Petition for Writ of Certiorari — Schultz v. Federal Communications Comission
Supreme Court brief1991
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In The
Supreme Court of the United States
October Term, 1991
PEPPER SCHULTZ,
Petitioner,
vs
FEDERAL COMMUNICATIONS COMMISSION, et al
Respondent,
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Pro Se:
Pepper Schultz
527-10th Street
Sparks, Nevada
Zip 89431-0811
(702) 331-0101 hm
(702) 331-6101 wk
SESEESESESSESESCEEESESEEEEEEEERE EES ES EEEEEEEEEESEEEESEESEESEEEEED
May an applicant as an individual or corporate entity, amend a
proceeding after an issue(s) is presented during Judicial Review,
respecting the powers of the Constitution of the United States, Article
III, Section 1, and Section 2, Clause 1?
May an agency or employee of the Federal Government, require an
applicant for a prospective advertising business construction permit, by
the use or threat of use of force, violence, intimidation, or duress, to
coerce, compel or constrain or attempt to coerce, compel or constrain
an applicant for a radio-broadcasting construction permit to employ or
agree to employ, in connection with the conduct of the applicant’s
broadcasting business, any person or persons "in excess of the number
of employees needed by such permit to perform actual services?” When
the government requires a potential business person to have employees
when he does not want or intend to, and being denied a construction
permit under burdens of proof in Judicial Review, it violates the
Constitution of the United States, Fifth Amendment, Due Process
Clause, and Ninth Amendment.
May an individual or entity claim redress, to defray attorney costs for
parties involved, and economic loss of money and livelihood, and for
reasons of duress imposed on an applicant, incurred by unfair Judicial
practice and procedures, perverse humor and regulation of Commerce,
resulting from a government agency or employee, causing economic
hardship, pursuant to the Constitution of the United States, First
Amendment, and Fifth Amendment, Due Process Clause?
May a Judicial Review Board member of an agency of government,
reverse an Administrative Law Judge’s decision of the same agency for
review, when a Review Board panel of three, in which one is not
participating, one is dissenting the reversal, and one is reversing the
decision? Is this not impeding justice, violating the Constitution of the
United States, Fourteenth Amendment, Section 1?
May a private corporate entity, regulated by the State of Nevada
provided by Article IV of the Constitution, prevail over a citizen of the
United States in a Judicial comparative hearing regulating commerce,
violating the Constitution of the United States, Fourteenth Amendment,
Section 1?
May an individual or entity cause Judicial due process interference,
by a physical letter of ex parte communication, to an Administrative
Law Judge? This action results in usurpation of Judicial powers of the
Constitution of the United States, Article III, Section 1, and Section 2.
May an agency or employee thereof, use public derision, to coerce a
worthy applicant from a livelihood through regulating commerce by
Judicial due process, and that government entity or employee be lizble
for such actions, for violating the Constitution of the United States, First
Amendment, and Fourteenth Amendment, Section 1?
LIST OF PARTIES
The parties to the proceedings below were the petitioner Pepper
Schultz and respondents Federal Communications Commission,
Comstock Broadcasters, Inc. (Principals Robert William Carroll and
William Bennet Akert, er al.), and the respondents of the District Court
of Appeals, District of Columbia.
iv
TABLE OF CONTENTS
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
QUESTIONS PRESENTED. Opening page
LIST OF PARTIES ........ ili
TABLE OF AUTHORITIES .. v
OPINIONS BELOW ....... 1
ps i ot l
CONSTITUTIONAL AND
STATUTORY PROVISIONS
VOU 6 hes eee ee z
STATEMENT OF iHECASE 2
REASONS FOR GRANTING
WE ee eee es 9
ee 8 ra 10
APPENDIX (Index to Appendix
includes the Judgement and Order
of Court of Appeals, District of
Columbia Circuit, Memorandums,
Opinions and Orders of case,
and other appended materials
pertaining to the
Questions Presented)....... ia
TABLE OF AUTHORITIES
CASES
PEPER v. FORDYCE,
Pe IN iis ckirnsnisvecgnveusdwaveuesiackosaxses
FEDERAL COMMUNICATIONS COMMISSION _v.
SANDERS BROTHERS RADIO STATION,
NT PI con ce ser ttes ciicenceviseswsaevckesias
UNITED STATES v. PETRILLO,
EE OI aired suncsuesnavuessvontckveesaecevens
STATUTES
United States Code
Te Bey SOUT BI OID is dvivvadivecsiccdcssehicaied
Title 28, Section 1291, 1292 (c) & (d), & 1295...........
United States Constitution
Pe adi daniiiritenveccnecessikeususecoreancieen
IN THE SUPREME COURT OF THE UNITED STATES
October Term, 1991
PEPPER SCHULTZ, Petitioner,
V.
FEDERAL COMMUNICATIONS COMMISSION, et al
Respondent,
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Pepper Schultz pro se, pursuant to Supreme Court Rule 34.2, hereby
requests earnestly that the Supreme Court grant this writ of certiorari to
review the judgement of the court below.
OPINIONS BELOW
-
The Judgement of the Court of Appeals for the District of Columbia
Circuit of case No. 90-1318 is reprinted in the Appendix hereto, p. 2a,
infra.
The Order of the United States Court of Appeals for the District of
Columbia Circuit of case No. 90-1318 is reprinted in the Appendix
hereto, p. la, infra.
JURISDICTION
a
Invoking federal jurisdiction under Section 402 (b) of the
Communications Act of 1934 (47 U.S.C. Section 402 (b)), and Rule 15
of the Federal Rules of Appellate Procedure, the petitioner brought this
case from the Federal Communications Commission jurisdiction, to the
United States Court of Appeals for the District of Columbia Circuit by
2
notice of appeal on June 22, 1990 (DATE DOCKETED June 25, 1990).
On petitioners appeal, the District of Columbia Circuit on March 21,
1991, filed a Judgement stating the appeal does not warrant a further
opinion for reasons stated by the Commission in its Memorandum
Opinion and Order released May 30, 1990 (Presented in Appendix, p.
2a, infra).
Invoking federal jurisdiction under Section 402 (b) (1) of the
Communications Act (47 U.S.C. Section 402 (b) (1)), the petitioner
submitted a brief titled On Appeal from Orders of the Federal
Communications Commission, dated November 27, 1990 (Date of
"Final Brief" February 15, 1991), the Court of Appeals for the District
of Columbia Circuit issued an Order denying petition for rehearing,
filed May 29, 1991 (Presented in Appendix, p. la, infra).
The jurisdiction of the United States Supreme Court to review the
judgement of the Court of Appeals for the District of Columbia Circuit
is invoked under 28 U.S.C. 1254 (1).
CONSTITUTIONAL AND STATUTORY PROVISIONS
INVOLVED
*
28 U.S.C. § 1291. Finai decisions of district courts
The courts of appeals (other than the United States Court of Appeals
for the Federal Circuit) shall have jurisdiction of appeals from all final
decisions of the district courts of the United States, the United States
District Court for the Canal Zone, the District Court of Guam, and the
District Court of the Virgin Islands, except where a direct review may
be had in the Supreme Court. The jurisdiction of the United States
Court of Appeals for the Federal Circuit shall be limited to the
jurisdiction described in sections 1292(c) and (d) and 1295 of this title.
Article III, Section 1, and Section 2, First Amendment, Fifth
Amendment, Ninth Amendment, and Fourteenth Amendment, Section
1 are presented in the appendix, infra.
STATEMENT OF CASE
*
Petitioner pro se, began tendering for filing his application for a
construction permit on May 3, 1982, with conscience of confidence in
thought, knowledge and responsibility. The application was received by
the Federal Communications Commission on May 19, 1982. A number
of briefs were filed before (Presented in Appendix, pp. 180a-182a) the
3
Hearing Designation Order, Released: November 10, 1983 (Presented
in Appendix, p. 3a), stating the issues for the proposed hearing, two of
which prevailed for iiearing:
a) To determine which of the proposals would, on a
comparative basis, best serve the public interest; and
b) To determine, in the light of the evidence adduced,
which of the applications should be granted, if any.
The Petitioner then obtained legal representation. An Order naming
the Administrative Law Judge (Presented in Appendix, p. 9a) to the
proceedings and setting the hearing date of February 13, 1984, was
released. Notice of Appearances were then submitted.
The hearing commenced on March 27, 1984, in Washington, D.C.
(Volume II, presented in Appendix, p. 191a) where Pepper Schultz and
Comstock Broadcasters, Inc. (Principal Robert W. Carroll) were
present. The Initial Decision of Administrative Law Judge James F.
Tierney was Released: July 30, 1984 (Presented in Appendix, p. 10a),
granting application of Pepper Schultz and denying Comstock
Broadcasting, Inc.
The Review Board hearing commenced on December 12, 1984, in
Washington, D.C. (Volume III, presented in Appendix, p. 193a), where
Pepper Schultz was present.
The Petitioner tried to amend the Review Board hearing, relating to
information discussed at the Review Board hearing, immediately after.
That amendment was rejected by the Review Board.
NOTE: Question Presented where violation may appear. May a
private corporate entity, regulated by the State of Nevada provided by
Article IV of the Constitution, prevail over a citizen of the United States
in a Judicial comparative hearing regulating commerce, violating the
Constitution of the United States, Fourteenth Amendment, Section 1?
A Memorandum Opinion and Order was Released: January 28, 1985
(Presented in Appeadix, p. 28a), by the Review Board, remanding
Pepper Schultz to the Administrative Law Judge on the following issues:
(1) To determine whether the staff proposed by Pepper
Schultz is adequate to effectuate his proposal; and
(2) To determine whether Pepper Schultz has sufficient
funds to cover his costs of construction and initial three
months operation.
EXCERPTS trom this MO & O:
"It seems Schultz now concedes that his
original proposal would shortly grind
Pepper down with a workload not to be
sneezed at." (n. 6)
IT IS FURTHER ORDERED, That the burden of
proceeding with the introduction of evidence and proof
under the issues added herein SHALL BE upon Pepper
Schultz.
NOTE: Question Presented where violation may appear. May an
agency or employee of the Federal Government, require an applicant for
a prospective advertising business construction permit, by the use or
threat of use of force, violence, intimidation, or duress, to coerce,
compel or constrain or attempt to coerce, compel or constrain an
applicant for a radio-broadcasting construction permit to employ or
agree to employ, in connection with the conduct of the applicants
broadcasting business, any person or persons "in excess of the number
of employees needed by such permit to perform actual services?" When
the government requires a potential business person to have employees
when he does not want or intend to, and being denied a construction
permit under burdens of proof in Judicial Review, it violates the
Constitution of the United States, Fifth Amendment, Due Process
Clause, and Ninth Amendment.
The Petitioner then presented a Motion for Leave to Amend, dated
February 22, 1985, and an Amendment (Presented in Appendix, p.
183a, p. 187a), to the presiding Administrative Law Judge, which was
accepted and unopposed by Comstock Broadcasters, Inc.
NOTE: Question Presented where it may appear. May an applicant as
an individual or corporate entity, amend a proceeding after an issue(s)
is presented during Judicial Review, respecting the powers of the
Constitution of the United States, Article III, Section 1, and Section 2,
Clause 1?
5
A hearing commenced on April 9, 1985, before the presiding Judge
in Washington, D.C. (Volume V, Presented in Appendix, p. 201a),
where only Pepper Schultz was present as a witness.
A Memorandum Opinion and Order was Released: April 12, 1985
(Presented in Appendix, p. 36a), by the Deputy Chief Administrative
Law Judge, denying a Motion for Summary Decision and a Motion for
Leave to File Supplement.
A Memorandum Opinion and Order was Released: May 7, 1985
(Presented in Appendix, p. 39a), by the Deputy Chief Administrative
Law Judge, denying Comstock Broadcasters, Inc., Motion to Enlarge.
A Supplemental Initial Decision of Deputy Chief Administrative Law
Judge James F. Tierney was Released: June 26, 1985 (Presented in
Appendix, p. 43a). This Supplemental Initial Decision SHALL FIND
IN FAVOR of Pepper Schultz application and denying Comstock
Broadcasters, Inc.
An Order was Released: January 24, 1986 (Presented in Appendix,
p. 56a), by Norman B. Blumenthal Member, Review Board, reversing
the Deputy Chief Administrative Law Judge’s decision and granting
application of Comstock Broadcasters, Inc. The following Excerpts are
in this Order:
"[W]e all but ignore counsel’s flummery suggesting that
Schultz’s insistence that he would utilize no "employees
did not necessarily negate a reliance on friends and
volunteers.” (n. 5)
"Schultz was either distantly out of touch with reality or
singularly qualified for the laurel of "FCC Fabulist of
the Decade." (p. 5)
"Schultz’s February 22, 1985 amendment (George
Washington’s Birthday, no less) indicating funds on
deposit of $101,000 contained no such qualification."
(n. 9)
"Raising additional doubt is the amazing fact that,
despite the claims of a ‘no strings attached’ conveyance
of $101,000, Schultz testified at subsequent hearing that
he might not draw upon this windfall for financing the
station, but might instead use it solely as ’collateral’ for
a cash bank loan. Tr. 237-239. Just why Schultz
might offer the bank his freefound $101,000 ready cash
for a lesser cash loan is unexplained, but we are certain
the hard-pressed banking industry would gladly rather
receive tribute than pay it. We'd take the deal
ourselves." (n. 9)
"[W]e have not previously encountered so threadbare an
applicant as Schultz. . ." (p. 10).
"{S]ome of the fault' for the unnecessary prolongation
of this case must be placed on the presiding ALJ, a
decent man whose well-known patience and mercy were
here taken advantage of by an applicant more to be
pitied than pampered." (n. 10)
"Schultz has now apparently abandoned the uneducated
illusion that ATS equipment was the panacea. It is not
known whether Schultz completed his computer
“correspondence courses,” or whether he had merely
advanced sufficiently to realize* that neither R2-D2 nor
C3-PO was a ’stock’ equipment item." (n. 13)
"Even now, Schultz urges that he be permitted a
construction permit to operate with not much more in
the way of resources than might be required for, say, a
modest roadside fruitstand, and in an environment that
would have daunted and depressed the desperate
denizens of Devil’s Island." (p. 12)
"We do not know if Schultz was (or is) serious about
his proposals, is incurably deluded, or merely covets
the permit in the hope of quick enrichment." (p. 13)
An Order was Released: March 9, 1987 (Presented in Appendix, p.
72a), by the Commission, denying Pepper Schultz’ Review of a Review
' This appears to be a “personal attack” by Norman B. Blumenthal, directed to the
presiding Administrative Law Judge.
? This appears to be a “personal attack” by Norman B. Blumenthal, on Pepper
Schuliz’ competence.
Board Decision.
An Order was Released: June 29, 1987 (Presented in Appendix, p.
75a), by Associate General Counsel John I. Riffer, denying Pepper
Schultz’ Petition for Reconsideration and upholding a Review Board
Decision granting Comstock Broadcasters, Inc. application for a new
FM radio station at Sparks, Nevada.
A Memorandum Opinion and Order was Released: March 11, 1988
(Presented in Appendix, p. 78a), by the Commission, granting a Petition
for Reconsideration and remanding Pepper Schultz to the Presiding
Judge for further evidentiary hearings.
A Memorandum Opinion and Order was Released: May 4, 1988
(Presented in Appendix, p. 83a), by the Deputy Chief Administrative
Law Judge, requiring a need for a further hearing to resolve the open
question whether Pepper Schultz possesses the basic qualifications to
construct and operate his proposed station at Sparks, Nevada.
An Order was Released: June 22, 1988 (Presented in Appendix, p.
89a), by the Deputy Chief Administrative Law Judge, granting an
amendment of Comstock Broadcasters, inc.(Principal Robert W.
Carroll), advising of a change in the official mailing address of
Comstock.
A Memorandum Opinion and Order was Released: June 28, 1988
(Presented in Appendix, p. 90a), by the Deputy Chief Administrative
Law Judge, granting a Motion to Enlarge Issues by Pepper Schultz and
further enlarged, to wit:
To determine whether Comstock Broadcasters, Inc.
solicited a prohibited ex parte presentation in this
proceeding and, if so, under the evidence adduced,
whether Comstock Broadcasters, Inc. is qualified to
become a Commission licensee.
NOTE: Question Presented where violation may appear. May an
individual or entity cause Judicial due process interference, by a
physical letter of ex parte communication, to an Administrative Law
Judge? This action results in usurpation of Judicial powers of the
Constitution of the United States, Article II], Section 1, and Section 2?
An Order was Released: July 11, 1988 (Presented in Appendix, p.
97a), by the Deputy Chief Administrative Law Judge, granting a Joint
Motion seeking receipt in evidence of the transcript of deposition of
Pepper Schultz on May 17, 1988, and to be discussed at the further
8
prehearing conference.
A hearing commenced on November 15, 1988, before the presiding
Judge in Washington, D.C. (Volume VIII, Presented in Appendix, p.
206a), where William B. Akert and Robert Carroll were witnesses and
Pepper Schultz was present, only as an observer.
A Further Supplemental Initial Decision of Deputy Chief
Administrative Law Judge James F. Tierney was Released: March 16,
1989 (Presented in Appendix, p. 99a), granting application of Pepper
Schultz and denying application of Comstock Broadcasters, Inc.
An Order was Released: August 17, 1989 (Presented in Appendix, p.
133a), by Review Board Member Norman B. Blumenthal, reversing the
presiding Administrative Law Judge’s decision, granting application of
Comstock Broadcasters, Inc. In this case the Review Board, normally
a panel of three, consisted of only two members, one reversing and the
other dissenting the reversal.
NOTE: 1) Questions Presented where violation may appear. May a
Judicial Review Board member of an agency of government, reverse an
Administrative Law Judge’s decision of the same agency for review,
when a Review Board panel of three, in which one is not participating,
one is dissenting the reversal, and one is reversing the decision? Is this
not impeding justice, violating the Constitution of the United States,
Fourteenth Amendment, Section 1?
