 (Commissioners

Furchgott-Roth and Powell, dissenting in part). "In these

circumstances," they said, "we find that imposition of the

'death penalty' of disqualification is both unfair and unwar-

ranted." Id. at 13634.

Appellants TBN and TBF, joined by intervenors NMTV

and Colby May (throughout this opinion, we shall refer to

these appellants and intervenors as "Trinity"), challenge both

the Commission's determination that TBN and Crouch

abused Commission processes when NMTV filed high-power

applications asserting that it was "minority-controlled," and

the Commission's denial of TBF's renewal application. Trini-

ty does not challenge the Commission's finding that TBN

exercised de facto control over NMTV. Instead, it contends

that TBN's exercise of de facto control did not justify denying

TBF's license renewal. In support of this claim, Trinity

makes several arguments, only two of which require our

attention: (1) the Commission's interpretation of section

73.3555 as requiring de facto minority control is unreasonable;

and (2) even if the Commission's interpretation is reasonable,

the regulation failed to provide fair notice that de facto

minority control was required. We consider each argument

in turn.

II

Trinity argues that section 73.3555 requires only that a

majority of a non-profit entity's board members be minori-

ties. According to Trinity, the regulation does not require

that the minority board members exercise "actual," i.e., de

facto, control over the entity. Acknowledging our traditional

deference to an agency's interpretation of its own regula-

tions, Trinity contends that no deference is warranted in this

case because the Commission's interpretation of section

73.3555 as requiring de facto minority control conflicts with

the regulation's plain language. See Thomas Jefferson Univ.

v. Shalala, 512 U.S. 504, 512 (1994) (holding that agency's in-

terpretation may not be entitled to deference if an alterna-

tive interpretation "is compelled by the regulation's plain

language") (internal quotation marks omitted). Trinity relies

on the fact that section 73.3555's only definition of "minority-

controlled"--"more than 50 percent owned by one or more

members of a minority group," 47 C.F.R. s 73.3555(d)(3)(iii)

(1990)--says nothing about de facto control.

As the Commission points out, however, its de facto control

requirement derives directly from the term being defined, i.e.,

"minority-controlled." As the Commission also points out,

the definition of "minority-controlled" does not even apply to

Trinity, for it speaks only in terms of "ownership," a concept

having no meaning with respect to non-profit entities. For

these reasons, we agree with the Commission that no conflict

exists between section 73.3555's plain language and the Com-

mission's ruling that majority-minority boards of directors of

non-profit entities must exercise de facto control.

The question, then, is this: Does the Commission's inter-

pretation "sensibly conform" to both the purpose and the text

of the regulation? Buffalo Crushed Stone, Inc. v. Surface

Transp. Bd., 194 F.3d 125, 128 (D.C. Cir. 1999) (internal

quotation marks omitted). In answering this question, we

"accord [the Commission's] interpretation of its own regula-

tions a high level of deference, accepting it unless it is plainly

wrong." General Elec. Co. v. EPA, 53 F.3d 1324, 1327 (D.C.

Cir. 1995) (internal citations and quotation marks omitted).

"Our task is not to decide which among several competing

interpretations best serves the regulatory purpose;" rather,

"we must defer to the [agency's] interpretation unless an

alternative reading is compelled by the regulation's plain

language or by other indications of the [agency's] intent at

the time of the regulation's promulgation." Thomas Jeffer-

son Univ., 512 U.S. at 512 (internal quotation marks omitted).

"[E]ven where the petitioner advances a more plausible read-

ing of the regulations than that offered by the agency, it is

the agency's choice that receives substantial deference." GE,

53 F.3d at 1327 (internal quotation marks omitted). Applying

this exceedingly deferential standard of review, we conclude

that the Commission's requirement that majority-minority

boards of non-profit entities exercise de facto control repre-

sents a reasonable interpretation of section 73.3555.

