Petition — Davidson Supply Co. v. Federal Communications Commission

JUL 17 1979

MICHAEL RODAK, JR., CLERK

IN THE

Supreme Court of the Anited States

OCTOBER TERM, 1978

n0o.7 9785 iad

DAVIDSON SUPPLY COMPANY,

Petitioner,

FEDERAL COMMUNICATIONS COMMISION

AND UNITED STATES OF AMERICA,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

FOURTH CIRCUIT

DAVID F. MESCHAN

J. SAMUEL GENTRY, JR.

Counsel for Petitioner

Tuggle, Duggins, Meschan,

Thornton & Elrod, P.A.

228 West Market Street

Post Office Drawer X

Greensboro, North Carolina 27402

(919) 378-1431

a aeiacieaee ie chelieatiomaia RITES ATRL NRT!

Washington, 0.C. © CLB PUBLISHERS © LAW PRINTING CO. » (202) 393-0625

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TABLE OF CONTENTS

Page

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COUPEE ROMEO WMRMUESEU REED cc ccccsecesccercccccecs 2

CONSTITUTIONAL PROVISIONS, STATUTES,

PIRI acess cc ccs scscscrescceses 3

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REASONS FOR GRANTING THE WRIT .......... 6

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APPENDIX A—FCC ORDER NO. 78-267 ......... la

APPENDIX B—OPINION OF THE COURT

EI IEEE PTE TERETE lb

APPENDIX C—ORDER OF COURT BELOW

DENYING PETITION FOR REHEARING ...... Ic

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(ii)

TABLE OF AUTHORITIES

Cases: Page

Francis v. Immigration and Naturalization

Service, 532 F.2d 268 (2nd Cir. 1976) .........0.. 11

Hughes Air Corporation v. C.A.B.,

Oe eg a ek) er rr: ern 12

King v. U.S., .

Gar Cine Per, 192 C0.C1, SEB (ISTO) .n cccccvccvess 13

Schlesinger v. Ballard,

419 U.S. 498, 95 S.Ct. 572, 42 L.Ed.2d 610

Se ea es ela weeiedes her Radek anes 10

U.S. v. General Motors Corp.,

323 U.S. 373, 65 S.Ct. 357, 89 L.Ed. 311

he ta Tere h cue e eee ca aa ek ole oo <RADRS 13

United States Constitution:

I Se eee aE De esa 2,3,14

Statutes:

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pos Tt | | ESTER UEP eRTETT TILE REE EET TLC Te 2

pg Te | RY FV Ree ROTSE TOTO ETE TT CTL Eee 5

re EE 50a 6600454 aoe 6 URKs Bn ee vee dcaean 5

Regulations:

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OF ee is eb ices bed eeasbh cebu 4,5,9

SF See 6 86.4 3 16h aS ook See Ro ARs 4,5,9

Other Authorities:

FCC Order No. 78-267, 68 FCC 2d 89 (1978), .1,2,5,6,7,8,

10,11,12,13

FCC Public Notice No. 96235 (January 30, 1978) ... 7,11

IN THE

Supreme Court of the Anited States

OCTOBER TERM, 1978

No.

DAVIDSON SUPPLY COMPANY,

Petitioner,

Vv.

FEDERAL COMMUNICATIONS COMMISSION

AND UNITED STATES OF AMERICA,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE FOURTH CIRCUIT

DAVIDSON SUPPLY COMPANY petitions for a

Writ of Certiorari to review the judgment of the United

States Court of Appeals for the Fourth Circuit in this

case.

OPINION BELOW

The Federal Communications Commission (“FCC”)

released FCC Order No. 78-267, 68 FCC 2d 89, on May

3, 1978. FCC Order No. 78-267 is reproduced as

Appendix A hereof. On April 19, 1979, the Court of

Appeals for the Fourth Circuit rendered an unpub-

2

lished per curiam opinion, which is reproduced as

Appendix B hereof.

JURISDICTION

The opinion of the Court of Appeals was entered on

April 19, 1979. A petition for rehearing was denied by

Order of the Court of Appels entered on May 23, 1979.

This Order is reproduced as Appendix C hereof. The

jurisdiction of thils Court is invoked under 28 U.S.C.

§1254(1).

QUESTIONS PRESENTED

1. Should certiorari be granted to review the holding

of the Court below that the promulgation and enforce-

ment of FCC Order No. 78-267 does not deny

Petitioner the equal protection of the laws guaranteed

by the Fifth Amendment of the Constitution of the

United States? |

2. Should certiorari be granted to review the holding

of the Court below that the action of the FCC in

adopting FCC Order No. 78-267 and prohibiting

Petitioner from reselling its used 23-channel CB radios

was neither arbitrary nor capricious and does not

constitute an abuse of discretion by the FCC in

violation of standards established by Congress to

regulate action by federal agencies in 5 U.S.C. §706, the

Administrative Procedure Act?

3. Should certiorari be granted to review the holding

of the Court below that the application of FCC Order

3

No. 78-267 to Petitioner does not constitute an

unjustifiable takilng of private property without just

compensation in violation of the Fifth Amendment to

the Constitution of the United States?

