Vernal Enterprises, Inc. v. Federal Communications Commission

Notice: This opinion is subject to formal revision before publication in the

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 4, 2003 Decided January 27, 2004

No. 02-1297

VERNAL ENTERPRISES, INC. AND

LARRY L. SCHRECONGOST,

PETITIONERS

v.

FEDERAL COMMUNICATIONS COMMISSION AND

UNITED STATES OF AMERICA,

RESPONDENTS

On Petition for Review of an Order of the

Federal Communications Commission

John M. Pelkey argued the cause and filed the briefs for

petitioners. Larry L. Schrecongost entered an appearance.

Harry M. Wingo, Jr., Counsel, Federal Communications

Commission, Robert H. Pate III, Acting Assistant Attorney

General, U.S. Department of Justice, Robert B. Nicholson

Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.

2

and Andrea Limmer, Attorneys, John A. Rogovin, General

Counsel, Federal Communications Commission, and Daniel

M. Armstrong, Associate General Counsel were on the brief

for respondents. Jane E. Mago, Assistant General Counsel,

C. Grey Pash, Jr., Counsel, and Adam D. Hirsh, Attorney,

U.S. Department of Justice, entered appearances.

Before: EDWARDS, SENTELLE, and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge EDWARDS.

EDWARDS, Circuit Judge: Petitioners Vernal Enterprises,

Inc., and Larry L. Schrecongost, the company’s President,

seek review of an order of the Federal Communications

Commission (‘‘FCC’’ or ‘‘the Commission’’) denying their re-

quest for refund of a $2,335.00 filing fee paid in connection

with a permit application for construction of a broadcast

station. See Vernal Enter., Inc., 17 F.C.C.R. 14,826 (2002).

Vernal was one of a number of mutually exclusive applicants

vying for a permit to construct a radio station in Brookville,

Pennsylvania. In January 1998, Vernal and the other appli-

cants filed a settlement agreement with the FCC pursuant to

which the construction permit was awarded to another appli-

cant. In April 2000, two years after the FCC approved the

settlement agreement and dismissed Vernal’s application, pe-

titioners requested a refund of the fee paid when Vernal filed

its application in 1996.

The Commission denied the refund request by memoran-

dum opinion and order on July 23, 2002. The Commission

held that, under the applicable agency policy, application fees

would be refunded only to applicants who had not resolved

their mutually exclusive applications through negotiated

agreements within 180 days of August 5, 1997, and whose

pending mutually exclusive applications would therefore be

resolved pursuant to the agency’s newly implemented compet-

itive bidding process. Petitioners now seek review of the

Commission’s order, claiming that the agency’s denial of the

refund request was arbitrary and capricious. 5 U.S.C.

§ 706(2)(A) (2000).

The Commission first contends that the court is without

jurisdiction to hear this case, because petitioners failed to

3

appeal within the 30 days allowed under 47 U.S.C. § 402(b)

(2000). See 47 U.S.C. § 402(c). We reject this argument.

Petitioners are properly seeking review under 47 U.S.C.

§ 402(a), and their petition for review was filed within the 60-

day limitation applicable to that statutory provision.

The Commission argues, in the alternative, that the agen-

cy’s enforcement of the disputed fee-refund policy was rea-

sonable and did not violate the arbitrary and capricious

standard of the Administrative Procedure Act. We agree.

We therefore deny the petition for review.

I. BACKGROUND

In August 1997, Congress amended § 309(j) of the Com-

munications Act (‘‘the Act’’) to require the FCC to use

competitive bidding (also known as auctions), rather than

comparative hearings, in connection with mutually exclusive

applications for commercial broadcast authorizations. See

Balanced Budget Act of 1997, Pub. L. No. 105-33,

§ 3002(a)(1), 111 Stat. 251, 258-59 (1997). Congress also

added a new section to the Communications Act, 47 U.S.C.