We begin with the concept of "minority-controlled." As the

Commission points out, interpreting section 73.3555 as not

requiring de facto minority control would not only read the

word "controlled" out of the regulation, but would run counter

to the Commission's "longstanding focus on control" and real

parties in interest. The Commission put it this way in its

brief: "The agency has consistently looked beyond the owner-

ship structure of licensees to determine who is the 'real party

in interest'--whether a person 'is or will be in a position to

actually or potentially control the operation of the station.' "

Trinity's interpretation, moreover, would undermine the regu-

lation's purpose. "[I]t is hard to imagine," the Commission

reasoned, "how an entity controlled by minorities in name

only or in which the minorities' interests are totally passive

could foster the objective of the Commission's policies to

broaden minority voices and spheres of influence over the

airwaves." Trinity, 14 F.C.C.R. at 13602 p 87 (internal quo-

tation marks omitted). According to the Commission, inter-

preting the regulation to require only a majority-minority

board "would provide an incentive for non-minorities to hire

front-men." The Commission's position has intuitive logic:

How could an entity actually controlled by non-minorities be

"minority-controlled?"

In support of its interpretation of section 73.3555 as requir-

ing that non-stock corporations demonstrate actual minority

control, the Commission points to two additional authorities:

(1) Note 1 of section 73.3555, which provides that "[t]he word

'control' as used herein is not limited to majority stock

ownership, but includes actual working control in whatever

manner exercised," and (2) a footnote to the Commission's

1985 Order adopting section 73.3555's minority exception, see

Amendment of Section 73.3555, 100 F.C.C.2d 74, 95 n. 59

(1985), which cites a 1982 Policy Statement saying that pref-

erential treatment in the form of tax certificates would be

granted " 'where minority ownership is in excess of 50% or

controlling. Whether certificates would be granted in other

cases will depend on whether minority involvement is signifi-

cant enough to justify the certificate in light of the purpose of

the policy announced herein.' " Trinity, 14 F.C.C.R. at 13603

p 88 (quoting Minority Ownership in Broad., 92 F.C.C.2d

849, 853 p 7 (1982)) (emphasis added). Both statements de-

fine control in terms of either majority stock ownership or

actual control. Because non-profits like Trinity, having no

stockholders, are unable to demonstrate "majority stock own-

ership," we think it not unreasonable for the Commission to

read Note 1 and the 1982 Policy Statement to require non-

profits to show actual control by minorities.

Relying on Southwest Texas Public Broadcasting Council,

85 F.C.C.2d 713, 715 (1981), the Commission also contends

that it has "long-standing precedent, applicable to non-stock

corporations such as NMTV, that 'control' encompasses every

form of actual or legal control over basic operating policies."

Trinity, 14 F.C.C.R. at 13602 p 86. In Southwest Texas, the

agency "looked beyond legal title" at who actually controlled

the operation of a station licensed to a non-profit entity in

order to determine whether the non-profit had illegally trans-

ferred control of the station. 85 F.C.C.2d at 715. Although

Southwest Texas involved a provision of the Communications

Act not at issue here, the case supports the Commission's

general argument that it goes beyond legal formalities--legal

title in that case and boards of directors here--to determine

control.

Urging us not to defer to the Commission's interpretation

of section 73.3555, Trinity argues that requiring de facto

minority control conflicts with prior Commission statements.

It points first to the Commission's statement that "[i]n a non-

stock corporation the Commission normally looks to directors

in evaluating ownership and control." Hearing Designation

Order, 8 F.C.C.R. at 2475 p 4 n.1 (citing Roanoke Christian

Broad., Inc., 52 R.R.2d 1725 (Rev. Bd. 1983)) (emphasis

added). The Commission has a persuasive response: Look-

ing first to the board of directors as one indicator of control is

not at all inconsistent with its interpretation of section

73.3555 as requiring that majority-minority boards actually

control non-profit corporations.

Trinity next points to the Commission's statement in con-

nection with section 1.1622 (the low-power regulation) that

"[i]f a majority of the governing board ... are minorities,

the entity is entitled to a minority preference." Public

Notice, Mimeo No. 6030 at 4 (released August 19, 1983). This

statement, Trinity argues, forecloses the Commission from

interpreting section 73.3555 as requiring de facto minority

control. We disagree. The statement was made in connec-

tion with the Commission's regulation governing minority

preferences in the low-power market, and until this proceed-

ing the Commission had never addressed how section 73.3555

applies to non-stock corporations. As the Commission itself

said when it promulgated section 73.3555, it "has adopted

different standards of minority control depending on the

mechanism used to foster its minority policies." Amendment

of Section 73.3555, 100 F.C.C.2d at 95 p 46.

