Petition for Writ of Certiorari — NextWave Personal Communications Inc. v. Federal Communications Commission, 121 S. Ct. 606 (2000) (No. 00-447)

Supreme Court brief2000

Ask Donna

What actually matters in this document.

Text

~~" Supreme Court, 0.8,

PILED

00-447 sep » 1 2000

No. OF Fire

eer

IN THE

Supreme Court of the United States

NEXTWAVE PERSONAL COMMUNICATIONS INC., ET AL.,

Petitioners,

FEDERAL COMMUNICATIONS COMMISSION,

Respondent.

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Second Circuit

PETITION FOR A WRIT OF CERTIORARI

Of Counsel: THEODORE B. OLSON

DEBORAH L. SCHRIER-RAPE Counsel of Record

MICHELLE V. LARSON DOUGLAS R. COx

ANDREWS & KURTH LLP THOMAS G. HUNGAR

1717 Main Street DAVID B. SALMONS

Suite 3700 GIBSON, DUNN & CRUTCHER LLP

Dallas, TX 75201 1050 Connecticut Avenue, N.W.

(214) 659-4400 Washington, D.C. 20036

(202) 955-8500

G. ERIC BRUNSTAD, JR. -

BINGHAM DANA LLP DONALD B. VERRILLI

One State Street JENNER & BLOCK

Hartford, Connecticut 06103 601 Thirteenth Street, N.W.

(860) 240-2700 Washington, D.C. 20005

(202) 639-6000

Counsel for Petitioners

QUESTION PRESENTED

Whether the court of appeals erred in holding that,

notwithstanding the comprehensive grant of bankruptcy

jurisdiction conferred by 28 U.S.C. § 1334, the district

and bankruptcy courts lack jurisdiction to enforce the

provisions of the Bankruptcy Code against a federal

agency merely because, absent bankruptcy, review of

the agency’s actions may be subject to the exclusive ju-

risdiction of another court.

PARTIES TO THE PROCEEDINGS

AND RULE 29.6 STATEMENT

The parties to the proceedings in the court of appeals

were NextWave Personal Communications Inc.

(“NPCT’), NextWave Partners Inc. (“NPI’’), NextWave

Power Partners Inc. (“NPPI”’), NextWave Wireless Inc.

(“NWI”), NextWave Telecom Inc. (“NTI”), and the

Federal Communications Commission. NPCI, NPI,

NPPI, and NWI are wholly owned subsidiaries of NTI.

NTI is not a publicly traded company, and no publicly

traded company owns 10 percent or more of its stock.

———-

ili

TABLE OF CONTENTS

Page

SUE IEW IRIINE NS STEED vnsncnssscsessesssenssssseccssonsssenscoscocosnes i

PARTIES TO THE PROCEEDINGS AND

I CEE MUR EET csnsunsnnnnscnnsansasvssannonsancnsnasosscesne ii

ee I FAA BERL ED sseeiesecacsessscssonssnnesonssecasceseonses Vv

ec svanisstansnvnsnnahunpaarenanaienencenss l

i iscsi Lath isnehstsntesminnntnnseesgnessssasmnvecses 1

STATUTORY AND REGULATORY

ETD BOT ie WEED vsceessnsiseccnnsescscecensssecssecsconsnenees 1

ae he Lat Se 2

Pa FE UIING asses sscsssnsseisscvessseccscccsccocnssssnseassee 4

B. The Original Bankruptcy Litigation.................:ee 6

C. The Automatic Stay Litigation ...............::::cceseseeeeeeeeees 6

REASONS FOR GRANTING THE WRIT..................-+ 11

I. The Judgment Below Conflicts With The

Governing Congressional Enactment And With

TR EE 0 ROUTINES oasis siscnssecncrccrerciccoccccrcccscozeseees 11

A. The Court Of Appeals’ Rejection Of —

Bankruptcy Jurisdiction Is Irreconcilable

With The Plain Language Of 28 U.S.C.

