Opposition — Western Communications, Inc. v. Federal Communications Commission

IN THE

i “Wt RODAK, IR. CLERK

| SUPREME COURT OF THE UNITED STATES

. _ OCTOBER TERM, 1OnR:

No. 78-1 229

WESTERN COMMUNICATIONS, INC.,

“Petitioner,

v,

FEDERAL COMMUNICATIONS COMMISSION and

LAS VEGAS VALLEY. BROADCASTING Co.,

Respondents.

ON’PETITION FORA WRIT OF CERTIORARI TO |

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR THE RESPONDENT

LAS VEGAS VALLEY BROADCASTING CO.

IN “ahinaae tes

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oy? WELCH'& MORGAN’ + Joseti M; Mornussey

“0, $00. Farragut Building: Roneat T. MURPHY

| 900 Seventeerith Street, N.W. | Attorneys for Respondent

Washington, D.C. 20006 Las Vegas Valley

: i: Broadcasting Co.

March 8, 1979 rae

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TABLE OF CONTENTS sme.

CPE OEE CN ce KKK eee ee WEe HK ee HOS Dec e es 1

I ons ac be Vikas Koasencecs was 2

QUESTIONS PRESENTED... 1... cece eee eee ee eens 2

STATUTES AND RULES INVOLVED................ 3

PUT Sok hah ee Rew ee SOD EAR CCH Se RDO COR 3

REE 65k Oe 6 oA KOA OSS KORO EMER Ce OO ORO 10

SET 34 0st biais oS wh ee CRON Re eee we dee 30

TABLE OF AUTHORITIES

Cases:

American Power and Light Co. v. SEC, 329 U.S. 90

SOUP so + einie ih ae ko 0lee Re ard.s ae eee eh an ele 23

Atlantic Refining Co. v. FTC, 381 U.S. 357 (1965) ...... 26

Beth Israel Hospital v. N.L.R.B., 437 U.S. ——, 98

S.Ct. 3463 (1978) ...... eee Ree eee ewes nw on ee 28

Butz v. Glover Livestock Commission, 411 U.S. 182

(RE as renee ee aes ere 23

Nick J. Chaconis, 28 F.C.C.2d 231 (1970) ..........4.. 20

Collins Securities Corp. v. SEC, 183 U.S.App.D.C. 301,

we Re oy re ee ee ree 14

Continental Broadcasting, Inc. v. FCC, 439 F.2d 58

(D.C. Cir.), cert. denied, 403 U.S. 905 (1971) ........ 22

Crowder v. FCC, 399 F.2d 569 (D.C. Cir.), cert.

denied, 393 U.S. 962 (1968). ....... ccc eee eceeess 21

Erlichman v. U.S., (No. 76-993), 45 Law Week 3718,

pe ae en eee ee ee 25

FCC v. National Citizens Committee for Broadcasting,

Se SO CU COED AK GAR Aw hiee CO6.0ON ec wee howe 27

FCC v. WOKO, Inc., 329 U.S. 223 (1946)..... 15, 20, 21, 22

(it)

Cases, continued: Page

Greater Boston Television Corp. v. FCC, 444 F.2d

841 (D.C. Cir.), cert. denied sub nom., WHDH, Inc.

ey oe OS |g) Sere re 22

Independent Broadcasting Co. v. FCC, 193 F.2d 900,

cert. denied, 344 U.S. 837 (1952) ...... ce cccccecs 21

Lorain Journal Co. v. FCC, 381 F.2d 824 (D.C. Cir.

PRG Cn cp besGebe ste e basa eee b en bee eases 22

Mitchell v. U.S. (No. 76-1081), 45 Law Week 3718,

PE Wy ROTE See cweeeedccernveneerceveccoede 25

Mobil Oil Corp. v. FPC, 417 U.S. 283 (1974) ........ 27, 28

Nassar and Co. v. SEC, 185 U.S.App.D.C. 125, 566

Tee FOU MUST UD we apes ee wscioenesseeeeesoesse 14

Neighborly Broadcasting Co., Inc., 24 P&F Radio Reg.

SE Ar ae ee a er ee ee 20

Red Lion Broadcasting Co. v. FCC, 395 U.S. 367

Cb ccre bs 6b 066 CONE ORR DAD eRe ee be sauces 15

Donald W. Reynolds, 65 FCC2d 451 (1977) ........... 16

Sea Island Broadcasting Corp., 44 P&F Radio Reg. 2d

RPE Ga bb uo 's's 6:0 0 6 6.40404 Oh 60:56 6 008 008 15

United States v. Haldeman, et al., 431 U.S. 933 (1977). ... 25

Universal Camera Corp. v. N.L.R.B., 340 U.S. 474

SOOM case das 6 4:66.08 hehe Chee aw abree 11, 13, 28

Vermont Yankee Nuclear Power Corp. v. National

Resources Defense Council, Inc., 435 U.S. 519

Se Kall Oat & © Pied a 6x 86 oe ei wk KE 608 6.668 27

In re Western Communications, Inc., 61 FCC2d 974

Os ha oA Abed ae we OR SKE UES Oh ae a 84 24

Statutes:

Administrative Procedure Act:

ey Sn WOES 6's go we Be ood eik S Osa Oe 28

(iit)

Statutes, continued: Page

Communications Act of 1934:

OF TE POR. TE cies ce ce recta reetideeees ne 15

47 U.S.C. Sec. 307(d) 2... eee cere cern eee evene 15

28 U.S.C. Sec. 1254(1).... cece reer cree rere vvccees 2

Miscellaneous:

4 K. Davis, Treatise on Administrative Law (1958)....... 23

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1978

No. 78-1222

WESTERN COMMUNICATIONS, INC.,

Petitioner,

v.

FEDERAL COMMUNICATIONS COMMISSION and

LAS VEGAS VALLEY BROADCASTING Co.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR THE RESPONDENT

LAS VEGAS VALLEY BROADCASTING CoO.

IN OPPOSITION

OPINIONS BELOW

The opinion of the Court of Appeals, not yet

reported, is reprinted in Petitioner’s Appendix, pp.

la-16a. The opinion of the Federal Communications

Commission is reported at 59 FCC2d 1441 (1976), and

appears in Petitioner’s Appendix, pp. 17a-54a; recon.