NOTE: 2) May an agency or employee thereof, use public derision,
to coerce a worthy applicant from a livelihood through regulating
commerce by Judicial due process, and that government entity or
employee be liable for such actions, for violating the Constitution of the
United States, First Amendment, and Fourteenth Amendment, Section
1?
NOTE: 3) Question Presented pertaining to redress may appear here.
May an individual or entity claim redress, to defray attorney costs for
parties involved, and economic loss of money and livelihood, and for
reasons of duress imposed on an applicant, incurred by unfair Judicial
practice and procedures, perverse humor and regulation of Commerce,
resulting from a government agency or employee, causing economic
hardship, pursuant to the Constitution of the United States, First
Amendment, and Fifth Amendment, Due Process Clause?
A Memorandum Opinion and Order was Released: May 30, 1990
9
(Presented in Appendix, p. 172a), by the Commission, agreeing with the
Review Board’s resolution of the case, denying application of Pepper
Schultz.
On March 18, 1991, Pepper Schultz was present at a hearing brought
before the United States Court of Appeals for the District of Columbia
Circuit, in Washington, D.C.
A Judgement was Filed: March 21, 1991 (Presented in Appendix, p.
2a), by the Circuit Judges, stating that the appeal does not warrant a
further opinion.
Pepper Schultz, by counsel, petitioned the United States Court of
Appeals for the District of Columbia Circuit for rehearing. The petition
was denied by an Order Filed: May 29, 1991 (Presented in Appendix,
p. la), from the Circuit Judges.
REASONS FOR GRANTING THE WRIT
*
Certiorari should be granted for the following reasons:
A. The possibility of rulings derived from this case
regarding Judicial review and the acceptance of a
curative amendment after the issues are determined.
This is pertaining to procedures of due process for an
applicant’s business of a limited public resource nature.
B. A possible violation of the U.S. Constitution by a
government agency, requiring an applicant for a
construction permit to have employees, should be
recognized in this case. Re: United States v. Petrillo,
332 U.S. 1 (1946), (Presented in Appendix p. 234a).
C. For possible rulings derived from this case regarding
the function and powers of the Federal communication
Commission imposed on broadcast applicants, resulting
in economic injury through due process. Re: Federal
Communications Commission v. Sanders Brothers Radio
Station 309 U.S. 470 (1940), (Presented in Appendix p.
225a).
D. The possibility of redress for legal fees for both parties
involved in this case and the possibility of reversal of
a decision. Re: Peper v. Fordyce, 119 U.S. 469
10
(1886), (Presented in Appendix p. 221a).
E. The Federal Communications Commission should be
required to adhere to their own rules regarding ex parte
communication.
CONCLUSION
x
The Federal Communications Commission acted in error by denying
Pepper Schultz’ application and accepting Comstock Broadcasters, Inc.
application.
Respectfully submitted,’
7,
gpl — hea
Pepper Schultz pro se
Dated: August 23, 1991
* Original Writ of Certiorari received for filing August 26, 1991 and an improper
Writ was also received for filing September 6, 1991 by the Supreme Court Clerk and
both were returned to petitioner pursuant to Supreme Court § 33.2 (4). This corrected
substitute Writ for the original is being tendered for filing on September 25, 1991, in
the U.S. mail for acceptance pursuant to § 33.7.
APPENDIX
INDEX OF APPENDIX
ORDER, filed May 29, !991, by the United States Court of Appeals
for the District of Columbia Circuit Judges, No. 90-1318....1a
JUDGEMENT, filed March 21, 1991, by the United States Court of
Appeals for the District of Columbia Circuit, No. 90-1318..2a
MEMORANDUMS, OPINIONS AND ORDERS, from the Federal
Communications Commission
HEARING DESIGNATION ORDER
Released: November 10, 1983, by the Mass Media Bureau,
aes vevuseranssesevevseccsvossouses 3a
ORDER
Released: November 18, 1983, from Administrative Law Judge
Chief Lenore G. Ehrig, FCC 83M-4256..................00000: 9a
INITIAL DECISION OF ADMINISTRATIVE LAW JUDGE
JAMES F, TIERNEY fi
Released: July 30, 1984, by Administrative Law Judge James
F. Tierney,
Nc vasenesenvowsrdacesses 10a
MEMORANDUM OPINION AND ORDER
Released: January 28, 1985, by Review Board Member Norman
eM ss cevnccnsvecececssccesscnces 28a
MEMORANDUM OPINION AND ORDER
Released: April 12, 1985, by Deputy Chief Administrative Law
Judge James F. Tierney, FCC 85M-1599.................... 36a
MEMORANDUM OPINION AND ORDER
Released: May 7, 1985, by Deputy Chief Administrative Law
Judge James F. Tierney, FCC 85M-1994..................... 39a
iia
SUPPLEMENTAL _INITIAL DECISION OF DEPUTY
CHIEF ADMINISTRATIVE LAW _ JUDGE JAMES F.
TIERNEY
Released: June 26, 1985, by Deputy Chief Administrative Law
Judge James F. Tierney, FCC 85D-43.............0....0.02.. 43a
DECISION
Released: January 24, 1986, by Review Board Member
Norman B. Biumenthal, FCC 86R-2........................065 56a
ORDER
Released: March 9, 1987, by the Commission,
PE TEE cehccei caxcdinenindes ccudcashascaudamieneeousin 72a
ORDER
Released: June 29, 1987, by Associate General Counsei John
Be a Be: I cons vanaietstyesswtanenkeveredaennens 75a
MEMORANDUM OPINION AND ORDER
Released: March 11, 1988, by the Commission,
Pas Mi ceclhunestestdnsuacinnscctasveansmeuvisiiesses’ 78a
MEMORANDUM OPINION AND ORDER
Released: May 4, 1988, by the Deputy Chief Administrative
Law Judge James F. Tierney, FCC 88M-1334............... 83a
ORDER
Released: June 22, 1988, by the Deputy Chief Administrative
Law Judge James F. Tierney, FCC 88M-1942............... 89a
MEMORANDUM OPINION AND ORDER
Released: June 28, 1988, by the Deputy Chief Administrative
Law Judge James F. Tierney, FCC 88M-2012............... 90a
ORDER
Released: July 11, 1988, by the Deputy Chief Administrative
Law Judge James F. Tierney,
cco iat capes ch nunaceavcasneuncasceusbauvs 97a
ilia
FURTHER SUPPLEMENTAL INITIAL DECISION OF
DEP HIEF _ ADMINISTRATIVE LAW GE
AMES F. TIERNEY
Released: March 16, 1989, by the Deputy Chief Administrative
Law Judge James F. Tierney, FCC 89D-10.................. 99a
DECISION
Released: August 17, 1989, by Review Board Member Norman
RR a. 133a
MEMORANDUM OPINION AND ORDER
Released: May 30, 1990, by the Commission,
cred na dtslmeeodacseavuance ss eeldasabceaes 172a
OTHER APPENDED MATERIALS relating to Questions Presented
CONSTITUTION of THE UNITED STATES. ..... 178a
DOCKET NO. 90-1318, parts thereof
COD Bete OU BUI icc civciicsceccnscscces 180a
Motion For Leave to Amend of Pepper Schultz.. 183a
Amendment of Pepper Schultz..................... 187a
PORTIONS OF TRANSCRIPTS of nine (9) Volumes and two
(2) Deposition of Pepper Schultz
VORLUBE i, BERGE 27, TFO4..........2..00.000000s. 19la
VOLUME III, December 12, 1984.................. 193a
poe ee eee 20la
VOLUME VIII, November 15, 1988............... 206a
CASE, PEPER v. FORDYCE
Pe sts dediieincuncnedvscavideseseveess 221a
CASE, FEDERAL COMMUNICATIONS COMMISSION v.
SANDERS BROTHERS RADIO STATION,
ne is cca swistasscxtndenisvrensoernes 225a
iy
CASE, UNITED STATED v. PETRILLO, f
rs IE da taveccenccta scenes vevnvecssesvivees 234a
iva
COMMUNICATIONS ACT OF 1934, Sec. 506 (a)... 252a
CODE OF FEDERAL REGULATIONS,
Title 47, § 73.346, October 1, 1984............. 254a
Title 47, § 73.1500, October 1, 1990............ 25Sa
STATE OF NEVADA CORPORATION LAWS (Excerpts),
Portion of NRS Chapter 78, 1981................. 257a
Portion of NRS Chapter 78, 1989................. 258a
State and Local information regarding such..... 259a
pt SR ii 296a
la
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 90-1318 September Term, 1990
Filed May 29, 1991 ;
CONTANCE L. DUPRE
CLERK
Pepper Schultz,
Vv.
Federal Communications Commission,
Appellees
BEFORE: Wald, Ruth B. Ginsburg and Thomas, Circuit Judges
Upon consideration of appeilant’s petition for rehearing, filed May 3,
1991, it is
ORDERED, by the Court, that the petition is denied.
Per Curiam
FOR THE COURT: ;
CONSTANCE L. DUPRE, CLERK
BY: /s/ Robert A. Bonner
Deputy Clerk
2a
NOT TO BE PUBLISHED - SEE LOCAL RULE 14
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT GF COLUMBIA CIRCUIT
No. 90-1318 September Term, 1990
FILED MAR 21, 1991
CONSTANCE L. DUPRE, Clerk
PEPPER SCHULTZ, Appellant
Vv.
FEDERAL COMMUNICATIONS COMMISSION, Appellee
COMSTOCK BROADCASTERS, INC., Intervenor
Appeal from the United States District Court
for the District of Columbia
Before: WALD, RUTH B. GINSBURG and THOMAS, Circuit Judges
JUDGMENT
This case was considered on the record from the Federal
Communications Commission and on the briefs and oral arguments of
counsel. After full review of the issues preserited, the court is satisfied
that appropriate disposition of the appeal does not warrant a further
opinion. See D.C. Cir. Rule 14 (c). Substantially for reasons stated by
the Commission in its Memorandum Opinion and Order released May
30, 1990, it is
ORDERED and ADJUDGED that the orders from which this
appeal has been taken be affirmed.
The Clerk is directed to withhold issuance of the mandate herein
until seven days after disposition of any timely petition for rehearing.
See D.C. Cir. Rule 15(b) (2).
Per Curiam
FOR THE COURT:
/s/ CONSTANCE L. DUPRE
3a
BEFORE THE
Federal Communications Commission
Washington, D.C. 20554
MM-662
In re Application
RED ROCK BROADCASTING CORP. MM Docket No. 83-1205
(hereafter RRB) File No. BPH-820423AR
Sparks, Nevada
Req: 92.1 MHz, Channel 221A
_3kW (H&V), 440 feet
PEPPER SCHULTZ MM Docket No. 83-1206
(hereafter Schultz) File No. BPH-820519AK
Sparks, Nevada
Req: 92,1 MHz, Channel 221A
_3 kW (H&V), -630 feet
COMSTOCK BROADCASTERS,INC. MM Dccket No. 83-1207
(hereafter CBI) File No. BPH-820628AQ
Sparks, Nevada
Req: 92.1 MHz, Channel 221A
_1 kW (H&V), 530 feet
For Construction Permit
for a New FM Station
a
HEARING DESIGNATION ORDER
Adopted: October 28, 1983 Released: November 10, 1983
By the Chief, Audio Services Division:
1. The Commission has before it the above-captioned mutually
exclusive applications for a new FM station.
2. In the interest of administrative efficiency and resource
a
4a
economy, portions of this Order had been standardized. Consequently,
opinion paragraphs, issues and ordering clauses will only apply where
an "X" appears in an appropriate box. If the paragraph is directed to
some, but not all, of the captioned applicants, those affected will be
specified. In addition, non-standardized text in this Order, if any, will
be set forth in an Appendix.
OPINION PARAGRAPHS
Inapplicable paragraphs omitted.
Late Filed
Amendments
12. The applicant(s) below has petitioned for leave to amend its
application on the date(s) shown. The accompanying amendment(s) was
filed after the "B" cut-off date, the last day for filing minor amendments
as of right. Under Section 1.65 of the Commission’s Rules the
amendment(s) is accepted for filing. However, an applicant may not
improve its comparative position after the time for amendments as of
right has passed. Therefore, any comparative advantage resulting from
the amendment(s) will be disallowed.
APPLICANT(S) DATE AMENDMENT(S) FILED
RRB 12/27/82
Areas &
Populations
13. Data submitted by the applicants indicate that there would be
significant difference in the size of the areas and populations which
would receive service from the proposals. Consequently, the areas and
populations which would receive FM service of 1 mV/m or greater
intensity, together with the availability of other primary aural services
in such areas, will be considered under the standard comparative issue
for the purpose of determining whether a comparative preference should
accrue to any of the applicants.
5a
ISSUES
m iV
2. To determine which of the proposals would, on a comparative
basis best serve the public interest.
Itim
3. To determine, in the light of the evidence adduced pursuant to the
foregoing issues, which of the applications should be granted, if any.
RDERING CLAUSES
Late Filed
Amendments
26. IT IS FURTHER ORDERED, That the petition for leave to
amend filed by the following applicant(s) IS GRANTED, and the
corresponding amendment(s) IS ACCEPTED to the extent indicated
herein: RRB
28. IT IS FURTHER ORDERED, That, to avaii themselves of the
opportunity to be heard, the applicants and any party respondent herein
shall, pursuant to Section 1.221(c) of the Commission’s Rules, in person
or by attorney, within 20 days of the mailing of this Orde, file with the
Commission, in triplicate, a written appearance stating an intention to
appear on the date fixed for hearing and to present evidence on the
issues specified in this Order.
29. IT IS FURTHER ORDERED, That the applicants herein shall,
pursuant to Section 311(a)(2) of the Communications Act of 1934, as
amended, and Section 73.3594 of the Commission’s Rules, give notice
of the hearing within the time and in the manner prescribed in such
Rule, and shall advise the Commission of the publication of such notice
as required by Section 73.3594(g) of the Rules.
FEDERAL COMMUNICATIONS COMMISSION
/s/ W. Jan Gay, Assistant Chief
Audio Services Division
Mass Media Bureau
6a
APPENDIX(ES) [x] IS [| ] IS NOT ATTACHED.
APPENDIX
Additiona! Opinion Paragraphs
30. Schultz has filed a petition for leave to amend its application. The
petition and the accompanying amendment were filed July 12, 1983; the
last day for filing amendments as a matter of right was October 22,
1982.*/ Schultz states that the amendment was necessitated by a
Federal Aviation Administration (FAA) determination, dated May 18,
1983, that the proposed antenna would "cause brute force interference
to the Instrument Landing System at Reno-Cannon International
Airport." CBI and RRB both have filed an opposition to petition for
leave to amend the Schultz petition. CBI states that the Schultz
amendment constitutes a major change within the meaning of Section
73.3573(a)(1) of the Commission’s Rules, thus requiring the application
to receive a new file number, and be returned to the processing line
without cut-off protection. Additionally, CBI states that good cause has
not been proffered by Schultz for the acceptance of his amendment.
RRB opposes Schultz’s petition as being late and states that Schultz
failed to "take steps to correct what he knew or should have known to
be an unacceptable proposal.” RRB also notes the grounds of
opposition of CBI regarding the amendment as being major, and concurs
with CBI’s proposed method for handling the application.
31. Review of the amendment shows that it is a major amendment
pursuant to Section 73.3573(a)(1) of the Commission’s Rules. Section
73.3573(b) of the Rules requires the application to receive a new file
number, and consequently, be assigned a new cut-off date, thereby
preventing the application from receiving comparative consideration with
the other applications on file. We note that the amendment was in
response to an adverse FAA determination, and not of Schultz’s own
personal volition. Therefore, good cause exists for the filing of the
amendment. It appears that Schultz was first informed of his proposal’s
*/ The Commission initially returned the petition and the opposition’s
thereto, but on its own motion reconsidered its action, and has
addressed the pleadings in the body of this Order.
7a
adverse effects to air navigation by the FAA letter daied May 18, 1983.
Prior to that time, Schultz had no way of knowing the adverse effects
of his proposed tower, and RRB does not provide any facts that Schultz
was actually aware of such. Schultz acquired a new site and filed a new
amendment on July 12, 1983, which in light of the circumstances
appears to be timely.
32. Accordingly, since the petition and the ensuing amendment
relocating the tower were filed in response to an adverse FAA
determination, we will waive Section 73.3573 as it relates to the cut-off
rules and accept the amendment for filing. However, Schultz may not
profit comparatively from his new proposal, for an applicant may not
improve its comparative position after the time for amendments as a
matter of right has passed. Therefore, any comparative advantage
resulting from the amendment by Schultz will be disallowed.
33. Schultz has filed two petitions to deny, and motion to dismiss the
application of RRB dated June 21, 1982, September 1, 1983 and
September 12, 1983, respectively. Schultz also has filed a petition to
deny and a motion to dismiss the application of CBI dated August 27,
1983 and September 9, 1983 respectively. However, Schultz’s petitions
and motions are essentially petitions to specify issues. Since the
Commission’s Report and Order in re Revised procedures for the
Pr ing of Con Broz ing Applications: Amendments of Part
1 of the Commission’s Rules, 72 FCC 2d 202, 45 RR 2d 1220 (1979),
directed the deletion of all issue pleadings in pending cases, the matters
sought to be raised in these pleadings have not been considered.
Accordingly, an opportunity to raise any allegations contained therein
will be afforded the parties post-designation pursuant to Section 1.229
of the Commission’s Rules.
34. RRB has petitioned for leave to amend its application. See
Paragraph 12, above. The accompanying amendments were filed
December 27, 1982; the last day for filing amendments as a matter of
right (the "B" cut-off date) was October 22, 1982. The applicant’s
amendments report: an increase in the corporate president’s percentage
of stock from 20% to 46.7%; a reduction in the corporate vice
president’s percentage of stock from 40% to 26.7%; the departure of
one shareholder; an increase in its effective radiated power from 1.2 kW
to 1.350 kW; and a proposal to maintain auxiliary power at its studio
and transmitter site. RRB states that the amendments report events to
8a
the Commission that were in existence prior to the "B" cut-off date.