§ 1334 And The Bankruptcy Code................00++ 11

B. The Judgment Below Directly Conflicts

With This Court’s Precedents ...............::scssseee 14

Il. The Second Circuit’s Decision Creates A

Square Circuit Conflict ...................c.scccsssrccsessrssessssee 16

Ill. The Question Of Federal Bankruptcy

Jurisdiction Presented In This Case Is

Important And Recurring, And Merits This

CIE Oem cxtiakacixinciacininicsbccdanianadinaliecdinansdaieues 19

Sa a aU iiss wiccvuinssnsiceihuplassiashinpensaia vinionnininapelaiaaaedl 26

Fa Ga a siaessnnhecheschcden easing ilauaciaaoaidlbsieandialasocaiaapaaiaas la

TABLE OF AUTHORITIES

Page(s)

CASES

Board of Governors v. MCorp Financial, Inc.,

Ne Ee Be Ce Eh ccnthisveencnceincblecasitnincsintasiatiienn 14

Brock v. Morysville Body Works, Inc., 829 F 2d

BE CO GC, Fe incites hes rascapieesienineesiensatrinivsne 3,17

Celotex Corp. v. Edwards, 514 U.S. 300 (1995).......... 15

Cisneros v. Alpine Ridge Group, 508 U.S. 10

FED isisndcniiicsetnsaneinkenbsienabevmigitxetiiitalahgubaniocesinnminiens 15

Commodity Futures Trading Comm'n v. Schor,

Ee ea, Re NE vasscinetinintcciacrtninensiaseccnaninesen 15

FCC v. GWI PCS 1, Inc., No. 99-11294 (Sth Cir.

Cond ate. FeO. 3, FOV) ccscciseecsesssesorsscorenssenvensetnsesvens 19

Grupo Mexicano de Desarrollo, S.A. v. Alliance

Bond Fund, Inc., 527 U.S. 308 (1999) .........eeseeeees 23

In re Atlantic Bus. & Community Dev. Corp., 994

Pe Re Ee al BD ete ticiaicicisnctenctansistonnaseniesnes 14

In re Bulldog Trucking, Inc., 150 B.R. 912

; CIE DIL. TIRE) aseteinsswisevsticnsicccrcsninsenestennsoosonnvesaveen 18

In re Central Ark. Broad. Co., 68 F.3d 213 (8th

OU: BOD cisissdensvtinisisncsnnccsmninicenenscitieiabiowsianeciinisoetiniee 14

In re Gruntz, 202 F.3d 1074 (9th Cir. 2000) ................ 18

In re Horizon Air, Inc., 156 B.R. 369 (N.D.N.Y.

FFD cnsckecsiusenisinicnantcasmuisionsincnaaiieitetensnauaninnnniselie 18

In re Kansas Personal Communications Services,

Ltd., 252 B.R. 179, 2000 WL 1199798

SEs ie UII BI Este nssdicedanncasessecesnensncsoes 18

In re Personal Communications Network, Inc.,

249 B.R. 233 (Bankr. E.D.N.Y. 2000)................00. 20

In re Tak Communications, Inc., 985 F.2d 916

Ce i eidblitiechguiiaisscedieinelitiipniicsasiinnnenoashirsiansiiens 14

In re Town & Country Home Nursing Servs., Inc.,

DOS FB BR CG, OIE i cnscsisccscnscrnessosessncssees 18

In re Transcon Lines, 147 B.R. 770 (Bankr. C.D.

Fe caine esi canenseilnipacianilectinashsiicbiintantnideienn 18

In re United States, No. 98-11123 (Sth Cir. Oct.

