# Appendix — Cowles Broadcasting, Inc. v. Central Florida Enterprises, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2607%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1979 - **Citation:** 441 U.S. 957 ## Text o ~ “ MAR 13 1979 i | if ———— IN THE = SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1978 No €8~1400 — COWLES BROADCASTING, INC. and COWLES COMMUNICATIONS, INC., Petitioners, v. CENTRAL FLORIDA ENTERPRISES, INC., Respondent. APPENDIX TO PETITION FOR A WRIT OF CERTIORARI ROBERT A. MARMET HAROLD K. McComss, JR. MARMET PROFESSIONAL CORPORATION 1822 Jefferson Place, N.W. Washington, D.C. 20036 WILLIAM T. COLEMAN, JR. DONALD T. BLISS Davip G. BouTTE O’MELVENY & MYERS 1800 M Street, N.W. _ Washington, D.C. 20036 Attorneys for Petitioners. Sanamememmahaetial Washington, D.C. + THIEL PRESS + (202) 638-4521 ee a a (:) TABLE OF CONTENTS / APPENDIX A: Central Florida Enterprises, Inc. v. Federal Communi- cations Commission, (“Original Opinion’’), _ U.S. App. D.C. __, Case No. 76-1742 (Decided, Sep- NE ES Ee eee APPENDIX B: Central Florida Enterprises, Inc., v. Federal Communt- cations Commission, (““Amendment’’), ___ U.S. App. Eee APPENDIX C: Central Florida Enterprises, Inc., v. Federal Communt- cations Commission, (“Per Curiam’’), ___ U.S. App. ee eee APPENDIX D: Central Florida Enterprises, Inc. v. Federal Communi- cations Commission, (Order), U.S. App. D.C. i CME cu weseescccccccces APPENDIX E: Cowles Florida Broadcasting, Inc., F.C.C. 73D-62, eee OSES eee APPENDIX F: Cowles Florida Broadcasting, Inc., F.C.C. 76-642, 60 F.C.C.2d 372, 37 Rad. Reg. 2d (P&F) 1487 Ne cece cece 139a APPENDIX G: ‘ Cowles Florida Broadcasting, Inc., reconsideration ‘ denied, F.C.C. 77-1, 62 F.C.C. 2d 953 (1977) OE cea c sce ccc cece cece 289a | APPENDIX H: Cowles Broadcasting, Inc., clarification, F.C.C. . | 77-446, ___F.C.C. 2d ____, 40 Rad. Reg. 2d | ee 302a (it) APPENDIX I: _Page_ Communications Act of 1934, 48 Stat. 1064, as amended, 47 U.S.C. §307(d) (1976)............ Communications Act of 1934, 48 Stat. 1064, as amended, 47 U.S.C. §309(a) (1976)............ la APPENDIX A Notice: This opinion is subject to formal revision before publication in the Federal Reporter or U.S. App. D.C. Reports. Users are requested to notify the Clerk of any formal errors in order that corrections may be made before the bound volumes go to press. United States Cmot of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT No. 76-1742 CENTRAL FLORIDA ENTERPRISES, INC., APPELLANT V. FEDERAL COMMUNICATION COMMISSION, APPELLEE COWLES BROADCASTING, INC., INTERVENOR Appeal from an Order of the Federal Communications Commission Argued 6 June 1978 Decided 25 September 1978 Joseph F. Hennessey with whom Lee G. Lovett and Richard C. Rowlenson were on the brief, for appellant. Daniel M. Armstrong, Associate General Counsel with whom Robert R. Bruce, General Counsel and Jack David Smith, Counsel Federal Communications Commission was on the brief, for appellee. 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 2a Robert A. Marmet with whom Harold K. McCombs, Jr. was on the brief, for Intervenor, Cowles Broadcast- ing, Inc. Before: ROBINSON and WILKEY, Circuit Judges, and FLANNERY, United States District Judge for the United States District Court for the Dis- trict of Columbia Opinion for the Court filed by Circuit Judge WILKEY. WILKEY, Circuit Judge: Appellant, Central Florida Enterprises, Inc. (Central), appeals a decision and ac- companying orders by the Federal Communications Com- mission (Commission) denying its application for a con- struction permit for a new commercial television station to operate on Channel 2 in Daytona Beach, Florida, and granting the mutually exclusive application for renewal of license to Intervenor Cowles Florida Broadcasting, Inc. (Cowles). Appellant contends that the Commission acted unreasonably and without substantial record support in preferring Cowles’ renewal application. We agree, vacate the Commission’s orders, and remand for further pro- ceedings. I. ISSUES IN COMPARATIVE RENEWAL PROCEEDINGS, PAST AND PRESENT What is at issue here is the validity of the process by which the competing applications of Central and Cowles were compared and the adequacy of the Commission’s articulated rationale for its choosing to renew Cowles’ license. This may well be a typical comparative renewal * Sitting by designation pursuant to 28 U.S.C. § 292(a). 1 Cowles Florida Broadcasting, Inc., 60 F.C.C.2d 372 (1976), reconsideration denied and clarified, 62 F.C.C.2d 953 (1977), reconsideration denied, 40 RAD. REG. 2d 1627 (1977) (P-H). The jurisdiction of this court is properly invoked pursuant to 47 U.S.C. § 402(b) (1970). 3a 8 case, hence the careful scrutiny we give the Commission’s procedure and rationale herein. Aside from the specific facts of this case, there is other evidence indicating the state of administrative practice in Commission comparative renewal proceedings is unsatisfactory. Its paradoxical history reveals an ordinarily tacit presumption that the incumbent licensee is to be preferred over competing applicants.’ Because the Federal Communications Act fairly precludes any preference based on incumbency per se,‘ the practical * See generally Fidelity Television, Inc. v. FCC, 515 F.2d 684, 705-17 (D.C. Cir.) (Bazelon, C.J.) (voting to grant re- hearing en banc), cert. denied, 423 U.S. 926 (1975); Citizens Communications Center v. FCC, 447 F.2d 1201, 1206-10 (D.C. Cir. 1971), clarification granted, 463 F.2d 822 (1972); Cowles Florida Broadcasting, Inc., 60 F.C.C.2d 372, 435-42 (1976) (Commissioner Robinson, dissenting); Geller, The Compara- tive Renewal Process in Television: Problems and Suggested Solutions, 61 Va.L.Rev. 471 (1975). 8 See note 17 infra. *The Communications Act of 1934 included language ex- pressly referring the decision to renew a license to “the same considerations and practice which affect the granting of orig- inal applications,” ch. 652, § 307(d), 48 Stat. 1084 (1934). Apparently to preclude the inference that an incumbent could not adduce evidence of its past broadcast record, Congress in 1952 deleted the language subjecting renewal applicants to “the same considerations and practice” as original appli- cants and substituted the present language subjecting all appli- cations to the standard of “public interest, convenience, and necessity,” 47 U.S.C. §307(d) (1970). See Citizens Com- munications Center v. FCC, 447 F.2d at 1206-07 and n.13. But see Report of the Federal Communications Commission to the Subcommittee on Communications of the Committee on Interstate and Foreign Commerce of the House of Repre- sentatives Re the Comparative Renewal Prucess, Joint Appen- dix (J.A.) at 172, 182 (1976) [hereinafter cited as Report] (suggesting that the 1952 amendment may have codified the Commission’s informal presumption of renewal). The Com- munications Act contains numerous other passages suggesting 4 4a bias arises from the Commission’s discretionary weigh- ing of legally relevant factors.’ Of course, the general preference, and a fortiori the disposition in any given instance, may be a lawful exercise of the Commission’s “substantive discretion.” However, it is the judicial func- tion to insure that such discretionary choices as are entailed in these proceedings are rigorously governed by traditional principles of fairness and administrative regularity. Comparative analysis is implicit in any scheme of allocation and has always been at least formally a con- sideration in broadcast licensing. The procedural setting for such a comparative review is the licensing hearing provided by Section 309(e) of the Communications Act.° The Supreme Court held in Ashbacker Radio Corp. v. FCC' that under Section 309(e) where two or more applications are mutually exclusive there must be a joint comparative hearing. This court had occasion to elaborate what is entailed by such a “full hearing” in Greater Boston Television Corp. v. FCC: (T]he findings must cover all the substantial differ- ences between the applicants and the ultimate con- that the grant of a license creates no preferential rights in the incumbent, providing, inter alia, that “no .. . license shall be construed to create any right, beyond the terms, conditions, and periods of the license,” 47 U.S.C. § 301; that an applicant waives any claim to a frequency “because of the previous use of the same,” 47 U.S.C. § 304; that no license granted “shall be for a longer term than three years,” 47 U.S.C. § 307(d); and that a license does “not vest in the licensee any right... in the use of the frequencies . . . beyond the term thereof,” 49 U.S.C. §309(h) (1970). See also FCC v. Sanders Bros. Radio Station, 309 U.S. 470, 475 (1940). 5 See pp. 22-23 infra. * 47 U.S.C. § 309(e) (1970). t 326 U.S. 327, 333 (1945). K Ja 5 clusion must be based on a composite consideration of the findings as to each applicant.® Although Ashbacker dealt with two original applications, this court and the Commission have consistently held that the doctrine governs renewal proceedings as well.® A less tractable matter has been the question of the substantive criteria to assure a fair comparison. The development of those criteria has been committed largely to the discretion of the Commission, with occasional anc quite general guidance from the courts, as in Greater Boston, supra. The standards, evolved gradually over the course of the Commission’s comparative pro- ceedings, were reviewed and restated in the 1965 Policy Statement on Comparative Broadcast Hearings.” Logi- cally, criteria for comparison should be derived from and relate to the defined objectives of the comparative hear- ing. The Commission so proceeded, identifying in the Policy Statement the primary objectives of the compara- tive hearing as “the best practicable service to the public” and the “maximum diffusion of control of the media of mass commumication.” '' The principal factors relevant to the “best practicable service” issue were the extent of participation of owners in station management, program- ming proposals, past broadcast record, technical capacity, and character.’* Diversification of ownership of the mass media was described as being “of primary signifi- cance.” ** Further, upon an appropriate showing, the parties could raise any other relevant factors. ° 444 F.2d 841, 851 (D.C. Cir. 1970), cert. denied, 403 U.S. 923 (1971) (footnote omitted). ® See Citizens Communications Center v. FCC, 447 F.2d at 1211. 1 F.C.C.2d 393 (1965) [hereinafter cited as 1965 Policy Statement]. 2 Td. at 395-98. " Td. at 394. 8 Id. at 395. 6a 6 The applicability of the Commission’s usual compara- tive criteria to comparative renewal proceedings has been uncertain. The fact of incumbency without more would appear legally irrelevant under the statute.* Although the 1965 Policy Statement pretermitted “the somewhat different problems raised when an applicant is contesting with a licensee seeking renewal of license,” ** the Com- mission subsequently held that the 1965 Policy Statement “should govern the introduction of evidence in this and similar proceedings where a renewal application is. con- tested.” ** The weight given to the 1965 criteria would still depend on the facts of each case. Despite the apparent statutory assurance of a free- wheeling inquiry into the relative merit of challenger and incumbent licensee, the history of Commission prac- tice reveals @ strong preference for renewal.’’ Further, until fairly recently, such choices by the Commission were routinely affirmed by this court.** This general phenom- enon has been rationalized into what we have called on occasion “a renewal expectancy.” ’® The question arises, material in this case, to what extent such an expectancy is compatible with the full hearing guaranty of Section 309(e). This was essentially the question we confronted 14 See note 4 supra. 18 1965 Policy Statement, supra note 10, at 393 n.1. 16 Seven (7) League Productions, Inc. (WIII), 1 F.C.C.2d 1597, 1598 (1965). 11 See Citizens Communication Center v. FCC, 447 F.2d at 1207-09; Wabash Valley Broadcasting Corp. (WTHI-TV), 35 F.C.C. 677 (1963); Hearst Radio, Inc. (WBAL), 15 F.C.C. 1149 (1951). 18 See Citizens Communications Center v. FCC, 447 F.2d at 1208 n.23. 1° See id. at 1213 n.85; Greater Boston Television Corp. V. FCC, 444 F.2d at 854, 858. 7a 7 in Citizens Communication Center v.. FCC. There we struck down the Commission’s 1970 Policy Statement Con- cerning Comparative Hearings Involving Regular Renewal Applicants ** because it foreclosed the fully comparative inquiry mandated by the statute as construed in Ash- backer. Under that Policy Statement, if there were a showing of past “substantial service,” a licensee would be renewed without consideration of comparative issues. Citizens thus stands for the proposition that “the Com- mission may not use renewal expectancies of incumbent licensees to shortcircuit the comparative hearing.” * We did note the relevance of the incumbent’s past per- formance: We do not dispute, of course, that incumbent licen- sees should be judged primarily on their records of past performance. Insubstantial past performance should preclude renewal of a licensee. . . . At the same time, superior performance should be a plus of major significance in renewal proceedings. The Court recognizes that the public itself will suffer if incumbent licensees cannot reasonably expect re- newal when they have rendered superior service.” Thus expectations are confined to the likelihood that a showing of superior performance will be sufficient, in light of the comparative criteria, to carry the day in the overall public interest inquiry. © 447 F.2d 1201 (1971). 21 22 F.C.C.2d 424 (1970). 22 Fidelity Television, Inc. v. FCC, 515 F.2d at 705, 709 (Bazelon, C. J.) (voting for rehearing en banc). 28 Citizens Communication Center v. FCC, 447 F.2d at 1213 and n.35. s Sa Il. THE COURSE OF THE LITIGATION Intervenor Cowles has operated its station, WESH-TV, on Channel 2 in Daytona Beach since it purchased the station in 1966. On 31 October 1969 Cowles filed its ap- plication for renewal of license. Central submitted its competing applicatiori for a construction permit for a new television station te operate on the same channel on 2 January 1970. The two applications were set for hearing by Commission order released 10 March 1971, and re- designated by orders released 20 August 1971 and 24 February 1972. In addition to inquiry into diversification of media ownership and “best practicable service,’ which comprise the customary comparative issues, certain special issues were designated for hearing. These were (a) whether contrary to Commission regulation, Cowles had moved its main studio without prior Commission approval; and (b) whether alleged mail fraud by five related corpora- tions supported inferences adverse to Cowles’ character.