Petition — West Coast Media, Inc. v. Federal Communications Commission

Office -s

82-1823 FIER os

No. MAY 9 1983

By LSE eu a seers

im NOER L. STEVAS.

IN THE

n ee wee

Supreme Court of the United States

OCTOBER TERM, 1982

WEST COAST MEDIA, INC.,

Petitioner,

V.

FEDERAL COMMUNICATIONS COMMISSION, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Eric L. BERNTHAL *

MANIA K. BAGHDADI

1050 Connecticut Avenue, N.W.

Washington, D.C. 20086

(202) 857-6032

DONALD B. MCCANN

National City Bank

East 6th Building

Cleveland, Ohio 44114

Attorneys for Petitioner

Of Counsel:

ARENT, Fox, KINTNER, PLOTKIN

& KAHN

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

May 9, 1983

* Counsel of Record

ERR OR ee

WILSON - EPES PRINTING Co., INC. - 789-0096 - \ ASHINGTON, D.C. 20001

A nncnemeeets

QUESTIONS PRESENTED FOR REVIEW

This case involves the Federal Communications Com-

rmission’s denial of the renewal of license for Station

KDIG(FM), San Diego, California, for failure to meet

its previously proposed levels of non-entertainment pro-

gramming. This is the very first time that the Federal

Communications Commission has ever denied a broad-

caster’s renewal of license for such a programming fail-

ure alone.

The questions presented are:

1. May the FCC impose its most severe sanction, denial

of renewal of license, without explaining why a lesser

sanction would not suffice?

2. May the FCC reverse twenty years of consistent

precedent in similar cases without explaining its reason-

ing in doing so?

3. May the FCC, consistent with administrative and

constitutional standards of due process, make findings

that a licensee made misrepresentations to it without giv-

ing the licensee notice and an opportunity to present evi-

dence on those charges?

(i)

ii

LIST OF PARTIES

Parties to the proceeding in the Court of Appeals for

the District of Columbia Circuit for which review is

requested were West Coast Media, Inc.;* the Federal

Communications Commission; John B. Musselman; and

Jonathan D. Lewis.

* West Coast Media, Inc. has no parent companies, subsidiaries

or affiliates.

TABLE OF CONTENTS

Page

ee i ictaccnceesenteonstnees 1

Pg AL 8g tue 5 GR A Ue BN leet ecanmen eA 2

STATUTES AND REGULATIONS INVOLVED........ 2

ees 3

MO ois csetitesnercenscccanenenene 3

acc ecaaceicmnencanns 3

REASONS FOR GRANTING THE WRIT .................... 8

I. The Court’s Decision Creates Uncertainty as to

an Agency’s Explanatory Burden When It De-

viates From Its Prior Precedent In Imposing a

Sanction, an Important Question Which Should

be Seccied oe Tats Court .......... 8

II. An Agency May Not Impose Its Most Severe

Sanction Without Explaining Why A Lesser

manction Would Not Safiice .................................. 11

III. The FCC’s Wide Departure From Standards of

Due Process, Sanctioned by the Court of Ap-

peals, Requires An Exercise of this Court’s

Powe Of Sunreen ___...................................., 14

IV. Summary Reversal of the Court of Appeals’

Clearly Erroneous Decision Is Warranted ........... 19

eae. LC LU... 20

(iii)

iv

TABLE OF AUTHORITIES

FEDERAL CASES Page

Atchison, Topeka, & Santa Fe Railway Co. v.

Wichita Board of Trade, 412 U.S. 800 (1973)..... 9,19

Beck v. SEC, 413 F.2d 832 (6th Cir. 1969), on later

appeal, 430 F.2d 673 (6th Cir. 1970) ................... 13

Bendix Corp. v. FTC, 450 F.2d 534 (6th Cir.

| OES CEG eee een cee ct 15

Blaise D’Antoni & Associates, Inc. v. SEC, 289

F.2d 276 (5th Cir. 1961), cert. denied, 368 U.S.

ee 13

Brandywine-Main Line Radio, Inc. v. FCC, 473

F.2d 16 (D.C.Cir. 1972), cert. denied, 412 U.S.

ee iy

Burinskas v. NLRB, 357 F.2d 822 (D.C.Cir. 1966)... 9

Burlington Truck Lines v. United States, 371 U.S.

oo 11

Butz v. Glover Livestock Commission Co.., Inc., 411

oe oo ee 9

City of Lawrence v. CAB, 348 F.2d 583 (1st Cir.

ee 9

Columbia Broadcasting System, Inc. v. FCC, 454

Pee eee cc 1S) 9,10

Communications Investment Corp. v. FCC, 641

Pore ce 1)..tCtsi‘(i‘CON®ONNCN#®NNCW 9

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

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

fe) ee ee ie 17

Decker v. SEC, 631 F.2d 1880 (10th Cir. 1980)... 13

Doubleday Broadcasting Co., Inc. v. FCC, 655 F.2d

ae LCL... 9

Edwards v. United States, 355 U.S. 36 C1967)...... 19

FCC v. WOKO, Inc., 329 U.S. 223 (1646) 9, 10, 17

FTC v. Crowther, 480 F.2d 510 (D.C.Cir. 1970}... 9

Garrett v. FCC, 518 F.2d 1056 (D.C.Cir. 1975) ...... 9

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

841 (D.C.Cir. 1970), cert. denied, 403 U.S. 923

Cid GO ES . oe

Vv

TABLE OF AUTHORITIES—Continued

Page

Greyhound Corp. v. ICC, 551 F.2d 414 (D.C.Cir.

a 9

Hatch v. FERC, 654 F.2d 825 (D.C.Cir. 1981) ........ 9

Herbert Harvey, Inc. v. NLRB, 385 F.2d 684 (D.C.

a 9

Johnson v. Virginia, 373 U.S. 61 (1963) ......... 19

Leflore Broadcasting Co., Inc. v. FCC, 636 F.2d

Mee CeCe. Fee at, 32, 16 17

Lorain Journal Co. v. FCC, 351 F.2d 824 (D.C.Cir.