Fg SEE ian saiigaddaaheitabbadeindibicceidasniaiavaniicicntitls 18-19

In re University Med. Ctr., 973 F.2d 1065 (3d

8 RE I ae ee Te TT PE OE 17

Katchen v. Landy, 382 U.S. 323 (1966) .............sscsse0e 15

Langenkamp v. Culp, 498 U.S. 42 (1990) .........ceeseeeeee 15

Official Comm. of Equity Sec. Holders v. Mabey,

S5d Fe er Cs CT Bittnsiinsatetbsnsitsttnsasnnsivenns 25

Pioneer Inv. Servs. Co. v. Brunswick Assoc. Ltd.,

DOT Si ee Ee FD cicadas hiainleken hee tandiinsntnaonains 22

Quality Tooling, Inc. v. United States, 47 F.3d

SP GN a Oe icin sihersiaietisiitnes 3,16,17

United States v. GWI PCS 1, Inc., 245 B.R. 59

(BSED. GR, rer annathanasnbiitiaieianaatileiciiiiiniindnioniininas 18-19

' sited States v. Whiting Pools, Inc., 462 U.S.

TS CU ite asec itcaatncaciexnaniornics 16,24

Vii

STATUTES AND REGULATIONS

Coseme At Act, 42 U.S.C: 6 FOI TG) ccneescccssessenscnssesssoone 20

Comprehensive Environmental Response,

Compensation, and Liability Act,

2 A ail AE sestnciiecsssicecessinasnesonsinuncinnsnatacs 20

- Safe Drinking Water Act, 42 U.S.C.