** Following extensive findings, the Administrative Law Judge (ALJ) concluded that renewal of Cowles’ license would best serve the public interest.** By a 4-3 vote the Commission affirmed with certain modifications.*® The facts in this case are essentially undisputed, and will be recounted only incidentally to our review of the Commission’s decision. ** Certain other designated issues, dealing with engineering and financial matters, are not at issue here. 28 Cowles Florida Broadcasting, Inc., F.C.C. 73D-62 (Re leased 7 Dec. 1973) [hereinafter cited as Initial Decision], J.A. at 78. ** See note 1 supra. 9a 9 A. The Initial Decision 1. Designated Issues. a. The Main Studio Move Commission rules require that “[t]he main studio of a television broadcast station shall be located in the prin- cipal community to be served.” ?7 WESH-TV’s city of assignment is Daytona Beach, and the station had al- ways had a studio just outside the city at Holly Hill. In addition, WESH-TV maintained “auxiliary” studios in Winter Park, just outside Orlando. Since 1960, the station had been authorized to identify as a Daytona Beach-Orlando station, although the Commission stressed that Daytona remained the city of assignment and “prin- cipal city.” The rule prescribing the location of the “main” studio, unlike the analogous rules governing radio stations,”* contains no definition of “main” studio and there is little clarifying precedent. Still, the ALJ found “inescapably” that “Cowles treats its Winter Park [Orlando] facility as its principal place of business.” * Because there had been an unauthorized move of the “main studio” contrary to rule, the ALJ gave Cowles a comparative demerit.*° However, the demerit was not given much weight in light of what the ALJ considered to be mitigating factors. First, the ALJ stressed that there was “little evidence that the move *7 47 C.F.R. 73.613 (1977). *® 47 C.F.R. 73-210 (1977) (FM stations); 47 C.F.R. 73.30 (1977) (AM stations). ® Initial Decision J 181, J.A. at 130. %° Id. {| 203, J.A. at 136. 10 10a resulted from a deliberate corporate decision to move the main studic in defiance of the Commission’s rules.” Rather, a “series of changes” responding to the “com- mercial lure” of Orlando, resulted in a “de facto move of the main studio.” * Second, the ALJ concluded that “the unauthorized move had not resulted in the downgrading of service to the community of assignment which [the rule] is designed to prevent.” * b. Mail Fraud Cowles is a wholly owned subsidiary of Cowles Com- munications, Inc., (CCI). During the license period CCI also published Look Magazine and owned five other subsidiaries, each in the business of obtaining magazine subscriptions. The five subsidiaries conducted so-called “paid during service” (PDS) operations in which sub- scribers paid installments of the purchase price over the life of the subscription. After a few years, complaints arose of improper sales and collection practices by the PDS companies. When CCI became aware of the problem, it promulgated a code of practice for the subsidiaries to cure the abuses. De- spite these efforts, the practices continued and by the fall of 1969 the PDS companies were under investigation by various state and federal agencies. In 1970, after being informed that the Justice Department intended to investi- gate the entire PDS industry, CCI initiated negotiations which resulted in nolo contendre pleas by the five PDS subsidiaries to fifty counts of mail fraud, and a consent decree against the five companies, guaranteed by CCI, enjoining specific sales and collection practices. * Id. J 182, J.A. at 131. 2 Id. 1 188, J.A. at 131. lla 11 With respect to Cowles’ parent, CCI, the ALJ reached conclusions that he characterized as “harsh.” ** He found that CCI acquired operations which “it must have realized” would be inclined to massive fraud. CCI’s super- vision was “spotty” and “ineffectual,” its internal in- vestigation coming “late in the day” when it recognized “that various governmental agencies were about to call it to account.” It was “inconceivable that it could have . . . been unaware” of such corruption “unless it chose to be.” * The ALJ concluded, however, that Cowles was insu- lated from these “harsh” findings concerning its parent. Although the ALJ supposed such evidence of fraud would probably disqualify an original applicant, the findings in this case were not “decisionally material” in light of Cowles’ broadcast record which better predicts future performance. Consequently, it was “unnecessary to at- tempt to.draw inferences from the nonbroadcast conduct of CCI and its non-broadcast subsidiaries; and “no con- clusions adverse to the character qualifications of [Cowles] should be reached on the basis of that issue.” * On the two specially designated issues, the main studio move and the mail fraud inquiry, by the ALJ’s reasoning Cowles escaped unscathed. 2. Standard Comparative Issues. a. Diversification of Media Ownership The ALJ concluded that “the advantage lies with Cen- tral” under the diversification factor because it had “no connection of any sort with any other mass media out- %8 Id. | 185, J.A. at 1382. * Id. J] 184, J.A. at 181-32. 8° Id. J 186, J.A. at 182. 12 12a let.” * Cowles’ parent, CCI, owned an AM-FM-TV combi- nation in Des Moines, Iowa, and another CCI subsidiary owned AM and FM radio stations in Memphis, Tennessee. While these interests were “remote” from Daytona Beach, the ALJ held that they remained a “significant factor in the ultimate choice.” *’ The ALJ further noted that CCI owned a substantial stock interest in the New York Times Company, which publishes the New York Times and has extensive publishing and broadcast holdings. Gardner Cowles, Chairman of CCI, was then a director of the New York Times Company. In addition, certain CCI stock- holders had substantial mass media interests. The Des Moines Register and Tribune Company owned 9% of CCI’s stock and had an 11% stock interest in the Minne- apolis Star and Tribune Company. But the ALJ concluded these related mass media interests were of “little deci- sional significance” because CCI did not control the New York Times Company, nor did the Des Moines Register and Tribune Company control CCI. Thus, no ,potential existed for compelling the media involved to “speak with a common voice,” and the basic policy underlying the diversification standard was “not disserved.” * The ALJ then concluded that although Central’s ad- vantage was “clear,” it would not be “compelling” unless Central were shown likely to render public service “at least as good” as that of Cowles." This was especially true in the present context where renewal “would not increase the existing concentration of control.” The ALJ found that Cowles’ incumbency evinced a prior Commis- sion determination that its media connections were not contrary to the public interest. Moreover, the ALJ noted * Id. | 193, J.A. at 133-34. * Id. 8 Id. J 194, J.A. at 134. *° Td. 4 195, J.A. at 134. 13a 13 the Commission’s reluctance to employ comparative re- newal proceedings to restructure the broadcast industry. In his view, the benefits from increased diversification had to be balanced against the public necessity of a stable broadcast industry. Accordingly, the ALJ con- cluded that a comparative renewal hearing should oc- casion an increase in diversification only if the competing applicant appeared likely to render service at least as good as that which the public had been receiving. b. Best Practicable Service Under the criterion of “best practicable service’ the ALJ made findings with respect to two matters: (1) Central’s proposals regarding the participation of owners in the station management; and (2) the quality of Cowles’ past service. (1) Integration of Ownership and Management The ALJ found Central’s integration proposals to be “very weak,” and concluded that Central’s owners would probably not play more than a nominal role in station affairs.*° He noted full time participation by station own- ers is of substantial importance under the 1965 criteria. But here, full time participation was proposed by only three of Central’s shareholders, collectively owning 10.5% of Central’s stock. While “not inconsequential,” this own- ership interest was not sufficient to control corporate policy. Further, the proposed integration was largely tem- porary. The important positions of General Manager and Program Director would be held by Mr. Stead and Mrs. Goddard, respectively, but Stead would serve only in Cen- tral’s “formative stages,” and Mrs. Goddard only until the station were “thoroughly organized and stabilized.” The ALJ consequently found it unlikely that the benefits * Id. J 201, J.A. at 136. 14 l4a of integration would continue throughout the license period. Moreover, the shareholders’ lack of broadcast ex- perience, ordinarily unimportant because remediable, be- came significant in light of the limited tenure contem- plated. In sum, the ALJ found that full time integration of management and ownership would be limited to Mr. Chambers, a 3.5% stockholder who would be supervisor of Administration. His duties were undefined and nothing indicated that he would be involved in determining the nature or content of program service. The ALJ conceded several of Central stockholders would participate in management on a part-time basis, pri- marily as consultants, but noted that little weight at- tached to such participation under the Policy Statement. In his view, part-time contributions by those who are “es- sentially dilletantes” rarely has a material effect on over- all station operations. (2) Cowles Past Service The ALJ found that Cowles’ past performance had been “thoroughly acceptable.” ** He observed that Cowles had developed and presented “a substantial number of programs . . . designed to serve the needs and interests of its community.” A number of local residents and com- munity leaders had expressed satisfaction with the sta- tion’s performance, and there had been no complaints concerning the station’s operation. Moreover, the ALJ found “no reason to believe that future performance would be less satisfactory.” Although the unauthorized move of the main studio warranted a “comparative de- merit,” since it was not done in bad faith and had not lowered the quality of service to Daytona Beach, it would not support a conclusion that Cowles was unlikely to con- tinue to provide “proper service.” * “1 Id. J 202, J.A. at 136. “ Id. J 203, J.A. at 136. l5a 15 c. The Public Interest Finding on the Two Stand- ard Comparative Issues In the end, the ALJ concluded that Cowles merited a “distinct preference” under the best practicable service criterion and that that preference outweighed Central’s preference under the diversification criterion. The ALJ reasoned that absent a showing that the degree of indus- try concentration which had existed when Cowles was originally licensed had “actually disserved the public in- terest,” the more compelling objective was obtaining the best practicable service. B. The Commission Decision. The Commission affirmed the decision of the ALJ with certain modifications. It concluded that the ALJ had cor- rectly disposed of the main studio issue.** Thus, the Com- mission rejected both Cowles contention that there had been no de facto move of the main studio and Central’s argument that the finding without more should have dis- qualified Cowles. Further, the Commission generally ap- proved the ALJ’s treatment of the factors mitigating the effect of the studio move. The Commission sustained the ALJ again with respect to the mail fraud issue, finding he had properly refused “to impart decisional significance” to the evidence of wrong-doing. Inasmuch as Cowles was not shown to be implicated in the PDS practices and there appeared to be no criminal case against CCI or its personnel, the Com- *s Id. 205, J.A. at 187. The ALJ gave Cowles a “defi- nite plus” for the superiority of its facilities at Orlando. Id. 204, J.A. at 137. This was overturned by the Commission, 60 F.C.C.2d at 416, in light of the impropriety of the de facto move which had enhanced those facilities. ** 60 F.C.C.2d at 398-400. 16 16a mission declined “to attribute the sins of the PDS’s to CCI and then visit them on Cowles’ head.” * Again, by the Commission’s reasoning on the two spe- cially designated issues, Cowles lost no ground. The Com- mission then turned to the two standard issues, diversifi- cation and service. Reviewing the ALJ’s treatment of the diversification issue, the Commission affirmed the award of a preference, finding Central’s advantage “clear.” ** The Commission agreed that the significance of the preference was re- duced by the fact that CCI’s other broadcast and news- paper interests were remote from Daytona Beach and were not shown to dominate their markets. Moreover, the Commission reiterated its reluctance to use the diversifi- cation criterion to restructure the broadcast industry, observing that “the need for industry stability had its own decisional bearing here.” In a subsequent order, the Commission expanded its discussion, finding that the autonomy which CCI accorded to the local station man- agement further reduced the significance of Central’s preference.‘’ Inasmuch as the Commission could find no *s Td. at 405. “ Id. at 409. “7 62 F.C.C.2d at 956. Central argues that the Commission was without jurisdiction to reconsider sua sponte its earlier disposition of the comparative issues. Brief of Appellant at 6. We disagree. Commission rules permit it to set aside on its own motion any action within 30 days after release of the order. 