1965), cert. denied sub nom. WWIZ, Inc. v. FCC,

mee ce, ee ee 10

McHenry v. Bond, 668 F.2d 1185 (11th Cir. 1982) .. 11

Matles v. United States, 356 U.S. 256 (1958) ........ 19

Matlovich v. Secretary of the Air Force, 591 F.2d

wee cece Cee 11

Melody Music, Inc. v. FCC, 345 F.2d 730 (D.C.Cir.

— lc 9

Morgan v. United States, 304 U.S. 1 (19388) ........... 15, 19

NAACP v., FCC, 682 F.2d 998 (D.C.Cir. 1982) ...... 9

NLRB v, Majestic Weaving Co., 355 F.2d 854 (2nd

ee 15

NLRB v. Tennsco Corp., 339 F.2d 396 (6th Cir

oa USEING OCIS CEOS CSIR URN O R 15

Public Media Center v. FCC, 587 F.2d 1822 (D.C.

Oe 9

RKO General, Inc. v. FCC, 670 F.2d 215 (D.C.Cir.

1981), cert. denied, 456 U.S. 927 (1982), cert.

denied sub nom., Fidelity Television, Inc. v.

Pia eon eee Cro)... 15, 18

Rodale Press, Inc. v. FTC, 407 F.2d 1252 (D.C.Cir.

OO a 15, 18

Rogers v. Calumet National Bank, 358 U.S. 331

— cd 19

SEC v. Otis & Co., 888 U.S. 843 (1949) .............. 19

Secretary of Agriculture v. United States, 347

ee )

vi

TABLE OF AUTHORITIES—Continued

Page

Steevinan v. SEC, 603 F.2d 1126 (5th Cir. 1979),

aff'd, 450 U.S. 91 (1981), rehearing denied, 451

oe wee Cee G. 7, Ii, 12, 18, 14, 19

White Mountain Broadcasting Co., Inc. v. FCC, 598

F.2d 274 (D.C.Cir.), cert. denied, 444 U.S. 963

Ce 9

STATUTES

Sie Cee 2,14, 18

meee Oe 2,14

ane tee... 5.32.38

oe see $, 13

> Uo. GOeeate), (6) and (f)............... 2 12

ne es Bee 2

a7 tee Goce? One (8)... 212,14

ose es... 6

ADMINISTRATIVE DECISIONS

Associated Communications Corp., 71 FCC 2d 1353

8

Cia, tne. 49 FCC 2d 1214 (1974)... 10, 16

Federal Broadcasting System, 75 FCC 2d 615

EE Ss ES ain Ca ea 8

Golden Broadcasting Systems, Inc., 68 FCC 2d

eee 17

Hubbard Broadcasting, Inc., 41 Rad. Reg. 2d

cee ee eee 8

Bua, ee. $1 ce; SS (1861)... 5, 8, 15

Leflore Broadcasting Co., Inc., 65 FCC 2d 556

(1977), aff’d sub nom, Leflore Broadcasting Co.,

Inc. v. FCC, 636 F.2d 454 (D.C. Cir. 1980)........ 6, 17

Loudon County Broadcasting Co., 4 FCC 2d 188,

recon, denied, 5 FCC 2d 18 (1966) ....................... 8

Nassar & Co., CCH Federal Securities Law Re-

ports, 7 $1,904 (BEC 1978) ...................._.. ook 13

Palmetto Radio Corp., 58 FCC 2d 1104 (1976)... 8

Radio Broadcasters, Inc., 23 FCC 2d 209, recon.

Genten, $5 FOC OE 660 (1670)... 17

vii

TABLE OF AUTHORITIES—Continued

Page

Rust Craft Broadcasting of New York, Inc., 54

ae ee ce... 4,8

Sea Island Broadcasting Corp. of S.C. v. FCC, 60

FCC 2d 146 (1976), recon. denied, 64 FCC 2d

721 (1977) aff'd, 627 F.2d 240 (D.C.Cir. 1980),

cert, dented, 449 U.S. 884 (1980)... 17

Underhill Securities Corp., 42 SEC 689 (1965)... 13

Vinita Broadcasting Co., Inc., 30 FCC 2d 458,

recon. denied, $2 FCC 2d 501 (1971) .............__ 17

WMOZ, Inc., 36 FCC 202 (1964), recon. denied, 36

FCC 1467 (1964), rev’d and remanded, 344 F.2d

197 (D.C. Cir. 1965), aff’d in part, 3 FCC 2d 637

— rr... 6, 17

Woe, fee. 29 FC we 441 (1971)... 5,8

WPRY Radio Broadcasters, Inc., 40 FCC 2d 1183

se 17

MISCELLANEOUS

Rule 23 of the Rules of the Supreme Court .....__. 19

Robert L. Stern and Eugene Gressman, Supreme

Court Frachee (th od. 1978)... 19

IN THE

Supreme Court of the United States

OCTOBER TERM, 1982

No.

WEST COAST MEDIA, INC.,

“ Petitioner,

FEDERAL COMMUNICATIONS COMMISSION, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Petitioner West Coast Media, Inc. (“WCM”) requests

that this Court issue a writ of certiorari to the United

States Court of Appeals for the District of Columbia Cir-

cuit to review the decision of that Court in the above-

captioned case.

OPINIONS BELOW

The opinion of the Court of Appeals, which affirmed

the action of the Federal Communications Commission

(“FCC” or “Commission”), is reported at 695 F.2d 617

(D.C. Cir. 1982) and appears at Appendix A, pp. la-12a,

to this Petition. The Initial Decision of the FCC’s Ad-

ministrative Law Judge (“ALJ”) renewing KDIG’s li-

cense for a short term is reported at 79 FCC 2d 625

(1978) and appears at Appendix B, pp. 13a-45a, to this

Petition. The FCC’s Decision denying the renewal of li-

cense of Station KDIG (hereinafter referred to as “De-

cision”), reported at 79 FCC 2d 610 (1980), appears at

2

Appendix C, pp. 46a-68a, to this Petition. The FCC’s

Memorandum Opinion and Order (hereinafter referred to

as “Reconsideration Decision’) denying reconsideration

of its previous Decision is reported at 86 FCC 2d 331

(1981) and appears at Appendix D, pp. 69a-79a, to this

Petition. Other relevant decisions below are: Memoran-

dum Opinion and Order and Notice of Apparent Liability,

61 FCC 2d 577 (1976), which appears at Appendix E,

pp. 80a-96a, to this Petition; and Memorandum Opinion

and Order, FCC 77M-1128, released June 24, 1977, which

appears at Appendix F, pp. 97a-100a, to this Petition.