CONSTITUTIONAL PROVISIONS,

STATUTES, AND REGULATIONS

The Fifth Amendment of the Constitution of the

United States provides, in part, that no person shall

“ .. be deprived of life, liberty, or property, without

due process of law; nor shall private property be taken

for public use, without just compensation.”

5 U.S.C. §706(a portion of the Administrative Procedure

Act) provides in pertinent part:

“To the extent necessary to decision and when

presented, the reviewing court shall decide all

relevant questions of law, interpret constitutional

and statutory provisions, and determine the mean-

ing or applicability of the terms of an agency

action. The reviewing court shall—

“(1) compel agency action unlawfully with-

held or unreasonably delayed; and

“(2) hold unlawful and set aside agency action,

findings, and conclusions found to be—

“(A) arbitrary, capricious, an abuse of dis-

cretion, or otherwise not in accordance with

ee

21 C.F.R. §1030.10 (a) provides as follows:

“ Apllicability. The provisions of this standard are

applicable to microwave ovens manufactured after

Octover 6, 1971.”

40 C.F.R. §86.077-1 provides as follows:

4

“The provisions of this subpart are applicable to

1977 and later model year new saetiinntadied and

Diesel light-duty vehicles, 1977 and later model

year new gasoline-fueled and Diesel light-duty

trucks and 1977 and later model new gasoline-

fueled and Diesel heavy-duty engines.

47 C.F.R. §15.59 (g) provides as follows:

‘The marketing of non-certificated CB receivers shall

be terminated not later than January 1, 1978.”

47 C.F.R. § 95.641 (c) (6) provides as follows:

“No CB transmittor type accepted pursuant to an

application filed prior to September 10, 1976 shall

be marketed on or after January 1, 1978.”

STATEMENT OF THE CASE

Petitioner is a North Carolina corporation with a

pricipal place of business in Greensboro, Guilford

County, North Carolina, and is a wholesale distributor

and retailer of sporting goods and electronic equip-

ment, including citizens band transceivers. For pur-

pose of this Petition, citizens band transceivers will be

referred to as “CB radios.”

For some time prior to January |, 1978, Petitioner

sold at wholesale and retail a large volume of 23-

channel CB radios. In connection with Petitioner's

established policy of guaranteeing customer satis-

faction, Petitioner accepts return of defective 23-

channel CB radios. In the case of consumers, it either

refunds the customer’s money or exchanges the re-

turned merchandise for new 23-channel CB radios

from stock. In the case of dealers, Petitioner accepts

5

return of the defective 23-channel CB radios and issues

credit for such CB radios. After receiving defective CB

radios from customers or dealers, Petitioner then

returns the 23-channel CB radios to the manufacturer

for repair. After repair, the 23-channel CB radios are

then returned to Petitioner to be merchandised by

Petitioner as used 23-channel CB radios.

During the summer and fall of 1976 and during 1977,

the FCC promulgated various orders and regulations

prohibiting the “marketing” of 23-channel CB radios

after January 1, 1978. See 47 C.F.R. §15.97 (g) and 47

C.F.R. §95.641 (c) (6), supra, at page 4. On Jan-

uary 24, 1978, Petitioner filed a petition with the FCC

requesting that Petitoner be permitted to resell the used

CB radios sold by Petitoner prior to January 1, 1978

but returned by customers or dealers after January 1,

1978 for exchange or refund. Petitioner requested a

waiver of the January 1, 1978 sales cut-off date as it

applied to used 23-channel radios returned for refund

or repairs or, in the alternative, a clarification that the

terms “marketed” and “marketing” as used in 47

C.F.R. §15.59 (g) and 47 C.F.R. §95.641 (c) (6) did not

apply to the resale of used 23-channel CB radios

returned by customers for repair or refund. In its Order

No. 78-267, which was released on May 3, 1978, the

FCC stated that to allow Petitioner to resell its used 23-

channel CB equipment would“ . . . fly inthe face of the

Commission’s decision to remove interference cable

equipment from the marketplace at the earliest possible

time”, Infra, at page 8a, and denied Petitioner’s petition.

Petitioner invoked the jurisdiction of the Fourth

Circuit Court of Appeals pursuant to 47 U.S.C. §402

(a) and 28 U.S.C. §2341, et seq. (more particularly 28

6

U.S.C. §2342 (1) and 28 U.S.C. §2344) for review of

FCC Order No. 78-267. While the review by the Fourth

Circuit was pending, the FCC denied a Petition for

Reconsideration of FCC Order No. 78-267.

On April 19, 1979, the Fourth Circuit entered an

unpublished, per curiam opinion denying Petitioner's

Constitutional and statutory challenges to FCC Order

No. 78-267.