However, RRB amended its application more than two months after the
"B" cut-off date.
35. Applicants are required, pursuant to Section 1.65 of the
Commission’s Rules, to keep their respective applications substantially
accurate and complete in all significant respects. The section requires
the filing of such amendments to be as prompt as possible, but in no
event more than 30 days after the occurrence of such event(s), unless
good cause is shown. If the matters contained in the amendments
occurred prior to the "B" cut-off date, then pursuant to Section 1.65 of
the rules, RRB should have filed the amendments promptly, within 30
days, not more than two months later. RRB does not provide a showing
of good cause as to why the amendments could not have been filed
promptly as required by Section 1.65 of the rules. Accordingly, an
issue will be specified.
Additional Issue Paragraphs
1. To determine whether RRB has failed to comply with the provisions
of Section 1.65 of the Commission’s Rules, with respect to keeping the
Commission advised of ownership and engineering changes to its
application, and if so, the affect of such noncompliance on the
applicant’s comparative qualifications.
Additional Ordering Paragraphs
36. IT IS FURTHER ORDERED, That the petition for leave to amend
filed by Schultz IS GRANTED, and the corresponding amendment IS
ACCEPTED to the extend indicated herein.
37. IT IS FURTHER ORDERED, That oppositions to petition for leave
to amend filed by RRB and CBI ARE DENIED.
38. IT IS FURTHER ORDERED, That the petition to deny the RRB
application filed by Schultz IS HEREBY DENIED.
9a
FCC 83M-4255
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In re Applications of
PEPPER SCHULTZ MM DOCKET NO. 83-1206
Sparks, Nevada File No. BPH-820519AK
COMSTOCK BROADCASTERS,INC. MM DOCKET NO. 83-1207
Sparks, Nevada File No. BPH-820628AQ
For Construction Permit
for a New FM Station
ORDER
Issued: November 17, 1983 ; Released: November 18, 1983
IT IS ORDERED, That Administrative Law Judge James F. Tierney
shall serve as Presiding Judge in the above-entitled proceeding; that the
hearing therein shall be convened on February 13, 1984, at 10:00 a.m.,
and the prehearing conference shall be held on January 12, 1984,
commencing at 9:00 a.m.; and,
IT IS FURTHER ORDERED, That all proceedings shall take place in
the Offices of the Commission, Washington, D.C.
All parties are put on notice that they are expected to be fully
cognizant of Part I of the Commission’s Rules and Regulations
concerning Practice and Procedure.
FEDERAL COMMUNICATIONS COMMISSION
/s/ Lenore G. Ehrig
Chief Administrative Law Judge
10a
FCC 84D-49
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In re Applications of
PEPPER SCHULTZ MM DOCKET NO. 83-1206
Sparks, Nevada File No. BPH-820519AK
COMSTOCK BROADCASTERS,INC. MM DOCKET NO. 83-1207
Sparks, Nevada File No. BPH-820628AQ
For Construction Permit
for a New FM Station
Appearances
Herbert D. Miller, Jr., Esq. (Koteen and Naftalin) on behalf of Pepper
Schultz; David M. Hunsaker and Denise B. Moline, Esqs. (Putbrese and
Hunsaker) on behalf of Comstock Broadcasters, Inc.; and Norman
Goldstein, Esq. on behalf of the Chief, Mass Media Bureau, Federal
Communications Commission.
INITIAL DECISION OF
ADMINISTRATIVE LAW_JUDGE JAMES F. TIERNEY
Issued: July 23, 1984 ; Released: July 30,1984
Preliminary Statement
1. Originally, this proceeding involved three mutually exclusive
applicants. By Memorandum Opinion and Order, FCC 84M-1615,
released April 3, 1984, Red Rock Broadcasting Corp.’s application,
following approval of a Settlement Agreement with Pepper Schultz, was
dismissed, with prejudice.
2. By Hearing Designation Order, MM-662, released November 10,
1983, the Chief, Mass Media Bureau under delegated authority
designated the mutually exclusive applications of Red Rock Broadcasting
lla
Corp. (since dismissed, supra.); Pepper Schultz (Schultz) and Comstock
Broadcasters, Inc. (Comstock) for authority to construct a new FM
station in Sparks, Nevada for hearing on the following issues:
a) To determine which of the proposals would, on a
comparative basis, best serve the public interest; and
b) To determine, in the light of evidence adduced, which of the
applications should be granted, if any.
3. With the surviving applicants Schultz and Comstock, a hearing was
held in Washington, D.C. on March 27, 1984 and the record of the
proceeding was closed on that date. Timely proposed findings of fact
and conclusions of law as well as reply findings were filed by Schultz
and Comstock on June 4, 1984 and June 18, 1984, respectively.
4. For the reasons set forth hereinafter this, as an Initial Decision,
SHALL GRANT the application of Pepper Schultz.
Findings of Fact
A. Schultz:
5. Mr. Schultz is an individual applicant. He proposes to be the full-
time general manager of his proposed station and to devote at least forty
hours per week to those duties (Schultz Exhibit No. 1).
6. Mr. Schultz has lived in Sparks, Nevada since 1942, with the
exception of the period 1960-1970, when he resided in Reno, Nevada.
He owns no interest in any medium of mass communication (Schultz
Exhibit No. 1), and is presently employed by the United States
Government as an electronics technician with the Department of the
Interior, Bureau of Land Management (Tr. 32). In that position, Mr.
Schultz installs and maintains two-way radio equipment (Tr. 34). He
will resign that employment in order to work at his proposed station
(Schultz Exhibit No. 1).
7. Mr. Schultz’s prior broadcast experience is as listed below:
Station Position Dates
KONE(AM), Reno Disc Jockey - announcer 1965
KTVN-TV, Reno Switcher - Ist class 1968
operator
KCRL(AM), Reno Account Executive 1972-74
KOLO-TV, Reno Transmitter Engineer 1974-76
The first two position were part-time and Mr. Schultz held them for less
than one year. The last two positions were full-time, and Mr. Schultz
held each for the periods indicated (Schultz Exhibit No. 1). As an
account executive with KCRL, Mr. Schultz’s duties included supervising
production personnel in the preparation of commercials for his accounts,
and he occasionally represented the station at meetings of civic
organization (Tr. 38-40). Mr. Schultz also worked as an account
executive for Donrey Outdoor Advertising for a period of time between
1976 and 1978 (Tr. 41-42). He holds a first-class radio operator’s
license (Tr. 45).
8. Mr. Schultz proposed to equip his proposed station with auxiliary
power facilities to permit the transmitter and necessary studio facilities
to operate during commercial power failures (Schultz Exhibit No. 1).
B. Comstock:
9. Comstock Broadcasters, Inc. is a Nevada common stock
corporation, with the following ownership and management structure:
Robert W. Carroll, President, Director and 51%
shareholder, with 100% Voting Rights
William B. Akert, Director and 49% Beneficial
Owner
Marva D. Carroll, Secretary
(Comstock Exhibit 1, p. 1). Through a Voting Trust Agreement
executed October 18, 1982, William B. Akert assigned his 49%
Ownership interest in Comstock to be held in Trust by Mr. Carroll.
Pursuant to the Agreement, Mr. Carroll is empowered to vote Mr.
Akert’s interest at all meetings of Comstock on any resolution, matter,
or business submitted at any such meeting (Comstock Exhibit 1, pp. 1;
4). The Trust may not be revoked by the Grantor earlier than the first
renewal filing date for the Comstock station subsequent to the issuance
a ee
13a
of a construction permit (Comstock Exhibit 1, p. 3). Under the Voting
Trust Agreement, Mr. Akert has left the complete control of the station
to Mr. Carroll (Tr. 87-88). y
10. Mr. Akert was not a stockholder in Comstock at the time the
corporation was formed. At that time, two other parties and Mr.
Carroll were the original subscribed stockholders (Tr. 71). The two
other stockholders, partners of Mr. Carroll in another business venture,
subsequently decided they did not wish to become involved in an
application for a radio station, and at that point, Mr. Carroll contacted
Mr. Akert, whom he has known for approximately six years, and asked
him to join with Carroll in filing the application (Tr. 71, 73-74; 76-77).
11. While acknowledging that one of the objectives of the Voting
Trust Agreement was to enhance Comstock’s comparative position in the
proceeding (Tr. 68; 74), Carroll stated that a primary objective was the
importance of having one person in complete control of the station and
answerable to the FCC (Tr. 66-68). Since Carroll had previous
broadcast experience, it was logical that he should be the one in control
(Tr. 68).
12. While Mr. Akert is nominally a director of the corporation
(Comstock Exhibit 1, p. 1; Tr. 69), he has, by the Voting Trust
Agreement, left complete control of the station to Carrol! (Tr. 87-88).
As a beneficial shareholder and director, Mr. Akert’s role would be
limited to attending a combined annual meeting of the stockholders and
directors for purposes of review (Tr. 69, 86-87). The nature of such a
meeting might take the form of a luncheon with Mr. Akert, wherein
Mr. Carroll would provide Akert with a general review of the radio
station with regard to programming, serving the needs of the community
of license, personnel, and profit and loss (Tr. 86-87). Unless votes are
required to be taken and recorded pursuant to the terms of the Articles
of Incorporation or By-Laws of Comstock, there would be no votes
taken at the annual lunch meeting (Tr. 88-89). Mr. Akert would not
have a vote, but would simply be in the position of a non-voting
stockholder receiving information about the financial status of his
company (Tr. 90). As stated by Mr. Carroll, Mr. Akert’s role at the
lunch meeting will be quite limited: "Mr. Akert will either receive a
bonus or come up with his checkbook at that meeting” (Tr. 87).
l4a
Robert W. Carroll
13. Robert W. Carroll was born February 6, 1937 in Chicago,
Illinois. He attended area schools, and later moved to California, where
he attended Los Angeles City College, majoring in broadcasting. While
attending college, Mr. Carroll worked part-time as a production
assistant at KTLA-TV (Channel 5), Los Angeles (Comstock Exhibit 4,
me 3S
14. In 1956, Mr. Carroll took a position as a staff radio announcer at
KSUE(AM), Susanville, California. His duties included other phases
of broadcast operations, including sales, engineering, logs,
programming, billing procedures, management, sports announcing
(including play-by-play) and news (Id.).
15. In 1958, Mr. Carroll moved to Reno, where he took a job as disc
jockey and News Director with KDOT(AM). After one year in that
position, he was appointed Television News Director for KOLO-TV in
Reno. From 1959 through 1967 he was the primary news anchorman
for the station with duties that included gathering and writing the news,
field interviews, shooting and editing film and working as a play-by-
play sports announcer for KOLO radio on many remote sports events.
Mr. Carroll was also appointed News Director for KOLO(AM), from
1962 to 1967. During this time, Mr. Carroll also wrote and produced
a number of television and radio documentaries for KOLO(AM) and TV
(id.).
16. In 1967, Mr. Carroll joined Reno’s new television station KTVN-
TV as News and Special Events Director. From 1967 through 1970 he
ran the station’s news department, was the anchorman on the evening
news, wrote and produced a number of documentary shows, and was
the play-by-play announcer for University of Nevada football,
basketball, and baseball games. He also functioned as the station’s
Operations Director for the period of one year. During this time, Mr.
Carroll was honored by several organizations (including the
Reno/Sparks chapter of the NAACP) for out standing reporting
coverage of civil rights activities in the State of Nevada. Mr. Carroll
also hosted a morning radio show on KCBN(AM) during the same
period (Id., pp. 1-2).
17. From 1970 through 1981, Mr. Carroll, a licensed pilot, produced
——————
15a
an irregular basis, throughout that period (Comstock Exhibit 4, p. 2).
18. For the past fifteen years, Mr. Carroll has been a frequent guest
lecturer at the University of Nevada, Reno, speaking on the subjects of
broadcasting, advertising and public relations. For the past three years,
Mr. Carroll has taught a weekly class in the field of advertising and
public relations at Truckee Meadows Community College (Id,).
19. Currently, Mr. Carroll is President and 40% shareholder in Media
Consultants, Inc.. a Reno advertising and public relations firm
(Comstock Exhinit 4, p. 2; Tr. 78-79). Media Consultants designs and
produces advertising, buys time on media, conducts publicity and
advertising research on behalf of clients - "people who have something
that they want to sell and want to advertise it" (Tr. 78-79). Media
Consultants places ads on radio, television, billboards, newspapers, and
other media (Tr. 79). In the event Comstock is awarded the
construction permit, Mr. Carroll intends to sever his relationship with
Media Consultants entirely. He would resign as officer and director,
and have the company buy out his 40% ownership interest (Tr. 81;
Comstock Exhibit 3, p. 1). Carroll has discussed the matter of his
disassociation from Media Consultants with his partner, and assumes
that his partner will take over Carroil’s present duties with the company
(Tr. 80-81). Upon his withdrawal as an officer, director and
stockholder, Mr. Carroll would no longer participate in any decision-
making process or business affairs of Media Consultants, Inc. (Tr. 80,
83).
20. Mr. Carroll has contributed in excess of 51% of the funds spent
thus far in filing and prosecuting the Comstock application, and intends
to contribute 51% of the funds necessary to build and operate the station
(Tr. 83-84).
Diversification (Comstock)
21. William B. Akert is the owner of 160 shares (approximately
0.0001999%), of Gannett Co., Inc., which holds interests in a number
of broadcast stations and newspapers. Gannett Co., is a publicly held
company with more than fifty shareholders (Comstock Exhibit 2, p. 1).
Gannett owns the Nevada State te-Journal, which serves Reno,
Nevada (Tr. 77-78). While the Gazette-Journal is the only daily
newspaper in the area, there are several weekly newspapers (Tr. 78).
16a
Nevada (Tr. 77-78). While the Gazette-Journal is the only daily
newspaper in the area, there are several weekly newspapers (Tr. 78).
22. Apart from Mr. Akert’s nominal interest in Gannett Co., Inc.,
neither Comstock nor any of its principals hold any ownership or
management interest in any broadcast station, MDS facility, STV
station, CATV system, newspaper, publishing house, or other medium
of mass communication (Comstock Exhibit 2, p. 1).
Integration of Ownership With Management (Comstock)
23. In the event Comstock is awarded the construction permit in this
proceeding, Robert W. Carroll, a holder of 100% of the voting stock of
Carroll, will become the full-time General Manager of the proposed
station (Comstock Exhibit 3, p. 1). Mr. Carroll intends to devote in
excess of 40 hours per week to these duties (Id.). As General Manager,
Mr. Carroll will supervise the construction and start-up of the station,
and thereafter supervise and oversee all station functions (Id.).
24. As noted above, Mr. Carroll intends to sever all connections with
his present business, Media Consultants, Inc., in order to ensure that his
responsibilities toward the proposed station are effectively met (Tr. 80-
81; 83; Comstock Exhibit 3, p. 1). Because of a long relationship with
two clients of the firm, however, Mr. Carroll stated that he might
continue to be a "commercial spokesperson" for them on a freelance
basis (Tr. 80, 82), not related to the business affairs of Media
Consultants, Inc. (Id.). Carroll indicated that this was not an unusual
practice for media personalities in an area of the size of Reno (ld.).
While Mr. Carroll would e calling on accounts in the area as part of
his duties as General Manager, this would be solely on behalf of the
new Station, and not connected in any way to media Consultants, Inc.
(Tr. 80, 83).
Local Residence and Civic Activities
25. Robert W. Carroll resides in Reno, Nevada, which is within the
1 mV/m contour of Comstock’s proposed station. Mr. Carroll has been
a resident of Reno since 1958 (Comstock Exhibit 3, p. 1).
26. Mr. Carroll is, and has been involved in local civic affairs in the
Reno-Sparks area. He is past President and current member of the
17a
President of the Washoe County Library Board of Trustees (whose
jurisdiction includes the Sparks library), as board member of the United
Way, Salvation Army and Nevada Civil Defense Advisory Board, as
past President of the Reno Kiwanis, and as past Lt. Governor of the
Kiwanis Division 23 (northern Nevada, including Reno and Sparks, and
Susanville, Caiifornia) (Comstock Exhibit 3, pp. 1-12).
Previous Broadcast Experience
27. Mr. Carroll has held the following positions at the broadcast
Stations indicated:
Dates ' Station/Location Position
1954-55 KTLA-TV Part-Time employee
Los Angeles, CA Production Department
1956-58 KSUE(AM) Staff Radio Announcer
Susanville, CA
1958-59 KDOT(AM) Disc Jockey and News Director
Reno, NV
1959-67 KOLO-TV TV News Director - Anchorman
Reno, NV reporter, sportscaster,
Operations Director
1962-66 KOLO(AM) News Director
Reno, NV
1967-70 KTVN-TV News & Special Events Director:
Reno, NV documentaries, sportscasting
Operations Director
1967-70 KCBN(AM) Announcer, Morning Radio
Reno, NV Show (simultaneous with
work at KTVN-TV)
' Dates are approximate and constitute the best recollecuon of the witness
(Comstock Exhibit 3, p. 2)
Ee
18a
1967-70. KCBN(AM) Announcer, Morning Radio
Reno, NV Show (simultaneous with
work at KTVN-TV)
1970-81 KOLO(AM) Program Producer, production
Reno, NV and airing of "Skywatch" -
traffic report
Auxiliary Pow ) k
28. Comstock proposed to acquire and maintain auxiliary power
facilities sufficient to provide emergency power for both the transmitter
and the studio, so that its proposed station may remain operational
during a power blackout or other emergency situation (Comstock
Exhibit 5, p. 1).
LTIMATE FINDINGS AND CONCLUSION
Diversification
1. Neither Schultz nor Comstock, nor Comstock’s principals hold any
cognizable interests in other media of mass communications that would
warrant the imposition of a significant demerit to one applicant or a
preference to the other.
2. Comstock’s William B. Akert, is 49% beneficial owner, holds 160
shares (approximately 0.0001999%) of Gannett Co., Inc. which holds
interests in a number of broadcast stations and newspapers. Nominal
interests are de minimis and are of little consequence in comparative
evaluation between competing applicants for broadcast facilities.