47 C.F.R. 1.108 (1977). It is Commission practice that the filing of a petition for reconsideration tolls the run- ning of the thirty day period. See Radio Americana, Inc., 44 F.C.C. 2506, 2510-2511 (1961). See also Old Belt Broadcast- ing Corp. (WSWS), 44 F.C.C. 1826, 1830 n.3 (1959). We be- lieve it is not unreasonable that where, as here, several peti- tions are consolidated for hearing and decision, a petition for reconsideration of any of the ensuing orders tolls the thirty day period as to all orders in the case. To find otherwise would 17a 17 evidence in the record “that the dangers of concentration ... exist in this case,” the preference was found to be “of little decisional significance.” * The ALJ’s conclusions with respect to the best prac- ticable service issue were modified in light of this court’s TV-9 decision *’ and the Commission’s finding that in- sufficient weight had attached to Cowles broadcast record. The Commission held that the minority group partici- pation proposed by Central entitled it to a merit under our 7'V-9 decision. Nonetheless, even when considered in conjunction with the merit to which Central was admit- tedly entitled for integration of ownership and manage- often result in anomaly and unfairness. Thus the sua sponte reconsiderations were timely in this case. The fact that ap- peal from the original order had already been brought in this court does not independently preclude reconsideration. See Wrather-Alvarez Broadcasting, Inc. v. FCC, 248 F.2d 646, 648-49 (D.C. Cir. 1957). *® 62 F.C.C.2d at 957. * TV-9, Inc. V. FCC, 495 F.2d 929 (D.C. Cir.), cert. denied, 419 U.S. 986 (1974). In TV-9 we held it was erroneous for the Commission to refuse to accord merit to an applicant for the “ownership and participation” of “its two Black stockhold- ers.” Id. at 941 (supplemental opinion). See also Garret v. FCC, 513 F.2d 1056, 1062-63 (D.C. Cir. 1975). In our supplemental opinion in TV-9, 495 F.2d at 941, we distinguished our use of “merit” from “preference.” We ex- plained that the latter term was used “to mean a decision by the Commission that the qualifications of a particular appli- cant in a comparative hearing are superior to those of another applicant with respect to one or more of the issues upon which the grant of a permit or license turns.” Jd. n.2. “ ‘Merit’ or ‘favorable consideration,’ ” we said, “is a recognition by the Commission that a particular applicant has demonstrated cer- tain positive qualities which may but do not necessarily result in a preference.” “ ‘Merit,’ therefore, is not a ‘preference’ but a plus-factor weighed along with all other relevant factors in determining which applicant is to be awarded the prefer- ence.” Id. 18 18a ment, the additional merit was not sufficient to outweigh the facts in Cowles’ favor under the best practicable serv- ice criterion. Finally, the Commission revised the ALJ’s characteri- zation of Cowles’ record as “thoroughly acceptable.” Find- ing this phrase “too vague to be meaningful,” and not adequately expressing “the outstanding quality of Cowles’ past performance,” the Commission found that perform- ance to have been “superior” in the sense in which we used the word in our Citizens opinion—“justifying a plus of major significance,” and inferentially, supporting an expectation of renewal.” In a subsequent order, the Com- mission clarified its use of the word “superior.” It had meant that the level of service provided by Cowles was “sound, favorable and substantially above a level of medi- ocre service which might just minimally warrant renew- al.” * It had not intended to suggest that the performance was exceptional when compared to other stations. The Commission thus articulated the final and decisive tally: The Commission—and the Court—have consistently recognized that a record of past programming per- formance is the very best indication of future per- formance. It is for this reason that we make clear _ that a substantial performance—i.e. sound, favorable —is entitled to legitimate renewal expectancies. Un- der the circumstances here, this consideration is de- cisive. Central’s preference under the diversification criterion is of little decisional significance and Cen- tral is entitled to no preference under the integration criterion. These factors, even considering Cowles’ slight demerit for the studio move and Central’s merit for the Black ownership it proposes definitely %° 60 F.C.C.2d at 421-22. %1 62 F.C.C.2d at 955. 19a 19 do not outweigh the substantial service Cowles ren- dered to the public during the last license period.” II. ANALYSIS The function of this court in reviewing a Commission decision is, as we have often recounted, a fairly limited one. This is particularly the case when the Commission acts under its broad mandate to license in the public interest. However, within the constraints upon our re- view, we must insist on adherence to those principles which assure the rule of law. Thus we must be satisfied that the agency has given reasoned consideration to all the material facts and issues; that its findings of fact are supported by substantial evidence;* and that if its notion of the public interest changes, that at least it has not deviated fronr prior policy without sufficient explana- tion.** In general, the agency must engage in reasoned decision-making, articulating with some clarity the rea- sons for its decisions and the significance of facts par- ticularly relied on. Admittedly, this is not an easy matter in comparative renewal proceedings, “but at least so long - as the government uses the forms of adjudication, and does not turn, e.g., to bidding, or even chance... , rea- soned decision-making remains a requirement of our law.” * *2 Id. at 958. ‘8 See, e.g., Greater Boston Television Corp. Vv. FCC, 444 F.2d at 851. % See, e.g., Fidelity Television, Inc. v. FCC, 515 F.2d at 699. 6 See, e.g., Columbia Broadcasting System, Inc. v. FCC, 454 F.2d 1018, 1026 (D.C. Cir. 1971). %* Greater Boston Television Corp. V. FCC, 444 F.2d at 852 (footnote omitted). 20 20a With this preface, we hold that the Commission acted unreasonably and without substantial record support in this matter and we remand for further proceedings. The Commission’s rationale in this case is thoroughly unsatisfying. The Commission purported to be conducting a full hearing whose content is governed by the 1965 Policy Statement. It found favorably to Central on each of diversification, integration, and minority participation, and adversely to Cowles on the studio move question. Then simply on the basis of wholly noncomparative assessment of Cowles’ past performance as “substantial,” the Com- mission confirmed Cowles’ “renewal expectancy.” Even were we to agree (and we do not agree) with the Com- mission’s trivialization of each of Central’s advantages, we still would be unable to sustain its action here. The Commission nowhere even vaguely described how it ag- gregated its findings into the decisive balance; rather, we are told that the conclusion is based on “administrative ‘feel.’” *' Such intuitional forms of decision-making, com- pletely opaque to judicial review, fall somewhere on the distant side of arbitrary. The Commission’s treatment of the standard compara- tive issues—diversification of media ownership and best practicable service—~is the most worrisome aspect of this case. The Commission plainly disfavors use of the 1965 criteria in comparative renewal proceedings. This in turn is largely because the Commission dislikes the idea of comparative renewal proceedings altogether *—or at least 5t 60 F.C.C.2d at 422. *% Although we would ordinarily be reluctant to reach such conclusions concerning the Commission’s state of mind, it has been extraordinarily candid in this matter. See Report, supra note 4, 7] 60-81, J.A. at 213-24, concluding, inter alia, “that the comparative renewal process should be abolished.” /d. 7 61, J.A. at 213. See also Cowles Florida Broadcasting, Inc., 60 F.C.C.2d at 480, 433 (Chairman Wiley dissenting) (“[T]he 2la 21 those that accord no presumptive weight to incumbency per se.’ As long as the renewal hearings were carried on in a completely ad hoc manner, it was little noticed that they were not really comparative. But the restate- ment of the comparative criteria in 1965 imposed an orderliness on the inquiry which made it obvious when applicants were not in fact on an equal footing. This would never have been a problem if the Commission had been able to distinguish in its rules between hearings comparing only new applicants and comparative renewal hearings. This it was unable to do and the 1965 Policy Statement has since governed comparative renewal pro- ceedings more or less by default.°° 1965 standards concerning diversification and integration ad- vance no public purpose to which agency is truly committed and, if implemented in a rigorous fashion, could well have a serious destabilizing effect on the broadcast industry to the detriment of the. . . public.’’) *° Some sort of presumption of renewal was implicit in Commission practice at least until the 1965 Policy Statement. See notes 2 and 17 supra. The 1970 Commission Policy State- ment Concerning Comparative Hearings Involving Regular Renewal Applicants, supra note 21, which we struck down in Citizens Communication Center v. FCC, 447 F.2d 1201 (D.C. Cir. 1971), expressly adopted a presumption of renewal if “substantial” past service could be shown. Most proposed legis- lative reforms would enact some such presumption. See S. 2004, 91st Cong., Ist Sess. (1969) (bill introduced by Senator Pas- tore and withdrawn when Commission issued its 1970 Policy Statement, supra); H.R. 18015, § 487(a), 95th Cong., 2d Sess. (1978) (“In any case in which a television broadcasting sta- tion submits an application to the Commission for the renewal of a license, the Commission may not consider any competing application for such license in determining whether to renew such license.’’) “In light of Citizens, it is doubtful whether any such dis- tinction would be lawful without an amendment to the hear- ing provisions of the Communications Act, 47 U.S.C. § 8309 (e) (1970). The Commission abandoned its effort to substitute 22 22a Since the 1965 Statement admits little room for a pre- sumption of renewal, the Commission has reconstructed the criteria in a manner creating a de facto presump- tion." Whether justified in precedent or logic, the process simple quantitative standards for its ad hoc inquiry under the 1965 criteria in comparative renewal hearings. See Formu- lation of Policies Relating to the Broadcast Renewal Appli- cant, Stemming from the Comparative Hearing Process, 66 F.C.C.2d 419 (1977), review pending sub nom. National Black Media Coalition v. FCC, No. 77-1500 (D.C. Cir.) [here- inafter cited as Formulation of Policies). * See, e.g., td. at 430: As illustrated most recently in the Daytona Beach, Florida case [this case], the renewal applicant must, therefore, continue to run on its record, and we believe that that record should be measured by the degree to which the licensee’s program performance was sound, favorable, and substantially above a level of mediocre service which might just minimally warrant renewal. Where the renewal applicant has served the public inter- est in such a substantial fashion, it will be entitled to the “legitimate renewal expectancy” clearly “implicit in the structure of the [Communications] Act.” Greater Boston Television Corporation V. F.C.C., supra, 143 U.S.App.D.C. at 396, 444 F.2d at 854. Thereafter, we will direct our attention to the comparative factors set forth in the 1965 Policy Statement, supra. While that policy state- ment will otherwise govern the introduction of evidence in the comparative renewal proceeding, the weight to be accorded the legitimate renewal expectancy of the in- cumbent licensee and the significance of other compara- tive considerations will depend on the facts of the par- ticular case. If the reader is unable to distinguish this modus operandi from prior instances of a renewal presumption attaching to some measure of substantial service, note 59 supra, neither are we. The Commission elsewhere makes equally erroneous state- ments of the law, using the language of burden of proof. See 60 F.C.C.2d at 421 (“Central has long known that if it wished to displace Cowles it would have to prove, inter alia, that Cowles’ past performance was below average.”’) 23a 23 has been straightforward and comports at least formally with the requirement of a “full hearing”: (1) the criteria of diversification and integration were converted from structural questions (challengers usually prevailed on the simple numbers) to functional questions regarding the consequences of other media ownership and autonomous management (but challengers could rarely show injury to the public service) ;* (2) a finding of “substantial,” if not above average, past performance by the incumbent would be given decisive weight;* and (3) other compara- tive or designated issues favoring the challenger would be noted, but would not be dispositive “even in conjunc- tion with other factors,” “ unless pertaining to grievous misconduct by the incumbent. This usual procedure, we believe, although the Commis- sion nowhere tells us, is essentially what occurred here. The development of Commission policy on comparative renewal hearings has now departed sufficiently from the established law, statutory and judicial precedent, that the Commission’s handling of the facts of this case make embarrassingly clear that the FCC has practically erected a presumption of renewal that is inconsistent with the full hearing requirement of § 309(e). A. The Designated Issues. 1. The Main Studio Move. The Commission was amply supported in its finding that Cowles moved its main studio from Daytona Beach to Orlando, in violation of FCC regulations. The Com- mission concluded, however, that this violation was miti- *2 See pp. 26-30, 33-35 infra. 3 See pp. 35-38 infra. * See pp. 17-18 supra. 24 24a gated by two factors: (1) the move was not effected in “deliberate definance” of FCC rules; and (2) Central made no showing that service to Daytona had suffered as a result of the de facto move. Consequently, Cowles was given a “slight demerit” for its violation. Apparently even this would overstate the Commission’s reaction, for in its original order it appeared to give the violation no weight at all.* Admittedly, the choice of remedies and sanctions for violations of Commission rules “is a matter wherein the Commission has broad discretion.” ** Moreover, in exer- cising that discretion the Commission is free to consider mitigating factors. But the Commission is not free wholly to disregard violations of its rules. Moreover, we find neither of the “mitigating” factors relied on by the Com- mission in this case to be persuasive. First, while a showing of harm occasioned by the vio lation would be relevant to the severity of the sanction imposed, the failure to show injury hardly excuses a plain violation. The regulation here involves a presumption that it is bad to have the main studio located—or slyly relocated—other than in the principal community. The ** The Commission apparently thought the unlawful studio move relevant only to the issue of best practicable service, and having found that the move had not been shown to injure service, concluded that Cowles’ distinct preference on the service issue was unimpaired, 60 F.C.C.2d at 422. It is some- what unclear from the Commission’s restatement of the over- all balance in its subsequent order whether or not the viola- tion was a demerit per se, 62 F.C.C.2d at 958, but it is in any case plain from its earlier discussion of the mitigating fac- tors, see p. 15 and note 44 supra, that the violation was given very little weight. * Lorain Journal Co. v. FCC, 351 F.2d 824, 831 (D.C. Cir. 1965), cert. denied, 383 U.S. 967 (1966). See also Greater Boston Television Corp. Vv. FCC, 444 F.2d at 861. ~ +» niall . ee . 