§ 309(l), allowing the Commission to determine whether to

use competitive bidding or comparative hearings in connec-

tion with mutually exclusive applications pending as of July

1, 1997. See § 3002(a)(3), 111 Stat. at 260. This new sec-

tion also provided a 180-day period during which pre-July

1, 1997 applicants who entered into settlement agreements

resolving mutual exclusivity would not be subject to FCC

rules limiting the amount of settlement payments between

applicants. See id.

In a notice of proposed rulemaking issued in November

1997, the FCC ‘‘tentatively’’ concluded that the use of auc-

tions to resolve pending comparative licensing cases would

‘‘better serve[ ] the public interest than deciding them by

comparative hearingTTTT’’ Implementation of Section 309(j) of

the Communications Act – Competitive Bidding for Commer-

cial Broadcast and Instructional Television Fixed Service

Licenses, Notice of Proposed Rulemaking, 12 F.C.C.R. 22,363,

22,369-70 ¶ 14 (1997) [hereinafter Notice of Proposed Rule-

4

making]. The Commission noted that it was seeking ‘‘com-

ment on whether we should continue to use comparative

hearings for some or all of these cases.’’ Id. at 22,370 ¶ 14.

In conjunction with its tentative decision to subject pending

applications to competitive bidding, the Commission also pro-

posed to refund the filing fees paid by applicants who chose

not to participate in the auction process. Id. at 22,370-71

¶ 16.

In August 1998, the FCC issued a report and order imple-

menting its auction authority. See Implementation of Section

309(j) of the Communications Act – Competitive Bidding for

Commercial Broadcast and Instructional Television Fixed

Service Licenses, First Report and Order, 13 F.C.C.R. 15,920

(1998), on reconsideration, Memorandum Opinion and Order,

14 F.C.C.R. 8,724 (1999), aff’d. mem., Orion Communica-

tions, Ltd. v. FCC, 221 F.3d 196 (D.C. Cir. 2000) [hereinafter

Report and Order]. The Commission also promulgated a fee-

refund policy in conjunction with the Report and Order. The

policy provided:

On or before the date for filing a short-form application,

pending applicants in all comparative licensing cases

subject to resolution by competitive bidding pursuant to

§ 309(l) may file a pleading disavowing any interest in

participating in the auction and seeking the dismissal of

their applications. Once dismissal of any such applica-

tion is final, we will entertain requests for refunds of any

hearing and filing fees actually paid by such applicants.

Id. at 15,957 ¶ 102.

In May 1996, Vernal Enterprises, Inc., a closely held

corporation owned by Larry L. Schrecongost and his wife,

filed an application for a permit to construct a new FM radio

station in Brookville, Pennsylvania. Vernal payed a $2335.00

filing fee in connection with the application. Several other

parties, including Robert Stevens and Renda Radio, Inc., also

filled applications to construct a station in the Brookville

community. Because the applicants sought to use the same

FM frequency, the Commission was required to decide to

whom the construction permit should be awarded. The

5

Brookville applications were pending in August 1997 when the

relevant amendments to the Communications Act were

adopted.

In January 1998, within the 180-day period during which

FCC limitations on settlement agreements were waived and

over six months before the FCC determined that all pending

pre-July 1997 applications would be subject to competitive

bidding, Vernal entered into a settlement agreement with the

other Brookville applicants. In April 1998, the FCC issued a

public notice announcing that, pursuant to the settlement,

Renda Radio, Inc. would be awarded the construction permit

and all other applications, including Vernal’s, would be dis-

missed. FM Broadcast Settlement Agreements and Applica-

tions, 1998 WL 174,855 (Apr. 16, 1998). The dismissals

became final in May 1998.

In October 1998, Stevens, who, like Vernal, sought dismiss-

al of his permit application pursuant to the settlement, re-

quested a refund of his filing fee. A staff member of the

Commission’s Office of Managing Director (‘‘OMD’’) granted

Stevens’ request in July 1999, and notice of the refund was

released in February 2000. Fee Decisions of the Managing

Director, 15 F.C.C.R. 2826, 2829 (2000).