1

2

denied, 61 FCC2d 974 (1976), reprinted in Petitioner’s

Appendix, pp. 55a-6la. The Initial Decision of the

Administrative Law Judge (“ALJ”) is reported at 59

FCC2d 1463 and is found in Petitioner’s Appendix, pp.

62a-142a. Other relevant orders are found in Petition-

er’s Appendix, pp. 143a-156a.

JURISDICTION

The judgment of the Court of Appeals was entered

on October 26, 1978. Western’s petition for rehearing

and suggestion for rehearing en banc was denied

December 29, 1978, Petitioner’s Appendix (‘‘Pet.

App.’’) pp. 157a-158a. The jurisdiction of this Court is

invoked under 28 U.S.C. §1254(1).

QUESTIONS PRESENTED

1. Whether there is sufficient evidence of record to

support the Court of Appeals’ affirmance of the

decision of the Federal Communications Commission

denying Western’s renewal application because of exten-

sive and flagrant fraudulent billing practices and deliber-

ate misrepresentations to the Commission which were

designed to conceal its fraudulent operating practices

from the Commission.

2. Whether the Court of Appeals properly exercised

its function of judicial review of an administrative

action in (1) determining that there was insufficient

evidence in the record to support the Commission’s

finding as to the adequacy of Valley’s bank letter under

applicable law and policy and (2) by remanding the

case to the Commission for review of Valley’s overall

financial qualifications.

3

STATUTES AND RULES INVOLVED

Relevant provisions of the Communications Act of

1934, the Administrative Procedure Act, as amended,

and pertinent Rules and Regulations of the Federal

Communications Commission are found in Petitioner’s

Appendix, pp. 159a-165a.

STATEMENT

In 1971, Western Communications, Inc. (“‘Western’’),

an incumbent licensee of KORK-TV, applied for re-

newal of its television broadcast license for Channel 3,

Las Vegas, Nevada. The station is affiliated with the

NBC network. Las Vegas Valley Broadcasting Co. filed

a competing application for a construction permit for a

new television broadcast station to operate on the same

channel. The mutually-exclusive applications were set

for hearing in 1972.

In 1976, following lengthy proceedings, the Commis-

sion found that Western’s extensive and protracted

fraud in station operations plus its deliberate misrepre-

sentations to the Commission designed to cover-up its

dishonest practices compelled the denial of its renewal

application. The Commission, on the other hand, found

that Valley had “established its qualifications to be a

Commission licensee in all respects except its financial

qualifications.”” (Pet. App. 45a) On consolidated ap-

peals, the Court of Appeals affirmed the Commission’s

order as to Western but remanded Valley’s application

to the Commission for review of its overall financial

qualifications.

Western is a wholly-owned subsidiary of Donrey,

Inc., of which Donald W. Reynolds, Sr., is the sole

stockholder as well as President and a Director. Channel

4

3, Las Vegas, is only one of numerous media outlets

owned and controlled by Reynolds Sr. Reynolds’

extensive media holdings, including a number of other

television and radio stations, the largest newspaper in

Las Vegas, many other daily and weekly papers,

outdoor advertising companies, and CATV interests,

etc., were detailed by the Administrative Law Judge

and appear in Petitioner’s Appendix, pp. 100a-103a. His

son, Donald W. Reynolds, Jr., was supervisor over all

his broadcast properties during pertinent times involved

in the proceedings at the Commission.

Fraudulent Billing

Western’s contract with NBC required it to carry all

network commercials and specifically forbade any dele-

tions of network programs without prior consent.

Weekly reports to NBC were required which certified

that each network program including commercial mes-

sages and credits was telecast in its entirety except for

those specifically listed on the report form. Western’s

compensation by NBC was based on its broadcast of

network commercials.

Edward R. Tabor and Robert N. Ordonez, general

managers of KORK-TV during the license period perti-

nent herein, as officers and directors of Western,

undertook a course of action in direct violation of the

network contract and the Rule of the Commission

applicable to misrepresentation of the quantity of

advertising actually broadcast.

In substance, Western, as a matter of policy and

general practice, deleted (clipped) portions of network

transmissions including network commercials in order to

telecast more local commercials than it could otherwise

sell and carry. It did not report the deletion of the

5

network commercials to NBC on its certified reporting

forms.! Thus, it collected from the network for the

omitted advertising as well as from the local advertiser.

Western conceded the “clipping” practices but con-

tended that it only clipped what it termed “clutter.” It

was found, however, that the “clipping of network

commercials was a common occurence.” (Pet. App.

133a) This fraudulent practice was properly character-

ized by the Commission as “protracted and flagrant’’ as

well as “extensive and egregious.” (Pet. App. 25a-26a)

Western’s deletion of network commercials was con-

firmed not only by evidence submitted by the Broad-

cast Bureau of the FCC and by Valley’s more extensive

analysis but also by Western’s own study which indi-

cated the clipping of approximately 800 commercials

for which Western made restitution to NBC after the

close of the record. (Pet. App. 21la-22a; Court of

Appeals Joint App. 1310-1339)

Joining network programs late, leaving them early

and extending mid-program breaks in order to run all

pre-scheduled local commercials was shown to be a

regular KORK-TV practice. A special study submitted

by Valley limited to only 28 weeks of the pertinent

license renewal period established over 500 occasions

when KORK left network programs early, 200 other

late joinings of network programs and over 500 mid-

break extensions. (Pet. App. 70a-7la) A more confined

analysis by the Broadcast Bureau revealed 41 occasions

of late joining of network programs ranging from 7 to

30 seconds and 14 occasions of mid-program break

extensions from 20 to 50 seconds. (Pet. App. 70a-7 1a)

leNone of the station reports indicated any deletions from

the network feed.” (Pet. App. 22a)

6

None of these omissions were reported by KORK to

NBC on its regular weekly reporting forms on which its

compensation by the network was based.”