We are equally unpersuaded by Trinity's contention that

the Commission's interpretation of section 73.3555 conflicts

with the agency's position before the Supreme Court in Metro

Broadcasting, 497 U.S. 547, where the Commission defended

the intrinsic value of minority ownership. Not only does

Trinity's argument rely on an incorrect assumption--that the

Commission's previous recognition of minority ownership's

value bars it from taking a different position when interpret-

ing a different regulation--but the Commission's interpreta-

tion here is not necessarily inconsistent with its prior empha-

sis on ownership. Because this case involves the definition of

"controlled" in the context of non-profits for which the con-

cept of "ownership" has no meaning, the Commission's prior

emphasis on ownership casts no doubt on its interpretation of

section 73.3555.

Trinity next argues that the Commission's definition of

"minority-controlled" undermines section 73.3555's purpose.

Acknowledging that section 73.3555 was designed to encour-

age established broadcasters to provide support to minority

broadcasters, Trinity says that "a de facto control standard

could lead to exceedingly difficult interpretive questions. A

bright line 'ownership' standard [is] more workable than a

more nebulous 'ownership' and de facto control standard....

[Bright-line] rules prevent 'controversy and confusion,' there-

by 'encourag[ing] settled expectations and, in doing so, fos-

ter[ing] investment by businesses and individuals.' "

Perhaps Trinity is correct. Perhaps requiring de facto

minority control will discourage established broadcasters, or

at least non-profit established broadcasters, from providing

the kinds of assistance that the Commission had hoped sec-

tion 73.3555 would foster and that Trinity made available to

NMTV. A challenge to an agency's interpretation of its own

regulation, however, turns not on whether the challenger has

articulated a rationale to support its interpretation, but on

whether the agency has offered an explanation that is reason-

able and consistent with the regulation's language and histo-

ry. See GE, 53 F.3d at 1327. In this case, we have no doubt

that the Commission's desire to promote true minority control

and to prevent sham arrangements is sufficient to justify its

interpretation of section 73.3555 as requiring de facto minori-

ty control.

Finally, Trinity observes that, in a dissent from the Com-

mission's Order adopting section 73.3555, Commissioner Pat-

rick interpreted the regulation as not requiring de facto

minority control: "Under the majority's scheme, the right to

purchase broadcast stations over the established ceiling turns

upon the race of the proposed owners alone. No further

showing is required with respect to how these new owners

may contribute to diversity. No concern is given as to

whether the 51% minority owners will exert any influence on

the station's programming or will have any control at all."

Amendment of Section 73.3555, 100 F.C.C.2d at 104 (Commis-

sioner Patrick dissenting in part). Because the majority

adopting section 73.3555 neither responded to this concern

nor offered a contrary interpretation, Trinity argues that the

Commission may not now interpret section 73.3555 to give

any "concern" to whether the minority owners "will have any

control at all." In the decision on appeal in this case,

however, the Commission interpreted section 73.3555 as re-

quiring de facto minority control, and it is to that decision, not

to the earlier dissent, that we owe deference.

To sum up, requiring de facto minority control of non-profit

corporations represents a reasonable interpretation of section

73.3555. Although Trinity offers a plausible alternative inter-

pretation, we cannot say, in view of the regulation's language

and underlying policy, that the Commission's interpretation is

"plainly wrong."

III

Were we simply reviewing the Commission's interpretation

of its regulation, our task would be at an end. But the

Commission has not just interpreted section 73.3555. Con-

cluding that Trinity had abused Commission processes by

exercising de facto control over NMTV in violation of section

73.3555, the Commission imposed a severe penalty--denial of

Trinity's application to renew its commercial television station

license. Because "[d]ue process requires that parties receive

fair notice before being deprived of property," we have re-

peatedly held that "[i]n the absence of notice--for example,

where the regulation is not sufficiently clear to warn a party

about what is expected of it--an agency may not deprive a

party of property by imposing civil or criminal liability." GE,

53 F.3d at 1328-29. We thus ask whether "by reviewing the

regulations and other public statements issued by the agency,

a regulated party acting in good faith would be able to

identify, with ascertainable certainty, the standards with

which the agency expects parties to conform...." Id. at

1329 (internal quotation marks omitted).