Vernal filed a request for a refund of its filing fee in April

2000. The OMD denied the request in a January 14, 2002

letter order. See Letter from Mark A. Reger to Larry S.

Schrecongost, reprinted in Joint Appendix (‘‘J.A.’’) 24. The

staff letter explained that, in implementing the competitive

bidding rules, the FCC had contemplated refunds of filing

fees in ‘‘circumstances where a permit is ultimately awarded

pursuant to the auction process, not where a permit is

awarded as a result of a settlement agreement among com-

peting applicants.’’ Id. at 25 (emphasis in the original). The

letter indicated that a 1999 public notice had made the FCC’s

intention clear and had stated that, ‘‘to the extent Settlements

contain provisions requesting that the Commission refund

previously paid filing fees, those provisions are inconsistent

with the Commission’s decision in the auction proceedings

concerning filing fee refunds.’’ Id. at n.2. The staff letter

6

acknowledged that the OMD had granted a refund request

made by another dismissed Brookville applicant and indicated

that that decision ‘‘was in error.’’ Id. at 25.

Petitioners filed an application for review before the Com-

mission on February 13, 2002. Application for Review (File

No. BPH-960520MD), reprinted in J.A. 27. The Commission

issued a memorandum opinion and order on July 23, 2002

denying the application for review. Vernal Enter., Inc., 17

F.C.C.R. 14,826 (2002). Citing to Wade Communications,

Inc., 16 F.C.C.R. 20,708 (2001), the FCC explained that the

fee-refund policy promulgated in conjunction with the Report

and Order made it clear that fees would be refunded only ‘‘to

the remaining pre-July 1, 1997 applicants for licenses or

permits who had not resolved their mutual exclusivity

through negotiated agreements during the 180-day period TTT

and whose pending mutually exclusive applications would

therefore be resolved pursuant to our decision to use competi-

tive bidding.’’ Vernal 17 F.C.C.R. at 14,827 ¶ 5. The FCC

concluded that Vernal, whose application was dismissed pur-

suant to a settlement agreement entered into during the

specified 180-day period and before the Commission’s decision

to subject all remaining pre-July 1997 applications to auction,

was not entitled to a refund. See id. The FCC acknowledged

that, prior to its decision in Wade Communications, staff

persons in OMD had granted some fee refunds to parties, like

petitioners, who had withdrawn their applications pursuant to

settlement agreements entered into before the applications

became subject to competitive bidding. See id. at 14,827-28

¶ 6. The FCC explained, however, that Wade Communica-

tions made it clear that these staff actions were not author-

ized by the Commission and that they were at odds with

agency policy. See id. at 14,828 ¶ 6. On September 23, 2002,

within 60 days of the issuance of the Commission’s order,

petitioners filed the instant petition for review.

II. ANALYSIS

A. Jurisdiction

As an initial matter, the FCC contends that this court is

without jurisdiction to hear this case. The Commission ar-

7

gues that petitioners incorrectly petitioned for review within

the 60-day filing period applicable to 47 U.S.C. § 402(a),

rather than seeking review within the 30 days applicable to

§ 402(b). The FCC’s position is unavailing. Petitioners

properly pursued their claim under 47 U.S.C. § 402(a), and

we consequently have jurisdiction to hear this matter.

Section 402 describes two mutually exclusive channels for

the review of FCC decisions. See Tribune Co. v. FCC, 133

F.3d 61, 66 (D.C. Cir. 1998); Friedman v. FCC, 263 F.2d 493,

494 (D.C. Cir. 1959). Section 402(b) provides for appeal of

FCC orders in nine enumerated situations. All but one,

which is not relevant here, involve the Commission’s licensing

authority. For all other final orders of the Commission,

§ 402(a) provides that review shall be sought ‘‘as provided by

and in the manner prescribed in Chapter 158 of Title 28.’’