Misrepresentation to the Commission

The practice of clipping network transmissions in

order to squeeze in or “overload’’ local advertising

material was particularly egregious in the 1970 World

Series broadcasts, prompting an irate fan to bitterly

complain to the F.C.C. concerning the interference of

the network telecasts of the ball games by local

commercials. The Commission called upon KORK-TV

(Western) for a complete and honest explanation of all

the circumstances surrounding the allegations of the

complaint. This inquiry and three subsequent ones in

ensuing months were met by responses from Western

which were analyzed at length by the Administrative

Law Judge (Pet. App. 73a-83a) and by the Commission

(Pet. App. 26a-32a) and found to be patently false and

misleading and clearly designed to conceal its operating

practices from the Commission. (Pet. App. 31a)

Valley’s Bank Loan Commitment

Valley’s application turned principally upon its abil-

ity to secure a bank loan with “reasonable assurance.”

In conjunction with its original application for a

construction permit, filed September 1, 1971, Valley

submitted a bank commitment letter, dated August 23,

1971, from Nevada State Bank, Las Vegas, Nevada.

2Two extended periods of time when the station was

completely off the air for 17 minutes and 45 seconds and for 50

minutes were even omitted from the network reports (Pet. App.

23a).

7

(Pet. App. 88a-91la) This letter was amended by a letter

from the Bank’s counsel dated February 22, 1973,

changing certain conditions relative to the loan because

of Valley’s subsequent intention to lease both its land

and buildings and to purchase its broadcast equipment

from RCA on credit. (Ibid.) In his letter, Bank counsel

explicitly stated: “On behalf of the Bank I am

authorized to confirm that at no time has the Bank

withdrawn its letter of August 23, 1971 to Valley and

that the Bank remains willing to make the loan

pursuant to the terms stated in said letter.”’ The certain

changes in the terms of the agreement included (1)

approval of the personal financial statements of Valley’s

stockholders, each of whom would guarantee payment

of the loan; (2) Bank to have right of first refusal on

future borrowings by Valley during the 5-year term of

the loan; (3) Valley to maintain all its bank accounts

exclusively at the Bank; (4) explanation of what was.

intended by the expression ‘“‘unimproved capital;” (5)

agreement extended to January 1, 1975. Valley ex-

pressly agreed to these terms and its shareholders

indicated that at all times they stood ready, willing and

able to comply with the Bank’s requirements.

Inasmuch as the question of collateral under the

revised terms of the Bank commitment became a matter

of special concern to the ALJ, certain interrogatories

were authorized to be propounded to the Bank’s

president.® In substance, the Bank’s president stated

that the Bank was fully aware that Valley would be

unable to pledge as collateral either the RCA technical

3The full text of the eleven interrogatories together with

answers are set forth in the Initial Decision at paragraph 64. (Pet.

App. 9la-94a) The more relevant ones, i.e., Nos. 9, 10 and 11

are found in the lower Court’s opinion. (Pet. App. 13a)

8

\

equipment or any land or buildings but, nevertheless,

the Bank was prepared to make its proposed loan of $1

million as set forth in the 1971 letter subject to a

normal routine bank reservation. The final interroga-

tory, No. 11, and its answer read as follows:

“11. In addition to the personal guarantee by

Valley’s stockholders, what is the minimum value

of collateral that the bank will require in order to

loan Valley up to $1,000,000 as proposed?

“Answer: It will depend upon the conditions at

the time the loan is required.”

This answer became the basis on which the ALJ and

the Commission rested the adverse finding that Valley

had failed to demonstrate that it had “reasonable

assurance’ that the bank loan would eventually be

forthcoming. The Court below thoroughly canvassed the

record evidence on the bank letter issue and found

insufficient support for the Commission’s adverse con-

clusion stating that: “We find insufficient support for

the Commission’s finding that its [Valley’s] bank letter

did not meet the reasonable assurance standard, and

remand for review of its general financial qualifica-

tions.” (Pet. App. 10a-11a)

Site Access

Valley proposed to locate its transmitter on a

federally-owned mountain site near Las Vegas which is

controlled by the Interior Department’s Bureau of Land

Management (BLM). Access to the site is via two

private roads, the first and longer one owned by Bell

Telephone which agreed to allow Valley to use the road

at an annual charge of $2,000. The second road is

owned by Alta Development Co., a company in which

Western holds equal shares with Summa Corporation.

9

Western refused a right-of-way to Valley over this road

except on the basis of compensating in full Western’s

alleged share of the cost of the road’s construction and

maintenance costs which Western kept raising until the

last figure (destined to rise) was $190,000. The Bureau

of Land Management indicated that in the event Valley

were awarded a construction permit by the F.C.C. it

would issue a permit to Valley to use the transmitter

site and the Alta access road. However, the policy of

the BLM is not to intervene in disputes between

original and later permittees as to terms for use of

facilities constructed by the original permittee. In early

1973 when Western’s estimated demand was $45,000

Valley budgeted $100,000 to purchase the right-of-way.

However, the impossibility of firm negotiations with an

obdurate Western left the matter in an unresolved state.

The Court of Appeals noting that the Commission

had not advised whether “the site access problem, by

itself, would warrant a finding of financial disqualifica-

tion” indicated that this issue could be considered and

resolved as part of the Commission’s examination of

“Valley’s complete financial qualifications.” (Pet. app.

15a)

“Leak” to the Trade Press

In a multiple series of filings following oral argument

before the Commission, Western charged procedural

irregularities based on an alleged “leak” to the trade

press by Commission personnel as to what the Commis-

sion had tentatively decided. Importantly, not a single

party of interest in the case was implicated in the

allegations nor did the charges touch upon or involve in

any way the merits of the case. After careful considera-

tion and appropriate investigation the Commission was

10

unable to find any legitimate basis for re-opening the

record or enlarging the issues as Western requested and

specifically found that Western suffered no prejudice

whatever by reason of events deemed by the Commis-

sion to be “most unfortunate” but harmless to the

parties. (Pet. App. 44a)*

Similarly, the Court of Appeals considered these

allegations and properly concluded that it was unable to

discern a genuine ex parte question stating further “nor

can we identify, on this record, any infringement of

due process resulting from such disclosure.” (Pet. App.

6a)

Upon careful review of the record, the Court of

Appeals affirmed the denial of Western’s renewal appli-

cation, holding that there was substantial evidence to

support the Commission’s adverse findings, and re-

manded Valley’s application for further review of its

overall financial qualifications.