Cannon’s Point Broadcasting Co.,53 RR 2d 953, 958 (1983), among
others. Since Mr. Akert is a non-voting stockholder of Comstock, and
plans not to be involved in any way in the policy-making or
programming of the station, his nominal interest in Gannett, a publicly
held company, has no comparative significance. Nor does the fact that
Gannett publishes a local daily newspaper in Reno, Nevada, elevate Mr.
Akert’s interest into a significant role.
3. Also Mr. Carroll's current ownership and management interest in
Media Consultants, Inc., an advertising and public relations firm, no
19a
Television Corp., 43 RR 2d 857 (Rev. Bd. 1978); Iden St
Broadcasting Corp., 54 RR 2d 348 (Rev. Bd. 1983). In any event, the
record reflects that Mr. Carroll will divest himself of his entire interest
in the company.
4. Mr. Schultz holds no ownership interest in a medium of mass
communication. Schultz intends to proceed with construction
immediately upon a grant, and would, in any event, have construction
completed within three years time.
| ice - Integration of Ownership With Managemen
The Schultz Proposal
5. Pepper Schultz has proposed to be the full-time General manager
of his proposed station. As an individual applicant, he would be entitied
to 100% quantitative integration
6. Schultz for an indefinite initial period, would be the sole employee
and operator of the station: he would do all of the announcing, sell all
of the commercials, do all of the engineering, billing, etc. until such
time as the station had a cash flow sufficient to hire personnel. He
stated he has given no thought to what personnel he might hire at that
time. Comstock would have it that a significant and legitimate question
is raised about the efficacy of Mr. Schultz’s integration pledge. Despite
the fact that the station would be operating 24 hours a day, Comstock
says, Schultz claimed no other operator besides himself was needed. He
acknowledged, that Commission Rules require station identification
every hour, which he would be obliged to perform. Yet, continues
Comstock, at the same time, "he would be out in the street 20 hours a
week calling on potential accounts.” Schultz should also recognize that
the Commission requires an operator on duty at all times, adds
Comstock. His plans to operate the station, while "perhaps admirable",
Comstock notes, appear impossible of effectuation. Because Schultz’s
speculations of hiring additional personnel at a later time when the cash
flow comes in are based on the initial efficacy of his one-man operation,
Comstock suggests that the Schultz proposal "is factually defective” for
both the short and the long term. When promises, on their face cannot
be carried out, an award of integration credit cannot be justified,
Comstock argues.
20a
both the short and the long term. When promises, on their face cannot
be carried out, an award of integration credit cannot be justified,
Comstock argues.
7. Even if Mr. Schultz’s "Herculean expectations could somehow be
fulfilled," Comstock urges, it is clear that many of the duties that he
would be performing wouid not be management functions; e.g., non-
managerial functions, such as announcing, routine maintenance and
technical functions, and/or clerical duties. Citing High Sierra
Broadcasting, Inc., 55 RR 2d 627 (Rev. Bd. 1983); Bradley, Hand and
Triplett, 51 RR 2d 383 (Rev. Bd. 1982); Grand Broadcasting Co., 2 RR
2d 327 (1964).
8. Yet, Mr. Schultz, an individual applicant, proposed to be the full-
time General Manager of his station. His past activities respecting
earlier an unconstructed station is not, as Comstock would have it, a
comparative imperfection or blemish and, without more, he is clearly
entitled to credit for one hundred percent full-time integration.
9. Mr. Carroll, who owns 51% of Comstock beneficially and an
additional 49% as trustee under a voting trust, also proposed to be the
full-time General Manager of Comstock’s station.
10. It seems clear and admitted that the principal reason for the
Comstock voting trust arrangement is to confer legal title to one
‘ ondred percent of Comstock’s stock on Mr. Carroll so that Comstock
an claim credit for 100% full-time integration in this proceeding. In
the absence of that voting trust, Comstock could claim only the 51%
integration credit to which it is entitled by virtue of Mr. Carroll's legal
and beneficial ownership of 51% of Comstock’s stock.
11. Schultz argues that in Anax Broadcasting, Inc., 87 FCC 2d 483,
49 RR 2d 1589 (1981), it was observed that where limited partners
"have no authority to participate in the management of an applicant, are
required to maintain a purely passive role," and "are passive investors
and have no authority to control the licensee, their integration or lack
of integration is inconsequential" (49 RR 2d at 1594). In these
circumstances, Schultz notes, only the integration of the general partners
is considered and, in an extreme example, a sole general partner having
1% equity position but proposing to work full-time as the general
manager of a limited partnership’s proposed radio station, would be able
21a
participation of the holders of its voting stock, and the proposed
participation of its non-voting, purely passive investors, preferred
stockholders is not considered, see Bradley, Hand and Triplett, 89 FCC
2d 657 (Rev. Bd. 1982).
12. These cases, however, are not dispositive of the present question.
First, under Commission policy and precedent extant, limited partners
are merely passive investors, with no say in the manner in which the
partnership is run. The same is generally true of holders of non-voting
preferred stock. Mr. Akert, however, is not merely a passive investor.
He is also one of Comstock’s three directors, and has all of the rights
and obligations incident to that position, regardless of where he can
"vote" his stock.’ Schultz relates:
"In the exercise of their duty of management, the
directors, usually as a board, are required to use their
best judgement and independent discretion, and are
responsible for the determination and execution of
corporate policy. Their management functions usually
include: (a) policy decisions with respect to products,
services, prices, wages, labor relations, (b) selection,
supervision, and removal of officers and possibly other
executive personnel, (c) fixing of executive
compensation, pension, retirement, etc., plans (d)
determination of dividends, financing and capital
changes; (e) delegation of authority for administrative
and possibly other action, (f) possible adoption,
amendment, and repeal of by-laws, (g) possible
participation, along with shareholders, in approving
various extraordinary corporate matters, and (h)
supervision and vigilance for the welfare of the whole
enterprise" (Handbook of the Law of Corporation,
Henn, 1961, p. 338 (footnotes omitted)).
As 4 director of Comstock, Akert would therefore have duties and
rights of a substantial nature, which takes him out of the "passive
? Mr. Carroll could think of no circumstances in which he would vote Mr. Akert
out as a director.
22a
As a director of Comstock, Akert would therefore have duties and
rights of a substantial nature, which takes him out of the “passive
investor" category.”
13. Second, Schultz asserts, limited partnerships are recognized
investment vehicles and have valid commercial purposes; that the same
is true of the various classes of common and preferred stock. But is not
true of the present arrangement. As Mr. Carroll stated, there is no way
in which the existence of the trust will impact upon either the day-to-day
operation of the proposed station or the adoption of policies governing
that day-to-day operation. Mr. Carroll will have no more "say" in the
operation of the station than he would in the absence of the trust
agreement. And the trust beneficiary, Mr. Akert, will have no less say
in those matters.
14. Schultz states that the answer to the question posed by the voting
trust agreement must, therefore, be searched for in the light of the
purpose stated by the Commission for placing great significance upon
integration of ownership and management:
"We consider this factor to be of substantial
importance. It _is_ inherently desirable that legal
responsibility an - rforman losel
associated. In addition, there is a likelihood of greater
sensitivity to an area’s changing needs, and of
programming designed to serve those needs, to the
extent ion’s proprietor ivel icipate
in the day-to-day operation of the station. This factor
is thus important in securing the best practicable
service. It also frequently complements the objective of
diversification, since concentrations of control are
n il hiev xpen integr
ownership." Poli tatement on mparative
Broadcast Hearings, 5 RR 2d 1901 (1965) (Emphasis
added in the original).
* The Initia! Decision in Bradley, Hand and Triplett, supra., specifically noted that
"None of the preferred stockholders is an officer or director of OCR" (89 FCC 2d at
682).
23a
Akert’s stock to Mr. Carroll did not produce a closer association of
legal responsibility and day-to-day performance. Mr. Carroll already
had the power to control the affairs of the corporation, by virtue of his
51% stock interest; Akert, in his capacity as a 49% stockholder, had no
power to prevent Mr. Carroll from doing so. By virtue of the trust
arrangement, however, Carroll will have a fiduciary responsibility to
Akert which he would not otherwise have. That fiduciary obligation
may well require him to be, at least, somewhat more attentive to Mr.
Akert’s interests than he would have to be in the absence of the trust.
16. Since Akert retained full powers as a director of Comstock, he
will still be able to exert substantial influence over Comstock, and will
have substantial legal responsibility for its conduct, even though he will
not participate in its day-to-day operations, Schultz adds.
17. Schultz suggests that the particular trust relationship between
Carroll and Akert may have detrimental attributes as far as being able
to fully respond to the needs of the community here. Schultz speculates
that, for example, if Mr. Carroll must decide whether Comstock should
spend corporate profits on public service programming instead of
declaring a dividend, it would appear that his fiduciary obligations to
Mr. Akert would require him to "vote" Mr. Akert’s stock in favor of
the declaration of the dividend, since that would be the course most
beneficial to Mr. Akert’s private interests. Scott on Trusts, third
edition, Section 193.1 (1967). Schultz contends, the least Mr. Carroll
would have a difficult choice to make and there is no way on the present
record to determine which choice he would make. And, of course, Mr.
Akert, as one of Comstock’s directors, would continue to have a
substantial influence over the making of such decisions.
18. Without doubt, the craftsmanship or design by Comstock of the
trust instrument, otherwise permissible if not somewhat resourceful,
seeks to fashion the best possible integration posture vis a vis its
opponent. Yet, as Schultz argues, quite well and convincingly, the
Shadow of the trust and its traditional duties is immanent and while
perhaps not the “artificial procedural gimmick" Schultz describes, it
cannot, in reason, achieve its flawed purpose and, thus, for reasons
stated in greater detail, infra, it may be concluded that Comstock can be
credited only with full-time integration of its 51% stockholder.
24a
Integration as Enh By Local Residen
19. While both Mr. Carroll and Mr. Schultz are residents of the
Sparks area, Mr. Carroll resides and apparently will continue to reside
in Reno. Only Mr. Schultz resides in Sparks, of which he has been a
resident for more than thirty of his forty two years. Both applicants are
entitled to enhancement by virtue of local residence. The slight
differences of Sparks versus Reno is hardly of significance.
20. Since the record is silent as to any civic activities of Mr. Schultz,
Schultz is entitled to no enhancement on that basis.
21. Prior broadcast experience is the least significant of the factors
enhancing integration credit, because, if given greater significance, it
might very well discourage and dissuade the entry of newcomers in the
enterprise of broadcasting. Yet, however, disparaged as of little
moment by Schultz, Comstock’s Carroll’s considerable broadcast
experience be it part-time or other, far exceeds that of Schultz, is a plus
factor and would entitle Comstock, on any measure, to a moderate
preference over Schultz.
22. Though Schultz would denigrate Comstock’s Carroll civic
activities as being in the "distant past," hence of little value, Comstock
characterized this argument as "nonsense." The evidence would support
Comstock’s position and Comstock would be entitled and is credited
with a moderate preference over Mr. Schultz. Walter Broadcasting
Corp., 52 RR 2d 1063 (1982). Likewise,as noted above, respecting
broadcast experience, Comstock terms Schultz’s suggestion of very little
difference between two applicants as “nothing short of an insult."
While it does not have that harsh ring, it is mistaken and the some thirty
years of Carroll’s broadcast experience, be it part-time or other is
clearly creditable and a positive or clear preference can be assigned to
Comstock in this qualitative category. Also, little distinction can be
attributed in the matter of local residence of the parties. Both reside in
the proposed service area; indeed Sparks (Schultz) and Reno (Comstock)
are contiguous communities. See Minority Broadcasters or East St.
Louis, Inc., FCC 84R-45, released June 5, 1984.
23. Diversification attributes between the applicants, likewise are
virtually equal, Schultz would not deserve the modest preference he
seeks simply because the Gannett interests of Comstock being of
aad
25a
inscrutable dimension to assess its effect - less than 2/10,000th of one
percent of Gannett Co., - would be tantamount to setting forth precision
to the extreme outer limits if pi (a7) 3.14159265+, the + being
mathematically infinite. In a word, such an extremely small interest
could have no appreciable effect on what the comparative process
respecting diversification seeks. Again, on this score the parties stand
equal.
24. The critical and dispositive question of comparative choice here
appears to rest on the full appraisal of the parties’ claims to 100%
integration of ownership with management. There is no obstacle or
impediment in the evidence which would undermine Schultz’ claim of
100% integration, albeit Comstock would have it that the proposed one-
man operation by Schultz of the many duties affecting a business of an
FM station is an impossible feat; hence, Schultz’s proposal on
integration must be greatly diminished. Without doubt, as he concedes,
he “will be very busy during the first month or two of station operation"
but that the necessary functions are not beyond his capabilities. The
evidence would support that Schultz even “after the perhaps somewhat
hectic months” will be able to perform as expected and required. Thus,
as to Schultz, a 100% integration can be and is credited.
25. Respecting Comstock’s claim for 100% integration, the question
is not that simple to resolve. A full appraisal must be made of the trust
agreement whereby the 49% stockholder Akert has placed that interest
in trust with Carroll, the 51% owner. Comstock argues in its Reply
"there is nothing unfair, prejudicial or gimmicky about a legal
instrument enabling Comstock to_obtain the comparative benefit_it
deserves" (emphasis in original). And though it may be the case that
the ownership attribution rules need "some overhauling," as Comstock
Suggests, nevertheless by devising the trust instrument Comstock may
have perhaps unwittingly created its own monster.
26. Why? Even though the trust instrument may have attributes of a
"legal fiction,” as Schultz urges - legal fictions abound in our system of
jurisprudence, which have proven historically convenient and at times,
necessary - a private corporation is a fictionalized person for a simple
example - under the trust, a trustee such as Comstock’s Carroll, by
virtue of that office is infused with much more than the bare legal title
of the corpus of the trust - 49% voting rights - the trustee is also
charged with the very high duty in a fiduciary relationship with the
26a
trust’s beneficiary. All acts of the trustee must redound to and be
reflective of the best interests of the beneficiary. Thus, while the law
may recognize that “legal title" rests in the trustee, that fact does not
strip the beneficiary of all recourse should impairment, potential or real,
be visited upon the trust and its objects by the acts of the trustee.
27. Hence, the shadow of the immanence of the beneficiary casts
fettered, not infettered, restraints upon the trustee here, Carroll; such
would not be the case where Carroll’s stock ownership of the 49%
unqualified. And this condition is a far different situation or
circumstance of voting and non-voting stock in a private corporation of
the rights of a partnership comprised of general and limited partners,
both well established and well recognized legal concepts. Here, besides
the beneficiary remaining a Director of the corporation, as pointed out
by Schultz, there persists a trustee/benecficiazy relationship between two
fully emancipated, presumably compos mentis persons who additionally
appear to be both close social as well as business friends. These
conditions, to this mind, fatally affects the true ownership of the trust
stock by Carroll and whatever the supposed imperfections of the
Ownership attribution rules, footnoted by Comstock, in the sometime
Never Never Land of comparative choice and absent thcse well
recognized legal conditions of tenancy-by-the entirety or joint tenency
and the like, 100% ownership attribution in integration of management
with ownership must be equated with flawless, unqualified ownership -
which is not the case here.
28. Trust instruments are, of course, greatly different than proxy
instruments where the stock owner retains ownership but, from time to
time, gives to another party authority or power to vote as he or she sees
fit; in a trust, the cestui que trust, or beneficiary’s interest is paramount,
not that of the trustee; and surely trustee instruments are not in the legal
category of lenders of capital, private or public, who may require
collateral conditions or directorships as prerequisites of lending; such
parties, presumably, consider their interests paramount but they are
neither trustees nor owners; at best, lien holders.
29. Having noted this and finding the arguments of Schultz respecting
the trust arrangement fully persuasive, Comstock cannot be given the
100% integration credit it seeks; rather and compellingly Comstock’s
claim of full-time management/ownership posture must be rejected and
it is concluded to be 51% and nothing more.
27a
30. On the other qualitative aspects of integration e.g. local residence,
prior broadcast experience, civic activities etc., the difference between
the parties, while cognizable in favor of Comstock, on grounds of
broadcast experience and civic activities, they are not dispositive of the
choice to be made. This contest must be decided on the integration
posture of the parties and, on that premise, it is clear that the applicant
Schultz must prevail by his being accorded 100% full-time integration
versus 51% for his opponent.
For the foregoing reasons, the application of Pepper Schultz for the
captioned facilities at Sparks, Nevada may be AND IS HEREBY
GRANTED; that being so, the application of Comstock Broadcasting,
Inc. for those same facilities, must be AND IS HEREBY DENIED.‘
IT IS SO ORDERED.
/s/ James F. Tierney
Administrative Law Judge
Federal Communications Commission
* In the event exceptions are not filed within 30 days after the release of this Initial
Decision and the Commission does not review the case on its own motion, this Initial
Decision shall become effective 50 days after its public release pursuant to Section
1.276(d) of the governing Rules.
28a
FCC 85R-5
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In re Applications of
PEPPER SCHULTZ MM DOCKET NO. 83-1206
Sparks, Nevada File No. BPH-820519AK
COMSTOCK BROADCASTERS,INC. MM DOCKET NO. 83-1207
Sparks, Nevada File No. BPH-820628AQ
For Construction Permit
for a New FM Station
MEMORANDUM OPINION AND ORDER
Adopted: January 22,1985 ; Released: January 28, 1985
By the Review Board:
1. The Review Board has under consideration exceptions filed August
29, 1984 by Comstock Broadcasters, Inc. (Comstock) and a reply
thereto filed by Pepper Schultz (Schultz); "contingent" exceptions filed
August 29, 1984 by Schuitz and Comstock’s reply; a Motion for Leave
to Amend filed December 26, 1984 by Schultz and comments thereon
filed by Comstock; a Petition for Leave to Amend filed December 31,
1984 by Comstock and Schultz’s opposition thereto; and a Motion for
enlargement of Issues filed December 31, 1984 by Comstock and
Schultz’s opposition thereto. Previously, after a comparative hearing,
presiding Administrative Law Judge James F. Tierney (ALJ) found
Schultz to be the comparatively superior of these two remaining
applicants for a new FM broadcast station at Sparks, Nevada, and
granted his application. Initial Decision (L.D.), FCC 84D-49 released
July 30, 1984. Oral argument was held before the Review Board on
December 12, 1984. For reasons that follow, we find that this
proceeding must be remanded to the ALJ to explore patent inadequacies
in Schultz’s proposed staffing and on a related financial qualifications
issue against Schultz.