III iiasiiccds ialih sini esigichiaibvacauaichanaihindoboaaemidnhabes 20

Fk Be IN cinrstcitisinntiesiscinsnkasinnienimniniiionpian 20

eas IE iiti isteach niaencpminicda 13,23

ee eae I Bisaseicesleabeadenciccdstnindlandiiostebamebuletioptaiienne 9

Mere seach acc cinsen escapism 23,141a

Ee rs eis cidiccscesssnstcxamrcasasacuecnacccebanebeesiainke 12

er Se IE We iinctsceicisatauiccincdesaavianereaieinvcreaan 2

ae Oe aides iniscsntccchcehdanssaniiiannionheoncsane 3,23,25

Fe nT SE iiss citschsssusdviciigeddaianimianntibsannasenecniees 8,13

oe Oe I cis dsicvinsniennineiaeinbsisceegsveiseopasansatnienkia 23

ee es SD cari ceinuisscncssntesinsahsiannsikincesbsakaiuiaions 24

ee ee a I TD sc isndcaciosckeninesibanaenandtiiorninieeiaeniiins 24

ec ie eI EE sins ctnsiiesanseiscuniidobomniiaaedsbiandioeies 24

eae ae BIE BI sisnaseciestasesessiiecrnavipnideibessanninnees 24

Be er Oe I iiiadecinin cs caanisscecasaicbeovsbehediesincsniendehcannssiales 9

ee Te Pe ia aciciitilsnidsnsaitiatilacinintieaniccrsaiinaninhacbiins 3,25,142a

Re Seis SF EID sirmninsenacstignonbecninans 8,10,13,23,24,142a

ES sia aici dahianssigegbaaabeaniiian 6

"ag 2" EMIS ARS a sa erect 24

Be Ride eta ca canceccnenveauin 24

ie os 24

DR I iii ee 3,13,25

EES OMe Gls c 2. eee nnn 8

CEC. Sot Sh) ae ee 8.9

DN ON hiring iit 25

CRIT Cot 2.) c. |) aes 9

28 U.S.C. § 157 eccccccssssees eee ern a ree ON 2,143a

MI 6 I sissies 11,143a

BE UBL. © USI) acssnnccssnnsccccnccrceeanrecssnieosse 11,13,143a

LR So. : : eee See aE 1

28 U.S.C. § 1295(a)(6)-(14) ..cceecccceccsseeccssecsseesssecssecsees 21

ENE oe a: | eae een 6,11,16,19,23,144a

WE UGC. 6 FEI na ccccesscnsecscsscssences 2,11,12,14,15,16,

17,18,19,23,25,144a

eee oe 14,145a

Bear Cee... 16

ene ee 21

MT © CI sss tcsccsne 16

aE eee ehatae tes tk eater ates ed 21

Oe 2,6,10,12,18

Te Se 20,146a

Le Sa 2. RnR es aetna etre ain AD 20

TOG I rr oiisoacsecheetectcseneiooes 20

SEU, PUI isc eecees: 20

Se St ees Ae I sichtiin eesctctiiesarn thin tn etacagathaldeiaidas 20

SF | CRE EE GN a 20

ics yD iticinitssanciaicssiessbind isabel 20

SE gis Ae EE TD isseiccsa pints cisiviesid dieihindiceanatesnariaateiaideasta 20

Fae ee ID aicclisictianictitesiistalleiuidaalaaaialdtabiaa 17

Fe SE iE in itdipieccinciditansennsiicnnicahipiaadidiateedbuetmaaces 21

OF Sans Be itissienheincesnestnecnicennions nivlaaianaaneinte 2,6,147a

i S| RSE I 10,11,147a

Fa ae tievninslecncaiapadtionstactlaiiioinsediai 12,20,147a

Se Spine Se COG IEE vainhansiccnsvinecipncacvesesitecduadabicliccacbadbsicains 21

BF pe eee ee ieeesicasvcn ceorarhagnciadiadectied 5

OF Cr ie ST Fe COD eiecinstisssenstcitensdniblaincesiaitanenie 5

OTHER AUTHORITIES

H.R. REP. NO. 595, 95th Cong., 2d Sess. (1977),

reprinted in 1978 U.S.C.C.A.N. 5963 .......... 11,14,22

S. REP. NO. 989, 95th Cong., 2d Sess. (1978),

reprinted in 1978 U.S.C.C.A.N. 5787 ........ccscceeeeeee 22

Se ek ie IE <aidineb alinlianisctnioneaslecceedicticcieanesaviddes aco

FCC Public Notice, DA 00-2038 (Sept. 6, 2000)........... 8

PETITION FOR A WRIT OF CERTIORARI

Petitioners NextWave Personal Communications

Inc., NextWave Partners Inc., NextWave Power Part-

ners Inc., NextWave Wireless Inc., and NextWave Tele-

com Inc. (collectively “NextWave’ ") respectfully peti-

tion for a writ of certiorari to review the judgment of the

United States Court of Appeals for the Second Circuit in

this case. In addition, because the decision below con-

stitutes plain error in violation of the governing statute

and numerous precedents of this and other Courts,

NextWave respectfully suggests that the Court may

wish to consider summary reversal.

OPINIONS BELOW

The opinion of the court of appeals (App., infra, la-

29a) is reported at 217 F.3d 125. The opinion of the

bankruptcy court (App., infra, 30a-100a) is reported at

244 B.R. 253. The prior opinion of the court of appeals

(App., infra, 101a-139a), upon which the court based

the present mandamus decision, is reported at 200 F.3d

43, pet. for cert. filed, No. 99-1980 (June 9, 2000).

JURISDICTION

The judgment of the court of appeals was entered on

May 25, 2000. A timely petition for rehearing was de-

nied on August 23, 2000. App., infra, 140a. The juris-

diction of this Court is invoked under 28 U.S.C.

§ 1254(1).

STATUTORY AND REGULATORY

PROVISIONS INVOLVED

The pertinent provisions of the Bankruptcy Code,

the Hobbs Act, and the Federal Communications Act

(“FCA”) are reproduced at App., infra, 141a-148a.

STATEMENT OF THE CASE

This petition, like the related petition currently pend-

ing in NextWave Personal Communications, Inc. v.