ARGUMENT

There are no important federal questions presented

by the petitioner which would justify the grant of a

writ of certiorari. The multiple reasons for granting the

writ advanced by Western are, essentially, a re-cycle of

*The Commission pointedly noted that Western had flooded

the Commission with a barrage of pleadings and unauthorized

briefs in such a manner as to “have delayed the ultimate

resolution of this proceeding and raise a question concerning

counsel’s compliance with Section 1.52 of our Rules which

provides in pertinent part that their signature on each Western

pleading certifies their ‘belief there is good ground to support it;

and that it is not interposed for delay... .’ Counsel are advised

that further pleadings directed to the alleged ex parte violations

will be summarily dismissed.” (Pet. App. 44a, fn. 21)

%

1]

those presented to the Commission and again in the

Court of Appeals where, in both instances, they were

found to be completely without merit.°

Despite a sophisticated effort to distill from them a

suitable and persuasive reason for the grant of the writ,

the absence of any genuine and compelling ground for

so doing is apparent on the face of this proceeding.

Recourse to the decision of the Court of Appeals, the

several Decisions of the Commission and the Initial

Decision of the ALJ, all appearing in Petitioner’s

Appendix, pp. la-156a, quickly and affirmatively dis-

pells any notion that Western has been denied due

process (procedural or substantive) or has been unjustly

denied renewal of a privileged license to utilize the

public’s airways for its private gain. Rather, Western has

enjoyed an abundance of process, has received full and

fair consideration of its multiple defenses and argu-

ments, and has successfully prolonged its profitable

hold on Channel 3 for almost 8 years beyond its last

authorized license period.

Similarly, the remand of Valley’s application to the

Commission for further proceedings involving ‘‘con-

sideration of Valley’s complete financial qualifications”

5The Court of Appeals summarized the claims as follows:

“Western claim[ed] that the Commission’s denial of its renewal

application (A) was not based on substantial evidence, (B)

neglected valid defenses presented on Western’s behalf and (C)

constituted an unjustifiably harsh sanction of conduct not clearly

prohibited under prior commission policy.” (Pet. App. 4a) As to

Valley’s appeal, Western, in substance, challenges the verity of

the applicable standard of review as pronounced by this Court in

Universal Camera Corp. v. N.L.R.B., 340 U.S. 474 (1951),

repeated in others and which was faithfully followed by the

Court of Appeals in this case.

12

(Pet. App. 15a) in no way constitutes a legitimate and

persuasive reason for the grant of the extracrdinary writ

of certiorari.

Western’s specious contentions that serious and im-

portant federal questions having wide and _ general

application are presented by the decision of the Court

of Appeals in respect to (1) Standard Of Proof; (2)

Sanction and Defense; (3) Leak to Trade Press; and (4)

Remand of Valley’s Application For Further Proceed-

ings, are, hereinafter, addressed seriatim.

Preliminarily, however, by way of background it is

important to observe that Western proceeds here, as

below, on a sordid and sullied record—a record of the

elevation of private corporate greed over the basic

notions of public trust accompanying the temporary

possession of one of the government’s most valuable

privileges and “scarce resource’’—the use of the public

airways for private profit. Western’s dishonest conduct

was so patently revealed upon this record as to

constrain a case-hardened, veteran Administrative Law

Judge to denounce it as “dishonesty deserving of the

utmost censure” pointing out, inter alia, that Western’s

practice of “selling twice what it could only deliver

once, and of collecting for its own benefit the proceeds

of both sales” was a more aggravated form of fraud

than the classic “double billing” offenses normally

encountered. (Pet. App. 133a). The Commission was

moved unanimously to refer to petitioner’s fraudulent

billing not only as “protracted and flagrant” but also

“extensive and egregious” (Pet. App. 25a-26a); to

denominate Western’s responses to Commission inquiries

as to just what was going on in their station operations

as “false, misleading and evasive representations”; and

to properly state that these carefully concocted com-

13

munications “were clearly designed to conceal its

operating practices from the Commission.” (Pet. App.

31a) These outright blatant misrepresentations designed

to mislead the Commission and to conceal the invidious

fraudulent practices of Western had previously been

found by the ALJ to be “rife with inaccurate and

misleading statements” and ‘‘contained deliberate mis-

representations” (Pet. App. 133a), thus compelling the

conclusion that these assertions were “false and the

station’s executives knew it when the letters were

written.” (Ibid.)

In short, it is difficult to postulate a more explicit

tapestery of deceit and dishonesty against which the

attack upon the judgment of the Court of Appeals by

Western must be viewed.

Standard of Proof

In respect to the standard of proof, there is no

important federal question presented on the sullied

record of Western’s unfaithful trust of a public license

in this case.

At the outset, it must be observed that Western

implicitly acknowledges that the Court of Appeals

correctly reviewed the record in conformity with the

requirements of the Administrative Procedure Act and

the norm declared by this Court in Universal Camera

Corp. v. N.L.R.B., 340 U.S. 474 (1951). The appro-

priate standard of review, as explicated by the Court of

Appeals “requires that the Commission’s findings be

supported by substantial evidence.” (Pet. App. 5a) And,

pointedly and properly the Court of Appeals found

substantial support in the evidence for the Commis-

sion’s findings adverse to Western’s renewal application.

14

Western’s principal attack on the case against its

license renewal, both before the Commission and in the

Court of Appeals, charged that it was not supported by

“reliable and probative” evidence of a “substantial”

character. It now suggests that a different standard of

proof should be required in FCC license renewal cases,

namely, the “clear and convincing” standard presum-

ably required b. the Court of Appeals in SEC license

revocation cases where the charge is completely based

on circumstantial evidence and results in a practical

deprivation of livelihood. Collins Securities Corp. v.

SEC, 183 U.S. App. D.C. 301, 562 F.2d 820 (1977);

Nassar and Co. v. SEC, 185 U.S. App. D.C. 125, 566

F.2d 790 (1977). The inference to be drawn is,

presumptively, that the record in this case could not

measure up to such a different standard. Western’s

contention in this regard, however, has no real applica-

tion to the record in this case and constitutes, largely,

an exercise in semantics.

Important distinctions between this case and the SEC

cases and other authorities advanced by Western are

obvious. First, the instant case involved a license renewal

proceeding not a license revocation as in Collins and

Nassar.

Unlike those cases, here there was substantial direct

as well as circumstantial evidence establishing Western’s

dereliction of duty.