JURISDICTION

The judgment of the Court of Appeals for the District

of Columbia sought to be reviewed was filed and entered

on December 7, 1982.' A timely petition for rehearing of

the Court’s decision filed by WCM was denied on Febru-

ary 7, 1983.* The jurisdiction of this Court is invoked

under 28 U.S.C. § 1254(1).

STATUTES AND REGULATIONS INVOLVED

Appendix I, pp. 104a et segq., to this Petition contains

the texts of the following statutes:

(1) Section 309(a) and (e) of the Communications

Act of 1934, as amended, 47 U.S.C. § 309(a) and (e) ;

(2) Section 5(b) of the Administrative Procedure Act

of 1946, 5 U.S.C. § 554(b) ;

(3) Section 10(e) of the Administrative Procedure Act

of 1946, 5 U.S.C. § 706(2) ;

(4) Sections 208(c), (e) and (f) of the Investment

Advisors Act of 1940, 15 U.S.C. § 80b-3(c), (e) and (f) :

1A copy of the judgment sought to be reviewed appears at

Appendix G, pp. 101a-102a, to this Petition.

2A copy of the Order denying rehearing appears at Appendix

H, p. 103a, to this Petition.

EE EL

3

(5) Section 15(b) of the Securities Exchange Act of

1934, 15 U.S.C. § 780(b) ; and

(6) Section 9(b) of the Investment Company Act of

1940, 15 U.S.C. § 80a-9(b).

STATEMENT OF THE CASE

Preliminary Statement

This case was precipitated by the FCC’s denial of re-

newal of license for Station KDIG, San Diego, California

on the sole ground that the station had failed to meet its

prior programming promises. This is the first time the

FCC has ever denied a broadcaster’s license renewal for

a promise-versus-performance shortfall alone. In doing

so, the FCC did not explain its departure from all previ-

ous precedent in such cases. The Commission also failed

to explain why a lesser sanction would not suffice. Fi-

nally, despite the absence of an appropriate issue, the

FCC’s Decision was permeated by findings that the li-

censee made misrepresentations before the agency. Thus,

this case involves two key issues: first, the FCC’s ex-

planatory burden when, as here, it imposes a sanction

unprecedented in its severity in similar cases; and second,

the agency’s authority to make pivotal findings about a

licensee’s character without affording the licensee notice

and an opportunity to be heard on that issue.

Background

WCM, incorporated in 1970 by a group of business peo-

ple with no broadcast experience, acquired Station KDIG

in 1971. Almost immediately WCM encountered severe

financial problems. Jnitial Decision, J] 3-10. As part of a

salvation plan for the Station, on December 23, 1971,

WCM amended the station’s pending 1971 renewal ap-

plication to propose a reduction in non-entertainment pro-

gramming to 1.1% of its broadcast week. The Commis-

sion accepted the reduction on July 25, 1972. Initial

4

Decision, {| 12-18. Operating, however, out of a studio/

office fashioned out of two motel rooms and beset by an

unending stream of physical, technical, staffing and finan-

cial problems, WCM was unable to carry out even this

reduced proposal. Initial Decision, {] 15-20, 33.

In 1976, in response to a petition to deny KDIG’s 1974

application for renewal of license, the Commission des-

ignated that application for hearing on a number of is-

Sues, including whether “West Coast Media, Inc. made

reasonable and good faith efforts to carry out its non-

entertainment programming proposal as set forth in its

1971 application for renewal... .” Memorandum Opin-

ton and Order and Notice of Apparent Liability, 61 FCC

2d 577, 585 (1976).* Despite the urgings of petitioners

to deny that WCM had misrepresented to the Commission

in a number of areas, the FCC’s Chief Administrative

Law Judge, who presided over the case, refused to en-

large the issues to inquire whether WCM had been guilty

of misrepresentation, concluding that the Commission had

“made a reasoned decision not to include a misrepresenta-

tion issue” in issuing its designation order in this case.

Memorandum Opinion and Order, FCC 77M-1128, re-

leased June 24, 1977. After hearings in this case, the

ALJ issued his Jnitial Decision, finding that WCM had

failed to meet its 1971 program promises. Nonetheless,

the ALJ granted KDIG’s renewal for a short term,* based

3In Commission parlance, this is a “promise-versus-performance”

case. “Promise-versus-performance” is a Commission-created term

which refers to those cases in which it is charged that the licensee

failed to broadcast the non-entertainment programming which it

proposed at the beginning of its license term. See, e.g., Rust Craft

Broadcasting of New York, Inc., 54 FCC 2d 1222, 1230 (1975).

* A short-term renewal grant is an administrative sanction which

renews a station’s license for a period less than the statutory term.

It is used, as the ALJ noted here, “in order that the Commission

may review the station’s performance promptly and take such

actions as circumstances may dictate.” Jnitial Decision, | 68. The

short term renewal has often been imposed in promise-versus-

5

on his conclusions that WCWM’s errors resulted from in-

experience and, therefore, that “in this instance, the past

is [not] a reliable guide to the future.” Initial Decision,

1 66.

On August 25, 1980, the Commission reversed its Chief

Administrative Law Judge and denied renewal of KDIG’s

license. Noting that its review of programming perform-

ance in promise-versus-performance cases is confined “to

a determination of whether the licensee made reasonable

and good faith efforts to effectuate its proposal,” *® the

Commission concluded that WCM’s efforts had not met

that standard.* Not content to end its inquiry there, how-

ever, the Commission also found that WCM made its 1971

program proposals with no intent of carrying them out,’

in effect finding that WCM had misrepresented to the

Commission in making those proposals. Moreover, while

affirming the ALJ’s decision not to enlarge the issues to

add a misrepresentation issue,* the Commission noted

paradoxically that “[a] ppropriate findings and conclusions

performance cases to permit an early review of a licensee’s post-

term non-entertainment programming. See, e.g., WSER, Inc., 29

FCC 2d 441 (1971): KORD, Inc., 31 FCC 85 (1961).