29a
2. To begin, Comstock’s exceptions fault the ALJ for crediting
Schultz’s ownership integration proposal, contending - as it did below -
that the proposal is patently impossible of effectuation.' The specific
findings and conclusions under exception are set forth at LD., Ultimate
Fdgs. and Conclus., para. 6, and state:
Schultz for an indefinite initial period, would be the
sole employee and operator of the station: he would do
all of the announcing, sell all of the commercials, do all
of the engineering, billing, etc. until such time as the
station had a cash flow sufficient to hire personnel. He
stated he has given no thought to what personnel he
might hire at that time.
Comstock urges *:
Despite the fact that at commencement of operations,
Schultz’s station would be operating 24 hours a day (Tr.
44), Schultz stated he had no present plans to hire any
personnel. (Tr. 43-44). He represented in his initial
application that he would hire zero employees, and
confirmed this on cross examination. (Tr. 49). Schultz
indicated that he would be the sole operator for an
indefinite period of time. (Tr. 44). He stated that he
might, in time, hire some people when the cash flow
starts coming in. (Tr. 43-44). He estimated that it
would take at least one to two months of operation
before he could hire any staff to perform some of those
duties that he personally would be undertaking after
commencement of operations (Tr. 46-47), but he had
given no thought as to how many employees he
ultimately might need. (Tr. 48). When asked how he
expected to operate the station totally by himself for a
period of time, Schultz stated that he would use pre-
recorded commercials produced by local advertising
agencies (Tr. 44). He acknowledged, however, that he
would have to do the required station identification
announcements every hour.
' Comstock Exceptions at 6-9.
? Id., at 7 (emphasis in original)
30a
Comstock asks the Board to judicially notice that Schultz cannot do
without sleep for two or three months, that he cannot be on the street
selling advertising for the twenty hours per week Schultz proposed while
also manning the technical and operational controls of the station, and
that Schultz has flatly admitted that he cannot afford employees until
advertising revenues reach adequate levels. Faced with this unusual
exception, the Board has consulted the underlying record.
The transcript citations fully support Comstock.*
> For example:
Q. I see. Now would you briefly describe for us what your duties as general
manager - what you envision your role as general manager would be at the
station?
A. To keep the station operating; to obtain advertising revenues; provide
programming and do billing; and supervise the personnel the station has.
Q. When you say keep operating, are you referring to the technical operation of
the station?
A. Yes sir.
Q. When you say obtain advertising revenues, does that mean you intend to do
sales yourself?
A. Yes, I do.
Q. And would the same answer be true for providing programming?
A. Yes.
Q. And doing the billing?
A. Yes.
Q. And your last duty described as supervising personnel, do you plan to hire a
program director?
A. At the present time, | don’t have anybody planned jor hiring. I may in time
hire some people as soon as the cash flow starts coming in, hire somebody to
do these duties.
(continued...)
3la
3(.. continued)
Q. Make sure I understand your answer. You're saying initially, upon first
Starting the station up and getting on the air, in essence it will be just
yourself?
A. Yes.
Q. A.nd that later, if cash flow is generated, you anticipate possibly hiring some
employees?
A. Yes.
Q. How many hours a day will the station be on during this period that you in
essence are going to be the sole operator?
A. 24 hours.
Tr. 43-44. At further questioning, Schultz testified:
Q. Thank you, your Honor. To refresh your recollection of the question, Mr.
Schultz, I ask you if you had given any thought to ultimately how many
employees would be working for you on a full-time basis?
A. None.
Q. None, meaning you have noi given any thought, or none -
A. None.
Q. Or none that would not be working for you.
A. None in the respect that | haven't considered it, as far as the number of
people to work for me. In other words, I didn’t set down and write out |
need this many people to do this job and this many people to do that job.
Q. Is it not a fact that when you initialiy applied to the Commission for this
frequency, you indicated in that application filed in October of 1981 that you
would employ 0 employees.
A. Myself. It wouid be 0 employees because the owner would be myself. In
other words, hiring somebody else, | wouid not.
Q. Other than yourself, you would hire 0 employees.
A. Yes, nght.
(continued...)
32a
3. Atoral argument, Schultz’s counsel candidly and properly conceded
the damaging hearing representations of his client, * but nonetheless
argued that Schultz "has friends who can help him out" on a volunteer
basis.© When the Board pointed out that, throughout Schultz’s entire
hearing testimony, he made not the slightest reference whatever to
volunteer assistance, counsel responded °:
It’s not on the record, because there’s no issue.
(_. continued)
Id., at 48-49.
* For example, while acknowledging that Schultz repeatedly insisted at hearing that
he alone would operate the station on a 24 hour per day basis (see supra note 3),
counsel submitted “that Mr. Schultz does not propose to operate this station 24 hours
a day all by his lonesome forever." Tr. of Oral Arg. of December 12, 1984 at 120.
Yet, counsel also admitted:
He did testify that he was planning to operate the station 24 hours a day. He
did testify that that was his intention during the first month or two of
operation.
Id. Further, counsel understood that FCC rules require “a licensed operator orn duty
somewhere,” id.; that Schultz has averred that "he is going to be the only employee ...
[djuring the first initial phase of the station operation,” id., at 121; and that "when the
money started rolling in, he [Schultz] could hire people." Id., at 123.
+ Id., at 121. |
* id. Indeed, on December 26, 1984, Schultz filed a Motion for Leave to Amend
to reflect that Schultz intends “to rely on a automated transmission system (ATS) and
on help provided without charge by friends to permit his proposed station to operate
twenty-four hours per day with no ‘employees’." Id., at 1. Putting aside for the
moment precisely what Schultz seeks to “amend,” the motion will be denied. Post-
hearing designation amendments are governed by 47 CFR §73.3522(b), and an
amendment will not be accepted unless it meets all six of the “good cause" elements set
out in Erwin O'Conner Broadcasting Co., 22 FCC 2d 140, 143 (Rev. Bd. 1970).
Schultz 's Motion does not show "good cause"; in general, it simply asserts that "Mr.
Schultz has given considerable additional thought to his proposal, and has concluded that
the slight modifications made in the attached amendment are necessary.” Id., at 2. It
seems Schultz now concedes that his original proposal would shortly grind Pepper down
with a workload not to be sneezed at. For similar lack of a “good cause" showing,
Comstock’s Petition for Leave to Amend (to remedy serious problems with the bona
fides of its own integration proposal), filed December 31, 1984, will be denied, and all
responsive pleading's of both parties’ motions are, therefore, dismissed as moot
33a
Had a motion to enlarge issues been filed, we would
have had an opportunity to respond with an affidavit of
Mr. Schultz saying what he proposed to do.
4. While some might ague that Schultz’s unambiguous representations
summarily nullify his “ownership integration" proposal, which - in
totality - appears "inherently incredible"’, others would contend that the
arcane protocols of communications law demand that the addition of a
discrete "“staffing"* issue was necessary before Schultz could be
negatively affected by finding that his operational plans are not to be
credited. See Tr. of Oral Arg., supra note 4, at 121-122 (Schultz
counsel).
5. At the risk of some derision, we will remand this case on
appropriate issues to assure that Schultz has adequate notice and
” Cf. Hudson C. Miller, Jr. v. FCC, 707 F.2d 1530, 1539 (D.C. Cir. 1983) (citing
Gamble-Skogmo, Inc. v. FTC, 211 F.2d 106,115 (8th Cir. 1954). On the other hand -
and technically speaking - a “full-time” integration proposal denotes only that an
applicant's principal proposes to devote 40 hours per week to station mamagement.
Sec, ¢.g., Vacationland Broadcasting Co., Inc., 55 RR 2d 1299, 1303 n.1 and 1304,
recon. denied, 56 RR 2d 1260 (Rev. Bd. 1984). and cases cited therein. Comstock does
not trifle with the 40 hour per week aspect per se; it is the remaining 128 hours at issue.
* “[UJniess an applicant's plans are, on their face, incapable of effectuation, a
staffing issue will not be specified in the absence of specific allegations tending to
demonstrate that those plans cannot be effectuated.” KOWL, Inc., 49 FCC 2d 962, 966
(Rev. Bd. 1974), and cases cited therein. Accord, Brookhaven Broadcasting Co., Inc.,
50 FCC 2d 703, 708 (Rev. Bd. i975) ("where effectuation of a proposal is not
inherently improbably,” no staffing issue will be specified "absent specific allegations
demonstrating that the proposal cannot be effectuated"), and cases cited therein.
However, the Commission has specified staffing issues in cases where the proposed
staffing has been larger and better defined than the solo 24-hour per day operation
proposed in the case at bar. See, ¢.g., Mace Broadcasting Co., 13 RR 2d 753, 755-756
(1968) (staff of 5 persons proposed for 125 hour weekly schedule was “marginal! at
best"); Clarkston Broadcaster, 12 RR 2d 1203, 1207-1208 (1968) (staff of 5 persons,
only 3 of whom will be actually involved in station on-the-air activities, proposed for
83 hour weekly programming schedule); Sunset Broadcasting Corporation, 5 FCC 2d
321, 323 (1966) (8 person staff; proposed station operation of 71 hours and 45 minutes
per week), compare United Broadcasting Company (KBAY-FM, MO&O, 58 FCC 2D
1346, 1357-1358 (Rev. Bd. 1976) (4 fulltime employees plus vague reliance on
volunteers; issue specified) with id., Decision, 93 FCC 2d 482, 511-515 (1983)
(Comm'n) (issue resolved favorably to applicant based on specific hearing evidence
demonstrating “reasonable likelihood" of effectuation).
34a
opportunity to be heard on the obvious concerns. We admonish in
advance, however, that contradictions in evidence and testimony will be
construed in their ordinary legal fashion and that no comparative
“upgrading” over original proposals will be permitted. Furthermore,
Schultz’s indication that he can hire no employees to help him operate
the station until “the money started rolling in" after several months
ineluctably raises the issue of whether he has the financial resources to
qualify for licenseeship. The Commission requires:
... that a new aural applicant must demonstrate that he
has a sufficient capital reserve to cover construction
costs and that initial start-up period between
inauguration of broadcast service and the point where
advertising accounts begin to ‘pay-off.’ We believe that
a fairly conservative 90-day standard will serve
adequately.
Financial Qualifications Standards For Aural Broadcast Applicants, 69
FCC 2d 407, 408 (1978) (emphasis added). To the extent that Schultz
needs to rely on eventual advertising revenues to hire those necessary
to operate the station (as proposed for the initial start-up period of
several months), he is prima facie out of compliance with our financial
standards. And appropriate issue will be added.
6. ACCORDINGLY, IT IS ORDERED, That the petitions for leave
to amend filed December 26 and 31, 1984 by Pepper Schultz and
Comstock Broadcasters, Inc., respectively, ARE DENIED; and
7. IT IS FURTHER ORDERED, That the motion to enlarge issues
filed December 31, 1984 by Comstock Broadcaster, Inc. IS
DISMISSED as moot; and
8. IT IS FURTHER ORDERED, That this proceeding IS
REMANDED to the presiding Administrative Law Judge for adduction
of evidence on the following issues and the issuance of a Supplemental
Initial Decision:
(1) To determine whether the staff proposed by
Pepper Schultz is adequate to effectuate his
proposal; and
(2) To determine whether Pepper Schultz has
sufficient funds to cover his costs of
construction and initial three months operation.
9. IT IS FURTHER ORDERED, That the burden of proceeding with
the introduction of evidence and proof under the issues added herein
SHALL BE upon Pepper Schultz.
FEDERAL COMMUNICATIONS COMMISSION
/s/Norman B. Blumenthal
Member, Review Board
36a
FCC 85M-1599
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In re Applications of
PEPPER SCHULTZ MM DOCKET NO. 83-1206
Sparks, Nevada File No. BPH-820519AK
COMSTOCK BROADCASTERS,INC. MM DOCKET NO. 83-1207
Sparks, Nevada File No. BPH-820628AQ
For Construction Permit
for a New FM Station
MEMORANDUM OPINION AND ORDER
Issued: April 10, 1985 : Released: April 12, 1985
1. This will memorialize a ruling at the hearing April 9, 1985,
denying Motion for Summary Decision, filed March 19, 1985, by
Pepper Schultz (Schultz) seeking, on the grounds urged, resolution in
his favor of the two issues added, on remand, by the Review Board.
An Opposition was filed on April 2, 1985 by Comstock Broadcasters,
Inc. (Comstock). Schultz on April 5, 1985, filed a Motion for Leave
to File Supplement to its Motion for Summary Decision, also denied.
2. The added issues are:
To determine whether the staff proposed by Pepper Schultz is
adequate to effectuate his proposal; and
To determine whether Pepper Schultz has sufficient funds to
cover his costs of construction and initial three months
operation. (FCC 85R-5, released January 28, 1985).
Schultz predicates its instant Motion on information contained in the
Amendment, unopposed, filed February 22, 1985, and listed as
Attachment A to the instant Motion. That proposed Amendment reflects
37a
the financial and staffing proposal which Schultz contends fully satisfies
and resolves the questions posed in the added issues. Construction and
staffing costs would amount to $67,622.60 and, Schultz states, "he has
cash on hand in excess of $101,000" with “a cushion in excess of
$33,000."
3. In Opposition, Comstock, citing the Review Board’s admonition
that "contradiction in evidence and testimony will be construed in their
ordinary legal fashion and no comparative ‘upgrading’ over originai
proposals will be permitted," (FCC 85R-5, at 5), and, argues
Comstock, the condition of "co-ownership" of a bank account with his
brother, among other imperfections, make the grant of Schultz’s Motion
impermissible. Schultz would have it that the bank account is freely
available to him without condition; that the money advance of his
brother is an unqualified "gift" and not a "loan". Not so, argues
Comstock, "co-ownership at least casts a shadow of qualification on
Schultz’s freedom of choice in the use of those funds."
4. But more, Comstock urges, that the Review Buard’s admonition is
ignored by Schultz in "his attempt to reconfigure his plan" and that "his
credibility [is] squarely in question"; that, indeed, Schultz is little more
than “an incredible, unreliable and wholly unrealistic applicant." In a
word, Comstock contends that material questions of fact remain to be
resolved concerning both the financial and staffing issues, thus,
precluding favorable disposition of Summary Decision in Schultz’s
favor.
5. Schultz, on the other hand urges that the Review Board’s
admonition should not be permitted to suggest that he could not change
his staffing or financial proposals. Rather, Schultz urges that
admonition "means simply that contradiction in evidence will [be] dealt
with as they are customarily dealt with." Since Mr. Schultz’s staffing
proposal has been completely changed (with the exception that Mr.
Schultz still intends to be the general manager and chief engineer of his
proposed station), there is no contradiction to be found, adds Schultz.
This is more so, argues Schultz, that the changes in staffing proposal
would not amount to a comparative upgrade because Schultz continues
to claim the maximum quantitative integration since he will be the full-
time general manager of the facility of which he will be the 100%
owner.
38a
6. In summary then, serious and germane questions of fact remain to
be determined, particularly respecting the newly proposed staffing
system for Schultz, as well as the real nature of the earlier "co-owned"
bank account. Hence, clearly a need for direct and cross-examination
on those points arise, and thus, Summary Decision may not be granted.
7. Schultz’s unopposed Petition for Leave to Amend his application,
filed February 22, 1985, seeking to reflect staffing and financial updated
information may be AND IS HEREBY GRANTED; and _ the
Amendment tendered therewith ACCEPTED, with the caveat that no
comparative advantage is to be gained thereby.
For the foregoing reasons and those reflected in the record at the
hearing April 9, 1985, Schultz’s Motion for Summary Decision, March
19, 1985, and Motion for Leave to File Supplement, April 15, 1985,
must be AND ARE HEREBY DENIED.
SO ORDERED.
FEDERAL COMMUNICATIONS COMMISSION
/s/James F. Tierney
Deputy Chief Administrative Law Judge
39a
FCC 85M-1994
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In re Applications of
PEPPER SCHULTZ MM DOCKET NO. 83-1206
Sparks, Nevada File No. BPH-820519AK
COMSTOCK BROADCASTERS,INC. MM DOCKET NO. 83-1207
Sparks, Nevada File No. BPH-820628AQ
For Construction Permit
for a New FM Station
MEMORANDUM OPINION AND ORDER
Issued: May 6, 1985 ; Released: May 7, 1985
1. At hand is a Motion to Enlarge Issues, filed April 5, 1985, by
Comstock Broadcasters, Inc. (Comstock) seeking additional issues
against its opponent Pepper Schultz (Schultz). Schultz filed an
Opposition on April 18, 1985 and Comstock filed its Reply on April 30,
1985.
2. Comstock’s Motion urges that four additional issues are warranted
against Schultz: (1) a false certification issue; (2) a misrepresentation
or lack of candor issue regarding Schultz’s financial qualifications
growing out of Schultz’s February 18, 1985 amendment to his
application; (3) a real party in interest issue to determine whether three
other persons are undisclosed parties to the Schultz application; and (4)
a lack of candor issue regarding Schultz’s "various" staffing proposals.