See 28 U.S.C. §§ 2341-2351 (2000). Under § 402(b), an ap-

peal must be taken within 30 days of the date of public notice

of the order at issue. See 47 U.S.C. § 402(c). Section 402(a)

petitions for review must be filed within 60 days of the date of

public notice. See 28 U.S.C. § 2344. Under either provision,

an appeal filed out of time ‘‘must be dismissed’’ for lack of

jurisdiction. Waterway Communications Sys., Inc. v. FCC,

851 F.2d 401, 405 (D.C. Cir. 1988) (emphasis in original)

(citation and internal quotations omitted).

The FCC admits that the refund order at issue here does

not fall within one of the enumerated categories of § 402(b).

However, relying primarily on the ‘‘ancillary to’’ rationale of

Tomah-Mauston Broadcasting Co. v. FCC, 306 F.2d 811

(D.C. Cir. 1962), the agency argues that the order here is so

‘‘intimately associated with’’ the application process as to

require review under § 402(b). According to the FCC, the

refund order was issued ‘‘solely because Vernal filed an

application for a construction permitTTTT The FCC would

never have received the fee but for the filing of Vernal’s

application, and Vernal’s application would not have been

accepted for filing if it had not been accompanied by the filing

fee.’’ Respondents’ Br. at 11. The Commission’s reliance on

the ‘‘ancillary to’’ notion is misplaced. The applicable law

simply is not what the FCC suggests.

8

National Ass’n of Broadcasters v. FCC, 554 F.2d 1118

(D.C. Cir. 1976), provides the initial framework for our analy-

sis. There we held reviewable under § 402(a) a variety of fee

orders, including those denying refund of ‘‘certain filing and

grant fees that [were] submitted with various types of appli-

cations for grant of license or other authority.’’ Petitions for

Refund of Fees, 50 F.C.C.2d 730 ¶ 2, cited in Nat’l Ass’n of

Broadcasters, 554 F.2d at 1123 n.11. See id. at 1121 n.1. At

least some of the fees at issue in National Ass’n of Broad-

casters were, like the construction permit fee at issue here,

paid in connection with applications described in § 402(b).

Nevertheless, the court found that ‘‘[t]he statute itself ap-

pears quite clear: except for the eight specific cases listed in

§ 402(b) (none of which concerns refunds or fee assessments),

‘[a]ny proceeding to enjoin, set aside, annul or suspend any

order of the [Federal Communications] Commission under

this chapter TTT shall be brought [by a petition for review

under 28 U.S.C. § 2342.]’ 47 U.S.C. § 402(a)TTTT’’ Id. at

1121 n.1 (alterations in original). The court specifically de-

clined to rely on Tomah-Mauston to require review under

§ 402(b), stating:

[W]e do not believe (nor does any party allege) that the

order presented for our consideration here can be consid-

ered ‘‘ancillary’’ to one of the actions listed under section

402(b), since the fees assessed were to reimburse the

agency for the costs associated with rendering its ser-

vices (as mandated by 31 U.S.C. § 483a) rather than for

a reason connected in any way with the purposes speci-

fied in section 402(b).

Id.

The FCC argues that the fee order at issue here is

distinguishable from the fee orders at issue in National Ass’n

of Broadcasters, because the fee here was paid in connection

with an application for a permit enumerated in § 402(b). In

other words, the FCC suggests that none of the fees at issue

in National Ass’n of Broadcasters was paid in connection

with one of the application procedures enumerated in

§ 402(b). This is plainly wrong. Although the opinion is not

9

entirely clear with respect to all of the matters at issue in the

case, there is no doubt that some of the fees at issue in

National Ass’n of Broadcasters were paid in connection with

application procedures enumerated in § 402(b).