5 Decision, § 15.

§ While acknowledging that WCM had suffered severe financial

problems, the Commission declined to excuse KDIG’s programming

shortfall on that ground, alleging that WCM had failed to make a

“station-specific’ showing of financial distress for KDIG. Essen-

tially, the Commission found that WCM had made a “stepchild”

out of KDIG, depriving it of facilities and resources, and dispro-

portionately allocating its available resources to a commonly-owned

Station. Decision, TF 31-33 & n.39.

‘The Commission found that “the licensee made initial [ pro-

gram] proposals to the Commission which it did not then intend

to effect,” and that WCM principal Donald B. McCann “did not

intend to fulfill the [1971] programming promises when they were

made.” Decision, 99 33,36.

8 Decision, § 39.

6

relating to licensee candor could and should have been

made with regard to evidence which surfaced in the hear-

ing processes” respecting the June 1974 program logs

submitted by WCM as part of its 1974 renewal applica-

tion. Decision, { 40.

Finally, the Commission rejected the ALJ’s reasoning

in ordering a short-term renewal grant. It dismissed as

a “generalized personal assessment, ... not material to

the... promise versus performance issue” the ALJ’s con-

clusion that WCM’s principals are “honorable men,”

whose past failings had resulted from inexperience and

thus were not indicative of WCM’s future performance.®

The Commission denied KDIG’s renewal, citing as jus-

tification only two cases—WMOZ, Inc., 36 FCC 202

(1964) and Leflore Broadcasting Co., Inc., 65 FCC 2d

596 (1977), affirmed sub nom, Leflore Broadcasting Co.,

Inc. v. FCC, 636 F.2d 454 (D.C. Cir. 1980)°—both of

which involved licensee misrepresentation. Neither in

its Decision nor on reconsideration did the Commission

explain its divergence from all precedent in promise-

versus-performance cases in denying KDIG’s renewal.

On appeal of the Commission’s denial of its license re-

newal to the United States Court of Appeals for the Dis-

trict of Columbia Circuit,’ WCM argued, inter alia, that

the Commission had: (1) violated due process by making

findings that WCM had misrepresented without giving

WCM notice and an opportunity to respond to those

charges; (2) imposed its harshest sanction without fur-

nishing the compelling justification required by Steadman

v. SEC, 603 F.2d 1126 (5th Cir. 1979), affirmed, 450 U.S.

® Decision, § 35.

10 Decision, ‘J 36.

11 The Court of Appeals’ jurisdiction was invoked under Section

402(b) of the Communications Act of 1934, as amended, 47 U.S.C.

§ 402(b).

”

91 (1981), rehearing denied, 451 U.S. 933 (1981) ; 7?

and (3) failed to explain its departure from consistent

precedent in promise-versus-performance cases.

In a brief and cryptic opinion, the Court of Appeals

rejected these arguments. While acknowledging that the

Commission’s findings regarding WCM’s intent were “im-

prudent” and “should not [have been] discussed by the

Commission in the absence of a designated misrepresenta-

tion issue,” the Court held that no due process violation

had occurred because WCM had not been “harmed by lack

of notice.” * Further, while conceding that “[t]his case

is apparently the first time a license renewal has been

denied solely because of a promise-versus-performance

failure,” the Court held that the Commission was not re-

quired to meet the Steadman requirement to furnish com-

pelling justification for its use of its most severe sanction

“because of differences in the regulatory schemes at

issue.” 695 F.2d at 621-22. Finally, the Court held that

the FCC was not required to explain its deviation from

past precedent in denying KDIG’s renewal because of its

broad discretion in fashioning sanctions,

WCM timely petitioned for rehearing of the Court of

Appeals’ decision. Rehearing was denied on February 7,

1983, and this petition for certiorari followed.

12 Steadman requires an agency imposing similarly severe sanc-

tions upon an applicant or licensee to explain why a lesser sanc-

tion would not suffice to serve the agency’s statutory goals. See

text at notes 24-29 infra.

13 The Court also noted that the Commission had denied, in its

Reconsideration Decision, that it had made findings of misrepre-

sentation. 695 F.2d at 619-20.

14 Steadman involved the debarment by the Securities and Ex-

change Commission (“SEC”) of an investment adviser.

ami

8

REASONS FOR GRANTING THE WRIT

IL The Court’s Decision Creates Uncertainty as to an

Agency’s Explanatory Burden When It Deviates From

Its Prior Precedent In Imposing a Sanction, an Im-

portant Question Which Should be Settled by This

Court.

This case represents a watershed in FCC history.

Ever-sensitive to the First Amendment concerns which

inhere in the subject matter it regulates, the FCC has

never before denied license renewal for programming

failures alone. Indeed, the Commission has here departed

from over twenty years of consistent precedent in

promise-versus-performance cases, in which, absent ac-

companying affirmative licensee malfeasance, prospective

sanctions have always been employed.'® The Court of Ap-

peals itself acknowledged that this “is apparently the first

time a [Federal Communications Commission] license

15 As the Commission itself noted in its Brief to the Court, pp.

6-7, in Committee for Community Access, et al. v. FCC, Case Nos.

82-2314, 82-2373, 82-2400 (D.C. Circuit) :

First Amendment and other policy considerations favor giving

deference to a broadcaster’s discretion in the sensitive area

of programming, and have led [the D.C. Circuit] to remind

the Commission that it must walk a ‘tight rope between say-

ing too much and saying too little’ and ‘avoid pervasive super-

vision’ of programming content. Banzhaf v. FCC, 405 F.2d

1082, 1095 (D.C. Cir. 1968), cert. denied, 396 U.S. 842 (1969).

16 See, e.g., Federal Broadcasting System, 75 FCC 2d 615 (1980)

(renewal granted to permit distress sale); Associated Communi-

cations Corp., 71 FCC 2d 1353 (1979) (renewal granted; report-

ing conditions imposed); Hubbard Broadcasting, Inc., 41 Rad.