Further a radically different type of license is

involved here than in the SEC cases—an FCC license is a

temporary, contingent license to use a limited and

scarce public resource for private gain thereby con-

ferring a special privilege upon the recipient in the

nature of a public trust. The broadcast licensee acquires

15

no property right in the channel, as made plain by

statute (47 U.S.C. Sec. 301).®

This Court has unequivocally stated that “licenses to

broadcast do not confer ownership of designated fre-

quencies, but only the temporary privilege of using

them.” Red Lion Broadcasting Co. v. F.C.C., 395 US.

367, 394 (1969).

The critical differences in license type and classifica-

tion are cogently explicated in the Report of the

Commission in Sea Island Broadcasting Corp., 44 P&F

Radio Reg.2d 1265 (1978). There the Commission

noted at p. 1267 that: “Broadcasters have a special

status as public trustees of a scarce source, namely, the

broadcast frequencies. The Supreme Court has noted

that because broadcast frequencies are limited, ‘they

have been necessarily considered a public trust.’ ” Citing

Red Lion, supra.

Moreover, refusal to renew a broadcast license is not

a penalty as definitively laid down by this Court in

F.C.C. v. WOKO, Inc., 329 U.S. 223, 228 (1946). Thus,

6The Communications Act of 1934 provides in pertinent part:

“It is the purpose of this Act, among other things, to maintain

the control of the United States over all the channels of

interstate and foreign radio transmission; and to provide for the

use of such channels, but not the ownership thereof, by persons

for limited periods of time, under licenses granted by Federal

authority, and no such license shall be construed to create any

right, beyond the terms, conditions and periods of the li-

cense....” 47 U.S.C. Sec. 301. It further provides that: “No

license granted for the operation of a broadcasting station shall

be for a longer term than three years ... Upon the expiration of

any license, upon application therefor, a renewal of such license

may be granted from time to time for a term of not to exceed

three years in the case of broadcasting licenses...if the

Commission finds that public interest, convenience and necessity

would be served thereby... .”” 47 U.S.C. Section 307(d).

16

unlike the SEC cases relied upon by Western, a penalty

approaching a deprivation of livelihood is not here

involved.’

The other and additional cases advanced by Western

on standard of proof deal with (a) deportation, (b)

denaturalization, (c) involuntary confinement and the

like and are completely inapposite.

In any event, however, unlike the shaky and ambigu-

ous record and dubious circumstantial evidence involved

in Collins and Nassar, supra, the weight and quality of

the record proof here left neither the hearing officer

nor the reviewers with any substantial doubt as to the

justification of the non-renewal decision. Indeed, if

morality in broadcasting is to have any meaning, no

other conclusion could be reached.

Summary reference to only a few parts of the

Commission’s Decision and the ALJ’s Initial Decision

demonstrates the clarity and conviction with which the

case for non-renewal was established.

Thus, the Commission clearly stated that “... the

logs establish with reasonable certainty that KORK-TV

was off network for significantly longer periods than

authorized and that as a general practice it clipped all

or parts of network commercials in order to telecast

local advertising....” (Pet. App. 2la) (Emphasis

7 Western emphasizes the renewal by the Commission of all of

Reynold’s other broadcast licenses. Donald W. Reynolds, 65

FCC2d 451 (1977). Unlike the securities dealers in Collins and

Nassar, Reynolds has suffered no bar to continuing in the

broadcast business—no loss of livelihood. This is an important

distinguishing fact and one which is wholly inconsistent with the

cry of “stigma plus impairment of future employment” resulting

to Reynolds as claimed by Western in a fanciful flight from

reality. (Pet. 14)

17

added.) Again, the Commission in unequivocal language

found: “‘Jt is clear, that the alleged failure by Mr. Tabor

and Mr. Ordonez to be aware of the fraudulent nature

of the network reports establishes a lack of competence

and diligence in their supervision over KORK-TV’s

affairs which contributed to the fraudulent billing and a

gross disregard of the Commission’s fraudulent billing

rules, which reflects adversely on Western’s qualifica-

tions to be a Commission licensee.” (Pet. App. 23a-24a)

Additionally, obvious and clear misrepresentations

advanced in Western’s own communications to the

Commission are meticulously noted in the Commission’s

Decision as set forth in Petitioner’s Appendix, pp.

26a-32a. The referenced evidence is neither obscure nor

circumstantial. Rather, it is “clear and convincing” and

while this descriptive language was not employed by the

Commission in precise talismanic tandem, the quality

and quantity of proof of Western’s deceptive practices

was obviously of a kind to satisfy any such standard.

The Initial Decision of the ALJ likewise demonstrates

that the case for Western’s falsity in word and deed was

beyond cavil. Thus, the Judge found that it was

“apparent that KORK’s policy to clip network ‘clutter’

was in deliberate violation of the terms of its contract,”

[with the network] and “equally apparent that its

failure to report such clipping in its weekly Station

Reports rendered those reports into misrepresenta-

tions.” (Pet. App. 73a-83a; 132a-133a) Again, the Judge

found that “KORK’s correspondence with the Commis-

sion as to its commercial practices was mnfe with

inaccurate and misleading statements. The station was

deliberately pursuing a policy of scheduling more local

commercials during network breaks than could possibly

be accommodated.” (Pet. App. 132a-133a) (Emphasis

18

added.) If required, there can be no doubt that the

descriptive adjectives ‘“‘clear and convincing” could be

readily and truly applied to the evidence which was

“apparent” and “substantial” and “‘reasonably certain.”

To carp, as Western so manifestly does on this score, is

truly to elevate form over substance which was, of

course, clearly obvious to the Court of Appeals.

The plain fact is that the record in this case as to

Western was viewed and examined by the Court of

Appeals in accord with statutory requirements and the

mandate of this Court in Universal Camera, supra, and

its progeny and found to be fully supportive of the

findings and conclusions of the Commission. (Pet. App.

5a-6a) “On the clipping issue, the factual record

supports the Commission’s conclusion that KORK sub-

stituted local material for network broadcasts. ... There

is also substantial evidence in the record that Western’s

responses to Commission inquiries involved misrepresen-

tations and lacked candor. The F.C.C. opinion carefully

traces Western’s inaccurate characterizations of particu-

lar incidents and general practices... .” (Id. 5a)

The evidence of clipping or deletion of network

commercials leading to fraudulent billing was extensive

and convincing and was treated at length both in the

Initial Decision of the ALJ (Pet. App. 66a-73a), and in

the Decision of the Commission (Pet. App. 19a-26a).