In any event, if National Ass’n of Broadcasters leaves any

doubt over the reach of § 402(b), Tomah-Mauston makes

clear that a petition for review under § 402(a) is the appropri-

ate channel for judicial review in this case. In that case,

‘‘[t]he appellant had sought to have intervenor’s construction

permit revoked before intervenor could commence opera-

tions.’’ Tomah-Mauston, 306 F.2d at 812. Relying on two

cases involving orders that resolved what, in effect, were

requests that the Commission reconsider the grant of various

applications enumerated in § 402(b) and a third case involv-

ing an order granting a request to allow a broadcast permit to

continue in effect pending a decision in a protest filed against

that authorization, the court held that the order was ‘‘ancil-

lary to’’ the grant of the construction permit and should be

reviewed under § 402(b). See id. The decision noted that

because the Commission had ‘‘considered appellant’s petition

on its merits TTT its order denying the petition was in

substance a re-affirmation of [the FCC’s] earlier grant’’ of the

construction permit. Id. The court also distinguished an

earlier decision in which § 402(b) was apparently found not to

provide the remedy for appeal on the grounds that ‘‘the

orders there sought to be reviewed did not grant or deny an

application.’’ Id.

The order denying the fee-refund request here similarly

does not grant or deny an application. Nor does it, in any

way, reaffirm or undermine the Commission’s decision to

grant the construction permit to Renda Radio or otherwise

affect Renda Radio’s activities with respect to the Brookville

permit. Thus, under Tomah-Mauston, the refund order can-

not be characterized as ‘‘ancillary to’’ an order appealable

under § 402(b).

It is also noteworthy that recent decisions of the court have

declined to broaden the ‘‘ancillary to’’ rationale of Tomah-

Mauston to extend the reach of § 402(b) beyond its pre-

10

scribed boundaries. See, e.g., Coalition for Noncommercial

Media v. FCC, 249 F.3d 1005 (D.C. Cir. 2001); Freeman

Eng’g Assocs., Inc. v. FCC, 103 F.3d 169 (D.C. Cir. 1997). In

Freeman, the court found that the Commission’s grant of a

‘‘pioneer’s preference’’ was not ‘‘ancillary to’’ the grant of a

license, even though ‘‘[a] preference ‘effectively TTT guaran-

tee[s] the innovating party a license in the new service

(assuming it is otherwise qualified) by permitting the recipi-

ent of a pioneer’s preference to file a license application

without being subject to competing applications.’ ’’ 103 F.3d

at 174 (alterations in original) (quoting Establishment of

Procedures to Provide a Preference to Applicants Proposing

an Allocation for New Services, 6 F.C.C.R. 3,488, 3,492 ¶ 32

(1991)). Quoting Waterway Communications, 851 F.2d at

403, the court explained:

‘‘[R]elief TTT under § 402(b) requires as a trigger the

grant or denial of a license application.’’ The Commis-

sion does not grant licenses at the time a pioneer’s

preference is awarded. Nor does the grant of a prefer-

ence irrevocably commit the Commission to grant a

license. The recipient of a pioneer’s preference must

still be ‘‘otherwise qualified’’ in order to obtain a license.

It therefore appears that our jurisdiction to review a

denial of a pioneer’s preference application is not gov-

erned by § 404(b), but falls within § 404(a).

Freeman, 103 F.2d at 177 (citations omitted). Thus, even in a

situation in which the order at issue ‘‘strongly foreshadow[ed]

the grant of a 402(b) application,’’ Coalition for Noncommer-

cial Media, 249 F.3d at 1008, we declined to apply the

‘‘ancillary to’’ rationale of Tomah-Mauston in the absence of

the ‘‘trigger[ing] TTT grant or denial of a license application.’’

Freeman, 103 F.2d at 177.

The necessary ‘‘triggering’’ action was absent in this case

as well. The FCC never granted or denied petitioners’

permit application. Rather, it simply agreed, at petitioners’

request, to dismiss the application after Vernal reached a

settlement agreement with the other applicants for the

Brookville permit. Moreover, although the FCC did grant

11

the Brookville permit to another applicant, Renda, that grant

cannot function as the necessary ‘‘triggering’’ event with

respect to petitioners’ refund order since, unlike in Tomah-

Mauston, the refund order did not and could not in any way

affect that construction permit.

In Coalition for Noncommercial Media, the court was

presented with a Commission order which, since it modified

two television licenses, arguably fell within the ambit of

§ 402(b). See Coalition for Noncommercial Media, 249 F.3d

at 1006-08. However, the court declined to require review

under § 402(b), because the Commission had modified the

licenses in question on its own initiative. See id. at 1008.