REASONS FOR GRANTING THE WRIT

This Petition raises substantial and important

questions concerning bureaucratic usurpation of rights

guaranteed to Petitioner under the Fifth Amendment

of the Constitution and the Administrative Procedure

Act. No precedent at all exists for the action attempted

by the FCC against Petitioner in this case: namely, a

prohibition of resale of a used non-hazardous con-

sumer product. This Petition will also show that the

FCC’s position is totally illogical and inconsistent and

that the granting of the relief sought by Petitioner will

in no way offend the FCC’s objective of removing

interference-prone 23-channel CB radios from the

marketplace at the earliest possible date. Furthermore,

in view of the fact that the FCC continues to permit all

new and used 23-channel CB radios to be given away

without restriction, to arbitrarily prohibit Petitioner

from reselling its used 23-channel CB radios, as does

the FCC in Order No. 78-267, does nothing to expedite

the removal of such units from the marketplace and

constitutes an unnecessary and unreasonable violation

of Petitioner’s rights under both the Fifth Amendment

7

and the Adminilstrative Procedure Act.

In FCC Order No. 78-267, the FCC decreed that to

allow Petitioner to resell its used 23-channel CB radios

would“... fly inthe face of the Commission’s decision

to remove interference capable equipment from the

marketplace at the earliest possible time.” According to

the arbitrary guidelines established by the FCC, how-

ever, Petitioner may give away ail of its 23-channel CB

radios, either new or used models, as door prizes or

gifts. To quote a portion of FCC Public Notice No.

96235, dated January 30, 1978:

“May a 23 channel radio be given away?

“Yes, within certain limits. The Commission will

not prohibit the giving away of a 23 channel radio

if the transaction is a genuine gift. However, these

23 channel CB’s must have been purchased prior to

January 1, 1978 since the sale of this equipment

after that date is prohibited even if the purchaser

intends to give away the radio. As examples, the

Commission would not prohibit the following

types of give aways:

“(a) An individual making a gift of a 23 channel

CB to a family member, friend, or charity.

“(b) The giving away of 23 channel radios as

‘door prizes’. _

“(c) A store giving away 23 channel radios to

the first ten people who entered the store ona given

day.”

Petitioner is thus in the position of being told the 23-

channel CB radios it presently owns create so much

interference that they cannot be sold, but not to worry

because the offending radios may still be given away to

the general public. Such a position by the FCC is

8

illogical and inconsistent. The interference capability

of a used 23-channel CB radio is not diminished in any

way whatsoever by the fact that Petitioner gives it away

rather than sells it. Once in a consumer’s hand, a used

23-channel CB radio will create the same amount of

interference irrespective of whether the consumer

purchased the unit or received it as a gift. Stated

another way, the prohibition by FCC Order No. 78-267

of the resale of Petitioner’s used 23-channel CB radios

does nothing to further the FCC's stated goal of

removing “interference capable equipment from the

marketplace at the earliest possibie time.” Absent a

decision by the FCC that no 23-channel CB radios may

be used or operated, the removal of such units from the

marketplace will, as is true with other consumer goods,

ultimately depend on natural attrition.

As wil be discussed, infra, by arbitrarily and un-

reasonably prohibiting Petitioner from reselling its

used 23-channel CB radios, FCC Order No. 78-267

constitutes a gross violation of Petitioner's rights under

the Fifth Amendment and the Administrative Pro-

cedure Act which should not have been tolerated by the

Court below, and which requires review by this Court.

THE FOURTH CIRCUIT COURT OF

APPEALS FAILED TO RECOGNIZE

THAT FCC ORDER NO. 78-267 DENIES

PETITIONER THE EQUAL PROTEC-

TION OF THE LAWS BY PROHIBITING

THE RESALE OF PETITIONER’S USED

23-CHANNEL CB RADIOS.

In contrast with previous govermental elimination of

hazardous or otherwise undesirable comsumer pro-

9

ducts, the FCC regulations dealing with 23-channle CB

radios, 47 C.F.R. §15.59 (g) and 47 C.F.R. §95.641 (c)

(6), supra, at page 4, go one step further: their focal

point is the time of the sale of the consumer product

rather than the time of manufacture as has been the

case with previous similar regulations. In contrast,

consider 40 C.F.R. §86.077-1, supra, at page 3, a

part of the standards promulgated by the Environ-

mental Protection Agency in an attempt to reduce the

pollution caused by automobile exhaust systems. This

regulation is geared to the year of manufacture and

makes no mention of vehicles manufactured prior to

the time the standards became effective. Certainly it

would be both impractical and economically wasteful

to prohibit the sale of used automobiles without

emission controls manufactured prior to the deadline.

The same could be said of a policy prohibiting the sale

of used 23-channel CB radios.

Compare also the regulations of the Food and Drug

Administration relating to the hazards of microwave

ovens, contained in part in 21 C.F.R. §1030.10 (a),

supra, at page 3. Once again the federal agency

involved established a compliance date for the gover-

ment standards based on the time of manufacture, not

time of sale.

As the owner of used consumer goods which have

been the subject of a change in manufacturing specifi-

cations promulgated by a federal agency, Petitioner

finds itself in circumstances similar to those of the

owner of an automobile manufactured prior to the

pollution control standards or the owner of a micro-

wave oven manufactured prior to the issuance of the

new health regulations. Unlike the automobile owner

or the microwave owner, however, under FCC Order

10

No. 78-267, Petitioner is prohibited from selling its

used CB equipment which violates regulatory stan-

dards.