In Satellite Broadcasting Co., Inc. v. FCC, 824 F.2d 1 (D.C.

Cir. 1987), for example, the Commission had dismissed as

untimely applications to operate radio stations, finding that

the applications had been filed in the wrong location. Be-

cause the rules addressed the filing of applications "in a

baffling and inconsistent fashion," we held that the FCC had

failed to give fair notice of its interpretation and thus could

not "use that interpretation to cut off a party's right." Id. at

2, 4. In GE, EPA had fined General Electric for distilling

used solvents and incinerating only the contaminated portion

instead of immediately incinerating the entire solution. 53

F.3d at 1326-27. Although we deferred to EPA's interpreta-

tion of its regulations as requiring immediate incineration of

the entire solution, we held that the agency could not fine GE

for its failure to comply with an interpretation that was "so

far from a reasonable person's understanding of the regula-

tions that [the regulations] could not have fairly informed GE

of the agency's perspective." Id. at 1330. See also, e.g.,

United States v. Chrysler Corp., 158 F.3d 1350, 1354-57 (D.C.

Cir. 1998) (holding that agency failed to provide fair notice of

specific requirements of compliance testing and government

therefore could not seek an automobile recall on the ground

that Chrysler had failed properly to perform the testing);

Rollins Envtl. Svcs. (NJ) Inc. v. EPA, 937 F.2d 649, 653

(D.C. Cir. 1991) (rescinding fine assessed by EPA because

regulation was ambiguous); Gates & Fox Co., Inc. v. OSHRC,

790 F.2d 154, 156 (D.C. Cir. 1986) (holding that agency failed

to give fair notice of its interpretation that breathing equip-

ment was required where the regulation "would reasonably

be read" not to require the equipment).

Conceding that the denial of a broadcast license triggers

due process protection, the Commission argues that section

73.3555 gave fair notice that non-profit entities had to demon-

strate de facto minority control. Trinity disagrees. Not only

did section 73.3555 itself fail to make clear that non-profits

had to show anything other than a majority-minority board,

Trinity argues, but Commission statements in connection with

the low-power minority preference regulation, together with

Commission action on Trinity's high-power applications, led it

to believe that a majority-minority board was sufficient.

We begin again with section 73.3555's requirement that an

entity be "minority-controlled." This time we ask not wheth-

er interpreting the term "minority-controlled" as requiring de

facto minority control in the non-profit context is "plainly

wrong," but whether that interpretation is "ascertainably

certain." Although section 73.3555 never defines "minority-

controlled" in the context of non-profit organizations, the

Commission maintains that section 73.3555's use of the word

"controlled" should have made clear to Trinity that the agen-

cy was interested in actual control. Under the circumstances

of this case, we disagree.

To begin with, the Commission never clearly articulates its

theory of where or how section 73.3555 requires "actual

minority control." At various points in both its decision and

in its brief here, the Commission appears to contend that the

term "minority-controlled" requires an entity to show that

minorities have either majority stock ownership or actual

control; since non-profits lack stock owners and cannot show

that they are "more than 50 percent owned by one or more

members of a minority group," they must demonstrate actual

minority control. See, e.g., 14 F.C.C.R. at 13603-04 p 88

("[W]hat the Commission had in mind was 50 percent owner-

ship that constitutes voting control or an equivalent degree of

interest."). Elsewhere, however, the Commission seems to

agree with Trinity that "stock ownership" means board mem-

bership in the non-profit context. Viewed this way, the actual

control requirement stems from the word "ownership"--enti-

ties must demonstrate not only that minorities own more than

fifty percent of the stock or that they have majority-minority

boards, but also that those "ownership" interests are bona

fide. Id. at 13604 p 90 ("[T]he Commission has consistently

required that minorities have both a substantial equity inter-

est and actual control of the station."). In other words, both

non-profits and stock corporations would have to show de

facto minority control. As we said of a similar situation in

GE, "[s]uch confusion does not inspire confidence in the

clarity of the regulatory scheme." 53 F.3d at 1332.