Federal Communications Commission, No. 99-1980,

arises out of the Second Circuit’s evisceration of what

may be the most comprehensive jurisdictional grant in

the United States Code: Congress’s vesting of jurisdic-

tion in the bankruptcy and district courts to hear all pro-

ceedings arising under the Bankruptcy Code or related

to a bankruptcy case, “/n/Jotwithstanding any Act of

Congress that confers exclusive jurisdiction on a court

or courts other than the district courts.” 28 U.S.C.

§ 1334(b) (emphasis added); see also 28 U.S.C. § 157.

The decision below holds that bankruptcy and district

courts lack jurisdiction to apply core provisions of the

Bankruptcy Code whenever an agency action that ad-

versely affects a bankruptcy debtor’s interests is review-

able in another court pursuant to an exclusive jurisdic-

tion provision. Notwithstanding the unambiguous and

sweeping language of Section 1334(b) and related juris-

dictional provisions, the court of appeals reasoned that

“fe]xclusive jurisdiction to review the [agency’s]

regulatory action lies in the courts of appeals” by virtue

of the exclusive jurisdictional provisions of 28 U.S.C.

§ 2342 and 47 U.S.C. § 402. App, infra, 25a.

The court of appeals’ conclusion is flatly contra-

dicted by the plain language of Section 1334(b), which

confers jurisdiction on the bankruptcy courts “notwith-

standing” any statutes purporting to confer exclusive ju-

risdiction on another court. Other provisions of the

Bankruptcy Code confirm the self-evident proposition

that Section 1334(b) means what it says, and vests bank-

ruptcy courts with jurisdiction to enforce the Bank-

ruptcy Code in the administration of a bankruptcy case

even when the Code’s provisions affect or restrain ac-

tions sought to be taken by federal agencies. See, e.g.,

11 U.S.C. § 106(a)(2) (“The [bankruptcy] court may

hear and determine any issue arising with respect to the

application of [the Code provisions at issue here] to

governmental units.”) (emphasis added).

In addition, the court of appeals’ nullification of

these essential bankruptcy jurisdictional statutes con-

flicts with decisions of this Court and of other courts of

appeals. Indeed, every other appellate court that has ad-

dressed the issue has given full effect to the Bankruptcy

Code’s governing jurisdictional statutes, and has recog-

nized correctly that these statutes confer bankruptcy ju-

risdiction even over proceedings that would normally be

subject to the exclusive jurisdiction of another court.

See, e.g., Quality Tooling, Inc. v. United States, 47 F.3d

1569 (Fed. Cir. 1995); Brock v. Morysville Body Works,

Inc., 829 F.2d 383 (3d Cir. 1987).

The decision below threatens the jurisdictional and

substantive foundations underlying Congress’s carefully

crafted bankruptcy scheme. The Second Circuit’s juris-

dictional ruling prevented the bankruptcy court from en-

forcing core provisions of the Bankruptcy Code—

Sections 525, 1123 and 362—against the FCC to stop

the removal of valuable assets (spectrum licenses) from

NextWave’s bankruptcy estate. The bankruptcy system

depends upon the ability of bankruptcy courts to mar-

shal each debtor’s assets and prevent creditors, includ-

ing government agencies, from engaging in conduct that

removes value from the bankruptcy estate or prevents

the orderly administration of the debtor’s affairs. If the

bankruptcy and district courts lack jurisdiction to en-

force the provisions of the Bankruptcy Code against the

FCC here, it follows that a wide array of federal agen-

cies must enjoy the same broad immunity. Because

federal agencies appear frequently as creditors in bank-

ruptcy cases, immunizing such agencies from the

Code’s requirements sets a precedent that is destined to

render chaotic the administration of bankruptcy cases

nationwide.