3. False Certification Issue. Briefly, Schultz in his Opposition while
conceding that he did not "personally own" all of the resources needed
to construct his proposed station in 1982, adds that Comstock’s
contention "simply does not hold water" in that all that is demonstrated
is that Schultz, while exploring various financial options after the release
of the Initial Decision, “was fortunate enough to have several options
40a
and that he was prudent enough to explore them." That "[aJll that is
required is that an applicant have a viable plan of financing at the time
of filing and continuously thereafter. Flexibility is permitted and that
the plan need not remain static . . .". In sum, Schultz states under
earlier lease proposals contingent upon credit approval and not then
represented by counsel whatever "the fine points of Commission policy.
Schultz "believed that the assurances he had received were sufficient to
establish his financial qualifications"; that he had been financially
qualified in 1982 and, as at this time, his belief "regardless of his actual
financial qualifications," was and is sufficient to support his certification
and that no basis exists to suggest he intended to mislead the
Commission.
4. Misrepresentation Issue. Schultz submits, his representation on
February 22, 1985, concerning his financial situation "was entirely
accurate." He had funds on deposit in excess of $101,000, and the fact
that the account was "co-owned" by his brother, his sister-in-law and a
family friend did not preclude Schultz from withdrawal of that sum by
him at any time. Indeed, adds Schultz, the fact that the funds are now,
since April 1, 1985, in an account owned solely by him answers any
contention that the gift from his brother was without substance and a
sham. Whatever the speculation of Comstock, Schultz argues, he has
"sole access" to the funds, a fact gained by "merely telling his brother
that he desired it."
5. Real Party in Interest Issue. Next Schultz states, he “has exclusive
control of the funds in an account in his name only. That, whatever
Comstock’s speculation, there is no evidence that Schultz’s brother, or
any one else wishes to or can exert any degree of control whatever
"over his operation of the proposed station." "Comstock may, of
course, entertain such suspicions as it wishes," notes Schultz, but the
evidence does not support the notion that "he iied during his
deposition." Speculation on the part of Comstock, Schultz argues, does
not sustain the premise that someone else “is the real party in interest."
6. Lack of Candor as to Staffing. First, says Schultz, a recital of the
facts which led the Review Board to specify a staffing issue, do not
disclose that the Board, which might have saw fit to specify lack of
candor issue. At least, Schultz would have it, when the staffing issue
was added, he "re-thought his staffing plans" and that the better plan
“would be simply to hire employees"; and that nothing "sinister" was
4la
conceived by him in his change of plans; hence, it was not meant to
mislead any one.
7. Comstock’s Reply in essence, claims that ignorance of "fine points"
of Commission policy cannot be credited; that this is Schultz’s third
application for a Sparks, Nevada FM facility and second comparative
hearing for the same facility, in which a financial qualification issue was
designated against him; that Schultz’s failure to disclose the “co-
ownership" of his proposed funds at the time of his February 22, 1985
amendment, does permit the premise of non-disclosure of material facts-
-amounting to misrepresentation--lack of candor; that Schultz is required
to meet, not his own subjective standard of financial qualifications, but
the Commission’s objective standard.
8. On the Real Party in Interest Issue, Comstock further submits in is
Reply that under a recent Initial Decision in Virginia Beach Television,
Ltd., FCC 84D-87, released December 28, 1984, it was found that
despite absence of evidence of actual control of a parent over his child’s
application and the parties’ protestation of no future control or
influence, the father was found to be the real party in interest based
upon the complete financing by the father of his daughter’s venture,
albeit there, as footnoted by Comstock, a loan rather than, as here a
gift, was involved.
9. Finally, Comstock’s Reply concerning the Lack of Candor in
Staffing Issue, notes that Schultz does not basically dispute the fact that
he has changed his staffing proposals. Actually, says Comstock,
Schultz's Opposition when compared with his hearing testimony
“corroborates rather than contradicts" Comstock’s conclusions that
Schultz’s proposal of "volunteer" help was a mere fabrication. These
inconsistencies alone warrant inquiry into the veracity of his earlier and
current proposal on staffing as well, Comstocks urges. Schultz is one
who “will tell the Commission anything . . .," whose behavior makes
his application a "moving target," concludes Comstock.
10. Though the seeming and various shifting of his positions
respecting control of his financial resources and the nature of his
staffing proposals appear to make Schultz, what Comstock characterizes
as a "moving target," what, at most, remains is an applicant re-grouping
to bolster imperfectly articulated positions and proposals; proposals, in
part at least, naively thought out and constructed, e.g., Schultz’s earlier
42a
notion of wearing “all hats" in his proposed facility for all times and
hours until expected revenues would permit other plans. Credulity, a
tendency to believe too readily may be subject to an uncommonly rough
road here; yet, Schultz’s shifting tactics would not be tantamount to
incredulous. Certainly, they would not rise to the level of intentional
deceit, a cardinal premise to the conditions of misrepresentation and/or
lack of candor. "“Misrepresentation, both legally and conventionally
connotes a false statement of an objective fact intentionally made to
deceive," Fox River Broadcasting, Inc., FCC 82R-3, released February
1, 1982 at para. 6.
11. Lack of Candor, on the other hand, is a separate historical wrong
or offense, at least in these proceedings, albeit rooted in common theme
with misrepresentation, conduct "this side of misrepresentation can be
found not forthcoming. Lack of candor, unlike misrepresentation, does
not arise directly out of the more universal requirement, that
intentionally false statements not be made in connection with an
application or adjudicatory proceeding before any federal agency. It
arises rather, out of the special status of licensees as trustees of a scared
public resources . . . Thus, in proceedings before the Commission
involving a licensee or ’would be licensee’ misleading conduct which
Goes not necessarily amount to a misrepresentation actionable in other
departments may nonetheless warrant a penalty for breach of the
standard of complete candor expected by the Commission . . ."_ Ibid at
para. 7. Various examples of the characteristics of lack of candor are
also set out there, noting that the core of lack of candor is "omission."
12. In the full light of scrutiny by the guiding precedent of Fox river,
supra, neither would Comstock’s urgings reach the level of lack of
candor on the part of Schultz, whatever misgivings one might have on
the embellishments or "re-grouping” pursued by him here.
In a word, even though Comstock premises certain of its arguinents on
sworn testimony in Discovery and at trial, the necessary premise of
evidence of high persuasion underlying Rule 1.229 does not appear;
hence, on all ground urged, comstock’s Motion to Enlarge must be
AND IS HEREBY DENIED.
SO ORDERED.
FEDERAL COMMUNICATIONS COMMISSION
/s' James F. Tierney
Deputy Chief Administrative Law Judge
ee
43a
FCC 85D-43
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In re Applications of
PEPPER SCHULTZ MM DOCKET NO. 83-1206
Sparks, Nevada File No. BPH-820519AK
COMSTOCK BROADCASTERS,INC. MM DOCKET NO. 83-1207
Sparks, Nevada File No. BPH-820628AQ
For Construction Permit
for a New FM Station
Appearances
Herbert D. Miller, Jr., Esq. (Koteen and Naftalin) on behalf of Pepper
Schultz; David M. Hunsaker (Putbrese and Hunsaker) on behalf of
Comstock Broadcasters, Inc.; and Norman Goldstein, Esq. on behalf of
the Chief, Mass Media Bureau, Federal Communications Commission.
SUPPLEMENTAL INITIAL DECISION OF
DEPUTY CHIEF ADMINISTRATIVE LAW_JUDGE
JAMES F. TIERNEY
Issued: June 21, 1985 : Released: June 26, 1985
Preliminary Statement
1. By Memorandum Opinion and Order, FCC 85R-S, released January
28, 1985, the Review Board remanded this proceeding and added the
following issues:
a. To determine whether the staff proposed by Pepper Schultz
is adequate to effectuate his proposal; and
b. To determine whether Pepper Schultz has sufficient funds to
cover his costs of construction and initial three months
ell
operation.
2. A further prehearing conference was held on February 25, 1985
principally setting dates for the hearing of the added issues. On May
19, 1985, Pepper Schultz (Schultz) filed a Motion for Summary
Decision which was later denied by Order, FCC 85M-1599, released
April 12, 1985. The hearing was held on April 9, 1985 and the record
was closed on that date. Proposed Findings of Fact and Conclusions of
Law were filed, as directed, by the parties applicant on June 3, 1985;
Reply findings were filed on June 14, 1985.
3. Where factual proposals of the parties faithfully reflect the evidence
of record, they not only serve the efficient expedition of the
administration of justice, they are welcome augurs to the customary
burdens of the trier-of-fact, hence, effectively serve the principal objects
of the governing rule--rule 1.263 (47 CFR 1.263). Here, the parties
have, in the main, honored those notions and liberal use and adoption
of the proposals most fine-tuned have been made and adopted, save at
times, for preference of language, largely editorial in nature. Proposed
conclusions are usually another matter where the poetic license of
advocacy permits greater let in the strivings for truth.
4. For the reasons set forth hereinafter, this, as a Supplemental Initial
Decision SHALL GRANT the application of Pepper Schultz; that being
so, the application Comstock Broadcasters, Inc. MUST BE DENIED.
Findings of Fact
I. Staffing Issue.
5. Schultz, at the time of filing his original application, and until
December 12, 1984, intended to operate his proposed station completely
by himself, at least initially, by the use of studio automation equipment
and an ATS (automatic transmission system). (Tr. 220, 221-222). He
did not intend then to use any personnel, hired employees or volunteer
help. (Id., p. 220) When Schultz was thinking of using automated
equipment, he was relying on information gained through
correspondence courses on computers to decide what kind of equipment
to buy to run the station as far as billing, selecting proper tape
machines, commercials and transmitter parameters. He was not going
to write his own programs or build his own equipment. (Tr. 239).
45a
6. Schultz’s intention to automate and use no personnel changed after
oral argument before the Review Board in December, perhaps due to
remarks that remand on a staffing issue was a possibility. (Tr. 221).
Prior to the issuance of the remand Order Schultz sought to amend his
application to preempt such remand possibility:
So I amend [made] an amendment at that time, or a brief,to try
to get out from having the remand process. So I took an
avenue, and I went to some of my friends to get them, I asked
them if they would help me out, and they said they would, on
staffing of the station. So I was just trying to correct a possible
deficiency, which I didn’t know if it would come true or not at
the time. (Tr. 221-222).
7. Schultz then proffered an amendment to the Review Board (filed on
December 26, 1984) indicating that (a) he might not operate 24 hours
per day initially as he had previously testified, and (b) he now intended
to rely on the volunteer help of six acquaintances.’ (id). This
amendment was rejected by the Review Board in its Remand Order for
failure to make a sufficient good cause showing. FCC 85R-S, p. 4, n.
6; (Tr. 223-224). Thereafter, on February 22, 1985, Schultz petitioned
to amend his application, proposing to hire four full-time and six part-
time employees. It is on this latest amendment, that Schultz relies to
meet the staffing issue added by the Board. (Tr. 223-224).
8. while he has now abandoned the idea of using automation
equipment and an ATS system, he may decide to use such a system after
the station is operational. (Tr. 225). While he had no timetable for
changeover, he indicated that such a move would likely be made after
the station is making a profit. (Tr. 226). Alternatively, he stated that
he might invest in new equipment for the station. (Tr. 226).
9. According to Schultz’s Exhibit No. 2, the proposed staff will have
the following duties:
The three full time announcers will take care of the announcing
and will also perform required equipment monitoring functions
Mondays through Fridays in eight hour shifts. One announcer
' Schultz's Amendment of December 26, 1984; Official Notice Taken
will perform the same duties on weekends, in three eight hour
shifts on Saturdays and in three eight hour shifts on Sundays.
I will fill in as necessary. In addition to such announcing duties
as it may be necessary for me to perform, and in addition to my
responsibilities as owner and General Manager, I am qualified
to and will perform the duties of Chief Engineer. I will also
devote approximately twenty hours per week to selling time on
the station. Ali employees will, of course, perform their duties
under my supervision and subject to my direction. (Schultz Ex.
2, p. 5)
10. Schultz does not propose to hire any additional personnel for the
first three months other than those listed above. (Tr. 195). Schultz’s
staff will be required to work in a studio space of 200 square feet,
which will accommodate a studio control room, Schultz’s office, the
bookkeeper/traffic person’s office and a production room. (Tr. 188).
Schultz does not intend to provide air conditioning in an area where the
temperature sometimes climbs to as high as 101 0- 1020. (Tr. 190).
He does not intend to hire any sales staff or news personnel. Id.
Schultz proposed to do all of the sales for the station himself. (Tr. 195-
196). He expects that he will devote approximately 20 hours per week
to selling. (Tr. 196).
11. Schultz would not produce his own commercials. (Tr. 204). He
proposes to sell an advertising contract to an advertiser, and then direct
the advertiser to one or more local advertising agencies which have
facilities to make commercials. The agency would write the copy and
produce the commercial, charging the advertiser a fee for the service.
(Tr. 204-205). Schultz did not know, and has not asked any agencies
what they would charge the advertiser for the writing and production
service. (Tr. 206). He has inquired of several agencies whether they
have production facilities available (Tr. 205), and has asked agency
personnel to "get their tape recorders ready." (Tr. 206). Schultz would
ask that the commercials be produced on a tape cassette, if the agency
can do it (Tr. 208), as he does not have on hand, and does not plan to
purchase initially any cartridge or “cart” record/playback.
12. Schultz described his typical day of getting up at 6:15 a.m., going
to work at 7:20 - 7:30 a.m. until 4:30 p.m. He usually goes downtown
for dinner and is back home by 6:30 - 7:00 p.m. He takes
correspondence course or works at reading FCC materials and planning
47a
for the present proceeding. He normally retires at 10:00 p.m. (Tr.
231-234).
13. On occasion, Schultz’s duties as a communications installer and
repairer for the Bureau of Land Management requires him to work long
hours. This occurs when there is a range fire in the area, and two-way
communications equipment is necessary to be installed and maintained
for the firefighting command center. (Tr. 235).
Il. The Financial Issue.
14. Schultz has $101,000 on deposit in a money market account with
First Federal Savings, in Sparks, Nevada. * the funds are not in a time
deposit, no penalty will be payable for early withdrawal. (Tr. 216).
The funds are in his name alone, and while he has the unrestricted
ability to withdraw those funds at any time, he has “earmarked” them
for the specific purpose of construction and initial operation of his
proposed radio station (Tr. 237). He also has $3,500 on deposit in a
savings account, and will receive a lump sum payment of $7,500 for his
accrued retirement contributions when he resigns from the Department
of the Interior Bureau of Land Management (Schultz Ex. No. 2, p. 6).
15. Schultz has no debts other than $20,720.40 owed to
communications counsel, which he is paying off at the rate of $600.00
per quarter. (Schultz Ex. No. 2, p. 3; Tr. 200)
16. the funds on deposit with First Federal Savings were a gift from
Schultz’s brother Marc Simoncini (Tr, 210). There is no expectation,
? The funds were initially in an account held in the name of Mr. Schultz, his
brother, his sister-in-law, and a family friend. On April 1, 1985, the funds were
withdrawn from that account and placed in an account in Mr. Schultz's name alone.
(Tr. 210-215).
* If Federal Gift Tax is payable on the funds given to him by his brother, he rather
than his brother, will pay the tax (Tr. 212-213). However, it seems apparent that no
such tax will be payable, because Section 2505 of the Internal Revenue Code provides
for a credit of $121,000. (A copy of the pertinent provision of the Code was provided
by Schultz, Official Notice Taken.) The gift to Schultz of $101,000 was less than the
amount of the available credit. Accordingly, only an information return will have to
be filed. This rationale is disputed in Comstock's Reply Findings, infra, it appears.
48a
by Schultz or by Simoncini, that the gift will be “repaid,” because it is
not a loan (Tr. 215). Schultz does, however, feel that he is under a
moral obligation to repay his brother’s kindness at some time in the
future (Tr. 215). Despite this feeling of moral obligation on Schultz’s
part, Schultz stated that there will be no “repayment” of the gift until
after the station becomes profitable and that he has no intention of
taking any steps which would impair the ability of his radio station to
operate. (Tr. 215).
17. Schultz proposes to construct his radio station as follows:
(a) He will purchase a used transmitter and associated equipment from
KTDY(FM), in Lafayette, Louisiana for $10,000, in cash. (Tr. 238).
The equipment is presently in use by KTDY(FM) but will no longer be
needed when the station improves its facilities in June of 1985 (Schultz
Ex. No. 2, p. 1). Schultz has discussed the purchase of the equipment
with KTDY(FM)’s chief engineer, Pat Shirley, who agreed to advise
him should anyone else make an offer on the equipment. Schultz has
a “right of first refusal" on the equipment. (Tr. 182).
Schultz estimates that the cost of transporting the equipment from
Lafayette, Louisiana to Sparks, Nevada will not exceed $2,500 * and
states that should the equipment no longer be available when he obtains
a construction permit other comparable equipment is readily available
at comparable prices (Schultz Ex. No. 2, p. 1).
(b) Schultz will obtain additional equipment, including an antenna
transmission line, and STL system, from Broadcast Services Company,
in Sparks, for $17,961.05 plus shipping charges of $200. Auxiliary
power equipment will be acquired from Nevada Generator Systems, in
Sparks, for $4,957 plus freight ($317.76) and taxes ($298.50) (Schultz
Ex. No. 2, pp. 1-2).
(c) Schultz already owns the following studio equipment, which he
testified will be all that he requires to operate the station initially:
* This figure was obtained by doubling and then adding $500 to a previously
received quote on shipping more equipment from Greely, Colorado to Sparks. Mr.
Schultz testified that Lafayette is approximately 710 miles from Sparks, while Lafayette
is approximately 1500 miles from Sparks (Official Notice Requested).
49a
|
Item
Microphones (broadcast quality)
Microphones (voice grade)
Turntables
Tonearms
Reel-to-reel tape recorders
Cassette record and playback
Cassette playback only
Blank tape
Broadcast mixer board
Monitor que amp
Line amplifiers
Speakers
Mixers
Over air monitors
boxes
NN BN KK NWNN S SN LY
All of the above listed equipment is broadcast quality, with the
exception of the two voice quality microphones and one of the two
cassette recorders, which is adequate for playback purposes but does not
record adequately for broadcast use (Schultz Ex. No. 2, p. 3). Schultz
also owns studio and office equipment, including four tables, four
chairs, a book shelf, and a four drawer filing cabinet. He has a library
of in excess of five hundred phonograph records (Schultz Ex. No. 2, p.