25a 25 rule would be substantially undercut if a party relying on it were forced in each case to show that the move did in fact injure the quality of service. Second, we fail to see how Cowles’ violation is “miti- gated” by the fact that its conduct may not have been nefarious. Obviously Cowles moved its principal opera- tions little by little; and it is well-settled that people are held to intend the obvious consequences of their acts. Further, Cowles is chargeable. with knowledge of the main studio regulation. Thus, we are left with an in- tentional violation of a Commission rule. Of course, if Cowles had acted in bad faith, that might aggravate its violation; but the mere absence of bad faith cannot miti- gate it. On remand, the Commission should reconsider what weight to accord Cowles’ plain violation of an FCC rule. 2. The Mail Fraud Issue. We have two difficulties with the Commission’s treat- ment of the PDS matter. First, it appears from the record that there were at least two persons who were ° principal officers both of Cowles and of each of the five PDS subsidiaries.” Neither the ALJ nor the Commission *7 Marvin C. Whatmore is the Treasurer of Cowles and the President of CCI. See Initial Decision { 116, J.A. at 116. The record shows that he is also the Senior Vice President and a Director of Home Reader Service, Inc., J.A. at 708; a Vice President and Treasurer of Mutual Readers League, Inc., J.A. at 744; a Vice President of Home Reference Library, Inc., J.A. at 784; a Vice President, Treasurer, and a Direc- tor of Civic Reading Club, Inc., J.A. at 820; and a Vice President and a Director of Educational Book Club, Inc., J.A. at 878. The record shows that John F. Harding was Secretary of Cowles, and the Executive Vice President and General Coun- sel of CCI. See Initial Decision J 116, J.A. at 116. Additionally, he was a Vice President and the Secretary of Home Reader 26 26a made findings concerning these common officers. In light of this uncontradicted evidence it is plain that the Com- mission’s finding that there was no connection between Cowles and the PDS companies apart from common own- ership by CCI is unsupportable. On remand the Commis- sion will have to reconsider its findings and, if appro- priate, consider the relevance of wrong-doing by a related corporation sharing principal officers with the licensee. Second, while not unmindful of the time already oc- cupied exploring this matter, we are troubled by appel- lant’s contentions that the inquiry was curtailed in cer- tain material respects. Specifically, Central argues (1) that the ALJ erroneously quashed subpoenas requiring the testimony of the postal inspectors conducting the mail fraud inquiry;* and (2) that it was error not to inquire into proceedings involving similar allegations being con- ducted by the Federal Trade Commission and various states.** As we are unable to decide these claims on the record before us, it will be appropriate on remand for the Commission to review the pertinent rulings by the ALJ to determine if any were prejudicial to a full and fair inquiry. B. Standard Comparative Issues. 1. Diversification. The effect of the Commission’s reconstruction of the diversification criteria is obvious in its belittling of Cen- Service, Inc., J.A. at 716; a Vice President and Secretary of Mutual Readers League, Inc., J.A. at 744; a Vice President and Secretary of Home Reference Library, Inc., J.A. at 784; a Vice President, Secretary and a Director of Civic Reading Club, Inc., J.A. at 820, 823; and a Vice President, Secretary and a Director of Educational Books Club, Inc., J.A. at 873, 876. “ Brief of Appellant at 22-23. * Id. at 20-21. 27a 27 tral’s advantage there. Because of its lack of other media interests, as contrasted with those of Cowles, Central was found by the ALJ and the Commission to have a “clear advantage” and was consequently accorded a “clear pref- erence.” However, the Commission found that the signifi- cance of the “clear preference” was reduced by several factors and that, in the end, the preference was “of little decisional significance.” *° We fail to see how a “clear preference” on a matter which the Commission itself has called a “factor of pri- mary significance” can fairly be of “little decisional significance.” We should have thought the relevance of unconcentrated media ownership to the public interest inquiry was well-settled. We said—and rather plainly -said—in Citizens that: the Commission simply cannot make a valid public interest determination without considering the extent to which the ownership of the media will be con- centrated or diversified by the grant of one or another of the applications before it.” In light of this the Commission itself has stated “what- ever policy is developed [in the future] will take into account diversification as a factor that must be con- sidered in a comparative renewal hearing.” ™ Nor, as we have noted, does the Commission in this case purport to disregard the diversification factor. It merely found the © 62 F.C.C.2d at 957. " Citizens Communication Center v. FCC, 447 F.2d at 1218 n.36. 7 Second Report and Order on Multiple Ownership, 50 F.C.C.2d 1046, 1088, amended upon reconsideration, 58 F.C.C. 2d 589 (1975), aff'd sub nom. FCC V. National Citizens Com- mittee for Broadcasting, 46 U.S.L.W. 4609 (U.S. 12 June 1978). 28 28a applicants’ clear difference uninteresting as there was no showing “that the dangers of concentration .. . exist in this case.” " Apart from the obvious unfairness of placing this novel burden on Central without fair notice, the question arises whether this has not seriously undercut the utility of the diversification criterion. The brief answer must be that it has. There is some support for the relevance of the factors on which the Commission relied. The 1965 Policy State- ment did say that related media interests within the service area were usually more important than more dis- tant interests.”* It did not nearly say that interests out- side the service area were unimportant. In fact, the fairer inference, and the one more consistent with other Commission policy,” is that related media interests any- where in the nation are quite material. "8 62 F.C.C.2d at 957. ™ There the Commission said that the media interests were to be considered in light of the following schedule: Other interests in the principal community proposed to be served will normally be of most significance, followed by other media interests in the remainder of the proposed service area and, finally, generally in the United States. 1 F.C.C.2d at 394-95 (1965). ™ See Multiple Ownership of AM, FM, and Television Broadcast Stations, 18 F.C.C. 288 (1953). These regulations limited each person to a total of seven AM radio stations, seven FM radio stations, and five VHF television stations anywhere in the United States. They were upheld in United States v. Storer Broadcasting Co., 351 U.S. 192 (1956). Of course, it is strongly arguable that rule-making is preferable to ad hoc license renewal proceedings as an occasion for re- structuring the broadcast industry, see Report, supra note 4, 1 65, J.App. at 214-15, but so long as the Commission purports to be relying on diversification as a material factor in renewal hearings, it must do so in a reasonable manner. See p. 30 infra. 29a 29 More troubling still is the Commission’s reliance on the autonomy which CCI accorded the local management of Cowles. This, in conjunction with the “remoteness” of CCI’s other media interests, led the Commission to con- clude that there had been “no adverse effect upon the flow of information to those persons in WESH-TV’s serv- ice area.” Further: We can find no evidence in the record that the dangers of concentration, which we have character- ized as any national or other uniform expression of political, economic, or social opinion, exist in this case.”® The theory that management autonomy may satisfy the function of diversification was wholly novel when pre- sented to this court in Fidelity Television, Inc., v. FCC. There we were faced with a “nothing” applicant “who offers little more and is likely in fact to provide some- what less than the incumbent.” " We held that the FCC had not acted unlawfully in finding that local autonomy met the objectives of diversification “sufficiently to with- stand the competition of a ‘nothing’ competitor.” Whether it would have been more appropriate in Fidelity to con- cede the challenger’s advantage under diversification but to conclude that that need not carry the day, is not now before us. In any case we are reluctant to expand the relevance of local autonomy much beyond the facts of Fidelity for two reasons. First, the prospect of inquiry into the con- tent of programming as would be entailed in defining “uniform expression” raises serious First Amendment "6 62 F.C.C.2d at 957. ™ Fidelity Television, Inc. v. FCC, 515 F.2d at 704. 78 Td. at 705. 30 30a questions.*’ Indeed, the Commission was sensitive to the threat of just such intrusions when it declined to employ quantitative program standards in comparative renewal hearings.” Second, to require a showing of the “dangers of concentration” in each case would remove the cus- tomary presumption on which the structural approach to increasing ownership diversification has rested. Given the likely difficulties of proof in such matters, widespread reliance on the autonomy excuse would effectively repeal the diversification criterion. Summarizing, we conclude that inasmuch as the Com- mission correctly found that Central’s advantage was “clear,” it was unreasonable then to accord the diversifi- cation finding “little decisional significance.” On remand, it will be appropriate for the Commission to reconsider its conclusions in light of the following: (1) the con- ceded relevance of diversification of media ownership in the comparative renewal context; (2) the materiality of related media interests anywhere in the nation; and (3) the evident hazards of relying on local management autonomy as a surrogate for diversification of media ownership. 2. Best Practicable Service. Whatever weight the Commission may have given to Central’s advantages under the integration and minority participation criteria, it was not enough to “outweigh” Cowles’ unexceptional record. This puzzling result ap- pears more bizarre as it is thought about. First we note there was no direct inquiry into whether Central’s pro- posed service would be “superior” or even just “sub- 7® See id, at 705, 716 (Bazelon, C.J.) (voting to grant rehear- ing en banc). See also Alianza Federal de Mercedes v. FCC, 539 F.2d 732, 736 (D.C. Cir. 1976). * Formulation of Policies, 66 F.C.C.2d at 426, 430. 3la 31 stantial.”” The Commission rejected that question as too speculative, preferring to rely on those structural char- acteristics identified in the 1965 statement." These it supposed were less susceptible of puffery than represen- tations concerning future programming. That is probably correct. The fly in the analysis is that the Commission judges incumbents largely on the basis of their broadcast record,“ to which there will be nothing comparable on the side of a challenger in any case. The “comparison” thus necessarily ends up rather confused. For at the end of a hearing the Commission is left on the one hand with a series of comparative findings pertaining to integra- tion, etc., and on the other hand with a wholly incom- mensurable and noncomparative finding about the incum- bent’s past performance. Of course the incumbent’s past performance is some evidence, and perhaps the best evi- dence, of what its future performance would be. But findings on integration and minority participation are 81 See Initial Decision 9] 191-92, J.A. at 133. Thus it is Commission practice not to designate an issue pertaining to the challenging applicant’s proposed programming unless the challenger makes “a prima facie showing that there are sig- nificant differences” related to its “ascertainment of commu- nity needs.” Chapman Radio and Television Co., 7 F.C.C.2d 213, 215 (1967). As was pointed out to us in oral argument, in this case, Central did not request that its programming proposals be designated for hearing. 82 At the time of the Initial Decision, the renewal applicants’ past broadcast record was the exclusive basis for predicting its future performance. See Initial Decision { 191, J.A. at 138; Wadeco, Inc., 41 F.C.C.2d 251 (1973). The Commission changed its position prior to its decision in this case; although still according primary weight to the renewal applicant’s past record, it will also consider other comparative criteria under the 1965 statement in comparing a renewal applicant and a new applicant. See Belo Broadcasting Corp., 47 F.C.C.2d 540 (1974). In light of the altered practice, the Commission made its own findings regarding Cowles’ “integration proposals,” 60 F.C.C.2d at 416. 32 , 32a evidence as well, and are both the only evidence comparing the applicants and also the only evidence whatsoever per- taining to the challenger. In a comparative inquiry evidence of past performance is ordinarily relevant only insofar as it predicts whether future performance will be better or worse than that of competing applicants.“ The Commission nowhere articu- lated how Cowles’ unexceptional, if solid, past perform- ance supported a finding that its future service would be better than Central’s.* In fact, as we have noted, Cen- tra! prevailed on each of the questions supposedly pre- dicting which applicant would better perform—the same criteria the Commission uses for this purpose in non- renewal comparative hearings. It is plain then that this record will not support a finding that Cowles would give the best practicable service. In light of this we leave to conjecture what leap of faith would be required to find that Cowles prevailed in the overall inquiry. On remand, the Commission will have to reconsider its manner of deriving a preference under the best practicable service criterion, and if appropriate, how such a preference should be balanced against other factors in the more general public interest inquiry. To 8s Although this proposition is hardly apparent from Com- mission renewal practice, see, e.g., 62 F.C.C.2d at 958 (“[W]Je make clear that a substantial performance—i.e. sound, favor- able—is entitled to legitimate renewal expectancies.”’), we be- lieve that it fairly states the relevance of past performance. Admittedly this more limited relevance will remit the Com- mission to those 1965 comparative criteria which it finds dis- tasteful in the renewal context. See note 58 supra. Ab- sent statutory amendment, see note 59 supra, or promulga- tion of other comparative criteria, e.g., Formulation of Policies, 66 F.C.C.2d at 433, 438 (separate statement of Commissioners Hooks and Fogarty), we see no lawful alternative. ™“ Fidelity Television, 515 F.2d at 689 n.3. See also 47 C.F.R. §§ 0.281 (a), 1.561, 1.562, and 1.591 (1977). 