The Commission argues that "[a] reasonable reader could

have ascertained that a regulation requiring 'minority control'

by implication forbade control by non-minorities." This argu-

ment might have some force but for the fact that the Com-

mission's only clear statements (until it refused to renew

Trinity's Florida license) about what constituted minority

control over "non-stock corporations" like Trinity were these:

"If a majority of the governing board ... are minorities, the

entity is entitled to a minority preference," Public Notice,

Mimeo No. 6030 at 4 (released August 19, 1983); and "[w]e

agree ... that nonstock corporations ... should be judged

as to minority status on the basis of the composition of the

board." Random Selection Lotteries, 93 F.C.C.2d at 977. To

be sure, the Commission made these statements in connection

with section 1.1622, the low-power minority preference rule,

but section 1.1622's language is virtually identical to section

73.3555's: the former granted minority preferences to "[a]p-

plicants, more than 50% of whose ownership interests are

held by members of minority groups," 47 C.F.R.

s 1.1622(b)(1); the latter granted preferences to entities

"more than 50 percent owned by one or more members of a

minority group." 47 C.F.R. s 73.3555(d)(3)(iii) (1990). Appli-

cants could thus have assumed, quite reasonably we think,

that section 1.1622's statements regarding non-stock corpora-

tions applied equally to section 73.3555. And just as those

statements "may well have ... confused" low-power appli-

cants, as the Commission itself found, Trinity, 14 F.C.C.R. at

13601 p 85, they may have "confused" high-power applicants

like Trinity.

The Commission responds that the absence of a similar

statement in connection with section 73.3555 should have

alerted Trinity that a majority-minority board was insuffi-

cient for section 73.3555 purposes. But the standard is

"ascertainable certainty." Although we agree with the Com-

mission that its statements in the low-power context do not

"carr[y] over automatically" into the full-power realm, we also

think that where, as here, the agency failed to provide a

relevant definition for the key regulatory term--"minority-

controlled"--the applicant is entitled to rely on the agency's

prior interpretation of a nearly identical regulation. See

Satellite Broad., 824 F.2d at 4 ("The Commission through its

regulatory power cannot, in effect, punish a member of the

regulated class for reasonably interpreting Commission rules.

Otherwise the practice of administrative law would come to

resemble 'Russian Roulette.' ").

Given the facts of this case, Trinity's interpretation of

section 73.3555 as requiring only a majority-minority board is

particularly understandable. After NMTV's predecessor,

TTI, applied for low-power/translator television licenses, the

Commission issued its low-power/translator television minori-

ty preference regulation along with its statement "that non-

stock corporations ... should be judged as to minority status

on the basis of the composition of the board." Random

Selection Lotteries, 93 F.C.C.2d at 977. Issuing a Public

Notice informing TTI and other low-power/translator televi-

sion license applicants of section 1.1622's passage and in-

structing them to complete supplemental forms regarding

their eligibility for minority preferences, the Commission

reiterated: For "non-stock corporations ... [i]f a majority of

the governing board ... are minorities, the entity is entitled

to a minority preference." Public Notice, Mimeo No. 6030 at

4 (released August 19, 1983). When NMTV moved into the

high-power, commercial television realm with its Odessa li-

cense application, nothing in section 73.3555 signaled that the

Commission might require non-stock corporations to demon-

strate anything beyond a majority-minority board. No won-

der Crouch, acting on the advice of counsel, assumed that if

the company was entitled to a minority preference under the

low-power regulation, the Commission would consider it "mi-

nority-controlled" under the virtually identical high-power

regulation. NMTV's commercial television station license

applications, moreover, disclosed that NMTV was operating

on exactly that belief. In support of NMTV's claims to

minority preferences, the applications stated that "a majority

of its directors are minorities, and NMTV is therefore minori-

ty controlled." Based on both these representations and its

own investigation into NMTV's license application, the Com-

mission awarded NMTV the Odessa license. May testified

that the award of the Odessa license "further confirmed my

belief that NMTV's structure complied with Commission poli-

cy." Not until the Commission began inquiring into NMTV's

application for the Wilmington license did the agency give

NMTV any reason to believe that "minority-controlled" might

mean something beyond a majority-minority board.