Reg. 2d (P&F) 979 (1977) (short-term renewal grant); Rust

Craft Broadcasting of New York, Inc., 54 FCC 2d 1222 (1975)

(short-term renewal granted); Palmetto Radio Corp,, 58 FCC 2d

1104 (1976) (renewal granted); WSER, Inc., 29 FCC 2d 441

(1971) (short-term renewal granted); Loudon County Broadcast-

ing Co., 4 FCC 2d 188, recon. denied, 5 FCC 2d 13 (1966); KORD,

Inc., 31 FCC 85 (1961) (short-term renewal granted).

9

renewal has been denied solely because of a promise-

versus-performance failure.” 1”

It is well-settled that an agency has broad discretion in

imposing a sanction and is not required “to deal with all

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

comparable.” FCC v. WOKO, Inc., 329 U.S. 228, 228

(1946). Accord, Butz v. Glover Livestock Commission

Co., Inc., 411 U.S. 182, 187 (1973). Yet, it is also beyond

dispute that an agency must explain any such deviation

from prior precedent in order to facilitate judicial review

of its decision.'* Thus, where the agency departs from its

prior precedent, the court must be satisfied “that the

agency was aware it was changing its views and has arti-

culated permissible reasons for that change, and also that

the new position is consistent with the law.” NAACP v.

FCC, 682 F.2d 998, 998 (D.C. Cir. 1982) (emphasis

17 695 F.2d at 621.

18 Atchison, Topeka & Santa Fe Railway Co. v. Wichita Board

of Trade, 412 U.S. 800, 807-08 (1973); Secretary of Agriculture v.

United States, 347 U.S. 645, 652-53 (1954): Hatch v. FERC, 654

F.2d 825, 833-35 (D.C. Cir. 1981); Doubleday Broadcasting Com-

pany, Inc. v. FCC, 655 F.2d 417, 423 (D.C. Cir. 1981); Communica-

tions Investment Corp. v. FCC, 641 F.2d 954, 976-77 (D.C. Cir.

1981); White Mountain Broadcasting Co., Inc. v. FCC, 598 F.2d

274, 278-79 (D.C. Cir.), cert. denied, 444 U.S. 963 (1979) (explana-

tion not required only when reason for departure is so obvious

as to remove the need for explanation) ; Greyhound Corp. v. ICC,

551 F.2d 414, 416 (D.C. Cir. 1977) (“[t]his Court emphatically

requires that administrative agencies adhere to their own prece-

dents or explain any deviations from them.”) ; Garrett v. FCC, 513

F.2d 1056, 1060 (D.C. Cir. 1975); Columbia Broadcasting System,

Inc. v. FCC, 454 F.2d 1018, 1026-27 (D.C. Cir. 1971); FTC v. Crow-

ther, 430 F.2d 510, 514 (D.C. Cir. 1970) ; Greater Boston Television

Corporation v. FCC, 444 F.2d 841, 852 (D.C. Cir. 1970), cert.

denied, 403 U.S. 923 (1971): Herbert Harvey, Inc. v. NLRB, 385

F.2d 684 (D.C. Cir. 1967); Burinskas v. NLRB, 357 F.2d 822,

827 & n.5b (D.C. Cir. 1966); City of Lawrence v. CAB, 343 F.2d

583, 588-89 (1st Cir. 1965); see Public Media Center v. FCC, 587

F.2d 1322, 1331-32 (D.C. Cir. 1978); Melody Music, Ine. v. FCC,

345 F.2d 730, 732-33 (D.C. Cir. 1965).

10

added). Accord, Columbia Broadcasting System, Inc. v.

FCC, 454 F.2d 1018, 1026-27 (D.C. Cir. 1971).

The Commission’s Decision did not discuss, acknowl-

edg+, or, indeed, show any awareness of, the unprece-

dented nature of its action. Nowhere in the Decision is

there any explanation for the departure from twenty

years of consistent treatment of promise-versus-

performance cases. The subject is not addressed even on

reconsideration, after WCM had pointed out to the

Commission the unprecedented nature of its action.®

The Court of Appeals admitted that this case involved

the application of an unprecedented sanction,” and paid

brief obeisance to the principle that an agency must ac-

knowledge and explain its deviation from past precedent.”?

However, in affirming the FCC’s denial of KDIG’s re

newal, the Court totally ignored the FCC’s failure to ex-

plain its departure from precedent in imposing that

sanction here, emphasizing instead the FCC’s broad dis-

cretion to choose appropriate sanctions. 695 F.2d at 622,

citing FCC v. WOKO, Inc., 329 U.S. 228, 228-29 (1946) ;

Lorain Journal Co. v. FCC, 351 F.2d 824, 831 (D.C. Cir.

1965), cert. denied sub. nom. WWIZ, Inc. v. FCC, 383

U.S. 967 (1966).

The FCC’s discretion to select the sanction it imposed

here has never been challenged by WCM, and it is simply

not in issue. It is only the agency’s failure to explain its

decision to reject reasoning which it had followed con-

sistently for twenty years which necessitates this Court’s

19 See Petition for Reconsideration of West Coast Media, Inc.,

p. 21. In fact, on reconsideration the Commission expressly de-

clined to explain its departure from prior precedent, resting simply

on its “broad discretion” to select sanctions in renewal proceedings.

Reconsideration Decision, § 12.

20 695 F.2d at 621.

21 695 F.2d at 620-21.

11

review.” In the absence of such an explanation, an ap-

plicant cannot proceed before an agency in the informed

and rational manner which we demand as minima] ad-

ministrative due process. See, McHenry v. Bond, 668 F.2d

1185, 1192 (11th Cir. 1982); Matlovich v. Secretary of

the Air Force, 591 F.2d 852, 857 (D.C. Cir. 1978). More-

over, no reviewing court can be satisfied that the agency

did not act arbitrarily or discriminatorily. And most seri-

ously, failure to require an agency explanation here would

result in unfettered and unjustified agency action.

Courts have always required more:

expert discretion is secured, not crippled, by the

requirements for . . . reasoned analysis. Expertise

is strengthened in its proper role as the servant of

government when it is denied the opportunity to

‘become a monster which rules with no practical

limits on its discretion.’ 2°

II. An Agency May Not Impose Its Most Severe Sanction

Without Explaining Why A Lesser Sanction Would

Not Suffice.