There are few FCC cases, if any, revealing a more

explicit pattern of fraud and deceit than in the instant

one.

The accuracy of the charges of deletion of network

commercials set forth in the Bill of Particulars of the

Broadcast Bureau was conceded by Western and, during

the pendency of the cases before the Commission, it

compensated NBC for them. (Pet. App. 21a)

ee ne Oe ORM ee

Re ree

19

A more extensive study by Valley, covering only 1

week in each of 28 months of Western’s programming,

clearly established that all or part of 250 network

commercials were deleted thus conclusively indicating

that clipping of network commercials was not a random

sometime thing but ‘a common occurrence” and a

regular and frequent practice (Pet. App. 69a-70a), a

practice deliberately built into the station policy by its

managers both of whom were Western corporate of-

ficers.®

Western’s own analysis substantially confirmed the

accuracy of this clear and convincing evidence and

moved it, in a burst of belated “contrition,” to proffer

NBC more than $7 thousand for network commercials

billed to NBC but not carried by the station. (Pet. App.

71a-22a)

Moreover, as to the issue of misrepresentation and

lack of candor, the record disclosed that on four

separate occasions in 1970-1971 the Commission, acting

on complaints of the viewing public regarding intrusion

of local commercials upon network programs, specific-

ally inquired of Western just what was occurring at the

station in this respect. In light of the admitted practices

of Western in overloading network breaks with local

8 The painstaking investigation and assembly of documentary

evidence through comparison of station logs presented a burden-

some challenge not only because of time restrictions but also the

sheer enormity of the task. Thus, Valley’s indepth investigation

and subsequent evidence covered the documents for only 1 week

per month for 28 months of the 36 month license period.

Western claimed that its station records for the other 8 months

were destroyed in a fire at the station in March 1972. The daily

and weekly pattern of fraud on a large scale, however, was

obvious.

20

commercials, the responses to these inquiries were, as

found by the ALJ and the Commission, “rife with

inaccurate and misleading statements” (Pet. App. 133a)

designed to conceal the fraudulent practices of the

station. The record further discloses, as the Court of

Appeals noted, that these investigative inquiries were

carefully considered and analyzed by the Commission

(Pet. App. 5a; 26a-32a). Likewise, reference to the

Initial Decision of the ALJ indicates a concientious and

precise evaluation of them at length (Pet. App. 73a-83a;

132a-133a) leading to the inexorable conclusion that

“KORK’s subject correspondence contained deliberate

misrepresentations to the Commission and was lacking

in candor regarding its policies and practices in joining

network programs after their beginning, leaving network

programs before their end, and extending network

station or commercial breaks so as to affect the content

of the network programs.” (Id. 133a)

Because of the vast scope of its oversight responsi-

bilities and the manifold number of its licensees, the

Commission must rely on the candor and good faith of

those, like Western, entrusted with the use of a

property in the public domain—indeed, it must demand

it, Neighborly Broadcasting Co., Inc., 24 RR 959, 967

(1963), and “must refuse to tolerate deliberate mis-

representations.” Nick J. Chaconas, 28 FCC2d 231

(1971). As this Court has noted, deception or lack of

candor in F.C.C. operations constitutes a serious impair-

ment of the public interest and the very fact of

concealment may be more significant than the facts

concealed or the substance of the false statement.

F.C.C. v. WOKO, Inc., supra. As the Commission noted,

these misleading deceptions, standing alone, would

constitute sufficient grounds for rejecting Western as a

qualified applicant for continued licensing on the

21

frequency. And, as the Court of Appeals pointedly

noted: “The Commission has held, and the courts

affirmed, that misrepresentation of even immaterial

facts is a valid basis for non-renewal.” (Pet. App. 8a)

Citing: F.C.C. v. WOKO, Inc., supra, at 226-227;

Independent Broadcasting Co. v. F.C.C., 193 F.2d 900,

902 (D.C. Cir., 1951), cert. denied, 344 US. 837

(1952); Crowder v. F.C.C., 399 F.2d 569 (D.C. Cir.),

cert. denied, 393 U.S. 962 (1968). (Emphasis added.)

Finally, as the record in this case to date so

eloquently demonstrates, the evidence of Western’s

illegal avarice and chicanery was clear enough to

convince (1) a veteran Administrative Law Judge, wise

in the ways of the industry (Pet. App. 62a-142a); (2) a

unanimous array of the Commissioners of the Federal

Communications Commission (Pet. App. 17a-54a); (3) a

unanimous panel of seasoned Circuit Court Justices—a

panel with a collective record of 53 years of experience

in careful screening of F.C.C. and other agency cases

(Pet. App. la-16a); and (4) the corporation, Western,

itself, which was moved to acknowledge the false

billings for network commercials covered in_ the

Bureau’s Bill of Particulars and those confirmed by its

own study (Pet. App. 2la-22a).

Defenses and Sanction

Western complains of disparate treatment by the

Commission which the Court of Appeals allegedly

condoned. Hence, Western asserts that there is an

“important federal question” of wide application requir-

ing the intervention of this Court.

To the contrary, there is neither an important

federal question presented nor any valid basis for

22

complaint other than the normal “‘post-mortem”’ railings

that not infrequently accompany lost litigation.

First, the Commission gave full, attentive, and rea-

soned consideration to Valley’s defenses, fairly com-

pared the record with those cases involving lesser

administrative sanctions and adverted to those reasons

which compelled an obvious distinction. (Pet. App.

23a-26a) Further, the Court of Appeals undertook the

rational, concise consideration which Western’s exagger-

ated claims merited in light of the sordid, sullied record

of deliberate fraud and complete lack of candor as

disclosed in the misleading and false responses to

Commission inquiries. (Pet. App. 6a-8a) There is no

ground for complaint here.

_ Moreover, as to sanctions, the considerable primary

discretion accorded the Commission “‘in fashioning

remedies to maximize compliance with Commission

policy” has, in the public interest, been the accepted,

judicial rule, as cogently noted by the Court of Appeals

in rejecting Western’s contentions in this respect. (Pet.