3).
(d) The equipment is to be acquired by Schultz will be installed under
his supervision and with his assistance by Broadcast Services Company,
at a total cost of $1,130 (Schultz Ex. No. 2, p. 2).
(e) Electrical and telephone installation will cost a total of $1,744.00
(Schultz Ex. No. 2, p. 2).
Schultz’s total construction costs will, therefore, be $39,126.26
(Schultz Ex. No. 2, p. 3). °
Schultz costs to operate the facility for the initial three-month period
will be as follows:
* There may be additional costs of no more than $2,500.00 for spare parts for the
transmitter and associated equipment (Tr. 184).
50a
Studio and office rental (S months) $3,000.00 °
Telephone service 266.40
Electric power 2,381.60 ’
Office supplies 1,100.00 *
Employee costs 18,720.00
Automobile expenses 258.00 ”
Total 25,726.00
18. Schultz needs $910.00 per month for personal living expense
(Schultz Ex. No. 2, p. 6), and is obligated to pay his attorneys $600
every three months in respect of prior legal fees (Schultz Ex. No. 2, p.
3). He has no other financial obligations. (Schultz Ex. No. 2, p. 3).
19. Schultz’s total costs of construction and initial operation of
$64,852.26, plus $2,500 worth of spare transmitter parts, five months
living expenses ($4,550) and payments to his attorney of $200 per
month over a period of one year ($2,400), will amount to $74,302.26
which is $37,697.74 less than the $112,000 cash available to him from
the account at First Federal Savings, his $3,500 savings account and the
* This is based on a charge of $1.00 per square foot per months for three hundred
square feet of transmitter space and three hundred square feet of studio-office space.
The $1.00 per square foot figure was obtained from the proposed lessor of Schultz's
transmitter space, in a “high rent district" of Reno. Schultz testified that rental charges
in Sparks, where his studio-o ‘fice will be located are significantly lower, on the order
of $0.50 - $0.60 per square foot, and that he is aware of several available sites there
(Tr. 194). However, the high $1.00 per square foot figure was used for both studio and
transmitter space, to be conservative (Tr. 188-189).
’ During cross examination, Mr. Schultz revised his initia] projection of $2,181,
upward by two hundred dollars to provide for five, rather than three months electricity
use to his proposed studio (Tr. 193).
* Schultz stated that his projection of the cost of office supplies is probably
excessive (Tr. 229).
* Schultz will be using his personal automobile, a Volkswagen Beetle, (Tr. 236) for
station related duties and that it will probably need more fuel than is presently the case
Mr. Schultz testified that his automobile gets approximately 240 miles per tank of
gasoline, and that tank of gasoline costs approximately $10.75. (Tr. 237).
Assuming that Schultz will drive 500 miles per week on station business (which seems
a very high estimate), the additional fuc! will cost him $86.00 per month or $258 during
the initial three months of operation
Sla
more than $7,500 lump sum payment ™ he will receive from the
United States government when he resigns his position. (Tr. 199).
20. While Schultz wanted to hold the option to use the $101,000 on
deposit at First Federal as collateral for a loan to purchase necessary
equipment, he will use the funds to make the purchases should such
financing prove unavailable on acceptable terms. (Tr. 215-118; Tr.
238-239).
Itimate Findings and Conclusions
III. Staffing Issue.
21. In adding this issue, the Review Board, while expressing some
possible disdain in its remand, noted that Schultz be given assurance of
“adequate notice and opportunity on the obvious concerns" adding that
"{wje admonish in advance, however, that contradictions in evidence
and testimony will be construed in their ordinary legal fashion and that
no comparative ’upgrading’ over original proposals will be permitted."
(FCC 85R-S at para. 5). Yet, though Schultz’s earlier notion to operate
his proposed station with no employees suggested Herculean
commitment, this side of realism, given further and sober thought, albeit
afterthought, he did amend his application to propose a more
enlightening staffing proposal. (See Memorandum Opinion and Order,
FCC 85M-1599, released April 12, 1985, para. 7). That amendment
was unopposed and was accepted under governing law with the caveat
of no comparative advantage.
22. The Schultz latest staffing proposal of a full-time staff of five
(three announcers, a secretary and himself) and a part-time staff of six
(all announcers) for the type of facilities here appears reasonable. To
Say this, no enhancement is endowed to Schultz under abiding
comparative cannons. Simply stated, his first proposal smacked of
seeming naivete’ faced with the customary demands of a start-up
Operation of an FM station. Yet, then as now, Schultz would be
credited with the important comparative criterion of 100% integration
of ownership and management, buttressed, of course, with the more
realistically promising staffing proposal. Under such conditions the
'° According to the wage statement he receives every two weeks, more than $7,500
is now available in his account. (Tr. 198).
52a
penetrating discernment of the remanding authorities has been, in this
mind, not only vindicated but, more to the point, met and honored by
Schultz’s corrective response in his amendment. The standards of
ordinary legal meaning would neither be disparaged or demeaned under
these circumstances, bottomed on the properly amended original Schultz
proposals. Had Schultz been denied his quest to amend, his whole
standing may have been fatally imperiled. Azalea Corp., et al., 31 FCC
2d 561, 563.
23. Thus, while Schultz’s latest staffing proposal might be "frugal,
rigorous and demanding," he is a relatively young person in apparently
good health, unmarried and accustomed to long and trying hours and
hardships in his present occupation confronting "range fires" and “other
emergencies"; the evidence would not suggest that he would be unable
to fulfill his commitments, however supposedly Herculean. Hence, it
is found under the evidence that Schultz’s staffing proposal is adequate
to effectuate his object. Cf. Bisbee broadcasters, Inc., 31 RR 2d 71
(Rev. Bd., 1974).
24. Financial Issue. Schultz relies on three sources of funds to meet
his estimated costs and personal expenses: $3,500 in two bank
accounts, a distribution of retirement earnings in the amount of $7,500
which is to be expected upon resignation of his U.S. Government
position, a resignation he would effect in order to construct and operate
the proposed station; and $101,000 from his brother, which is a savings
and loan account, an amount which Comstock emphasizes as a "gift".
25. While repeating a dark shadow of doubt respecting the full
efficacy of Schultz’s $101,000 "gift" urging that a Federal Gift Tax
would attach to someone, Comstock nevertheless urges that Schultz’s
estimate of total costs of $64,594.26 and a surplus of $36,045.74, from
"this cushion one must subtract additional Comstock itemized costs of
$75,382 leaving ultimately, including “the cushion," of a deficit of
$38,976. (Comstock
Proposed Findings at 28-29).
26. In his Reply Findings, Schultz rejects the deficit comments
projected above by Comstock saying-- that his proposal to purchase a
used transmitter for $10,000--is realistic and with reasonable assurance
not only from Schultz’s discussion with Station KTDY(FM)’s chief
engineer, but also in the marketplace of used radio transmitting
il
53a
equipment; Schultz also would have it that the Comstock thesis that
Schultz’s testimony is but "hearsay." Noting that Comstock’s challenge
of "hearsay" occurred after Schultz had been excused following cross-
examination, Schultz, citing McCormick on Evidence, Chapters 25-37 -
West Publishing Co. 1954, relates that "the tendency is toward, rather
than away from the receipt of such evidence." That notion is the true
state of the Law of Evidence, in this view, and particularly so in these
premises where the Federal Rules of Evidence apply but also where
those Rules may be relaxed to serve the ordinate ends of justice. But
even putting aside that observation, nothing that Comstock speculates
would undermine the reliability of Schultz’s proposals concerning the
availability of the equipment he intends to purchase and, hence, his
$10,000 for the transmitter, be it used or other, would remain
unaffected as an item of cost; not the $40,000 Comstock suggested new
transmitter cost.
27. Much the same may be said for the other Comstock projected
additional costs concerning legal fees--$20,724.40 with continued
payments of $600 by Schultz every three months until that sum is
eliminated and no other payments to be made until after the completion
of the third month of operation and none whatever during the current
remand; the projected payments on a $60,000 loan--a loan not relied on
or planned save for Schultz wishing “to hold open" such an option;
lastly the Comstock projected gift tax on the $101,000 under Section
2505 of the Internal Revenue Code, as annexed by Schultz in his Reply
Findings, would not require him "to make any tax payments” on that
gift.
28. Schultz would agree that his "financial proposal inadvertently
made no provision for an auxiliary power generator," though he would
have “ample funds” to acquire a second generator, he would concede a
slight comparative demerit under precedent for that oversight.
Whatever Comstock’ »rojected deficit items, the evidence would allow
that, in any event, Schultz would still have a financial cushion of at least
$22,000, assuming there were substance to such projections.
29. In its Reply Findings, Comstock concedes that Section 2505 of the
Internal Revenue Code provides for a credit against gift taxes up to
$155,800 in the tax year 1986 with lesser amounts in earlier tax years.
But, urges Comstock, the tax is still imposed even though Schultz’s
donor brother "may opt" to charge the gift tax against unified credit in
54a
his estate; the fact is that Schultz stated he would pay the tax; that, in
any event, the gift is not "free" without significant tax consequences.
Also, now that Schultz "has now changed his story" to allow his
brother’s estate to pay the tax after all, this is a further example of the
"vacillation of Mr. Schultz and clear evidence of his lack of credibility
and non-reliability."
30. Comstock attacks the feasibility, indeed the possibility of Schultz’s
being able to meet the additional costs Comstock calculated against him,
a sum in excess of $75,000. Comstock lists a series of "forgots" by
Schultz. He "forgot" about auxiliary power--a "forgot" conceded; he
"forgot" station refurbishing and installation costs--Schultz claims
possession of all studio necessities and can perform all installation
himself; he "forgot" about the summer heat at Sparks, Nevada, thus, air
conditioning costs; Schultz responds that a converter blower (flow air
transfer) would be sufficient; also Comstock disparages Schultz’s plans
and schedules to pay off his legal fees, as well as Schultz’s unsupported
reliance on a “used transmitter” at a price of $10,000.
31. Apparently, Schultz’s counsel is not displeased with Schultz’s
proposed payments and payment schedule and "that no legal fees beyond
those amounts will be paid until after completion of the third month of
operation" (Schultz, Ex. No. 2; Schultz Reply Findings at 9).
Likewise, concerning the “used transmitter" and as noted earlier,
Comstock’s afterthought objection on the "hearsay" nature of Schultz’s
testimony, the availability of. that equipment premised on station’s
KTDY(FM) chief engineer’s stated selling price of $10,000, is
reasonably certain; indeed, a substantial number of used FM
transmitters are available for purchase at approximately $10,000,
Schultz adds. (Schultz Ex. No. 2, p. 1; Schultz Reply Findings at 12).
32. Comstock denigrates Schultz’s latest staffing, plan, beside other
imperfections, a need for “one additional announcer for a 24-hour
Operation” and that this is the latest in a constantly shifting and moving
plan of Pepper Schultz"; that no precedential comparison is possible
here with the Bisbee case, surpa, and that "Schultz has acted at best
with willful myopia, or at worst, hapless legerdemain," citing Dutchess _
Communications Corp., FCC 85R-49, released June 13, 1985 at 16).
Were rhetoric to rule the day here, comstock should prevail by a virtual
light year. Traditionally, and funtunately* (“ERRATUM July 1, 1985
“funtunately" should read "fortunately" and is so changed.), that is not
55a
the touchstone in these proceedings.
33. While Schultz may be seen, under the evidence, as something less
than a wizard at planning the myriad details of a start-up FM broadcast
operating, his latest efforts, particularly in his amendment accepted in
FCC 85M-1599, April 12, 1985, adequately address the staffing issue
imposed on remand in all of its common attributes; employees, five full-
time including himself; hours of work, studio space, his multifaceted
duties, many perhaps difficult, but not beyond his ken or endurance, and
sundry other manning requirements. Cf. United Broadcasting Co,
(KBAY-FM), 53 RR 2d 57 (1983). In like manner, Schultz has
adequately responded to and met his assigned burdens concerning his
financial qualifications, a companion matter set forth in remand.
Whatever the nature of the origins and metamorphoses from loan to
unqualified gift from a sibling donor, the $101,000 appears
unqualifiedly available and also appears fully adequate to underpin his
financial qualifications with a sizeable cushion of approximately
$22,000.
For the foregoing reason, Schultz has reasonably met and discharged
his burdens unde: the added issues; he remains the better candidate for
choice of the public franchise there in Sparks, Nevada; besides his
earlier established qualifications, his 100% integration of ownership and
management remains and is a far better quantitative comparative
proposal than the greaily flawed, however resourcefully contrived,
distribution of authority by Comstock addressed in the Initial Decision.
That being so, this as a Supplemental Initial Decision SHALL FIND
IN FAVOR of Pepper Schultz under the issues added on remand and
shall affirm the earlier grant of the Schultz application; consequently,
the application of Comstock Broadcasters, Inc. MUST BE DENIED. "'
IT IS SO ORDERED.
/s/ James F. Tierney
Deputy Chief Administrative Law Judge
Federal Communications Commission
'' This being a Supplement to the Initial Decision, FCC 84D-49, released July 30,
1984, the rights of review and appeal attach, as in the case of the Initial Decision itself,
under Rule 1.276 (47 CFR 1.276).
iinet
56a
FCC 86R-2
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In re Applications of
PEPPER SCHULTZ MM DOCKET NO. 83-1206
Sparks, Nevada File No. BPH-820519AK
COMSTOCK BROADCASTERS,INC. MM DOCKET NO. 83-1207
Sparks, Nevada File No. BPH-820628AQ0
For Construction Permit
for a New FM Station
Appearances
Herbert D. Miller, Jr., on behalf of Pepper Schultz; and David M.
Hunsaker and Denise B. Moline, on behalf of Comstock Broadcasters,
Inc.
DECISION
Adopted: January 14, 1986 ; Released: January 24, 1986
By the Review Board: MARINO (Chairman), JACOBS,
BLUMENTHAL.
Board Member BLUMENTHAL:
1. This proceeding involves the mutually exclusive applications of
Pepper Schultz (Schultz) and Comstock Broadcasters, Inc., (Comstock)
for authority to construct a new FM broadcast station to operate on
Channel 221 at Sparks, Nevada. * By Hearing Designation Order, 48
' A third competing application, that of Red Rock Broadcasting Corp., was
previously dismissed by the ALJ at the applicant's request pursuant to a settlement
(continued...)
57a
Fed. Reg. 51858, published November 14, 1983, the applications were
designated for consolidated hearing on the standard comparative issue,
including a comparison of the applicant’s respective coverage of areas
and populations. In an Initial Decision (I.D.), FCC 84D-49, released
July 30, 1984, presiding Administrative Law Judge (ALJ) James F.
Tierney granted the Schultz application after concluding that "Schultz
must prevail by his being accorded 100% full-time integration [credit]
versus 51% for his opponent." LD., Consls., para. 30. After
considering the parties’ exceptions to the LD. and oral argument held
before the Review Board on December 12, 1984, we remanded the
proceeding to the ALJ on issues:
(1) To determine whether the staff proposed by Pepper Schultz
is adequate to effectuate his proposal; and
(2) To determine whether Pepper Schultz has sufficient runds to
cover his costs of construction and initial three months
operation.
Memorandum Opinion ind Order, FCC 85R-5, released January 28,
1985 (Rev. Bd.) (hereinafter "Remand Order"). In a Supplemental
Initial Decision ($.I.D.), FCC 85D-43, released June 26, 1985, the ALJ
resolved both of the remand issues favorably to, and reaffirmed the
grant of the application of, Schultz.
2. The proceeding is now before the Review Board on exceptions to
the $.L.D. filed by Comstock and Schultz’s reply. The board has
reviewed the S$.LD. in light of the exceptions and briefs and our
examination of the record. * In light of our review, we must reverse
the ALJ’s erroneous conclusion that Schultz is basically qualified to be
a licensee, and we grant the Comstock application.
3. In its exceptions, Comstock does not take issue, in the main, with
'(.. continued)
agreement, see Memorandum Opinion and Order, FCC 84M-1615, released April 3,
1984, and therefore is not before us for consideration.
? We shall deny Comstock’s request for oral argument because we believe that such
argument would not materially aid in the resolution of this case. See Section 1.277(c)
of the Rules, 47 CFR §1.277 (c); Van Buren Community Service, 87 FCC 2d 1018,
1019 (Rev. Bd. 1981).
58a
the S.I.D.’s basic factual findings, * but instead urges that "Schultz’s
revised staffing proposal remains inadequate to permit operation of the
station on a reasonable basis," Comstock Br. at 11-15; that the ALJ
"erred in concluding that Schultz was financially qualified," id. at 18-
25; and that Schultz’s comparative standing should be downgraded "as
a result of [his] fluctuating position on staffing and integration," id. at
15-18. * Schultz supports the ALJ’s conclusions that his amended
staffing plan is capable of effectuation, Schultz Reply at 10-17, and that
he is financially qualified, id. at 2-9.
4. Staffing Issue. When he filed his application on May 19, 1982 and
until December 26, 1984, Schultz repeatedly insisted that he would
operate the proposed station completely by himself during the initial
three-month period. S$.I.D., para. 5; LD., Concls. para. 6. Schultz
indicated that he would have no money for hiring employees for a
period of several months "When the money started rolling in." Remand
Order at n. 4; see also id. at n. 3 (quoting hearing transcript of Schultz
testimony). He apparently had a hazy idea that, by using studio
automation equipment and an automatic transmission system, he could
somehow operate the station for several months as a total one-man
show, 24 hours per day, with no human assistance of any kind. Id.; Tr.