33a 33 avoid, if possible, further appeal in this case, we address ourselves to more specific objections to the disposition of the best practicable service question. a. Integration We confess we were unable to make sense of the Com- mission’s treatment of the integration issue, though we will reconstruct its language. The ALJ found that Cen- tral’s integration proposals were “very weak.” The Com- mission agreed, although it found Central’s showing “somewhat stronger than that of Cowles.” The Commis- sion then noted that the ALJ’s findings should be amended in light of this court’s intervening TV-9 deci- sion; it thus gave Central a “merit” for its proposed black participation. Pre-figuring the outcome, the Com- mission said that the “merit” and the “slight preference” (for integration) were insufficient to outweigh the fac- tors in Cowles’ favor under the best practicable service criterion. Oddly, four paragraphs later the Commission rethought the integration matter and decided that “neither is entitled to a preference”—not even a slight one—though Central was entitled to a “merit.” * Odder still, this “merit” (distinct from the TV-9 merit) is never heard of again.” More troubling is the manner by which Central’s inte- gration “preference” became a “merit.” In a way wholly analogous to the diversification question, the Commission replaced the customary integration criterion (under which Cowles faired miserably, being absentee-owned by CCI) with a functional inquiry into whether manage- ment autonomy had been an adequate surrogate for 8° 60 F.C.C.2d at 416. 8* Leading the cynical to suggest that the only difference between a “preference” and a “merit” is that the latter may be misplaced without embarrassment. 34 34a owner-management.” Unsurprisingly, the Commission concluded that on this record it had. This permitted it to conclude “that the integration proposals of both appli- cants are substantially similar.” * Mildly put, this finding is incredible if anything remains of the customary inte- gration criterion. This further repeal of the 1965 standards again derives some support from our opinion in Fidelity.*’ Like the re- constructed diversification analysis, the notion of func- tional integration was novel when presented in that case, and we have already recounted the special circumstances presented there. It may well have seemed, recalling the court’s characterization of Fidelity as a “nothing” appli- cant, that the modifications of the 1965 criteria left the substance of the comparative hearing unimpaired. On the facts of this case, the same cannot be said. The Com- mission’s treatment of the integration criterion, in light of its treatment of diversification and Cowles’ past per- formance, has denied Central the substance of its right to a full hearing, and is ipso facto unreasonable. The Commission may not, comfortably with the hearing man- date of § 309(e), practically abandon the 1965 criteria without providing an alternate scheme affording a thor- ough and intelligible comparison. On remand, the Com- mission will have occasion to reconsider its findings on the integration issue. *' 60 F.C.C.2d at 415, 416. In finding this ersatz integration enhanced by local management’s civic interests, the Commis- sion seems to be running headlong into itself, see Lorain Com- munity Broadcasting Co., 18 F.C.C.2d 106, 109-10 (Rev. Bd. 1968) ; Report, supra note 4, { 25, J.A. at 189, although to be sure it has done so before with this court’s pardon. See Fidelity Television, Inc. v. FCC, 515 F.2d at 701. ** 60 F.C.C.2d at 416. * Fidelity Television, Inc. v. FCC, 515 F.2d at 700-01. 35a 35 b. Cowles’ Past Performance For anyone who remained hopeful that Central’s now- shrunken advantages would carry the day, the treatment of Cowles’ past performance was plainly the coup de grace, The Commission recharacterized as “superior” the record which the ALJ had found “thoroughly acceptable.” Evidently, the Commission felt that a recitation of the idiom in Citizens would permit it to recognize Cowles’ “renewal expectancy.” If that were correct, we might be more inclined to resist the Commission’s characteri- zation.” However, a finding of “superior” service is not * Chairman Wiley was similarly skeptical about the “su- periority” of Cowles’ performance. Dissenting from the Com- mission’s first order, 60 F.C.C.2d at 480, the Chairman con- cluded that Cowles’ “thoroughly acceptable” performance was “insufficient to offset [its] disadvantage under the other com- parative criteria.” Jd. at 431. Then in light of the Commis- sion’s subsequent opinion, Chairman Wiley concurred in the renewal, predicated now on a more modest characterization of Cowles’ performance: In its original opinion, the majority adopted the re- quirement of “superior service” as set forth in dictum in Citizens Communication Center v. FCC. I dissented to this determination on the grounds that WESH-TV’s service, while “thoroughly adequate” so as to justify re- newal under any rational renewal system, was simply not “superior.” On reconsideration, the majority now articu- lates the required standard of service as “solid and favor- able” (as opposed to superior in terms of exceptional or of the highest possible level). As indicated, I did not—and do not now—find Cowles’ service to be superior (in the sense of exceptional). How- ever, I did—and do now—find that service to be suffi- ciently substantial (in the sense of solid and favorable) to Warrant renewal. Accordingly, given the majority’s clarification of intent, I find myself able to concur in this matter. 62 F.C.C.2d at 958-59 (emphasis added). Although the Com- mission majority in its clarification, did not expressly find that 36 36a an end to the inquiry; it is rather, as we stated in Citizens, a “plus of major significance” to be factored into the comparative analysis. In its reconsideration, the Commission resisted general use of the word “superior” preferring the word “substantial” to describe records such as Cowles’. This the Commission felt would not “convey the impression that . . . past programming was exceptional when compared to other broadcast stations in service area or elsewhere.” ™ If by this the Commission means either (1) that “substantial” service will justify renewal more or less without regard to comparative issues;** or (2) that “substantial” performance which is not above the average is entitled to “a plus of major significance,” “ it is plainly mistaken. We emphasize that Cowles’ performance was not superior, it did decline t» find that it was superior in the sense of being exceptional. 62 F.C.C.2d at 956. It being conceded that Cowles’ record was not exceptional, we have no quarrel with the Commission’s assess- ment, which is amply supported. See 60 F.C.C.2d at 421. ™ 62 F.C.C.2d at 956. * This inference is inescapable in light of the Commission’s numerous statements in this case, e.g., 60 F.C.C.2d at 421-22; 62 F.C.C.2d at 956, 958; and elsewhere. E.g., Formulation of Policies, 66 F.C.C.2d at 430. The Commission is not unwitting of its error. It has re- cently recalled (not in a renewal proceeding to be sure) that this court has proscribed just such noncomparative renewal decisions. See Report, supra note 4, { 79, J.A. at 222. ** As the Commission finds substantial service, without more, to be dispositive, it has no occasion to make the some- what less erroneous determination merely to accord its finding excessive weight. We have previously described the quality of performance entitled to “a plus of major significance:” We used the word “superior” in its ordinary dictionary meaning: “far above the average.” Webster’s New World Dictionary 1463 (college ed. 1968). And we suggested specific criteria for use in determining whether an in- cumbent had performed in a “superior” manner, includ- 37a 37 lawful renewal expectancies are confined to the likelihood that an incumbent will prevail in a fully comparative in- quiry. “Superior” or above average past performance 1s, of course, highly relevant to the comparison, and might be expected to prevail absent some clear and strong showing by the challenger under the comparative factor (either affirmative bearing on the challenger’s projected program performance, or negative regarding the incumbent’s media ties or perhaps discovered character deficiencies) or other designated issues.“ But we do not see how performance that is merely average, whether “solid” or not, can warrant renewal or, in fact, be of especial rele- vance without some finding that the challenger’s per- formance would likely be no more satisfactory.” On remand, the Commission will have occasion to re- consider its characterization of Cowles’ past performance ing (1) elimination of excessive and loud advertising; (2) delivery of quality programs; (3) the extent to which the incumbent has reinvested the profit from his license to the service of the viewing and listening public; (4) diversification of ownership of mass media; and (5) inde- pendence from government influence in promoting First Amendment objectives. Citizens Communication Center v. FCC, 463 F.2d 822, 823 (D.C. Cir. 1972), clarifying Citizens Communication Center, 447 F.2d 1201 (D.C. Cir. 1971). Because the Commission did not purport to find Cowles’ performance superior, see note 90 supra, we have no occasion to review its conformance with our second Citizens opinion. % See Citizens Communication Center v. FCC, 447 F.2d at 12138. *.This case does not raise the question whether, between equally qualified applicants, the renewal applicant lawfully may be preferred on the basis of a renewal expectancy. £.g., Fidelity Television, Inc. v. FCC, 515 F.2d at 702. We con- template that such instances of equipoise will be exceedingly rare if the Commission seriously undertakes a full comparison. 38 38a and to articulate clearly the manner in which its findings are integrated into the comparative analysis. III. CONCLUSION We remand this case in light of our abiding conviction that the Commission’s order is unsupported by the record and the prior law on which it purported to rely. We are especially troubled by the possibility that settled prin- ciples of administrative practice may be ignored because of the Commission’s insecurity or unhappiness with the substance of the regulatory regime it is charged to en- force. Nothing would be more demoralizing or unsettling of expectations than for drifting administrative adjudi- cations quietly to erode the statutory mandate of the Commission and judicial precedent. Orders vacated and case remanded for proceedings consistent with this opinion. oS ee SS ——— ee —————eEeee ——————— — ———— 39a APPENDIX B Notice: This opinion is subject to formal revision before publication in the Federal Reporter or U.S.Anp.D.C. Reports. Users are requested to notify the Clerk of any formal errors in order that corrections may be made before the bound volumes go to press. United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT September Term, 1978 No. 76-1742 CENTRAL FLORIDA ENTERPRISES, INC., APPELLANT V. FEDERAL COMMUNICATIONS COMMISSION, APPELLEE COWLES BROADCASTING, INC., INTERVENOR Before: ROBINSON and WILKEY, Circuit Judges, and FLANNERY,* Judge, United States District Court for the District of Columbia. Filed 12 January 1979 ORDER Upon consideration of the petition for rehearing filed herein by appellee Federal Communications Commission, and of the further memorandum of said appellee filed herein on December 11, 1978, at the request of the Court, as supplemented by appellee on December 13, 1978, it is * Sitting by designation pursuant to 28 U.S.C. § 292(a). 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 40a ORDERED, by the Court, sua sponte, that the Opinion for the Court, filed herein on 25 September 1978, be, and it hereby is, amended as follows: (a) On page 7 of the slip opinion, strike the last four lines of text and substitute in lieu thereof the following: Despite the language in Citizens, it is fair to say that the law governing comparative renewal proceedings re- mained unclear. Although Ashbacker had said a chal- lenger could not be denied a hearing and Citizens appar- ently assured some kind of substantive comparison, the nature of the inquiry and the pertinence of “renewal expectancies” was left uncertain. As an original matter, of course, a “renewal expect- ancy” could be shorthand for any of several plausible theories of the publie interest standard contained in sec- tion 309. For example, expectations could be confined to the likelihood that an incumbent would prevail under the customary 1965 criteria without any special regard for the quality of its past performance one way or the other. It would hardly be sensible, however, to ignore the past, for it affords the “best evidence” of what the incumbent’s future performance will be, and it has never been the Commission’s practice to do so. Conceding therefore, that an incumbent's past performance is highly relevant, an incumbent with a meritorious record would possess a natural advantage insofar as its actual performance made its proposals more credible than the “paper prom- ises” of a challenger. Some such comparative assessment of likely performances would, in fact, seem inescapable. It would then follow naturally from discounting the promises of challengers that incumbents would prevail more often, thereby assuring more “continuity” in the industry. The certainty thus afforded a meritorious in- cumbent through its natural comparative advantage may in turn induce it to commit enough resources to perpetu- 4la 3 ate its quality of service. An expectation raised by the probability of prevailing in the overall inquiry is, of course, fully compatible with the comparison assured by section 309. We understand the Commission’s present idea of re- newal expectancies may be more expansive—that an “ex- pectancy” may be generated by something less than or different from more meritorious service. An incumbent is said entitled to expect renewal if it has “served the public interest in . . . a substantial manner.” Apparently, a “substantial” past record would be a factor weighed in the incumbent’s favor irrespective of which applicant were predicted to perform better in the future. Such an entitlement would be provided to promote security directly and to induce investment which otherwise may not be made. Whether and in what manner placing such a thumb on the balance in an otherwise comparative in- quiry may be reasonable are, we think, open and difficult questions. In a number of cases before and after Citizens this court has had occasion to refer to renewal expectancies without much inquiry into the notion’s content. Thus, in dictum in Greater Boston Television Corp. v. FCC, we observed there were “legitimate renewal expectancies im- plicit in the structure of the Act.” We said that “such expectancies are provided in order to promote security of tenure and to induce efforts and investments, furthering the public interest.