App. 8a) Citing: F.C.C. v. WOKO, supra, at 228;

Greater Boston Television Corp. v. F.C.C., 444 F.2d

841, 857 (D.C. Cir., 1970), cert. denied sub nom.;

WHDH, Inc. v. F.C.C., 403 US. 923 (1971); Conti-

nental Broadcasting, Inc. v. F.C.C., 439 F.2d 580, 583

(D.C. Cir.), cert. denied, 403 U.S. 905 (1971); Lorain

Journal Co. v. F.C.C., 381 F.2d 824, 831 (D.C. Cir.,

1965).

Indeed, the decision of this Court in FCC. v.

WOKO, Inc., supra, is a convincing answer to the

unsubstantiated charge of Western here. There a com-

plaint concerning dissimilarity in FCC sanctions was

deemed groundless by a unanimous Court with the

holding that the Commission is not bound “to deal

ee

ee ar nk rt

23

with all cases at all times as it has dealt with some that

seem comparable.” (Id. at 228) Pointing out that

“denial of an application for a license ...is not a penal

measure,” this Court emphasized the latitude of discre-

tion that must be allowed to the Commission in

determining whether “the public interest will be served

by renewing the license.” Significantly, this Court

stated: “...the fact that we might not have made the

same determination on the same facts does not warrant

4 substitution of judicial for administrative discretion

since Congress has confided the problem to the latter.”

(Id. at 229)°

In essence, Western’s arguments are a repetition of

‘hose advanced before the Commission and the Court

of Appeals and found to be without merit. The strained

effort to dress them in a fashion hopefully to satisfy

the requirements for certiorari is singularly unavailing.

As noted supra, they have been carefully and fairly

considered and properly rejected. The credibility of

witnesses advancing so-called mitigating defenses is, in

the first instance the function of the ALJ as the hearing

officer, and, ultimately, the Commission. Dissatisfaction

with their judgments with respect to crediting such

testimony and evidence constitutes no basis for the

intervention of this Court.

*The principle of agency discretion in choosing sanctions has

been reiterated by this Court more recently in Butz v. Glover

Livestock Commission, 411 U.S. 182 (1973). See also: American

Power and Light Co. v. SEC, 329 U.S. 90, 112-113 (1946); 4 K.

Davis, Treatise on Administrative Law, Sec. 30.10 at 250-251

(1958).

24

Leak to Trade Press

Western’s allegation that a premature “leak” to the

trade press of the tentative decision of the Commission

following the close or oral argument deprived it of due

process, in some vague and undefined manner, was

thoroughly considered and investigated by the Commis-

sion and found to be without merit. (Pet. App.

143a-156a)

Importantly, none of the parties to the proceeding

were involved in the allegations nor did the charged

conduct touch upon the merits of the case. After

careful and reasoned consideratior. the Commission

found that the substantive matters involved in Western’s

allegations pertained wholly to the internal procedures

of the Commission and failed to establish a “basis for

finding that the leaks involved bias or prejudice,

indicated prejudgment of the merits of this proceeding,

or that additional hearings would do anything more

than delay the proceeding, without any likelihood of

altering the outcome.” Jn re Western Communications,

Inc., et al., 61 FCC2d 974, 975 (1976).

Western’s cry of “‘ex parte,” considerably muted if

not completely abandoned in this Court,!® was com-

pletely inapposite and without foundation as noted by

the Court of Appeals (Pet. App. 6a).

The incident of a temporary lapse in the internal

functions of the Commission is closely akin to the press

leak of a confidential decision of this Court cited by

Western in the Court below. There, this Court denied

permission to petitioners to file a supplemental memo-

randum directed to the alleged impact of the news leak

10Western does not claim that any leak is reversible error.”

(Pet. Brief, p. 32)

nn en ts Petia A

25

on the rights of the petitioners. No. 76-793, Erlichman

v. U.S.; No. 76-1081, Mitchell v. U.S., 45 L.W. 3718

(April 28, 1977). Subsequently, this Court denied

certiorari without comment on the purported claim of

prejudice arising from the premature disclosure to the

press. United States v. Haldeman, et al., 431 U.S. 933,

97 S. Ct. 2641 (1977).

Western’s contention that “‘thoughtful consideration

of the evidence” was prima facie precluded because of

the short lapse of time between oral argument and

tentative decision is completely at variance with the

rubrics of normal agency proceedings. The entire record

and the briefs of the parties were before the Commis-

sion for review and study for a substantial length of

time prior to oral argument, at which, of course, there

is no presentation of evidence.'! Presumably, the

Commission—like an appellate court—is familiar with

the record and issues involved in the oral argument.

Here, the palpable indictment of Western’s fraudulent

conduct by the overwhelming evidence of record,

including its own concession of deleting network trans-

missions including commercial content, the documented

evidence of Western’s deliberate misrepresentations and

lack of candor in response to Commission inquiries, left

little, if any, room for debate or doubt as to its

complete lack of requisite qualifications for renewal of

its license.

\I Briefs in this proceeding were filed with the Commission

December 2, 1974. Oral Argument was heard by the Commission

March 9, 1976.

26

Remand of Valley’s Application

In seeking review of the decision of the court of

appeals as it relates to Valley’s appeal which centered

on the adequacy of Valley’s bank letter, Western is

patently laboring under a misapprehension. Western

incorrectly claims (Pet., p. 33) that the court below

undertook extensive de novo review of the record in

Valley’s appeal and then substituted its judgment for

that of the Commission on Valley’s financial qualifica-

tions. Western further claims incorrectly that the Court

of Appeals exceeded the bounds of judicial review

prescribed by the Administrative Procedure Act, pro-

ceeded in conflict with decisions of this Court, and

jeopardized a fundamental statutory prerequisite of

broadcast licensing.

The record clearly shows that the court of appeals

reviewed the entire record pursuant to the applicable

requirements of the Administrative Procedure Act, 5

U.S.C. Section 76 and the mandate of this Court. As to

Valley’s bank letter, it was unable to find the required

evidence necessary to support the “substantial evi-

dence” requirement of the Administrative Procedure

Act. Being thus unable to find this “substantial evi-

dence” the court of appeals had no choice but to

reverse the Commission’s decision as it relates to

Valley’s bank letter.