The license holder had requested modification of channel

assignments via a petition for a rulemaking that allowed it to

avoid seeking modification of its licenses. See id. at 1006-08.

The decision explained that had the license holder submitted

an application seeking the modification of its license, review

would have been required under § 402(b)(6), pursuant to

which a party may seek review if it can show that it ‘‘ ‘is

aggrieved or [its] interests are adversely affected by an order

of the Commission granting or denying any application de-

scribed in paragraphs (1) to (4) and (9) of this subsection.’ ’’

Id. at 1007 (emphasis in original) (quoting 47 U.S.C.

§ 402(b)(6)). The fact ‘‘[t]hat the Commission leapt forward

and on its own hook eliminated the need for such an applica-

tion does not create an application where none was made.’’

Id. at 1008. We thus found appeal under § 402(a) proper.

As noted in Coalition for Noncommercial Media, ‘‘we have

never extended Tomah-Mauston.’’ 249 F.3d at 1008. We

find no reason to do so here. Accordingly, we conclude that

the order at issue here was not ‘‘ancillary to’’ the grant or

denial of an order appealable under § 402(b). Consequently,

we find that petitioners properly and timely petitioned the

court for review under § 402(a).

B. The FCC’s Decision to Deny Petitioners’ Refund Re-

quest

The FCC’s order in this case may not be overturned unless

it is ‘‘arbitrary, capricious, an abuse of discretion, or other-

12

wise not in accordance with law.’’ 5 U.S.C. § 706(2)(A).

Pursuant to this standard, our review ‘‘is highly deferential;

we must presume the validity of [the] agency[’s] action.’’

Kisser v. Cisneros, 14 F.3d 615, 618 (D.C. Cir. 1994) (citation

omitted). The court may ‘‘reverse only if the agency’s deci-

sion is not supported by substantial evidence, or the agency

has made a clear error in judgment.’’ Id. at 619 (citing

Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415-

16 (1971)). Moreover, we must defer to an agency’s reason-

able application of its own precedents. See Global Crossing

Telecomm., Inc. v. FCC, 259 F.3d 740, 746 (D.C. Cir. 2001).

What is at issue in this case is the Commission’s fee-refund

policy that was promulgated in conjunction with the August

1998 Report and Order implementing the agency’s auction

authority, and then explained and enforced by the Commis-

sion in Wade Communications, Inc., 16 F.C.C.R. 20,708

(2001). Petitioners present essentially two arguments in

support of their challenge to the fee-refund policy. First,

they contend that the Commission’s failure to grant Vernal’s

refund request is inconsistent with the fee-refund policy.

Second, petitioners contend that the Commission subjected

Vernal to unjust disparate treatment in granting fee refunds

to other parties who, like Vernal, sought dismissal of their

applications pursuant to settlement agreements entered into

prior to the issuance of the August 1998 Report and Order.

Petitioners’ arguments are without merit.

At bottom, the petitioners’ principal argument is that the

fee-refund policy that was promulgated in conjunction with

the August 1998 Report and Order clearly contemplated fee

refunds for parties such as Vernal. The FCC’s response is

straightforward: The fee-refund policy adopted in conjunction

with the August 1998 Report and Order

made clear that [fee] refunds would be available only in

the case of applicants who withdrew their applications

after the applications had become ‘‘subject to resolution

by competitive bidding’’ and the applicant had ‘‘file[d] a

pleading disavowing any interest in participating in the

auction and seeking the dismissal of their application[ ].’’

13

Respondents’ Br. at 13 (alterations in original) (quoting Re-

port and Order, 13 F.C.C.R. at 15,957 ¶ 102). The Commis-

sion’s position is unassailable.