Neither Note 1 nor the Commission's footnote reference to

its 1982 Policy Statement gave Trinity "fair notice" that the

Commission was abandoning its low-power approach and

interpreting section 73.3555 to require minority directors of

non-profit organizations to demonstrate actual control. Even

setting aside the fact that the 1982 Policy Statement appears

only in a footnote, see McElroy Electronics Corp. v. FCC, 990

F.2d 1351, 1366 (D.C. Cir. 1993) (cautioning the Commission

"not to bury what it believes to be the heart of its order in the

last line of a footnote"), because the Commission has equated

seats on non-profit boards with "ownership" in other contexts,

see Hearing Designation Order, 8 F.C.C.R. at 2475 p 4 n.1

("In a non-stock corporation the Commission normally looks

to directors in evaluating ownership and control.") (citing

Roanoke, 52 R.R.2d 1725), a non-profit applicant could rea-

sonably interpret Note 1 and the 1982 Policy Statement to

mean that a non-profit entity would have to show either that

it had a majority-minority board or that minorities had actual

control, not both. See Trinity, 14 F.C.C.R. at 13628-30

(Commissioners Furchtgott-Roth and Powell, dissenting in

part).

Nor can we find "ascertainable certainty" in Southwest

Texas. Perhaps in hindsight the Commission's action in that

case--determining whether an unauthorized transfer of con-

trol had occurred by going beyond the formality of legal title

to examining a television station's actual operations--could

reflect a "long-standing" policy of looking at actual, rather

than formal, control. But the Commission had given no

indication that a general policy expressed in Southwest Texas,

a case arising in a different factual setting under a different

provision of the Communications Act, would transfer to sec-

tion 73.3555's definition of "minority-controlled."

Finally, section 73.3555's underlying purpose cannot pro-

vide the fair notice required by due process. Before an

agency can sanction a company for its failure to comply with

regulatory requirements, the agency "must have either put

this language into [the regulation] itself, or at least refer-

enced this language in [the regulation]." Chrysler, 158 F.3d

at 1356. General references to a regulation's policy will not

do.

We find the Commission's insistence that section 73.3555

provided fair notice particularly problematic in view of the

Commission's failure to explain satisfactorily how denying

Trinity's license can be reconciled with cases where it found

regulatory requirements too unclear to justify sanctioning

other broadcasters. In Fox Television Stations, Inc., 10

F.C.C.R. 8452 (1995), on reconsideration, 11 F.C.C.R. 5714

(1995), for example, the Commission ruled that when deter-

mining whether a licensee had exceeded a twenty-five percent

statutory benchmark for alien ownership, it would measure

"ownership" by considering the percentage of alien equity

capital contributions rather than the percentage of outstand-

ing shares of all classes of stock held by aliens. Measured by

that standard, Fox's alien ownership far exceeded the statuto-

ry benchmark because "foreign interests contributed more

than 99% of the capital of all classes of stock," a fact that

Fox's applications failed to reveal. Id. at 8474 p 50. Con-

cluding, however, that Fox's interpretation of the statute as

requiring it to report only the percentage of alien stock

ownership was "not facially implausible," id. at 5808 p 137,

and that "our reported decisions ... would not necessarily

have led a reasonable applicant" to the conclusion that the

Commission would measure ownership in terms of equity

contributions, the Commission chose not to deny Fox's license

renewal. Id. at 8486 p 82 (emphasis added). The Commis-

sion reached a similar result in CBS, Inc., 69 F.C.C.2d 1082,

1092-93 (1978), refusing to deny CBS licenses in spite of the

company's "misrepresentations" to the Commission: "Since

there have been no prior cases of a similar nature to serve as

examples ... network management heretofore has not been

made aware ... of the grave consequences to the licensee

which can result from such misrepresentations of facts to the

Commission." See also Roy M. Speer, 11 F.C.C.R. 18393,

18422-23 (1996) (concluding that Silver King, a Home Shop-

ping Network spin-off, had violated the FCC's ownership

attribution rules, but refusing to revoke its license "given the

various legal conclusions that can be drawn from Silver

King's documented activities.")