* In 1975, in our Fidelity Television opinion, confronted with a weak licensee and a weak contender, both only “minimally acceptable applicants,” we said “when faced with a fairly and evenly balanced record, the Commission may on the basis of the renewal applicant’s past performance, award him the license.” * 24 444 F.2d at 554. 25 515 F.2d at 702. 4 42a Finally, last term the Supreme Court observed, in the context of reviewing the FCC’s regulations barring cer- tain newspaper-broadcast combinations, that industry stability has consistently been a concern in comparative renewal procedings. It said: In the past, the Commission has consistently acted on the theory that preserving continuity of meritori- ous service furthers the public interest, both in its direct consequence of bringing proven broadcast service to the public, and in its indirect consequence of rewarding—and avoiding losses to—licensees who have invested the money and effort necessary to pro- duce quality performance. Thus, although a broad- cast license must be renewed every three years, and the licensee must satisfy the Commission that re- newal will serve the public interest, both the Com- mission and the courts have recognized that a li- censee who has given meritorious service has a ‘legitimate renewal expectanc[y]’ that is ‘implicit in the structure of the Act’ and should not be destroyed absent good cause. Greater Boston Television Corp. v. FCC, —— U.S.App.D.C. ——, 447 F.2d 841, 845 (1970), cert. denied, 403 U.S. 923 (1971) ; see Citi- zens Communications Center v. FCC, —— U.S. App. D.C. ——, 447 F.2d. 1201, 1213 and n.35 (1971); Formulation of Policies Relating to the Broadcast Renewal Applicant, Stemming From the Compara- tive Hearing Process, [66 F.C.C.2d at 420].?° Thus, although not a precise concept, renewal expectan- cies derived from “meritorious service” (to use the Su- preme Court’s terminology) are a natural aspect of the public interest inquiry carried on under section 309(e). Moreover, “the weighing of policies under the ‘public 7° FCC v. National Citizens Committee for Broadcasting, 46 U.S.L.W. 4609, 4617 (U.S. 12 June 1978) (footnotes omitted) 43a 5 interest’ standard is a task that Congress has delegated to the Commission in the first instance.” ” (b) On page 8 and on the following pages of the slip opinion, footnotes 24 through 95, inclusive, are renumbered footnotes 28 through 99, respectively. (ce) On page 21 of the slip opinion, strike the first sentence of renumbered footnote 64 (formerly foot- note 60). (d) On page 28 of the slip opinion, add to re- numbered footnote 77 (formerly footnote 73), im- mediately after the period which follows the number “957,” the following: In setting aside the Commission’s disposition of the diversification issue, we have taken the Commission’s assumption as our own that the matter is relevant to a comparative renewal inquiry. See 62 F.C.C.2d at 956-57; 60 F.C.C.2d at 422; note 76 supra; cf. FCC v. National Citizens Committee for Broadcasting, 46 U.S.L.W. at 4617. We thus confine our objections to the manner in which the Commission analyzed the concededly relevant factor, not intending to prescribe the weight which the Commission generally should accord media concentration in the context of comparative renewal hearings. See FCC v. National Citizens Committee for Broadcasting, 46 U.S.L.W. at 4617, 4618. And it is FURTHER ORDERED, by the Court, that appellee’s petition for rehearing is denied, for the reasons set forth in the per curiam panel opinion on rehearing filed herein this date. Per Curiam 27 Td, at 4618. 44a APPENDIX C Notice: This opinion is subject to formal revision before publication in the Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify the Clerk of any formal errors in order that corrections may be made before the bound volumes go to press. Yuited States Cianart of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT No, 76-1742 CENTRAL FLORIDA ENTERPRISES, INC., APPELLANT Vv. FEDERAL COMMUNICATIONS COMMISSION, APPELLEE COWLES BROADCASTING, INC., INTERVENOR On Petition for Rehearing Filed 12 January 1979 Before: ROBINSON and WILKEY, Circuit Judges, and FLANNERY,” Judge, United States District Court for the District of Columbia. Opinion Per Curiam. * Sitting by designation pursuant to 28 U.S.C. § 292(a). 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. -—-+--—— —-- + on oe 45a 2 The FCC and intervenors in this matter seek a re- hearing, complaining inter alia that our opinion disre- gards the “legitimate renewal expectancies implicit in the structure of the [Communications] Act.” * In light of the ambiguity of the phrase “renewal expectancies” and the frequency with which they are asserted to in- sulate an incumbent from license challenge, we think some clarification is called for, both generally aiid inso- far as such an expectation may have been undercut in this case. The content of the comparative proceeding at issue was governed by the Commission’s 1965 Policy Statement; * however, the weight to be given findings under the vari- ous criteria was, as in all renewal proceedings, dependent upon the particular facts of the case.* The Commission renewed the incumbent’s license after a hearing. It sum- marized as follows its rationale for doing so: Our conclusions in this regard do not mean—or suggest—that a challenger is denied an opportunity to show that a grant of his application will better serve the public interest. They do mean thai a chal- lenger is in a less favorable position, however, be- cause he asks the Commission to speculate whether his untested proposal is likely to be superior to that of an incumbent. The Commission—and the Court— have consistently recognized that a record of past programming performance is the very best indica- tion of future performance. It is for this reason that we make clear that a substantial performance— 1 FCC Petition for Rehearing at 9 (citing Greater Boston, 444 F.2d at 854). 21965 Policy Statement on Comparative Broadcast Hear- ings, 1 F.C.C.2d 398 (1965). * See Central Florida Enterprises, Inc., No. 76-1742 (D.C. Cir. 25 Sept. 1978), slip op. at 6; Seven (7) League Produc- tions, Inc., 1 F.C.C.2d 1597, 1598 (1965) ; see also Belo Broad- casting Corp., 47 F.C.C.2d 540, 548-44 (1974). 3 46a i.e. sound, favorable—is entitled to legitimate re- newal expectancies. Under the circumstances here, this consideration is decisive. Central’s preference under the diversification criterion is of little deci- sional significance and Central is entitled to no pref- erence under the integration criterion. These factors, even considering Cowles’ slight demerit for the studio move and Central’s merit for the Black ownership it proposes definitely do not outweigh the substantial service Cowles rendered to the public during the last license period.* We set aside the renewal. Our principal reason for doing so was that the Commission’s manner of “balanc- ing” its findings was wholly unintelligible,’ based, it was said, on “administrative ‘feel.’”* Admittedly, licensing in the public interest entails a good many discretionary choices, but even if some of them rest inescapably on agency intuition (not a comfortable idea) ,’ we may at *62 F.C.C.2d at 958 (emphasis original). * Slip op. at 20. * 60 F.C.C.2d at 422. *As Judge Leventhal said, dissenting to an affirmance of an FCC comparative hearing award in Star Television, Inc. v. FCC, 416 F.2d 1086, 1089, 1094-95 (D.C. Cir.), cert. denied, 396 U.S. 888 (1969) : I frankly put to myself this question, Should the courts continue to adhere to the approach of requiring the agency to develop a meaningful statement of reasons for a function like this, of choosing the best qualified among several competing applicants? Maybe an agency cannot meaningfully say more than why it screens out those ap- plicants who fall by the wayside due to ‘demerits’ in some prominent category, or who are plainly second best for some reason. Maybe all it can do as to the other applicants is say: These applicants are all reasonably qualified; we have no meaningful way of choosing on principle between them; all we can really do is speculate who will do the best job in the public interest; and our best possible 47a 4 least insist that they do not contradict whatever rules for choosing do exist. We think it plain that the Com- mission violated the rules. In our opinion we observed: the Commission purported to be conducting a full hearing whose content is governed by the 1965 Policy Statement. It found favorably to Central on each of diversification, integration and minority participa- tion, and adversely to Cowles on the studio move question. Then simply on the basis of [a] wholly noncomparative assessment of Cowles’ past perform- ance as “substantial,” the Commission confirmed Cowles’ “renewal expectancy.” * The dispositive question is, of course, the relevance of the incumbent’s past performance. We thought it relevant “only insofar as it predicts whether future performance will be better or worse than that of competing appli- cants.” * From much of the Commission’s language (apart from its holding), it appeared to agree. We understand, of course, that it does not." If we were correct, the Commission’s decision cannot stand, for as we noted: Of course the incumbent’s past performance is some evidence, and perhaps the best evidence, of what its hunch is X. I believe Justice Frankfurter has applied to the concept of administrative expertise the phrase of Justice Holmes concerning intuition that outruns analysis. The possibility that an agency may come to the point of resting on intuition is all the greater when it is recalled that there are no doctrines of burden of proof such as are available for decision of court cases when the proof stands in equipoise. * Slip op. at 20. ® Slip op. at 32. 10 See, e.g., 62 F.C.C.2d at 958 (“‘[A] challenger is in a less favorable position, however, because he asks the Commission to speculate whether his untested proposal is likely to be superior to that of an incumbent.”) (emphasis origina!) 11 See FCC Petition for Rehearing at 7. 5 48a future performance would be. But findings on inte- gration and minority participation are evidence as well, and are both the only evidence comparing the applicants and also the only evidence whatsoever per- taining to the challenger. . . The Commission nowhere articulated how Cowles’ unexceptional, if solid, past performance sup- ported a finding that its future service would be better than Central’s. In fact, as we have noted, Central prevailed on each of the questions supposedly predicting which applicant would better perform— the same criteria which the Commission uses for this purpose in non-renewal comparative hearings. It is plain then that this record will not support a finding that Cowles would give the best practicable service.” However, there is the possibility that an incumbent’s meritorious record had literally untold significance. If it were given enough weight (entirely apart from predict- ing the future), as, for example, to assure industry stability, the incumbent could conceivably prevail even were the challenger otherwise thought the better appli- cant. There are probably many policies, more or less in- ferable from the “public interest” which might be bal- anced together with the predicted quality of program- ming.** We understand the Commission, in pressing re- newal expectancies, to be concerned with the disincentive effects of uncertainty. It argues in its petition for rehearing: Moreover, under the panel’s ruling, substantially- performing incumbents are deprived of the “renewal expectancies” which this Court in Greater Boston viewed as “ordinary”, “legitimate”, and “implicit in the structure of the Act.” As the Court there ex- 12 Slip op. at 31, 32 (emphasis original). 18 Diffusion of media ownership is in some sense such a policy. ee 49a 6 plained, ‘such expectancies are provided in order to promote security of tenure and to induce efforts and investments, furthering the public interest, that may not be devoted by a licensee without reasonable se- curity.” Pursuant to these expectancies a ‘“‘substan- tial” or “meritorious” past record is a relevant factor to be weighed in the incumbent’s favor. In this sense, a “meritorious” past record deserves appropriate weight in the overall “public interest” determination, irrespective of the predictive value of past perform- ance and, contrary to the panel’s view (slip op. at 37), irrespective of any finding concerning the chal- lenger’s likely future performance. This, we admit, appears at least a plausible construction of the “public interest.” The trouble is, apart from several unenlightening re- citals that there are expectations implicit in the Act, there were few intimations that this was the Commis- sion’s inchoate rationale. Of course, even had we guessed, we could not have sustained the Commission by further speculating about the weight constructively given 4 FCC Petition for Rehearing at 7 (footnotes omitted). 15 See, e.g., 60 F.C.C.2d at 422; 62 F.C.C.2d at 958. The FCC also suggests in its Petition for Rehearing, at 6, that our opinion precludes it from taking account of the natural “‘credi- bility” of even an “average incumbent’s” proposals derived from the “common sense logic that substantial past perform- ance is the most dependable indicator of substantial future performance.” This is incorrect. We said ‘“‘we do not see how performance that is merely average, whether ‘solid’ or not, can warrant renewal or, in fact,”be of a special relevance without some finding that the challenger’s performance would likely be no more satisfactory.” Slip op. at 37. We plainly contemplated that the Commission would consider the likeli- hood of applicants effecting their proposals, as would be only sensible. 