Petitioner has been unable to find a record of any

other successful bureaucratic attempt to limit dis-

tribution of a major used consumer item. The stringent

marketing restriction imposed on used 23-channel CB

radios seems particularly difficult to justify in view of

the fact that automobile pollution and microwave oven

radiation pose potential health hazards, whereas 23-

channel CB radios may cause interference with othe

communication units, but certainly pose no direct

threat to human health.

It is well settled that the Due Process clause of the

Fifth Amendment protects citizens from the arbitrary

denial of Equal Protection by the Federal Goverment

or its agencies. As the Court recently stated in

Schlesinger v. Ballard, 419 U.S. 498 at 501,95 S.Ct. 572

at 547, 42 L.Ed. 2d 610, (footnote 3) (1975):

“Although it contains no Equal Protection clause

as does the Fourteenth Amendment, the Fifth

Amendment’s Due Process clause prohibits the

Federal Goverment from engaging in discrimi-

nation that is ‘so unjustifiable as to be violative of

due process.” Bolling v. Sharpe, 347 U.S. 497, 499,

74 S.Ct. 693, 694, 98 L. Ed. 884.”

In examining a law or ruling in light of the Equal

Protection clause, the courts have used two types of

analyses. Where a fundamental right is involved or a

suspect classification has been made, the courts require

a compelling state interest to uphold the regulation.

Petitioner contends that FCC Order No. 78-267 con-

stitutes an unjustified taking of private property and

therefore a denial of a fundamental right under the

Constitution. It is difficult to see how the FCC can

contend that there is a compelling govermental interest

in denying Petitioner the right to sell its used 23-

channel radios that have been returned by customers in

view of FCC Public Notice No. 96235, supra, at page

7, which permits the owners of new or used 23-

channel CB radios to give away as many of these units

as they so desire.

The other type of analysis of Equal Protection

involves the minimal scrutiny test, which Petitioner

also contends that FCC Order No. 78-267 cannot

withstand. This test was recently enunciated in the case

of Francis v. Immigration and Naturalization Service,

532 F. 2d 268 at 272 (2nd Cir. 1976):

“Under the minimal scrutiny test, which we con-

sider applicable in this case, distinctions between

different classes of persons ‘must be reasonable,

not arbitrary, and must rest upon some ground of

difference having a fair and substantial relation to

the object of the legislation, so that ail persons

similarly circumstanced shall be treated alike.’ ”

Stanton v. Stanton, 421 U.S. 7, 14,95 S.Ct. 1373,

1377, 43 L.E. 2d 688, 694 (1975).

Under this minimal scrutiny test, there is no rational

basis for treating Petitioner any differently from the

holders of used automobiles or used microwave ovens.

(It bears repeating that if anything, because the latter

examples constitute potential hazards to human health

which used 23-channel CB radios most certainly do not,

used 23-channel CB radios should be regulated /ess strin-

gently.)

12

CERTIORARI SHOULD BE GRANTED

TO REVIEW THE HOLDING OF THE

COURT BELOW THAT FCC ORDER NO.

78-267 DOES NOT VIOLATE SECTION

706 OF THE ADMINISTRATIVE PRO-

CEDURE ACT.

Under 5 U.S.C. §706, supra, at page 3, Congress

mandated that a court reviewing action by a federal

agency shall hold unlawful and set aside such agency

action found to be“. . . arbitrary, capricious, an abuse

of discretion, or otherwise not in accordance with

law;....” The Ninth Circuit recently held in a review

under 5 U.S.C. §706 of an order by the Civil Aero-

nautics Board:

“Admittedly the scope of our review is narrow. See

5 U.S.C. §706. However, we may set aside agency

action which is arbitrary or an abuse of discretion

if ‘this court should be of the Opinion that the

action was clearly wrong.’ Bates & Guild Co. v.

Payne, 194 U.S. 106, 109, 24S. Ct. 595, 597, 48 L.

Ed. 894 (1904). We are convinced that these orders

were clearly wrong and therefore they are unen-

forceable.” Hughes Air Corporation v. C.A.B..

482 F. 2d 143, 145, (9th Cir. 1973).

Petitioner respectfully submits that the portion of

FCC Order No. 78-267 prohibiting Petitioner from

reselling its used 23-channel CB radios is clearly wrong

and should have been declared unlawful and set aside

by the Court below. The relief requested by Petitioner

would, however, in no way invalidate the FCC pro-

hibition on manufacture or sale of new 23-channel CB

radios which would remain in a prohibited state.

13

FCC ORDER NO. 78-267 CONSTITUTES

AN UNJUSTIFIABLE TAKING OF PETI-

TIONER’S PROPERTY WITHOUT JUST

COMPENSATION.

It is well settled that the Fifth Amendment's restric-

tion against taking private property without just

compensation extends to personalty as well as realty

and prohibits the goverment from unreasonably limit-

ing a person’s use and enjoyment of his property. King

v. U.S., 427 F 2d. 767, 192 Ct. Cl. 548 (1970). This

Court held in U.S. v. General Motors Corp., 323 U.S.