In Steadman v. SEC, 603 F.2d 1126 (5th Cir. 1979),

affirmed on other grounds, 450 U.S. 91 (1981), the Fifth

Circuit Court of Appeals held that the Securities and Ex-

change Commission could not impose its most severe sanc-

tion—permanent debarment—without furnishing com-

pelling justification and explaining why a lesser sanction

would not suffice. The Commission’s imposition here of its

ultimate sanction triggered a duty to furnish the ex-

planation required by Steadman.** The Commission

*2 The FCC’s discretion in dealing with licensees “does not elimi-

nate [its] burden to express clearly the basis of its action.” Leflore

Broadcasting Co., Inc. v. FCC, 636 F.2d 454, 468 (D.C. Cir. 1980).

*3 Greater Boston Television Corp. v. FCC, 444 F.2d 841, 850

(D.C. Cir. 1970), cert. denied, 403 U.S. 923 (1971), quoting, Bur-

lington Truck Lines v. United States, 371 U.S. 156, 157 (1962).

*4In addition, compelling justification was required in this case

because the Commission’s unprecedented action denying WCM’s

12

plainly failed to explain why a lesser sanction would not

suffice, but the Court excused this omission, holding that

Steadman does not apply to the FCC “because of differ-

ences in the regulatory schemes at issue.” Unlike the

SEC, which debars a respondent as a punitive measure,

the Court reasoned, the “FCC is required to make an af-

firmative finding that the public interest will be served by

granting the license.” 695 F.2d at 622.

The Court of Appeals’ attempt to confine Steadman to

the statutes administered by the SEC is untenable, The

SEC and the FCC operate under similar statutory man-

dates. Both agencies must consider the public interest in

granting or denying licenses.** Moreover, the SEC does

not revoke a license as a punitive measure but rather

only on a finding that the public interest will be served

renewal of license on programming grounds alone raises serious

First Amendment concerns:

When the right to continue to operate a lucrative broadcast

facility turns on periodic government approval of the type of

broadcasting done, the right of the media to be free from

government control over the content of speech is in constant

jeopardy. (Emphasis in original.)

Leflore Broadcasting Co., Inc. v. FCC, 636 F.2d 454, 457 (D.C.

Cir. 1980).

25 The FCC must consider the public interest before granting

a license. See Section 309(a) of the Communications Act of 1934,

as amended, 47 U.S.C. § 309(a). Similarly, the SEC must consider

the public interest before it can initially register investment ad-

visors and broker-dealers. To be licensed, both investment ad-

visors and broker-dealers must complete an application for registra-

tion containing such information as the SEC finds necessary or

appropriate in the public interest. The SEC must grant registra-

tion if it finds that the requirements of the section on registration

have been complied with and must deny registration if it cannot

make such a finding or if it finds that the public interest would

require revocation or suspension of the permitted registration.

See Sections 203(c) and (e) of the Investment Advisors Act of

1940, 15 U.S.C. § 80b-3(c) and (e); Section 15(b) of the Securi-

ties Exchange Act of 1934, 15 U.S.C. § 780(b).

13

thereby.” Indeed, in Steadman, the Fifth Circuit itself

noted this fact and re-emphasized both the “prophylactic

purpose of the securities laws” and the SEC’s duty to

consider the “ ‘public interest’ . . . in fashioning its or-

ders... .” Steadman v. SEC, supra, 603 F.2d at 1142.77

Ultimately, however, whether or not the SEC and the

FCC administer different regulatory schemes is beside the

point. The Steadman requirement that an agency furnish

compelling justification for its use of its most “potent

weapon” ** is not based on any of the regulatory statutes

administered by the SEC but rather on the Court’s duty,

under the Administrative Procedure Act, to set aside

26 See Section 15(b) (4) of the Securities Exchange Act of 1934,

15 U.S.C. § 780(b)(4); Section 9(b) of the Investment Company

Act of 1940, 15 U.S.C. § 80a-9(b) ; Sections 203(e), and (f) of the

Investment Advisors Act of 1940, 15 U.S.C. § 80b-3(e) and (f);

Decker v. Securities & Exchange Commission, 631 F.2d 1380 (10th

Cir. 1980); Beck v. SEC, 413 F.2d 832 (6th Cir. 1969), on later

appeal, 430 F.2d 673, 674 (6th Cir. 1970); Blaise D’Antoni &

Associates, Inc. v. SEC, 289 F.2d 276, 277 (5th Cir. 1961), cert.

denied, 508 U.S. 899 (1961); Shuck v. SEC, 264 F.2d 358 (D.C.

Cir. 1958); Nassar & Co., CCH Federal Securities Law Reports,

| 81,904, p. 81,120 (SEC 1978); Underhill Securities Corporation,

42 SEC 689, 695 (1965). And, to the extent that there is a penal

element in the SEC’s revocation proceedings because the conse-

quences to the licensee are severe, it is also clear that there is a

penal element in the FCC’s denial of renewal. In both cases, the

agency is putting the licensee out of business. In fact, while the

Court of Appeals denied that the FCC’s denial of a license renewal

is a penalty, in the very next breath, it referred to the denial as a

“sanction to apply to licensee misconduct.” 695 F.2d at 622.

*7 While tnis Court and the Fifth Circuit referred to the pro-

ceedings involved in Steadman as “disciplinary” proceedings,

Steadman v. SEC, supra, 608 F.2d at 1139: Steadman v. SEC,

supra, 450 U.S. at 92, it is clear that the statutes at issue in

Steadman call for the SEC to censure, suspend or debar respond-

ents only on a finding that the public interest will be served

thereby, not as a punitive measure. See note 26 supra.

28 Steadman v. SEC, supra, 603 F.2d at 1139.

14

agency action found to be arbitrary or capricious. As the

Steadman Court noted:

We are empowered to set aside Commission orders

that are arbitrary and capricious. 5 U.S.C. § 551,

702, 706 (1976). We subscribe to the common-

sense notion that the greater the sanction the Com-

mission decides to impose, the greater is its burden

of justification.

Steadman v. SEC, supra, 603 F.2d at 1139. Since the

same standard of judicial review under the Administra-

tive Procedure Act was applied both to the FCC order at

issue in this proceeding and to the SEC order involved in

Steadman, the explanatory burden imposed by Steadman

clearly applied to the FCC’s action in this case.