Unless overturned by this Court, therefore, the deci-

sion below will engender widespread confusion regard-

ing the hitherto unquestioned scope of bankruptcy juris-

diction, and will eliminate the ability of bankruptcy

courts to apply the provisions of the Code in the every-

day administration of a bankruptcy case when a federal

agency is involved in the proceedings. Further, the

court of appeals’ decision will create a jurisdictional

Catch 22 for debtors seeking the protection of the bank-

ruptcy laws to reorganize their businesses, because it au-

thorizes federal agencies to take adverse action against a

debtor based solely on the debtor’s compliance with the

provisions of the federal bankruptcy laws. This Court

should summarily reverse the decision of the court of

appeals, or in the alternative should grant plenary re-

view to eliminate the conflict that now exists on this

important issue of federal court jurisdiction.

A. Factual Background

Following the 1993 amendments to the Federal

Communications Act, the FCC auctioned “blocks” of

the electromagnetic spectrum suitable for personal

communication services (“PCS”). The C and F Blocks

were reserved for “designated entities” such as small

businesses. NextWave, a newly formed small business,

was the high bidder for 63 licenses at the C-Block auc-

tions, which ended in May and July of 1996.

NextWave’s high bids totaled $4.7 billion. App., infra,

33a. In compliance with FCC regulations, NextWave

placed deposits with the FCC equaling 10 percent of its

total bid amount (approximately $474 million).

The FCC, however, did not approve NextWave’s li-

cense applications until January 1997, and did not actu-

ally issue the licenses to NextWave until February 1997.

App., infra, 33a. When the licenses were finally issued,

NextWave executed promissory notes to the FCC to pay

the balance of the $4.7 billion purchase price, with in-

conaiee’ ———— ——<—<———$ eee ——— a re

———-~-

terest, over a ten-year term. See 47 C.F.R. §§ 1.2110(e),

24.711(b) (1996).!

In the months between NextWave’s successful bid

for its licenses and the actual issuance of the licenses in

February 1997, the FCC held auctions for nearly 1500

additional PCS licenses. 99-1980 Pet. App. 71a. The

prices for these licenses were dramatically lower than

the prices for the C-Block licenses, averaging less than

25 percent of the C-Block bids. App., infra, 33a.

Because of this precipitous drop in the market value

of the licenses, NextWave was unable to obtain the fi-

nancing necessary to make its installment payments and

build out its PCS network, and on June 8, 1998—like a

significant number of other C-Block license holders—

NextWave commenced a bankruptcy proceeding under

Chapter 11 of the Bankruptcy Code. App., infra, 33a-

34a. As contemplated by the Bankruptcy Code,

NextWave’s bankruptcy filing was intended to provide

it with breathing room sufficient to preserve its assets

and permit it to reorganize its business under the protec-

tion of the automatic stay.

By the time of the bankruptcy filing, NextWave had

expended not only the $474 million already paid to the

FCC, but also approximately $100 million on the build-

out and pre-activation phase of its network development

plan. It owed thousands of creditors in excess of $400

million. Nevertheless, NextWave had complied with

every regulatory requirement imposed by the FCC, and

was not delinquent on any payment to the FCC.

1 One of NextWave’s affiliates, NPPI, was high bidder

for certain F-Block licenses, which were issued to NextWave

in the spring of 1997. The bankruptcy court litigation with

the FCC initially involved only the debt related to the C-

Block licenses, until the FCC’s January 12 Public Notice

purported to cancel and announce re-auctions for both

NextWave’s C- and F-Block licenses.

B. The Original Bankruptcy Litigation

Upon the filing of a petition for protection under the

bankruptcy laws, NextWave assumed the statutory role

of debtor-in-possession, charged with the responsibility

to ensure that creditor claims are valid and represent

amounts for which the company received equivalent

value. Concurrent with the filing of its bankruptcy peti-

tion, NextWave (following the precedent set by other

insolvent C-block licensees) commenced a fraudulent

conveyance action against the FCC to challenge the

FCC’s claim. Pursuant to Section 544 of the Bank-

ruptcy Code, NextWave sought to have the amount of

its debt to the FCC adjusted to the value of the licenses

at the time they were granted and the debt incurred. See

11 U.S.C. § 544(b)(1). After trial, the bankruptcy court

ruled for NextWave, reducing NextWave’s indebtedness

under the notes to $1.023 billion, the fair market value

of the licenses on the date the licenses were granted.