373, 378, 65 S.Ct. 357, 359, 89 L. Ed. 311 (1945):

“Govermental action short of acquistion of title or

occupancy has been held, if its effects are so

complete as to deprive the owner of all or most of

his interest in the subject matter, to amount to a

taking.” |

Unquestionably, goverment may use the police

power to regulate individual liberties for the benefit of

all. loss to the individual must, however, be

balanced against the gain to society as a whole. Since

the used 23-channel CB radios are in existence and will

undoubtedly return to circulation and . be used by

consumers in one form or another, society will not

benefit at all by the FCC prohibition on resale of these

units. A 23-channel CB radio given away by Petitioner

will create just as much interference as one that is sold.

Although FCC Order No. 78-267 does not confer any

measurable benefit on society as a whole, it does

penalize Petitioner both economically, by prohibiting

resale of its used 23-channel CB radios, and con-

stitutionally, by denying to Petitioner the aforementioned

14

Fifth Amendment rights.

To so limit Petitioner’s use of its property with no

resultant benefit whatever to society clearly constitutes

an unreasonable “taking” of Petitioner’s property

without just compensation. Such a violation of Peti-

tioner’s rights under the Fifth Amendment must not be

sanctioned. Unless certiorari is granted by this Court,

this violation of Petitoner’s constitutional rights will

continue unremedied.

CONCLUSION

For the reasons set forth above, it is respectfully

submitted that this Petition for a Writ of Certiorari

should be granted.

DAVID F. MESCHAN

J. SAMUEL GENTRY, JR.

Counsel for Petitioner

Tuggle, Duggins, Meschan,

Thornton & Elrod. P.A.

228 West Market Street

Post Office Drawer X

Greensboro, North Carolina 27402

(919) 378-1431

Dated: July 10, 1979

APPENDIX A

Before the

FEDERAL COMMUNICATIONS COMMISSION

Washington, D.C. 20554

FCC 78-267

84868

In the Matter of

Petitions to extend the January 1, 1978

marketing cut-off date for used

23-Channel CB radios

ORDER

Adopted: April 20, 1978 Released: May 3, 1978

By the Commission: Commissioner White Dis-

senting and issuing a Statement.

1. The Commission has before it two petitions to

waive Sections 15.59(g) and 95.641(c)(6) of our rules

which specify that marketing of 23-channel CB radios!

shall be terminated not later than January |, 1978. The

| As used herein, the term 23-channel CB radio refers to a CBradio

(transceiver) that does not meet the new technical specifications that

were adopted by the Commission on July 27, !976and went into effect

on September 10, 1976. All CB radios manufactured to meet these new

standards have a 40-channel capability.

2a

petitions request waiver for used 23-channel CB radios.

See Appendix.

2. One petition was filed on January 30, 1978 by

Davidson Supply Co. and was put on Public Notice

January 31, 1978 (FCC #96402). The second petition

was filed on February 3, 1978 by the Colorado Pawn

Brokers Association and was put on Public Notice on

February 14, 1978 (FCC #96960). In response to these

Public Notices a comment was received on February

21, 1978 from Pathcom, Inc., supporting the waiver

requested in the petitions. A letter was also received on

February 7, 1978 from Capitol Loans which asks for

special permission to dispose of the CB radios that

Capitol has on hand which Capitol is holding as

pledges on loans.?

3. The Commission established the new technical

standards for CB radios and also established cut-off

dates for the manufacture and marketing of 23-channel

2 A petition from the Heilig-Meyers Co. and a comment from the

Texas Pawnbrokers Assn. were received too late to permit detailed

treatment in this Order. Heilig-Meyers, a merchandiser in several states

on the East Coast seeks the same relief sought by Davidson. The Texas

Pawnbrokers filing and supplement is essentially a petition asking for

the same relief sought by the Colorado Pawnbrokers Association.

“= =

ss

3a

CB radios in several actions in 1976.34 The Com-

mission has also on three separate occasions °°’

considered the question of waiver of the January |,

1978 marketing cut-off date. With the exception of

hand held CB radios* which presented exceptional

’ Revised technical standards for CB transmitters and the trans-

mitter part of a CB radio (transceiver) were adopted in Docket 20120,

2nd Report & Order adopted July 27, 1976; released July 29, 1976 (41

FR 32678; 60 FCC 2d 762) and Memorandum Opinion and Order

adopted October 18, 1976, released October 28, 1976 (41 FR 47445; 62

FCC 2d 646). These revised technical standards went into effect on

September 10, 1976.

4 Technical standards were imposed on CB receivers and the

receiver part of a CB radio (transceiver) in Docket 20746, Ist Report

and Order adopted July 27, 1976, released August 4, 1976(41 FR 32590;

60 FCC 2d 687) and Memorandum Opinion and Order adopted

October 18, 1976, released October 28, 1976 (41 FR 47442; 62 FCC 2d

623). These new receiver standards went into effect on September 10,

1976,

‘In the Matter of manufacture and sale of 23-channel class D

citizens band equipment that was type accepted prior to September 10

1976. Order adopted August |, 1977 denies request to establish a cut-off

for importation and reaffirms the January |, 1978 marketing cut-off

date, FCC 77-562. Simultaneously, the Commission on August |, 1977

issued a Public Notice (FCC 77-563) cautioning and reminding

manufacturers and importers that manufacture of 23-channel CB

radios must be terminated not later than August |, 1977 and marketing

not later than January I, 1978.