Western likewise misconstrues the thrust of the cases

it cites as support for its incorrect argument that the

court of appeals was obligated to uphold the Commis-

sion’s decision. In both cases cited by Western, Atlantic

Refining Co. v. F.T.C., 381 U.S. 357 (1965) and S.E.C.

v. New England Electric System, 390 U.S. 207 (1968),

this court clearly stated that decisions of regulatory

agencies should be affirmed if the decision has ‘‘warrant

27

in the record” or is “adequately supported in the

record.” In the instant case, that key factor was totally

lacking as to Valley’s bank letter. As the court of

appeals stated (Pet. App. 10a):

“We find insufficient support for the Commission’s

finding that its (Valley’s) bank letter did not meet

the reasonable assurance standard... .”

In support of its incorrect argument that the court

below exceeded the proper scope of its judicial review,

Western cites F.C.C. v. National Citizens Committee for

Broadcasting, 436 U.S. 775 (1978); Vermont Yankee

Nuclear Power Corp. v. National Resources Defense

Council, Inc., 435 U.S. 519 (1978) and Mobil Oil Corp.

v. F.T.C. 417 U.S. 283 (1974). What Western fails to

comprehend is that its so-called scope of review is not

applicable to the instant case. F.C.C. v. Nattonal

Citizens Committee for Broadcasting and Vermont

Yankee Nuclear Power Corp. v. National Resources

Defense Council, Inc., supra, both deal with rulemaking

procedures of Government agencies. A different stan-

dard is applied in such agency rulemaking cases as this

Court noted in F.C.C. v. National Citizens Commission

for Broadcasting, supra, wherein it stated (at p. 801):

“We agree with the Court of Appeals that regula-

tions promulgated after informal rulemaking, while

not subject to review under the ‘substantial evi-

dence’ test of APA, 5 U.S.C. §706(2)(E), quoted

in n. 21, supra, may be invalidated by a reviewing

court under the ‘arbitrary or capricious’ standard if

they are not rational and based on consideration

of the relevant factors. Citizens to Preserve Over-

ton Park v. Volpe, 401 U.S. 402, 413-416, S.Ct.

814, 822-823, 28 L.Ed.2d 136 (1971).”

28

In the instant adjudicatory case the Court below

correctly applied the “substantial evidence” test. It was

unable to find the necessary “substantial evidence”’ as

to the bank letter and had no choice but to reverse the

Commission.

Mobil Oil Corp. v. F.C.C., supra, is likewise inap-

posite. In Mobil this Court affirmed a decision of the

Court of Appeals for the Fifth Circuit, which decision

had affirmed an Order of the Federal Power Commis-

sion. This Court stated that the action of the court of

appeals in that case was an appropriate exercise of

administrative discretion supported by substantial evt-

dence in the record as a whole. Again, the key factor of

substantial evidence in the record is lacking in the

instant case to support the Commission’s adverse find-

ings as to the bank letter.

There is no question that the court below correctly

followed the procedures outlined in the Administrative

Procedure Act, 5 U.S.C. §706(1)(E) applicable to this

type of case. The court likewise adhered to the

mandate of this Court delineated in its decisions in

cases properly applicable to the instant case. [See

Universal Camera Corp. v. N.L.R.B., supra, and Beth

Israel Hospital v. N.L.R.B., 437 U.S. , 98 S.Ct.

3463 (1978)]. As required by the Act and the decisions

of this Court, the court below, in applying the required

“substantial evidence” test, canvassed the record to

determine whether the evidence relied upon by the

Commission provided the requisite substantial support.

The record did not support the Commission’s finding.

The Court had no choice but to remand.

The correct procedure to be followed by the review-

ing courts in cases such as this was clearly spelled out

by this Court in Universal Camera Corp. v. N.L.R.B.,

29

supra, and recently reiterated in Beth Israel Hospital v.

N.L.R.B., supra. In Universal Camera, supra, this Court

went to great lengths in tracing the Congressional intent

and the legislative history of the Administrative Proce-

dures Act as it applies to the scope of judicial review. It

pointed out that the Court of Appeals was not

completely bound by decisions of Federal agencies. The

intent of Congress was made quite clear as to the scope

of review required by the Court of Appeals in dealing

with the review of decisions of Federal agencies such as

the National Labor Relations Board. This Court noted

(at 466):

“Reviewing courts must be influenced by a feeling

that they are not to abdicate the conventional

judicial function. Congress has imposed on them

responsibility for assuring that the Board keeps

within reasonable grounds. That responsibility is

not less real because it is limited to enforcing the

requirement that evidence appear substantial when

viewed, on the record as a whole, by courts

invested with authority and enjoying the prestige

of the Courts of Appeals. The Board’s findings are

entitled to respect; but they must nonetheless be

set aside when the record before a Court of

Appeals clearly precludes the Board’s decision

from being justified by a fair estimate of the

worth of the testimony of witnesses or its in-

formed judgment on matters within its special

competence of both.”

In the instant case the Court of Appeals properly

exercised its conventional judicial function. It took the

affirmative action required by both the Administrative

Procedures Act and the decisions of this Court. While

affording full respect to the Commission’s findings, it

reviewed the record and found lacking the substantial

30

evidence necessary to support the Commission’s find-

ings.

Western finally and incorrectly contends that the

Court of Appeals usurped the FCC’s statutory role (in

determining financial qualifications of broadcast appli-

cants by “... judicial bending of long-standing FCC

qualifications standards. ...’’). This claim is completely

inaccurate as reflected in the court of appeals opinion.

The court merely stated that the bank letter of Valley

met the “reasonable assurance” standard of the Com-

mission and stated further (Pet. App. 15a):

“We do not foreclose Commission consideration of

Valley’s complete financial qualifications.”

The Court of Appeals in no way has usurped the

Federal Communications Commission’s statutory role in

determining licensee qualifications.

CONCLUSION

There is, therefore, no substantial reason for this

Court to grant the petition for certiorari and, accord-

ingly, it should be denied.

Respectfully submitted,

EDWARD P. MORGAN

JOSEPH M. MORRISSEY

ROBERT T. MURPHY

Attorneys for Respondent

Las Vegas Valley

WELCH & MORGAN Broadcasting Co.

300 Farragut Building

900 Seventeenth Street, N.W.

Washington, D.C. 20006

March 8, 1979