# Petition — Davidson Supply Co. v. Federal Communications Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1979
- **Citation:** 444 U.S. 898

## Text

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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Cee ee sk pee end ss sbeeeeseccces 2
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
ee Ease heen se ersecescccece 14
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_0575%3A1. Public record. Not legal advice.