® In the Matter of petitions to extend the sales cut-off date for

certain CB radios. Order adopted August 24, 1977 extended the sales

cut-off date to hand held CB radios (as defined in Paragraph 12 of the

Order) and denied an extension of sales cut-off for all other (23 channel)

CB radios, FCC 77-586; 66 FCC 2d 139.

7 In the matter of petitions to extend the January 1, 1978 sales cut-

off date for 23-channel CB radios and CB receivers/converters. Order

adopted 11/9/77 denied the petitions, FCC 77-768 66 FCC 2d.

4a

circumstances, the Commission has denied all requests

for waiver and has consistently maintained that mar-

keting of 23-channel CB radios must be terminated not

later than January 1, 1978. Our most recent denial

(Order of November 9, 1978) was affirmed on review by

the court.’

The Davidson Petition

4. Davidson explains that it sells CB radios at

wholesale and at retail and that in 1977 it had sold

17,129 40-channel units and 89,933 23-channel units

(Davidson Exhibit A). In connection with its estab-

lished policy of guaranteeing customer satisfaction,

Davidson states that it accepts return of defective

equipment and either refunds the customer’s money or

exchanges the returned merchandise for new equip-

ment from stock. In the case of dealers, Davidson

accepts return of defective merchandise and issues a

credit for such equipment. Davidson then ships such

returned equipment to the manufacturer for repair.

Upon repair the equipment is returned to Davidson

and is sold as used equipment. In a set of exhibits

attached to its petition Davidson shows that during

1977 490 40-channel units and 1741 23-channel units

were returned to the manufacturer for repair, and that

as of December 31, 1977, 140 40-channel and 309 23-

channel units had not yet been returned to Davidson.

To allow it to continue its practice of exchanging and

repairing defective 23-channel CB radios, Davidson

requests the Commission either to waive the January |,

1978 marketing cut-off date or to construe the term

“marketing” not to apply to such used equipment.

8 Arthur Fulmer, Inc., v. FCC, D.C. Cir. No. 77-2064.

Sa

The Colorado Pawnbrokers Petition

5. The Colorado Pawnbrokers Association repre-

sents 39 licensed pawnbrokers in the State of Colorado

which constitutes 80% of the pawnbrokers in that state.

Under Colorado law, the petitioner explains, no pawn-

broker shall sell any pledge in his possession until six

months after maturity of the loan or until the pledgor

has been given ten days notice by mail of the time

within which the pledge shall be redeemed. The petition

explains that data collected from the Association

members shows that they hold 749 23-channel CB

radios under pledge which are not yet available to be

sold. They also hold 376 23-channel CB units that have

become available for sale since January 1, 1978.

6. The petition explains further that experience

indicates that about 80% of the pawned CB radios

would ordinarily be redeemed by their owners. How-

ever, it appears that Public Notice of the FCC Ruling?

is causing a substantial reduction in the number of

redemptions. Estimating that $20 was advanced on

each CB radio that was pawned, petitioner states that

the units now or soon to be available for sale represent

an out of pocket loss of $22,500.00

7. Petitioner explains that the advance of money by

a pawnbroker is not a typical loan. Such a loan has no

maturity date and continues indefinitely as long as

interest is paid and the pledge is not redeemed. The

” The petition does not indicate which FCC Ruling is referred to. It

may be assumed that the term FCC ruling encompasses the several FCC

Orders that established the new technical specifications and the

manufacturing and marketing cut-off dats for 23-channel CB radios,

and the Orders that denied waiver or extension of the marketing cut-off

date.

6a

pawnbroker has no control over the maturity of the

loan and is powerless to require new security. If the

borrower chooses not to repay his loan and abandons

the pledged property, the borrower has no further

obligation to the pawnbroker and the pawnbroker has

no further recourse against the borrower. The pawn-

broker's only way to recover the money he loaned is to

sell the unredeemed pledge.

8. Referring to the Commission’s Order of Nov-

ember 9, 1977,!° petitioner alleges that the reference to

“adequate notice” in Paragraph 9 of that Order cannot

appropriately be applied to pawnbrokers, since they do

not fit the description of parties “involved in CB

marketing” and that granting the requested waiver

would not constitute unwarranted favoritism on behalf

of pawnbrokers in view of the unique characteristics of

the pawnbroking business and the legal restrictions

under which pawnbrokers operate.

The Pathcom Filing

9. Pathcom urges the Commission to grant the

waiver requested by Davidson and extend this waiver

to all the retailers who follow the business practice

described by Davidson in its petition. Pathcom points

out that in many states, a retailer is required to refund

the cost of inoperable equipment and in almost states a

consumer seeking redress from small claims court

action effectively force the retailer to refund money.