99-1980 Pet. App. 112a, 117a-134a. The district court

affirmed. Jd. at 40a-S6a.

The Second Circuit reversed. App., infra, 101a-

139a. Contrary to the broad grant of bankruptcy juris-

diction conferred by 28 U.S.C. § 1334, the court of ap-

peals held that bankruptcy and district courts lack juris-

diction to adjudicate bankruptcy-related actions against

the FCC that implicate the FCC’s “regulatory” power.

Id. at 13a, 15a. The court reasoned that NextWave’s ob-

ligation to pay the full bid amount for the licenses was

“regulatory” in nature, and that 28 U.S.C. § 2342 and 47

U.S.C. § 402 grant “exclusive” jurisdiction over FCC

regulatory actions to the court of appeals. App., infra,

121a (“jurisdiction over claims brought against the FCC

in its regulatory capacity lies exclusively in the federal

courts of appeals”).

C. The Automatic Stay Litigation

As a result of NextWave’s extensive financing ef-

forts, aided substantially by the recovery of market con-

—e ee

ditions, NextWave was eventually able to raise suffi-

cient capital to pay in full its debt to the FCC and all of

its other creditors, emerge from bankruptcy, and pro-

ceed expeditiously to offer its PCS network to consum-

ers. NextWave is thus poised to fulfill the goals Con-

gress sought to achieve in enacting the Bankruptcy

Code and in mandating that portions of the spectrum be

auctioned to small and startup businesses.

Accordingly, on December 16, 1999, NextWave

filed a modified plan of reorganization providing, inter

alia, that the FCC would be paid in full, including all

past-due amounts, penalties, and interest. See Pet C.A.

App. 5, 13, 271.2. On January 11, 2000, in an effort to

; avoid further litigation, NextWave submitted an en-

hanced proposal to the FCC, offering to satisfy all pre-

; sent and future obligations to the FCC through a lump

sum cash payment in excess of $4.3 billion upon con-

firmation of the Plan. App., infra, 32a; Pet. C.A. App.

668-669.3

Notwithstanding NextWave’s ability and willingness

to satisfy its full bid price obligations, on January 12,

2000—only one day after NextWave’s lump sum offer,

4 and a mere nine days before scheduled plan confirma-

: tion—the FCC objected to confirmation of NextWave’s

: reorganization plan. The FCC asserted for the first time

that NextWave’s licenses had “automatically canceled”

at an unspecified date more than a year before—a full

DOs ha vide pe he OM a8 a

Tew al Rite <TR at i Pi

2 “Pet. C.A. App.” refers to the appendix of record mate-

rials filed by NextWave in the mandamus proceeding in the

‘ court of appeals.

3 The $4.3 billion payment, together with the $505 mil-

lion of license payments already made by NextWave, in-

cludes interest-on-interest and would total in excess of $4.8

billion, making it the largest payment ever made by a com-

pany to the United States government for any spectrum auc-

tion held to date.

eleven months prior to the Second Circuit’s original ju-

risdiction decision—ostensibly because NextWave had

not made timely interest payments during the pendency

of its bankruptcy case. App., infra, 31a-32a; Pet. C.A.

App. 700. The FCC also issued that same day a Public

Notice, purportedly scheduling an auction of Next-

= licenses for July 26, 2000. App., infra, 42a-

43a.

Applicable bankruptcy law, however, expressly pro-

hibits the FCC from revoking NextWave’s licenses on

this basis, and likewise permits NextWave to cure and

nullify the effects of any payment default. See 11

U.S.C. §§ 525(a), 1123(a)(S)(A), 1123(a)(S\(G), &

362(a). NextWave immediately sought relief in the

Bankruptcy Court from the FCC’s blatant violation of

those provisions of the Bankruptcy Code. On January

31, 2000, after briefing and an extended hearing, the

Bankruptcy Court held that the FCC’s attempted cancel-

lation of the licenses was void on several independent

grounds. App., infra, 30a-100a.