The Court of Appeals’ refusal to apply Steadman to the

FCC is a serious error. As noted above, courts require

agency explanations to guard against arbitrary and irra-

tional decision-making. When an agency, whether it be

the SEC, the FCC, or some other federal agency, imposes

its most severe sanction on a respondent, the courts must

be especially vigilant to insure that the agency decision is

the product of reasoned decision-making, for the stakes

are high.*” The FCC, no less than the SEC, must meet

this higher explanatory burden.

Ill. The FCC’s Wide Departure From Standards of Due

Process, Sanctioned by the Court of Appeals, Re-

quires an Exercise of this Court’s Power Of Super-

vision.

As the Court of Appeals acknowledged, “The Commu-

nications Act [Section 309(e)], the Administrative Pro-

cedure Act [Section 554(3)(b)] and the due process

clause require the FCC to designate the issues to be

°° The sanction here has drastic consequences. It puts a broad-

caster out of business.

15

considered in a renewal hearing.” 695 F.2d at 619. The

agency is required to designate the issues in order to pro-

vide the licensee fair notice of the charges brought

against it and an opportunity to respond to those charges.

Id. In this case, the FCC utterly betrayed its obligation

to afford WCM due process by making key findings of

misrepresentation without first designating a misrepre-

sentation issue.

Clearly, the Commission’s findings went beyond those

encompassed by the promise-versus-performance issue.

Under a promise-versus-performance issue, the Commis-

sion examines the bona fides and reasonableness of a li-

censee’s efforts to carry out its programming promises.

See KORD, Inc., 31 FCC 85 (1961). The promise-versus-

performance issue designated in this case should have

focused on “whether West Coast Media, Inc. made reason-

able and good faith efforts to carry out its non-

entertainment programming proposal. .. .” 61 FCC 2d

577, 585 (1976). Instead of examining WCM’s program-

ming performance, however, the FCC focused on its

motives and intent.

The Commission found that WCM had made its

programming promises to the Commission with no in-

tent to keep them. Decision, 17 19, 28, 33, 35 n.45, 36.

This is clearly a finding of misrepresentation, not of

promise-versus-performance failure: finding that a li-

censee “never intended to fulfill [its] programming

promises necessarily entails the corollary finding that [it]

3° See Morgan v. United States, 304 U.S. 1, 18-19 (1938); RKO

General, Inc. v. FCC, 670 F.2d 215, 224-25, 235-37 (D.C. Cir.

1981), cert. denied, 456 U.S. 927 (1982), 102 S.Ct. 2931 (1982);

Bendix Corporation v. FTC, 450 F.2d 534, 542 (6th Cir. 1971);

Rodale Press, Inc. v. FTC, 407 F.2d 1252, 1256-57 (D.C. Cir. 1968) ;

NLEB v. Majestic Weaving Co., 355 F.2d 854, 861-62 (2nd Cir.

1966); NLRB v. Tennsco Corp., 339 F.2d 396, 399-400 (6th Cir.

1964).

16

intended to deceive the Commission,” *! and intent to de-

ceive the Commission in making a representation is “a

sine qua non of a misrepresentation issue.” Leflore

Broadcasting Company, Inc. v. FCC, 636 F.2d 454, 461

(D.C. Cir. 1980), quoting CBS, Inc., 49 FCC 2d 1214,

1223 (1974). Moreover, the Commission made findings of

misrepresentation with respect to the 1974 KDIG re-

newal application. The ALJ found the application to

be “inherently misleading,” Initial Decision, § 50, and

the Commission concluded that “[a] ppropriate findings

and conclusions relating to licensee candor could and

should have been made” regarding that application. De-

cision, 40. Most significantly, the Commission made

these findings of misrepresentation without affording

WCM any opportunity to present evidence that it had

not misrepresented.

The Court of Appeals acknowledged that the Com-

mission’s findings concerning WCM’s state of mind in

making its programming proposals were “imprudent,”

noting that “[s]uch intentions should not be discussed

by the Commission in the absence of a designated mis-

representation issue,” because a licensee’s “intention not

to meet [its programming proposals] closely resembles

an intent to deceive the FCC, which is at the heart of

misrepresentation cases.” 695 F.2d at 620. Nonetheless,

the Court refused to remand the case to the FCC because

it held that WCM had neither been deprived of notice

nor harmed by the lack of notice. With due respect to

the Court of Appeals, this conclusion is flabbergasting.

Findings of misrepresentation permeated the Decision,

appearing there six times.** Clearly, the result in this

31 (Emphasis in original) Leflore Broadcasting Company, Inc. v.

FCC, 636 F.2d 454, 462 (D.C. Cir. 1980).

*2 See Decision, 17 19, 28, 33, 35 n.45, 36, 40. In the face of

these repeated findings, the Commission’s conclusory denial, on re-

consideration, that it had made findings of misrepresentation, a

denial] relied on by the Court of Appeals in rejecting WCM’s claim

of a due process violation, 695 F.2d at 620, merits no credence.

17

case is inextricably linked to these impermissible find-

ings. In justifying its decision to deny renewal in this

case, the Commission cited just two cases: both were

misrepresentation cases." Moreover, while broadcast

licenses have never before been denied solely for a

promise-versus-performance failure, they have consist-

ently been denied for licensee misrepresentation.*®

WCM never had notice or an opportunity to address

the questions raised concerning its intent at the time

it made its 1971 program proposals or at the time it

submitted its 1974 renewal application. And _ that

deprivation is at the heart of this due process violation,

8 See Decision, ° 36, citing WMOZ, Inc., 36 FCC 202 (1964), and

Leflore Broadcasting Company, Inc. v. FCC, 686 F.2d 454 (D.C.

Cir. 1980).

34 See n.16 supra.

38 See, e.g., FCC v. WOKO, Inc., 329 U.S. 223 (1946) ; Sea Island

Broadcasting Corp. of S.C. v. FCC, 60 FCC 2d 146 (1976), recon.

denied, 64 FCC 2d 721 (1977), aff'd, 627 F.2d 240 (D.C. Cir.