10. Pathcom recognizes that the intent of the “new

10 See footnote 7 above.

7a

type of regulation”!! was to stop the continued pro-

liferation of interference causing devices. It argues,

however, that a used CB radio is already on the air and

as such its repair does not constitute a new potential

source for interference. Finally, Pathcom argues, that

denial of the instant petitions will work an additional

hardship particularly on the smaller retailers who,

having suffered by not being able to sell after January

1, 1978 '2 the new 23-channel CB radios they had in

stock, will be compelled to take further losses if they are

not permitted to sell as used equipment the repaired 23-

channel CB radios that had been taken back from their

customers under warranty.

Commission Decision

11. Let us turn first to Davidson. The business

practice of taking back inoperable equipment, re-

turning such equipment to the manufacturer for repair

and subsequently selling this equipment as “used

equipment” is precisely the business practice described

by Montgomery Ward in its petition that was con-

sidered and denied in the Commission’s Order of

August 24, 19773,

12. Davidson is silent on the interference potential

of the used 23-channel CB radios it is seeking to sell

after January 1, 1978. However, Pathcom in sup-

'! Presumably the Commission’s new technical standards for CB

radios and the manufacturing and marketing cut-off dates for 23-

channel CB radios.

'- See footnote 7 above.

'' See footnete 6 above.

8a

porting Davidson, argues that the used equipment is

already on the air and therefore does not constitute a

new potential source of interference. The Commission

cannot agree with Pathcom. A transaction in which

Davidson (or for that matter any other retailer) takes

back a defective piece of equipment, has it repaired and

returns the repaired equipment to the purchaser, is not

a sale that is covered by our marketing cut-off regula-

tion. Similarly, the exchange of a working unit for a

defective unit would not be considered marketing. This

interpretation is set out in Paragraph 10 of our Public

Notice of January 30, 1978: Marketing of 23-channel

CB radios. (FCC #96235)!4

13. However, where the dealer takes back a defec-

tive 23-channel unit, has it repaired and then seeks to

sell it as used equipment to a new purchaser, such a

transaction is considered marketing and is prohibited

after January 1, 1978. This last transaction does

constitute a new potential source of interference,

Pathcom’s assertion to the contrary, and allowing the

sale of such a piece of used equipment would fly in the

——

'4 Item 10 of this Public Notice states:

If a customer purchases a 23-channel radio before January |,

1978 and the radio is defective, can the dealer exchange the

radio or repair it?

Both of these actions would be allowable. Repairs to the radios

are not prohibited. In the case of an exchange program to

supply the customer with a working radio in place of a defective

unit, this would not be considered marketing by the Com-

mission as the customer would still be in possession of the same

type of unit that was originally purchased before the cut-off

date. However, the dealer would not be permitted to sell the

unit he took in exchange.

9a

face of the Commission’s decision to remove inter-

ference capable equipment from the market place at the

earliest possible time.

14. The Colorado Pawnbrokers argue that they are

caught in a bind between the Commission’s regulation

that prohibits the sale of an abandoned pledge (a 23-

channel CB radio) to redeem the loan that had been

made theron and the Colorado state law that pro-

hibited the timely sale of such pledge. Moreover, they

argue that the pawnbrokers did not receive adequate

notice. The pawnbrokers argue that they do not fit the

description of parties “involved in CB marketing” and

‘cannot be expected to be knowledgeable of trade

publications in which the ban against marketing of pre-

September 10, 1976 was discussed.

15. The Commission is sympathetic to the pawn-

broker’s dilemma but cannot accept the argument that

it is due to lack of notice concerning the marketing cut-

off date. Our Orders of August 1976!5 which estab-

lished this cut-off date were properly publicized in the

Federal Register in accordance with established federal

rule making procedures!® and parties affected are

charged with notice!’. Moreover, as we pointed out in

Paragraph 9 of our Order of November 9, 1977,'8 these

rules were widely publicized not only in trade publica-

tions but also in publications of general circulations.

'S See footnotes 3 and 4 above.

'© § U.S.C. 552(D) and (E).

'7 44 U.S.C. 1507.

1S See footnote 7 above.

10a

16. While it may be technically correct that pawn-

brokers are not “involved in CB marketing” as alleged,

it would appear that a pawnbroker must have a good

knowledge of the market value of a CB radio (or of any

other item that he accepts as security for a loan) if he is

to succeed in his business. It can be expected therefore

that a pawnbroker would take whatever measures are

available under the law to protect his loan. In this

connection we note that the 1973 Colorado Revised

Statutes 12-56-112 set out a procedure for the pawn-

broker to terminate a loan.

17. The Colorado Pawnbroker’s and Davidson’s

arguments for relief appeared to be largely based on

financial hardship and economic loss. We have not

been persuaded by similar arguments in our con-

sideration of earlier requests for waiver or extension of

the marketing cut-off date.!9 Nor are we persuaded in

this instance. In setting the marketing cut-off date at

January 1, 1978 we recognized that some hardship and

financial loss would occur. We must reiterate that:

The dates chosen [August |, 1977 for termination

of manfacture and January 1, 1978 for termination

of sales] represented however what was and is

believed to be a reasonable compromise between

the alternatives of providing the lowest level of

interference potential on the one hand and a total

loss or waste of untold dollars of inventory of

components, parts and finished sets on the other.