Petitioners’ press for an expansive interpretation of the fee-

refund policy is entirely unconvincing, both because their

suggested interpretation is belied by the clear words of the

policy and, also, because it ignores the Commission’s subse-

quent decision in Wade Communications. In petitioners’

view, the Report and Order established a policy of refunding

filing fees to ‘‘all pre-July 1, 1997 applicants who opted not to

participate in the auction mandated by the Balanced Budget

Act of 1997TTTT’’ Petitioners’ Br. at 12. According to peti-

tioners, refunds may be claimed by parties, like Vernal, who

sought dismissals pursuant to settlement agreements entered

into before the FCC’s adoption of the August 1998 Report and

Order subjecting pending pre-July 1997 applicants to compet-

itive bidding. In other words, petitioners contend that the

FCC adopted a policy of refunding fees retroactively to all

pre-July 1997 applicants with applications pending at the time

the Balanced Budget Act was passed, regardless of whether

they settled and sought dismissal prior to August 1998. See

id. Petitioners contend that when the FCC denied Vernal’s

refund application, it departed from this policy without a

reasoned articulation of its reasons for doing so. See id.

We have no trouble concluding that the Commission order

in this case rests on the policy promulgated by the FCC in

conjunction with the August 1998 Report and Order and

subsequently enforced in Wade Communications. The anal-

ysis is not complicated. Section 309(l) of the Communications

Act authorized the Commission, in its discretion, to use

competitive bidding or comparative hearings to award licens-

es to mutually exclusive broadcast applicants who, like Ver-

nal, filed their applications prior to July 1, 1997. The Com-

mission did not determine that it would subject pre-July 1997

applications to auction until it issued the August 1998 Report

and Order implementing § 309(j). Consequently, applicants

like Vernal, who settled before the August 1998 Report and

Order, were never subject to auction.

14

The discussion of the fee-refund policy promulgated in

conjunction with the August 1998 Report and Order focused

on applicants who ‘‘elect[ ] not to participate in [an] auction.’’

13 F.C.C.R. at 15,957 ¶¶ 101 & 02. See also id. at 15,957-58

¶ 103. When Vernal entered into a settlement agreement it

surely was not ‘‘electing not to participate in an auction,’’

because the Commission had yet to determine that pre-July

1997 applicants would be subject to auction. Moreover, there

is no mention in the fee-refund discussion of applicants who,

like Vernal, obtained the benefit of § 309(l)(3)’s suspension of

FCC settlement caps by entering into agreements during the

six months immediately following enactment of the 1997

amendments. In short, the Commission order denying peti-

tioners’ refund request is in no manner inconsistent with the

policy set forth in conjunction with the August 1998 Report

and Order.

Petitioners raise several arguments in an attempt to stave

off this conclusion. None is persuasive, and only two merit

discussion. First, petitioners assert that the FCC’s refund of

filing fees was undertaken as part of its obligation under

§ 309(l)(3) of the Act to waive regulations necessary to permit

pre-July 1, 1997 applicants to enter into agreements resolving

mutually exclusive applications. Petitioners’ Br. at 13. The

portion of the Notice of Proposed Rulemaking cited by

petitioners does not support this assertion, and we find no

support for it in the Report and Order, the Notice of Pro-

posed Rulemaking, or anywhere else in the record.

Petitioners also point to paragraph 49 of the Report and

Order. That paragraph, which references the refund provi-

sion only in response to a compensation clause issue raised

during the notice and comment period, states:

[W]e will refund upon request all hearing fees actually

paid by applicants in proceedings in which the construc-

tion permit is awarded by auction rather than by compar-

ative hearing, and all filing fees paid by pre-July 1, 1997

applicants within the scope of Section 309(l) who elect not

to participate in the auction.

15

Petitioners’ Br. at 14 (quoting 13 F.C.C.R. at 15,939 ¶ 49).

Noting the differing language used to describe the refund of

hearing and filing fees, petitioners assert that the rule ‘‘made

it clear’’ that the refund of filing fees would not be contingent

on whether an application was withdrawn pursuant to a

settlement leading to the grant of an application without

auction or as a result of a unilateral decision by an applicant

to dismiss an application in a proceeding wherein the permit

was eventually awarded by auction. Petitioners’ Br. at 13-14.