If Fox's "not facially implausible" interpretation did not

warrant denying its license renewal application, how can

Trinity's "perhaps literally accurate" (the Commission's own

words) interpretation justify denying its license renewal ap-

plication? If the absence of "prior cases of a similar nature

to serve as examples" persuaded the Commission not to

sanction CBS for its misrepresentations, how can the Com-

mission justify penalizing Trinity in view of the fact that not

only was there no agency precedent regarding control of non-

profits, but Commission statements supported Trinity's belief

that a majority-minority board was sufficient to obtain a

minority preference? The Commission never answers these

questions--not in its decision, not in its brief, not at oral

argument. See Orion Communications Ltd. v. FCC, 131

F.3d 176, 181 (D.C. Cir. 1997) ("Although the Commission is

not necessarily bound by its prior decisions, ... the Commis-

sion is bound to provide an explanation when it departs from

a clear precedent.").

For all of these reasons, our conclusion in GE applies here

as well: "Where, as here, the regulations and other policy

statements are unclear, where the petitioner's interpretation

is reasonable, and where the agency itself struggles to pro-

vide a definitive reading of the regulatory requirements, a

regulated party is not 'on notice' of the agency's ultimate

interpretation of the regulations, and may not be punished."

53 F.3d at 1333-34.

IV

The Commission contends that even "[i]f the Court dis-

agrees with our assessment" that the regulation clearly re-

quired de facto minority control, "it may still find that TBN

intended to mislead the Commission by creating a sham

ownership structure...." Conceding that the commercial

television station application asked for information about nei-

ther the TBN/NMTV relationship nor Duff's employment

with TBN, the Commission faulted Trinity because "[a] rea-

sonable person could appreciate that if all the circumstances

had been made clear, the Commission would have had ample

reason to inquire further and ultimately to deny NMTV's

application." Trinity, 14 F.C.C.R. at 13601 p 84. But this

argument rests entirely on the Commission's flawed conclu-

sion that the regulation clearly required de facto minority

control. Unless the de facto control requirement was ascer-

tainably certain, a "reasonable person" would not have been

able to "appreciate" the need to disclose these facts. Indeed,

in view of the low-power regulation's statement that a majori-

ty-minority board entitled an entity to a minority preference,

a "reasonable person" might well have thought that informa-

tion about the relationship between NMTV and TBN was

irrelevant. Asked about this at oral argument, Commission

counsel candidly conceded that if the regulation was not clear,

Trinity would have had no obligation to disclose the omitted

information because it would not have known that the infor-

mation was at all "material."

The Commission also argues that Trinity had actual notice

of the de facto control requirement. Not only does this

amount to a post-hoc rationalization--the Commission no-

where relied on actual knowledge as a basis for finding abuse

of process, see SEC v. Chenery, 318 U.S. 80, 95 (1943) ("[A]n

administrative order cannot be upheld unless the grounds

upon which the agency acted in exercising its powers were

those upon which its action can be sustained.")--it also rests

on the Commission's misleading use of a fragment of the

testimony of Trinity's lawyer, Colby May. The Commission's

brief quotes May as saying: " 'I understood always that the

Board of Directors of [NMTV] had to be the parties that were

in fact controlling and operating [NMTV].' " The Commis-

sion neither quotes nor acknowledges the second half of

May's sentence: "... and they did that by coming to meet-

ings, participating in the discussions at meetings, voting at

meetings, and generally directing the policies and affairs of

the company." It was because of this advice that, after

NMTV was awarded the Odessa license, its board began

observing these formalities. Asked about all of this at oral

argument, Commission counsel conceded that there was no

actual notice and that if we were to disagree with the

Commission's conclusion that the regulation was clear, "that's

the end of the case."

The Commission's denial of Trinity's license renewal appli-

cation is vacated.

So ordered.