(underlining supplied)”°

9 See footnotes 5, 6 and 7 above.

20 FCC Order of August 1, 1978 at Paragraph 5. See footnote 5

above.

lla

18. The need to reduce the potential interference to

television, the land mobile service, and others is

overriding. Neither of the petitioners had challenged

this need. The loss asserted to be sustained by

petitioners is no greater and in many cases less than

that claimed by earlier petitioners who were denied.

The Commission must insist therefore that the January

1, 1978 marketing cut-off date for 23-channel CB

radios must stand.

19. In view of the above the petitions by Davidson,

Heilig-Meyers and the Colorado Pawnbrokers ARE

DENIED.

FEDERAL COMMUNICATIONS COMMISSION

William J. Tricarico

Secretary

Appendix

APPENDIX

12a

Appendix

Petition for waiver

Davidson Supply Co., petition filed January 30, 1978

attorney Kenneth R. Keller of Tuggle, Duggins,

Meschan, Thornton & Elrod, P.A., 228 West

Market St., Greensboro, N. Carolina 27402

Colorado Pawnbrokers Assn., petition filed February

3, 1978 by attorney Wilton W. Cogswell, III,

Mining Exchange Bldg., Colorado Springs,

Colorado 80903

Heilig-Meyers Co., petition filed March 24, 1978 by

attorney Larry M. Goodall of McGuire, Woods &

Battle, Ross Building, Richmond, Virginia 23219

Texas Pawnbrokers Association, comment filed Feb-

ruary 24, 1978 with supplement on April 7, 1978 by

attorney Stephen A. Goldberg of Hogan &

Hartson, 815 Connecticut Avenue, N.W., Washing-

ton, D.C. 20006. (These filings are labeled comment

and supplement to comments, but for all practical

purposes, these filings constitute a petition to

exempt CB radios held by members of the Texas

Pawnbrokers Association from the January 1, 1978

marketing cut-off date.

Comment

Pathcom, Inc., 24049 South Frampton Avenue, Har-

bor City, California 90710; letter dated February

14, 1978.

Capitol Loans, 774 Poplar Avenue, Memphis,

Tennessee 38105; letter dated February 4, 1978

(Although not strictly a comment in this pro-

13a

ceeding, this letter essentially asks for the same

relief requested by the Colorado Pawnbrokers

Association).

DISSENTING STATEMENT OF

COMMISSIONER MARGITA E. WHITE

IN RE: Order Denying Extension of Marketing

Cut-Off Date for Used CB Radios

I dissent to the majority’s decision to deny an

extensio marketing cut-off date for used 23-Channel

CB radios for the same reasons that I stated in my

dissent to the original order denying an extension of the

marketing cut-off date for new CB equipment. See my

dissenting statement Jn the Matter of Petitions to

Extend the January 1, 1978 Sales Cut-Off Date for 23-

Channel CB Radios and CB Receiver/ Converters,

FCC 77-768 (released November 30, 1977).

Ib

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 78-1308

Davidson Supply Co.,

Petitioner,

versus

Federal Communications

Commission and United

States of America,

Respondent.

On Petition for Review from Order dated May 3, 1978

by the Federal Communications Commission.

Argued March 14, 1979 Decided April 19, 1979

Before HAYNSWORTH, Chief Judge, WINTER and

HALL, Circuit Judges.

David F. Meschan (Kenneth R. Keller on brief) for

Petitioner; C. Grey Pash, Jr., Federal Communica-

tions Commission (Robert R. Bruce, General Counsel,

Daniel M. Armstrong, Associate General Counsel,

Federal Communications Commission; John H.

2b

Shenefield, Assistant Attorney General, Barry

Grossman, Peter De La Cruz, Dept. of Justice on brief)

for Respondents.

PER CURIAM:

After having adopted standards for citizen band

radios which would avoid interference with other radio

and television reception, the Commission entered an

order banning the construction of offending radios

after August 1, 1977, and the sale of such radios after

January 1, 1978. The plaintiff in this action unsuccess-

fully sought a waiver of the prohibition of the sale of

offending radios.

After consideration of the record, briefs, and oral

arguments, we conclude that neither of the Com-

mission’s orders nor its denial of a variance were in

violation of the Constitution or of the Administrative

Procedure Act.

AFFIRMED.

Ic

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 78-1308

DAVIDSON SUPPLY CO.,

Petitioner,

versus

FEDERAL COMMUNICATIONS

COMMISSION AND UNITED

STATES OF AMERICA,

Respondents.

ORDER

Upon consideration of the petition for rehearing,

and with the concurrence of Judge Winter and Judge

Hall,

IT IS ORDERED that the petition for rehearing be,

and it hereby is, denied.

/s/

Chief Judge, Fourth Circuit

May 18, 1979