This argument ignores the common sense observation that no

applicant could ‘‘elect not to participate in an auction’’ until

being subject to auction. No one was subject to auction until

the Commission’s issuance of the August 1998 Report and

Order, months after Vernal’s application had been dismissed.

As noted above, if there were any doubts about the mean-

ing of the Commission’s fee-refund policy, they were resolved

conclusively when the FCC enforced the policy in Wade

Communications in November 2001. In Wade Communica-

tions, the Commission explicitly held that applicants like

Vernal may not seek refunds of filing fees. See 16 F.C.C.R.

20,708. The Commission explained:

[B]oth the general context and specific language of the

[Report and Order] clearly state our intention that re-

funds of filing fees would only apply to the remaining

pre-July 1, 1997 applicants for licenses or permits who

had not resolved mutual exclusivity through negotiated

agreements during the 180-day period and whose pend-

ing mutually exclusive applications would therefore be

resolved pursuant to our decision to use competitive

bidding.

Id. at 20,710-11 ¶ 7 (citations omitted). Explaining the ratio-

nale behind the distinction it drew, the Commission stated:

[A]ny applicants that settled within the 180-day period

were entitled to negotiate payments from the other

mutually exclusive applicants that would cover their

costs, including their filing fees, and moreover, pursuant

to the statutorily mandated waiver requirement in sec-

tion 309(l), could also negotiate payment amounts that

16

exceeded their costs. Therefore, any equities that might

apply to non-settling applicants and warrant refund of

filing fees do not apply with the same force to these

applicants.

Id. at 20,711-12 ¶ 9.

Wade Communications eliminates any conceivable ambigu-

ity as to the FCC’s refund policy. It also makes clear that

the Commission, in denying petitioners’ refund request, did

not depart from its established precedent regarding fee appli-

cation refunds. Moreover, in its discussion of the benefits

available to applicants who settled within the 180-day period,

Wade Communications demonstrated the reasonableness of

the FCC’s decision to distinguish between applicants who

took advantage of the settlement opportunity created by

§ 309(l) and those who waited to see whether the Commission

would use comparative hearings or competitive bidding to

resolve pending pre-July 1997 applications. See Cassell v.

FCC, 154 F.3d 478, 484 (D.C. Cir. 1998).

Petitioners’ disparate treatment argument bears little dis-

cussion. We recently reaffirmed our well-established view

that an agency is not bound by the actions of its staff if the

agency has not endorsed those actions. See Cmty. Care

Found. v. Thompson, 318 F.3d 219, 227 (D.C. Cir. 2003)

(citing Amor Family Broad. Group v. FCC, 918 F.2d 960

(D.C. Cir. 1991)). See also Jelks v. FCC, 146 F.3d 878, 881

(D.C. Cir. 1998); MacCleod v. ICC, 54 F.3d 888, 891 (D.C.

Cir. 1995). The Commission has acted consistently with

respect to the refund of application fees to parties in a

position similar to Vernal’s. In the August 1998 Report and

Order, the Commission adopted a policy against refunding

fees to applicants who resolved their exclusivity by settlement

during the 180-day period provided for in the Communica-

tions Act. Petitioners point to no order in which the Commis-

sion has acted contrary to this policy. In Wade Communica-

tions and in the order now before this court, the Commission

denied the requested fee refunds. It is true that, in a few

instances, staff in the Commission’s OMD, without authoriza-

tion from the Commission, granted fee-refund requests. But

17

staff error cannot bind an agency and force it, in effect, to

continue such errors.

The Commission’s order in this case convincingly explains

why the fee-refund policy adopted in conjunction with the

August 1998 Report and Order and enforced in Wade Com-

munications required denial of Vernal’s request. The Com-

mission’s order clearly survives scrutiny under the arbitrary

and capricious standard of review. Therefore, the petitioners’

challenge must fail.

III. CONCLUSION

For the reasons noted above, the petition for review is

dismissed.