43-49, 220. That is, Schultz testified that he intended to personally
Operate the station, including the performance of all the necessary
announcing, engineering, sales, news, programming, business functions,
etc., 1.D., Conclus., para. 6, with no staff whatever. AT oral argument
held December 12, 1984, we made apparent our skepticism over
Schultz’s patently incredible staffing proposal. See Tr. of Oral Arg. at
119 et seg. Realizing, then that a remand on a staffing issue was legally
unavoidable, Schultz hastily filed a motion for leave to amend his
application to substitute an entirely new staffing proposal, therein
specifying reliance "on an automated transmission system (ATS) and on
* Comstock does claim that the $.1.D should have found Schultz's costs of station
construction and initial operation to be higher. As will be seen infra, this exception is
decisionally insignificant.
* Comstock also avers that the ALJ erred in denying its motion to enlarge issues to
add false certification, real party in interest, misrepresentation, and lack of candor issues
against Schultz. Comstock Br. at 4-10. In light of our ultimate conclusion herein, we
do not reach this exception, but agree - for reasons stated infra - that Schultz's original
“certification” of financial ability was hollow. Were he not otherwise found
disqualified, a hearing on Schultz's candor would be obligatory.
59a
help provided without charge by friends [six acquaintances] to permit
his proposed station to operate twenty-four hours per day with no
"employees.’" See Remand Order, at n. 6. We there denied Schultz’s
motion because he wholly failed to demonstrate "good cause" for the
amendment in accordance with the tenets of 47 CFR §73.3522, see id.,
and we remanded the case, inter alia, on a statfing issue because
Schultz’s operational plans in this regard were, on their face, incapable
of effectuation. Remand Order at paras. 4-5 and n. 8 (citing KOWL,
Inc., 49 FCC 2d 962, 966 (Rev. Bd. 1974), and Brookhaven
Broadcasting Co., Inc., 50 FCC 2d 703, 708, (Rev. Bd. 1975)).° In
remanding, we admonish that no new staffing proposals should be
nroffered; instead, the remand hearing was simply to provide Schultz
with a due process opportunity to demonstrate, if possible, how his
facially absurd proposal could be effectuated. Id., at para. 5.
5. Nonetheless, on February 22, 1935, Schultz filed before the ALJ
a motion for leave to amend to specify yet a third staffing proposal,
upon which proposal he now seeks to rely. See S.L.D., paras 9-10.
The ALJ, without performing the necessary "good cause" analysis,
granted this motion, see id., para. 7, and the third staffing proposal is
embodied as the new Schultz Exhibit 2. Schultz concedes, as it must,
that its current staffing proposal is an entirely new proposal, and not
simply a minor refinement of earlier plans:
While I had originally intended to hire no employees during the
initial period of operation, and to rely on help provided by
friends at no charge, I have changed my plans and not intend to
hire... employees.
* In essence, those cases hold that we will not question an applicant's intended
staffing unless effectuation is “inherently improbably." See, ¢.g., Brookhaven
Broadcasting, SO FCC 2d at 708. Schultz staffing - or rather, lack thereof - appeared
not only “improbably,” but a priori impossible. When confronted, at hearing, with
Schultz's outlandish assertions, a staffing issue should have been added immediately;
and - with due respect - the ALJ should not have remained passive in the face of
Schultz's startling admissions. Furthermore, we all but ignore counsel's flummery
suggesting that Schultz's insistence that he would utilize no “employees” did not
necessarily negate a reliance on friends and volunteers. This post-hoc ratiocination is
directly contradicted both litera!ly and by general implication in Schultz's hearing
testimony. See Remand Order at n. 3
60a
Schultz Exh. 2 at 4 (emphasis added). We hold that the ALJ's
unauthorized grant of Schultz’s amendatory motion was reversible error.
6. In general, the Commission demands that an applicant have its
proposal in order at the time it files its application. Although it may
amend prior to the specified cut-off date as a matter of right, so as to
accomplish any last-minute adjustments or firming-up, all basic
arrangements necessary to pursue the application should be completed
before a full comparative hearing on any competing proposals is to
commence. See 47 CFR §73.3522: Beio Broadcasting Corp., 68 FCC
2d 1313, 1320 (1978) ("the application should be finalized in advance
of the start of the actual hearing"); Dutchess Communications Corp.,
101 FCC 2d 243, 254-255 (Rev. Bd. 1985). Should an applicant seek
subsequently to alter its proposal, it must satisfy a six-part “good cause”
test so as not to delay the proceeding or prejudice competing applicants.
Dutchess Communications, supra, 101 FCC 2d at 255. That is, it must
demonstrate: (1) due diligence; (2) involuntariness; 6) no modification
or addition of issues or parties needed; (4) no disruption to hearing or
need for additional hearing; (5) no unfair prejudice to other parties; and
(6) no competitive advantage gained. Erwin O’Conner Broadcasting
Co., 22 FCC 2d 140, 143 (Rev. Bd. 1970).
7. As we recently emphasized in Dutchess Communications, supra
In the case of changes in [an] application proposal which go to
basic qualifying matters, the Commission has recently relaxed
its "good cause’ standards, Anax Broadcasting, [87 FCC 2d 483
(1981)}, but those seeking to avail themselves of the
Commission’s equity in this regard must make some showing of
good faith on their part..... On the other hand, an applicant
may not proceed... without seriously confirming the
rudimentary struts of its proposal; and, in the manner of
Dickens’ Mr. Micawber, hope that ‘something will turn up.’
101 FCC @d at 255 (footnote omitted; emphasis added). With regard
to the proposals intended in its application, an applicant must be "ready,
willing, and able" to effectuate. Id., at 254 (emphasis in original).
8. Here, it is evident that Schultz did not begin to meet the Erwin
O’Conner “good cause” test for amending his application; and,
therefore, the ALJ erred in accepting it. First, Schultz was far from
6la
diligent in developing a wholly new staffing proposal after completion
of the entire comparative hearing, and even after release of the LD. and
after the Board’s oral argument. That his amendatory motion was filed
within 30 days of the release of our Remand Order is insufficient to
render a finding of due diligence, because his failure to timely finalize
his application at the appropriate time, see Belo Broadcasting, supra, or,
at least, to take reasonable, good faith steps to do so, obliterates any
equities that could excuse his prolonged failure. Compare Dutchess
Communications, supra, 101 FCC 2d at 249-252 (lack of timely, serious
efforts to arrange bank financing demonstrated lack of due diligen ze and
warrented rejection of amendment) with Anax Broadcasting, Inc., 87
FCC 2d 483, 489 (1981) (submission of financial amendment promptly
after obtaining crucial bank letter and within a few days of the deadline
for amendments as of right raised sufficient equities to wgrrant its
acceptance). Second, the amendment was necessitated by $chultz’s
failure to consider seriously the need to employ a staff competent to
operate a broadcast station. Most critically, Schultz’s failure to take
reasonable steps to timely develop a bona fide staffing proposal has
grossly delayed this proceeding. As was made abundantly clear in
Adjudicatory Re-Regulation, 58 FCC 2d 865, 871 (1976), the broadcast
application process is not a "paint-by-numbers" exercise, in which
applicants fill in their proposals, even as they proceed through
comparative hearings - and beyond. Such a process is inconceivable,
an schultz’s post-hearing dabbling with his application is the antithesis
’ of the fair, orderly process established by the Commissicn. Belo
Broadcasting, supra. Further, because he utterly failed to satisfy four
of the six criteria of the Commission’s test for "good cause", Schultz’s
1985 motion for leave to amend should have been denied. Having filed
his application in May, 1982, it should not have taken Schultz nearly 3
years to appreciate that a round-the-clock radio operation would need
some minimum semblance of a staff. His insistence throughout the
comparative hearing that he alone would perform all of the myriad
functions of an ongoing broadcast station - with neither sleep no
surcease - constituted irrefragable evidence that Schultz was either
distantly out of touch with reality or singularly qualified for the laurel
of "FCC Fabulist of the Decade." °
® Schultz's solo, 168 hour per week proposal is to be distinguished from that of the
celebrated Simon Geller. Geller, though a one-man symphony, was on the air for only
(continued...)
————
62a
9. Therefore, the answer to the question of whether Schultz could
effectuate his record staffing proposal is a foregone conclusion. We
find nothing in the hearing record to refute our perception in the
Remand Order that there was no likelihood of Schultz being able to
effectuate his superhuman proposal. And, we find no basis in law (or
equity) for accepting an amendment nearly three years after the filing
of an application which - for the first time - recognizes that staff, any
staff, would be a useful element in running a full-time broadcast station.
Schultz’s record lack of a credible staffing plan renders him unqualified
to be a licensee. Cf. United Broadcasting Company (KBAY_FM), 93
FCC 2d 482, 511-515 (1983) (despite lack of some precision, staff of
4 paid full-time persons, ie.. sales director, engineer, news director,
and “access” director; and pledges of 143 hours from 13 volunteers,
found adequate to meet staffing issue).
1G. Financial Issue. ‘This issue was concurrently added because we
found that "Schultz’s indication that he can hire no employees to help
him operate the station until the money started rolling in’ after several
months ineluctably raise{d] the issue of whether he has the financial
resources to qualify for licenseeship." Remand Order at para. 5. At
the remand hearing, the ALJ permitted Schultz to amend to reliance on
a $101,000 money market account deposit with First Federal Savings,
Sparks, Nevada, to meet proposed costs of construction and initial
operation of $74,302.26. ’ This $101,000 was an allegedly recent
"gift" from his brother and sister-in-law, $.1.D., para. 16, a post-
application "certification" largesse we refuse to credit (even if Schultz’s
amended financial proposal were procedurally permissible). Of his
estimated costs, $10,000 was allocated for the purchase of a used
transmitter and associated equipment from Station KTDY(FM),
*(.. continued)
40 hours a week during the 1972-75 renewal period, and later on a 72 hour per week
basis. Simon Geller, 90 FCC 2d 284, 287 n. 2 (ALJ 1978) (subsequent history
omitted). Geller claimed to have worked 85 hours a week at the station, id., at 295,
and his programming was almost exclusively recorded music. Id., at 286. Geller, of
course, did no public interest programming of any kind, thereby placing his very license
at peril.
” Schultz was also said to have available $3,S90 in savings, and would receive a
lump sum payment of $7,500 for his accrued retirement contributions when he resigns
form his current employment with the Department of the Interior Bureau of Land
Management. S$ |.D., para. 14. He also claimed approximately $300 in a credit union
account. Tr. 201
63a
Lafayette, Louisiana, id., para. 17(a), which equipment Schultz claims
to have a right of first refusal to obtain. Id. Schultz does not actually
have a transmitter available at present and has no definite plan to obtain
one. Id.
11. The Commission requires that radio station applicants have
sufficient financial resources to meet their costs of construction and
initial three-months operation. See GACO Communications Corp., 94
FCC 2d 761, 781-782 and n. 72 (Rev. Bd. 1983), aff'd as modified,
FCC 84-212, released May 14, 1984 (Comm'n). although Schultz
“certified” with his application that he had the necessary financial
resources, Schultz Application, filed May 19, 1982, FCC Form 301,
Section III, it is clear that Schultz, at the time of certification, and made
no serious arrangements whatever for the requisite funding. The best
Schultz could assert was:
It is true that Mr. Schultz did not personally own all of the
resources needed to construct and operate his proposed station
in 1982. However, he believed that he had ready access to all
of those resources; as demonstrated by the ease with which he
obtained the funds when it became appropriate to do so by
virtue of the grant of his application in 1984, his expectation
was entirely reasonable.
Mr. Schultz also believed that he would be able to obtain the
necessary funds. As indicated in ‘iis attached statement, he had
been in contact with financia! institutions and equipment
suppliers, by telephone and by mail; had discussed terms with
them; and believ n_ grant of his construction permit
n ry resources woul vailabl
Schultz Opposition to Motion for Enlargement of Issues, filed April 18,
1985, at 2-3 (emphasis added). However, the Commission has made
clear *:
* Dutchess Communications, supra, 101 FCC 2d at 246 n. 4 (quoting Brief of FCC
in James L. Oyster v. FCC, No. 84-1562 (D.C. Cir. 1984), at 3-4 (footnote omitted:
emphasis added).
It is not sufficient for an applicant to simply believe that it will
be financially qualified by the time it obtains a construction
permit. Instead, as summarized in the current version of the
FCC Form 301, an applicant must certify that it has sufficient
net liquid assets on hand or available from committed sources
to construct and operate the proposed station for three months
without revenue. Moreover, if some or all of the financing is
to be provided by others, the applicant must have reasonable
assurance of a present firm intention for each agreement to
furnish financing. The applicant must be able and willing to
meet all contractual requirements with respect to collateral,
guarantees, and capital investment, and the applicant must have
determined that a reasonable assurance exists that all sources
other than financial institutions, banks, and equipment
manufacturers have sufficient net liquid assets to meet their
commitment. Revision of Form 301, ... 50 Rad. Reg. 2d
(P&F){381,} 382, 397 [1981]. See GACO Communications
Corp., 94 FCC 2d 761, 775 (Rev. Bd. 1984), review denied,
FCC 84-212. released May 15, 1984; United Broadcasting Co.
(KBAY-FM), 93 FCC 2d 808, 832 n. 101 (1983).
Schultz, of course, alleged no such firm arrangements with financiers.
12. At the remand, the ALJ found that Schultz claimed to be relaying
on two sources of funds (other than a purported $101,000 "gift" from
his brother and sister-in-law which, inter alia, was interposed too late
in the proceeding to receive legal cognizance). They were: (1) $3,500
in two bank accounts; and (2) a distribution of retirement earnings in
the amount of $7,500 expected upon resignation of Schultz’s U.S.
Government job. §.LD. at para. 24. Plainly, these two sources were
not sufficient to meet his proposed costs of $74,302.26. However, after
oral argument and the Board’s addition of the issue to determine
whether he had sufficient funds to cover his costs of construction and
initial operation, Remand Order at para. 8(2), Schultz sought leave to
amend his application to show that he now had “savings on deposit with
First Federal Savings of Nevada in excess of $101,000.00 cash subject
to withdrawal at any time.” Schultz Motion for Leave to Amend, filed
February 22, 1985, Att. F. This post-hearing amendment was
thoroughly unacceptable, for while we give equitable leeway to those
seeking to Overcome basic disqualifying issues, Anax Broadcasting,
supra, 87 FCC 2d at 489, there must Fe made a showing of timely good
65a
faith. Dutchess Communications, supra, 101 FCC 2d at 255. Here, no
"good cause" whatever was shown for this particular "after-the-ball-was-
over" amendment.
13. Even so, as to the alleged $101,000 "gift", we agree with
Comstock that a "dark shadow of doubt" surrounds the bona fides of the
intrafamilial transfer of funds. See $.1.D., para. 25. The $101,000 was
first asserted in Schultz’s February 22, 1985 motion for leave to amend
as funds available to him and withdrawable by him at any time.
However, in undisputed testimony elicited at a deposition session held
March 15, 1985, Comstock Opposition to Motion for Summary
Decision, filed April 2, 1985, Exh. b (hereinafter "Dep. at _"); see
also Schultz Reply at 21-22 (quoting Schultz testimony at deposition),
it was revealed by Comstock that Schultz had merely been made a co-
Signatory On a savings account Owned jointly by his brother, the
brother’s wife, and another family friend. Dep. at 33-34. This
maneuver was made only after Schultz asked his brother to guarantee a
bank loan he intended to apply for, id., at 42-44, an arrangement
apparently unacceptable to the brother. The $101,000 represented
solely the savings of Schultz’s brother and his brother’s wife, id., at 36-
37, and it is freely conceded that Schultz’s name was placed on the
account "to qualify [him] to get ... a permit and get it on the air." Id.
at 35. Subsequently, in opposing Comstock’s April 5, 1985 motion to
enlarge issues which sought the addition of false financial certification,
financial misrepresentation, real party-in-interest, and lack of candor
issues against Schultz, Schultz supplied an April 12, 1985 affidavit from
his brother stating that:
In mid March, Pepper advised me that his attorney had advised
him that the commission might have some concern over the
bona fides of the gift, in view of the joint nature of the account.
Since it was my view that the money was Pepper’s to do with
as he pleased, I had no objection whatever to withdrawal of the
funds or to the opening of a new account in Pepper’s name
alone. I cooperated with him to this end.
I have no desire for any financial or other interest in Pepper’s
proposed station, and there is no understanding between us that
I or anyone else will be given any such interest. Nor do we
have any agreement or understanding concerning “repayment”
of the gift. It is a gift, not 2 loan.
66a
Schultz Opposition to Motion for Enlargement of Issues, filed April 18,
1985 at Attachment B. However, Schultz and his brother never
discussed the considerable federal gift tax ramifications of the purported
gift, Tr. 212; Schultz absently suggested that, if a gift tax were
imposed, he would pay it because "I wouldn’t expect him to pay
anything on it." Tr. 213. In short, we view this last-minute, hastily
arranged "gift" of $101,000 as a very possible sham. More, indeed,
would be necessary to substantiate the remarkable claim that, without
promise of repayment or an equity interest in the station, Schultz’s
brother and sister-in-law casually signed over to him what appears to be
their life’s savings, for it is not unknown for a sibling to pop in at the
last moment with a belated transfer of valuable assets in an attempt to
shore up a troubled financial proposal. Cf. WHW_ Enterprises, Inc. v.
FCC, 753 F.2d 1132, 1138-1144 (D.C. Cir. 1985). °
14. Schultz’s Exceptions. We have also considered Schultz’s
exceptions to the original L.D. and, in light of our disqualification of
Schultz, do not reach those which pertain exclusively to the comparative
issue. See Schultz Contingent Exceptions at 12 et seg. The remaining
* Other circumstances surrounding this curious "gift" further lessen our confidence
in its credibility. Thus, despite our admonition that a party claiming an asset should
reveal whether the legal ownership is qualified, WHW _ Enterprises, Inc., 89 FCC 2d
799, 807-808 (Rev. Bd. 1982), Schultz’s February 22, 1985 amendment (George
Washington's Birthday, no less) indicating funds on deposit of $101,000 contained no
such qualification. It remained for Comstock to learn, at later deposition, that - lo and
behold - the $101,000 actually belonged to his brother and sister-in-law (and a
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