1980), cert. denied, 449 U.S. 834 (1980) ; Leflore Broadcasting Co.,

Inc. v. FCC, 65 FCC 2d 556 (1977), aff'd, 686 F.2d 454 (D.C. Cir.

1980); Brandywine-Main Line Radio, Inc. v. FCC, 473 F.2d 16

(D.C. Cir. 1972), cert. denied, 412 U.S. 922 (1973) ; Continental

Broadcasting, Inc. v. FCC, 489 F.2d 580 (D.C. Cir.), cert. denied,

403 U.S. 905 (1971): Golden Broadcasting Systems, Inc., 68 FCC 2d

1099 (1978); WPRY Radio Broadcasters, Inc., 40 FCC 2d 1183

(1973); Radio Broadcasters, Inc., 23 FCC 2d 209, recon. denied,

25 FCC 2d 450 (1970); Vinita Broadcasting Co., Inc., 30 FCC 2d

458, recon. denied, 32 FCC 2d 501 (1971) ; WMOZ, Inc., 836 FCC

202, recon. denied, 36 FCC 1467 (1964), rev’d and remanded, 344

F.2d 197 (D.C. Cir. 1965), aff'd in part, 3 FCC 2d 637 (1966).

*6 Notice to WCM that the proceeding would focus on its efforts

to meet its proposals after they had been made in no way con-

stituted notice that its state of mind at the time it made those

proposals was also at issue. The two issues are clearly different

in scope and focus, concerning themselves with two different and

discrete time periods. Moreover, the promise-versus-performance

issue designated did not afford notice to WCM that its intent in

submitting its 1974 renewal application was at issue.

18

regardless whether or not the result in the case was

altered thereby:

The evil at which the statute [the Administrative

Procedure Act, Section 554(b)] strikes is not rem-

edied by observing that the outcome would perhaps

or even likely have been the same. It is the oppor-

tunity to present argument under the new theory

of violation, which must be supplied.

Rodale Press, Inc. v. FTC, 407 F.2d 1252, 1257 (D.C.

Cir. 1968).

Ultimately, there is only one rational explanation for

what happened in this case. Though designated as a

promise-versus-performance case which would have led,

under appropriate FCC precedent, to license renewal

with prospective sanctions, the FCC became concerned

that misrepresentations had occurred. Without chang-

ing the issues in the proceeding, it made misrepresenta-

tion findings throughout its Decision. It then denied

renewal of license, relying exclusively upon misrepre-

sentation precedent and ignoring all prior promise-

versus-performance cases.

The FCC may not be permitted to “change theories in

midstream without giving respondents reasonable notice

of the change ....” Rodale Press, Inc. v. FTC, 407

F.2d 1252, 1256-57 (D.C.Cir. 1968). If it believed that

misrepresentation occurred, it was required to designate

an appropriate issue and give the licensee an opportu-

nity to adduce evidence in its own behalf. RKO Gen-

eral, Inc. v. FCC, supra, 670 F.2d at 224-25, 235-37.

This Court cannot sanction any lesser due process ob-

servance by administrative agencies.

19

IV. Summary Reversal of the Court of Appeals’ Clearly

Erroneous Decision Is Warranted.

The decision in this case put a broadcaster completely

out of business solely because it did not present enough

non-entertainment programming on its station. Although

the remedy imposed was unprecedented in its harshness,

the FCC did not justify its total disregard of precedent.

Nor did the FCC explain why lesser sanctions would not

suffice. Moreover, without designating appropriate hear-

ing issues, the FCC found that WCM had misrepre-

sented, findings conceded by the Court of Appeals to be

“imprudent”’.** In short, the action taken here was

clearly unprecedented, unexplained and effected with lit-

tle regard for requisite administrative due process.

There is no need for this Court to belabor the factual

record in this case. The decision of the Court of Ap-

peals affirming the Commission’s action in ‘this case was

so fraught with procedural error that summary reversal

is warranted.** Atchison, Topeka & Santa Fe Railway

Co. v. Board of Trade, 412 U.S. 800 (1973); Steadman

v. SEC, 603 F.2d 1126 (5th Cir. 1979), affirmed on

other grounds, 450 U.S. 91. (1981); Morgan v. United

States, 304 U.S. 1, 18-19 (1938).

87 Indeed, the injustice is magnified since the Commission made

these findings after affirmatively assuring WCM that misrepre-

sentation was not at issue. Memorandum Opinion and .Order,

FCC 77M-1128, June 24, 1977.

88 When confronted with clearly erroneous action below, this

Court may summarily reverse to conserve its time and resources.

See Rule 23 of the Rules of the Supreme Court; Robert L. Stern

and Eugene Gressman, Supreme Court Practice, p. 362 (5th ed.,

C.1978). The Court has adopted this procedure frequently. See,

e.g., Johnson v. Virginia, 373 U.S. 61 (1968); Rogers v. Calumet

National Bank, 358 U.S. 331 (1959); Matles v. United States, 356

U.S. 256 (1958); Edwards v. United States, 355 U.S. 36 (1957) ;

Securities & Exchange Commission v. Otis & Co., 388 U.S. 848

(1949).

20

CONCLUSION

Petitioner is the first broadcaster ever to lose its

license for mere promise-versus-performance shortfalls.

Yet, the FCC failed to explain why it departed from its

previous precedent in imposing the sanction in this case,

or why a lesser sanction would not suffice. Moreover.

the Commission’s decision was permeated with imper-

missible findings of misrepresentation, made despite the

absence of an appropriate issue at hearing. Despite

these serious flaws in the Commission’s decision, the

Court of Appeals affirmed. If its decision is permitted

to stand, it will afford the FCC unfettered discretion to

impose sanctions without adequate explanation and to

broaden evidentiary hearings to cover potentially deci-

sive issues without adequate notice.

For the reasons stated, the petition for certiorari

should be granted.

Respectfully submitted,

Eric L. BERNTHAL *

MANIA K. BAGHDADI

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 857-6032

DONALD B. McCANN

National City Bank

East 6th Building

Cleveland, Ohio 44114

Attorneys for Petitioner

Of Counsel:

ARENT, Fox, KINTNER, PLOTKIN

& KAHN

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

May 9, 1983

* Counsel of Record