7 50a the incumbent’s past performance. Nor may we review a rationale presented for the first time in this court.” The place for a.new rationale in this case, if one is to be logically developed, is on remand. Moreover, if through rule-making or adjudication the Commission decides to accord weight to such non-comparative values as industry stability, it will have to do so in a manner that is suscepti- ble of judicial review. This would seem to require that the Commission describe with at least rough clarity how it takes into account past performance, and how that factor is balanced alongside its findings under the com- parative criteria. Although mathematical precision is, of course, impossible, something more than the Commission’s ‘* Thus, conclusory references to the need for industry stability are hardly a substitute for the statutorily mandated and particularized balancing. '* See SEC v. Chenery Corp., 318 U.S. 80, 87-89 (1943), United States Lines, Inc. v. Federal Maritime Commission, No. 76-2004 (D.C. Cir. 28 July 1978), slip op. at 26 & n.43. '’ We recall that the Commission’s license to define the public interest, although broad, is not unbounded. See NAACP v. FPC, 425 U.S. 662, 669 (1976) (“the use of the words ‘public interest’ in a regulatory statute is not a broad license to promote the general public welfare,” instead these words “take meaning from the purposes of the regulatory legisla- tion”). Apart from the obvious limitations imposed by its subject matter jurisdiction, see National Organization for Women v. FCC, 555 F.2d 1002, 1017 (D.C. Cir. 1977), there may be subtler constraints “implicit in the structure of the Act.” The Communications Act is very clear that “no... license shall be construed to create any right, beyond the terms, conditions, and periods of the license.” 47 U.S.C. § 301 (1976). The Act’s disfavor of vested license rights reflects the need, which has long informed the public interest standard as well, for “diverse and antagonistic sources of information.” Citizens Communications Center v. FCC, 447 F.2d 1201, 1213 n.36 (1971). The point at which a renewal expectation would become an impermissible vested property right is a worri- some question about which we intimate no view. 5la 8 customary recitals, “completely opaque to judicial re- view,” must be provided. The choice of procedures through which an intelligible analysis could be composed is, as we have said, for the Commission. Since the FCC petition for rehearing displayed a cer- tain agitated concern that our decision in this case would destroy legitimate renewal expectancies of licenseez, with baleful commercial consequences and harm to the general public, we thought it relevant to inquire of the Commis- sion as to just how strong those renewal expectancies have been in the past, based on the action actually taken by the Commission and reviewing court. The history of comparative renewal proceedings since 1 January 1961 (the date from which the data was re- quested) discloses that incumbents rarely have lost, and then only because they were disqualified on some non- comparative ground. From 1961 to 1978 the Commission has conducted seventeen comparative television license renewal proceedings, seven of which are still pending.” In only two cases did the incumbent lose its license,” and in neither of those cases were the comparative criteria the grounds of decision. In one case the incumbent was disqualified because of its fraudulent conduct,” and in 19 Letter of Daniel M. Armstrong, Associate General Coun- sel, Federal Communications Commission, to George A. Fisher, Clerk, United States Court of Appeals, District of Columbia Circuit, 11 December 1978. 20 This does not include the much-publicized case of WHDH- TV, Boston, Massachusetts, which was treated as though it were a comparative proceeding between “new” applicants. See Greater Boston Television Corp. v. FCC, 444 F.2d 841 (1970), cert. denied, 403 U.S. 923 (1971). = Western Communications, Inc. (KORK-TV), Las Vegas, Nevada, 59 F.C.C.2d 1441 (1976), reconsideration denied, 61 F.C.C.2d 974, aff’d. in part and rev’d and remanded in part sub nom., Las Vegas Broadcasting Co. v. FCC, Nos. 76-2104 9 52a the other the incumbent failed to pursue its renewal ap- plication, so the challenger won by default.” The story is not much different in radio licensing. No license has been denied on a comparative basis.* Plainly, incumbents can “expect” in a statistical sense that their license will be renewed. We doubt that any realistic appraisal of the remand in this single case, calling upon the Commission to perform its duty in accord with its own expressed standards, could reasonably create the nervous apprehension among licensees claimed by the Commission. The only legitimate fear which should move licensees is the fear of their own substandard perform- ance, and that would be all to the public good. and 76-2124 (D.C. Cir., 26 October 1978) (affirming the denial of renewal but reversing the disqualification of the challen- ger). 22 Gerico Investment Co., 31 F.C.C. 625 (1961). * From 1961 to 1978 there were thirty-one comparative radio renewal proceedings, twelve of which are still pending. No incumbent radio licensee has been displaced on the basis of the comparative criteria. Three licensees were disqualified for misconduct, five other renewal applications were dis- missed, and the challengers’ applications granted. See letters of Daniel M. Armstrong, Associate General Counsel, Federal Communications Commission, to George A. Fisher, Clerk, United States Court of Appeals, District of Columbia Circuit, 11 and 18 December 1978. 53a APPENDIX D Notice: This opinion is subject to formal revision before publication in the Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify the Clerk of any formal errors in order that corrections may be made before the bound volumes go to press. United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT September Term, 1978 No. 76-1742 CENTRAL FLORIDA ENTERPRISES, INC., APPELLANT Vv. FEDERAL COMMUNICATIONS COMMISSION, APPELLEE COWLES BROADCASTING, INC., INTERVENOR Before: WRIGHT, Chief Judge, BAZELON, MCGOWAN, TAMM, LEVENTHAL, ROBINSON, MACKINNON, ROBB and WILKEY, Circuit Judges. ORDER Suggestions for rehearing en banc filed by appellee Federal Communications Commission and by intervenor Cowles Broadcasting, Inc., having been transmitted to the full court and no judge having requested a vote on these suggestions, it is ORDERED, by the Court, en banc, that the suggestions filed by appellee and by intervenor are denied. Per Curiam 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. 54a APPENDIX E Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 FCC 73D-62 12035 In re Applications of: DOCKET NO. 19168 File No. BRCT-354 COWLES FLORIDA BROADCASTING, INC. (WESH-TV) Daytona Beach, Florida For renewal of license DOCKET NO. 19169 File No. BPCT-4158 COWLES FLORIDA . BROADCASTING, INC. (WESH-TV) Daytona Beach, Florida For modification of authorized facilities CENTRAL FLORIDA ENTERPRISES, INC. Daytona Beach, Florida DOCKET NO. 19170 File No. BPCT-4346 me me ee ee ee ee eee For a construction permit Appearances Robert A. Marmet, Gordon R. Malick and Jacob A. Stein on behalf of Cowles Florida Broadcasting, Inc.; Joseph F. Hennessey, Lee G. Lovett and Eric T. Esbenson on behalf of Central Florida Enterprises, Inc.; J. Peter Luedtke and Edgar F. Czarra, Jr. on behalf of The Asso- ed 55a ciation of Maximum Service Telecasters, Inc.; Gene A. Bechtel on behalf of witness Robert M. Goshorn; Clyde E. Herring on behalf of witness Lester Suhler; and Charles W. Kelley, Kathryn S. McGovern, Thomas B. Fitzpatrick and Theodore Kramer on behalf of Chief, Broadcast Bureau, Federal Communications Commission. INITIAL DECISION OF ADMINISTRATIVE LAW JUDGE CHESTER F. NAUMOWICZ, JR. Issued November 27, 1973; Released: December 7, 1973 Preliminary Statement 1. By Commission order released March 10, 1971 (re- designated by orders released August 20, 1971 and Feb- ruary 24, 1972), the above-captioned applications were consolidated for hearing on the following issues: “1. With respect to the application of Central Flori- da Enterprises, Inc., to determine: (a) The areas and populations which may be ex- pected to gain or lose television coverage by the proposed operation, as compared to the service now provided by Station WESH-TV, and the other television broadcast services available to such areas; (b) To the extent that there may be a loss area, what plans are proposed to ameliorate or elimi- nate actual losses and the efficacy of those plans; (c) Whether circumstances exist that warrant a waiver of section 73.610(b) of the Commission’s rules, and, if so, to determine the necessary con- ditions to be met to assure that equivalent pro- ‘tection is provided to Station WTHS-TV, channel *2, Miami, Florida; (d) Whether the following subscribers to deben- tures of the applicant have sufficient current and 56a liquid assets in excess of current liabilities in suf- ficient amount to enable them to fully meet their commitments; H. Clinton Dunn, James W. Clower, O.L. White, Louis P. Samuels, Jos. A. Guernsey, J. Hyatt Brown, George W. Engram, William H. Cleveland, Arthur F. Jones, J.C. Adams, Jr., Fletcher G. Rush, and George P. Schanck; (ec) Whether Mr. James R. Stephen has current and liquid assets in excess of current liabilities in sufficient amount to enable him to meet his stock subscription commitment to the applicant; (f) Whether the applicant will have available stu- dio and transmitter buildings by lease from 749 Volusia, Inc., and, if so, the terms and condi- tions of that lease; (h) What items will be covered by the equipment supplier’s deferred credit; (i) Whether the applicant will have available addi- tional sources of funds to meet its requirements, and, if so, the terms and conditions under which those funds will be available; (j) In light of the evidence adduced under issues “f”? — “i, what the applicant’s cost of construc- tion and three-months operating expenses are; (k) In light of the evidence adduced under issues “ea aro 66599 )”’, whether the applicant is financially qualified. “2. With respect to the applications of Cowles Florida Broadcasting, Inc., to determine: (a) The areas and populations which may be expected to gain or lose television coverage by operating as proposed in its application for changes, and other television broadcast services available to such areas; 237 l --- 1,040 ++. 72 2 “+ 1,471 “+ 11 Grade B gain 3 59,009 66,319 429 460 4 or more 125,124 121,593 932 726 Grade B loss 0 90 666 12 17 l 967 2,676 97 101 2 296 545 17 19 3 7,152 13,147 90 110 4 5,295 6,102 242 214 6. Central proposes to continue WESH’s NBC network affiliation. If that proposal is effectuated it would pro- vide a first NBC affiliated Grade B signal to 59,116 per- sons in an area of 518 sq.mi. located 57 to 73 miles south of the proposed site. One hundred seven persons residing in 27 sq.mi. located 80 miles west of the proposed site would lose their only NBC affiliated Grade B service. 7. Cowles’ transmitter is now located some 21 miles southwest of Daytona Beach and 25 miles north of Or- lando. It proposes to move 12.7 miles southeast to a lo- cation 22 miles south of Daytona Beach and 21 miles 2 [See previous page] 6la northeast of Orlando. The areas and populations which would be gained and lost are as follows: Population Area (sq.Mi.) Cowles AMST* Cowles AMST Grade A Gain “s+ 118,132 ++. 943.4 Loss --- 8,424 “-- 254.1 Net Gain --- 109,708 --- 689.3 Grade B Present 1,107,443 10,856 --- Proposed 1,295,857 --- 12,042 --- Gain 200,702 188,941 1,587 1,303.5 Loss 12,288 15,639 401 399.6 Net Gain 188,414 173,302 1,186 903.9 8. The present WESH City Grade contour (74 dbu) covers 94% of the population of Daytona Beach and 45% of the population of Orlando. The proposed City Grade contour would include all of both cities. 9. Other services available within Cowles’ gain and loss areas are as follows: Number of Population Area (Sq.Mi.) Existing Services Cowles AMST Cowles AMST Grade A Gain l and 2 “+: 144 “++ 5.1 3 --- 117,988 “+> 938.3 Grade A Loss 0 --- 3,391 “+: 144.8 1 --- 1,529 --- 98.4 2 --- 3,504 --- 10.9 Grade B Gain 2 841 1,411 25 30.6 3 44,274 62,481 578 553.3 4 ormore 155,587 125,049 984 719.6 *Here, as with the Central figures under this issue, AMST’s computations differ noticeably, if not materially, from the compu- tations of the applicant. 62a Populstion Area (sq.Mi.) Cowles AMST* Cowles AMST Grade B Loss 0 540 625 11 22.2 l 2,792 3,433 111 128.0 4 628 572 25 24.8 3 3,780 5,936 57 98.1 4 4,548 5,073 197 126.5 10. At present there is a 36° spread in antenna orienta- tion for residents of Daytona Beach between the WESH transmitter and the transmitter locations of Orlando VHF stations WDBO-TV and WFTV. At the new location the spread would be reduced to 9.5°, thus permitting recep- tion from all three stations on a single antenna setting. Since Central’s proposed site is quite close to that of Cowles, a similar advantage would flow from grant of its application. Issue 1(b) and 2(b): Plans to Ameliorate Signal Loss 11. Central proposes to call upon all the homes in the loss area which have antennas oriented toward Daytona Beach. An adult member of the household will be ques- tioned regarding reception on Channel 2. If the response is that the signal has become less satisfactory, Central will offer to have a higher gain antenna installed at its own ex- pense. 12. It is the opinion of Cowles’ consulting engineer that no actual loss of Cowles’ existing service will occur. He bases this opinion on the fact that, although certain areas now within the Grade B contour would no longer be within such contour, the maximum decrease in signal strength would be 3 db. He believes that so minor a dim- inution of signal strength would be undetectable on a typical television receiver. —_ ae —— - 63a 13. Nevertheless, Cowles proposes to place notices of the change in local newspapers and Post Offices. If any- one in the loss area believes he has suffered an actual loss of signal Cowles will install a special antenna for such per- sons with a higher gain on Channel 2. In the event a sub- stantial number of persons claim to be effected, Cowles proposes to restore service through translators. Pursuant to that proposal there is now pending an application by Cowles for a Channel 64 translator to serve McIntosh, Florida, a community of 287 persons located within the loss area. Issue 1(c) and 2(c): Short Spacing 14. Under rules 73.609 and 73.610 the minimum sep- aration for co-channel VHF stations in the state of Flor- ida is 220 miles. Prior to September of 1959 the trans- mitter sites of WESH and WTHS-TV, Channel 2, Miami, Florida, were separated by 228 miles. However, on that date the Commission, with the consent of WESH, per- mitted WTHS to move its transmitter to a site only 215 miles from that of WESH. Since that time the stations have been short-spaced by 5 miles. 15. The distance from Central’s proposed site to that of WTHS-TV is 206.5 miles. Hence, it would be short- spaced by 13.5 miles, an increase of 8.5 miles in compari- son with the present WESH site. 16. Central’s reason for selecting its site was to enable it to provide coverage comparable to that of the stations which would be its competitors, WFTV and WDBO-TV, Orlando, Florida. In order to achieve this goal Central believes it needs antenna height equal to the approxi- matély 1500 feet from which its competitors operate. So tall a tower presents aeronautical hazards which limit the locations at which it can be erected. The only suitable 64a site, other than the one proposed, is in a swamp area some 30 miles west of Daytona Beach. However, Central rejected this site because it is further from the trans- mitter location of the Orlando stations, and would, there- fore, make its coverage even less comparable to that of the Orlando stations than that of present WESH. 17. Central proposes a directional antenna designed to suppress radiation toward WTHS-TV. Central’s engineer conducted a study indicating that at least equivalent pro- tection will be provided on all pertinent radials. His con- clusions were as follows: Effective Radiated Power (dbk) Azimuth (degrees true) Permissible Central 149 17.0 16.5 158 16.7 16.03 170 16.7 16.03 179 17.0 16.71 183 ee : 16.83 185 17.3 17.05 187 17.3 17.27 188 17.4 17.38 18. In addition to its directional antenna Central pro- poses, with the concurrence of Station WTHS-TV, to in- stall precise frequency control equipment. It believes this will result in a further reduction of interference on the order of 7 to 10 db. Moreover, to make certain that its transmitter will operate as proposed Central will have its antenna measured on the pattern range of the antenna manufacturer. There appropriate match marks will be applied to the antenna to assist antenna orientation in the field. After erection, orientation will be confirmed by a registered surveyor, and sufficient field intensity mea- surements will be taken to insure that installation was proper. SO On PRS NT Sa EME. ee Se ee a CRE A i 65a 19. Cowles’ existing transmitter site is 215 miles from co-channel Station WTHS-TV, Miami, Florida. Hence, as noted at paragraph 14, supra, the two stations are pres- ently short spaced by 5 miles.° Its proposed move would decrease the spacing to 205.29 miles. Thus, short-spacing would be increased by 9.7 miles to a total of 14.7 miles. 20. Cowles’ reason for seeking to move its site is to re- establish a competitive position with the Orlando VHF stations which were permitted to move to their present location some time ago. 21. In order to provide city-grade service to all of both Daytona Beach and Orlando Cowles must locate its trans- mitter within an ellipse containing some 200 square miles. Within that ellipse there is an area of some 4 square miles which would meet the 220 mile separation require- ment of the rule, and another area of approximately 40 square miles wherein the separation would be at least as great as the present 215 miles. However, considerations of air hazard preclude locating a tower of sufficient ‘height within these areas. 22. A third area of some 40 square miles within the ellipse presents no air hazard problems, but the entire area is less than 215 miles from the WTHS transmitter. It is within this area that Cowles and Central propose to lo- cate their transmitters. 23. Cowles proposes a directional antenna designed to suppress radiation toward WTHS-TV. However, there is some controversy as to whether its proposal would pro- 51f WTHS had not moved its transmitter site in 1959 there would now be a distance of 219 miles between WTHS and the WESH proposed site. WTHS does not now object to WESH’s pro- posed increase in short spacing presumably as a quid pro quo for WESH’s lack of objection in 1959. 66a vide WTHS with equivalent protection, the controversy stemming from which is meant by the term “equivalent protection”. 24. Cowles concedes that its antenna pattern would not provide equivalent protection as defined in Docket 13340, which is based on the assumption that the two stations are located at least 220 miles apart. If this stan- dard is applied the following table illustrates the permis- sible radiation on the pertinent radials as compared to that proposed by Cowles: Effective Radiated Power (dbk) Azimuth (degrees true) Permissible Cowles 149 17.0 17.8 158 16.7 17.2 170 16.7 17.0 179 17.0 17.6 183 17.2 17.9 185 17.3 18.1 187 17.3 18.3 188 17.4 18.4 25. However, Cowles contends that WTHS is not en- titled to “equivalent protection” based on a 220 mile separation. It points out that the existing separation is actually 215 miles, and that this situation exists because WTHS was permitted to short space its own transmitter. Hence, Cowles reasons, WTHS is only entitled to “equiva- lent protection” to the extent that its interfering signal is no stronger than that which WTHS receives at the exist- ing 215 mile separation. This degree of protection its pro- posed antenna pattern would provide, and, in fact, OA OU SE RO EE EE RET EET TTT re — -—-— =~ 67a WESH’s interference to WTHS would be reduced, as fol- lows: Population Area (Sq.Mi.) WTHS Grade B 2,215,981 6,360 Interference from Present WESH 107,220 (4.8%) 836 (13%) Interference from Proposed WESH 4,807 (0.22%) 137 (0.22%) 26. In addition, Cowles proposes to install precision frequency controls at both its own transmitter and that of WTHS. Its antenna will be range measured by the man- ufacturer, and field measurements will be made after in- stallation to assure that the anticipated protection to WTHS will actually occur. 27. Finally, Cowles proposes that, in the event the Commission determines that the equivalent protection standards of Docket 13340 should be applied, it will accept a grant conditioned on its amending its proposal to supply such protection. Ordinarily, such contingent applications are discouraged and no findings thereon would be made. However, in this instance it must be noted that the order of designation provides that “in the event Central does not establish that waiver of the spac- ing requirement is warranted, but would otherwise be the preferred applicant, its application will be granted subject to the condition that it find a transmitter location that does not lessen the existing spacing between Stations WESH-TV and WTHS-TV”’. If one applicant is to be per- mitted to amend its application after hearing to conform its spacing proposal relative to WTHS with that of its op- portent, elementary justice would seem to require that the opponent be afforded a similar opportunity. Hence, the findings as to Cowles contingent proposal have been 68a made, and the matter will be accorded appropriate con-. sideration in the conclusions. Issue 1(d): Ability of Central Principals to Meet Deben- ture Commitments. 28. H. Clinton Dunn is committed to purchase $21,000 of Central’s debentures. The First Atlantic National Bank of Daytona Beach has committed a loan to Mr. Dunn in the sum of $25,000, at call, to permit him to meet this obligation in the event Central receives a grant. Interest will be at the bank’s then prime rate, and no security will be required. 29. Tames W. Closer is committed to purchase $10,500 of Cei.tral’s debentures. The Westside Atlantic Bank of Daytoi.a Beach has committed a loan to Mr. Clower in the sum of $10,500, at call, to permit him to meet this obligation in the event Central receives a grant. Interest will be at the bank’s then prime rate, and no security will be required. 30. O.L. White is committed to purchase $21,000 of Central’s debentures. The First National Bank of Mait- land, Maitland, Florida has committed a loan to Mr. White in the sum of $25,000, at call, to permit him to meet this obligation in the event Central receives a grant. The bank’s interest on this type of loan is currently 7%. No security will be required. 31. Louis P. Samuels is committed to purchase $21,000 of Central’s debentures. The Westside Atlantic Bank of Daytona Beach has committed a loan to Mr. Samuels in the sum of $21,000, at call, to permit him to meet this obligation in the event Central receives a grant. Interest will be at the bank’s then prime rate, and no security will be required. rr 69a 32. Joseph A. Guernsey is committed to purchase $21,000 of Central’s debentures. The Commercial Bank of Winter Park, Florida, has committed a loan to Mr. Guernsey in the sum of $21,000 to permit him to meet this obligation. The loan will become available at such time as Central may have received a construction permit. The loan commitment is presently available through March 8, 1974. However, in the event it should expire before the termination of this hearing, the record shows that as of August, 1972 Mr. Guernsey had approximately $300,000 in current liquid assets in excess of all liabili- ties from which to meet his obligation to Central. 33. J. Hyatt Brown is committed to purchase $21,000 of Central’s debentures. The Commercial Bank of Day- tona Beach has committed a loan to Mr. Brown in the sum of $22,000, at call, to permit him to meet this obli- gation in the event Central receives a grant. Interest will be 1%% above the then New York prime rate, and no security will be required. 34. George W. Engram is committed to purchase $10,500 of Central’s debentures. The Florida Bank and Trust Company of Daytona Beach has committed a loan to Mr. Engram in the sum of $10,500 in order that he may meet his commitment. The loan will be secured by a mortgage on certain real property which Mr. Engram has set aside in order tltat it will be available at such time as the security may be needed. 35. William H. Cleveland has assigned his interest in Central to W. Warren Cole including the obligation to purchase $21,000 of Central’s debentures. Mr. Cole has current liquid assets in excess of $100,000, and his liabili- ties total less than $7,000. 70a 36. Arthur F. Jones is committed to purchase $21,000 of Central’s debentures. As of December, 1971 he owned publicly traded securities valued at approximately $250,000, and his total liabilities were less than $11,000. 37. J.C. Adams, Jr. is committed to purchase $21,000 of Central’s debentures. The Westside Atlantic Bank of Daytona Beach has committed a loan to Mr. Adams in the sum of $21,000, at call, to permit him to meet this obligation in the event Central receives a grant. Interest will be at the bank’s then prime rate, and no security will be required. 38. Fletcher G. Rush is committed to purchase $21,000 of Central’s debentures. The Commercial Bank of Winter Park, Florida has committed a loan to Mr. Rush in the sum of $21,000 to permit him to meet this obligation. However, the bank’s commitment expires on March 2, 1974. Mr. Rush’s unaudited financial statement of No- vember, 1971 indicates that he has current liquid assets of more than $300,000 in excess of current liabilities, but over $450,000 of these assets are in the form of unnamed securities. 39. George P. Schanck is committed to purchase $21,000 of Central’s debentures. The Citizens National Bank of Orlando, Florida has committed a loan to Mr. Schanck in the sum of $21,000, at call, to permit him to meet this obligation. Interest will be at the bank’s then prime rate, and no security will be required. 40. Although the Order of Designation does not in- quire as to Thomas W. Staed at Issue 1(d), he is men- tioned at paragraph 11 of the Order as not having demon- strated that his liquid assets exceed his current liabilities by the amount of his $21,000 commitment to purchase Central’s debentures. Hence, evidence as to his capability was adduced, and findings will be made. 7la 41. The First Atlantic National Bank of Daytona Beach has committed a loan of $21,000 to Mr. Staed to permit him to meet his obligation in the event Central receives a grant. Interest will be at the bank’s then prime rate, and no security will be required. Issue 1(e): Financial Qualifications of James R. Stephen 42. James R. Stephen has subscribed to $125,000 worth of Central’s stock and $10,500 of debentures. The Com- mercial Bank of Daytona Beach has agreed to lend him $150,000 to meet his commitment. The bank has agreed to refinance a mortgage it now holds on certain of Mr. Stephen’s property as full security for the loan. The loan would be for 15 years at 6%% interest, payable at $3,100 per month. The property is presently under a 15-year lease that returns $4,000 per month to Mr. Stephen. Issue 1(f): Availability of Bank Loan to Central 43. The issue as designated inquires whether Central will have available a $100,000 loan from the Commercial Bank of Daytona Beach. Subsequently, the application was amended to specify a loan in the sum of $800,000 from the Empire Bank, Springfield, Missouri. The Empire Bank has agreed to make this sum available at such time as Central may have received a grant. The bank’s commit- ment contemplates a three-year loan at 8%. The loan would be unsecured by Central. However, the bank may require that all of the shareholders pledge their stock in Central, and that guarantees to a total of $150,000 be given. 44. Each of Central’s shareholders has agreed to pledge his stock if required. Mr. Jack Ross and Mr. James Stephen have each agreed to guarantee $75,000 on the loan, and the Empire Bank finds their guarantees to satisfy the 72a $150,000 contingent surety. The bank’s commitment is subject to the usual caveat that changed conditions at the time the loan is to be taken down may modify the agreement. The bank proposes to sell participation in so much of the loan as may exceed $500,000. However, the bank’s President is of the opinion that such a participa- tion agreement is common, and that the bank can prop- erly expect to honor its commitment. The bank would not require any principal payment during the three-year term, although interest will be payable monthly. Issue 1(g): Availability of Studio and Transmitter Build- ings . 45. 749 Volusia, Inc. is a real estate holding and devel- opment corporation owned in equal shares by its presi- dent, James R. Stephen, and its secretary-treasurer, Rich- ard F. Livingston. The corporation has agreed to build a studio and lease it to Central. 46. Central has an option running to April 30, 1976 to purchase a 5 acre site in a business park being developed in the western portion of Daytona Beach. The option does not specify the precise 5 acres to be acquired by Central nor the exact price to be paid, although it is specified that the 5 acres will front on a named street and that the price will not exceed $12,000 per acre. At such time as Central may receive a grant it would exercise the option and reconvey the property to 749 Volusia at its own purchase price. 47. 749 Volusia would then build on the site a studio building containing approximately 30,000 square feet of space. The building would cost between $750,000 and $1,000,000. It would be leased to Central for not less than 10 years at a rate of 742% “over the best financing available for construction of the studios at the time of 73a making arrangements for the mortgage, computed on a basis of total costs of construction of studios and land acquisition’”’.® Central will also pay all taxes and costs for operating and maintaining the property. [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2607%3A2. Public record. Not legal advice.