First, the court held that the purported cancellation

was void because it violated the automatic stay, 11

U.S.C. § 362(a), which generally prevents creditors and

others from taking steps to enforce liens or otherwise

deprive debtors of property that may be essential to a

successful bankruptcy reorganization. App., infra, 50a-

54a. Second, the court held that the FCC’s attempt to

seize the licenses for non-payment of interest install-

ments violated the right to “cure,” which permits debt-

ors who default on their contractual obligations during

bankruptcy to cure any such default in their plan of re-

organization and thereby nullify the consequences of the

4 The FCC has since amended that date, and now pro-

poses to reauction NextWave’s C- and F-Block licenses on

December 12, 2000. FCC Public Notice, DA 00-2038 (Sept.

6, 2000).

default. Id. at 54a-S6a, citing 11 U.S.C.

§§ 1123(a)(5)(G) and 1124(2)(A). The court explained

that “even if there was a default in the ‘timely’ payment

of installments under the Notes, the Bankruptcy Code

explicitly provides for the right to cure the default and

reinstate the obligation.” App., infra, 54a.

Third, the Bankruptcy Court held that no default had

in fact occurred. App., infra, 68a-72a. The court ex-

plained that “[a]ny notion of a legally cognizable ‘de-

fault’ presupposes that the debtors could have lawfully

made post-petition payments to the FCC in the first in-

stance,” but that by virtue of the Bankruptcy Code’s

general prohibition against payments of this kind “the

debtors could not have made post-petition payments on

account of this pre-petition claim” without express judi-

cial authorization. Jd. at 68a, citing 11 U.S.C.

§§ 102(1), 363.

Fourth, the court held that the FCC’s attempted can-

cellation was barred by the doctrines of estoppel and

waiver. App., infra, 72a-82a. The court found numer-

ous explicit and public representations by the FCC on

which NextWave, its creditors and investors had relied:

(1) that the automatic stay protected NextWave from

any obligation to make payments on the licenses pend-

ing reorganization; (2) that the FCC was subject to the

automatic stay; (3) that NextWave continued to hold the

licenses long after the purported “automatic” cancella-

tion date; and (4) that automatic cancellation had not

occurred and could not occur absent a judicial order lift-

ing the automatic stay. Jd. at 72a-78a. The court found

that “[a]ll parties in interest, including the FCC, con-

ducted themselves in a way which clearly demonstrated

reliance upon these assumptions.” Jd. at 76a (emphasis

in original). The court further found that the FCC

waived any timely-payment requirement. Jd. at 80a-

82a.

Based on its resolution of these issues, the bank-

ruptcy court found it unnecessary to resolve

NextWave’s claim that the FCC’s attempted cancella-

tion of the licenses for non-payment of interest install-

ments was expressly precluded by 11 U.S.C. § 525(a).

App., infra, 57a-61a. Section 525(a) provides that “a ~

governmental unit may not... revoke ... a license...

because [the] debtor ... has not paid a debt that is dis-

chargeable in the case under this title.”

Following the bankruptcy court’s ruling, the FCC

petitioned the court of appeals for a writ of mandamus

seeking a determination that the bankruptcy court’s de-

cision violated the mandate of the Second Circuit’s De-

cember 22, 1999 decision, and that the bankruptcy court

was without jurisdiction to apply or enforce the provi-

sions of the Bankruptcy Code permitting NextWave to

retain and pay for its licenses. On May 25, 2000, the

Second Circuit granted the FCC’s petition. App., infra,

la-29a.

The court of appeals held that its prior ruling on the

appeal in this case (App., infra, 101a-139a; see Pet. for

Cert. in No. 99-1980) prevented the bankruptcy court

from exercising jurisdiction to enforce the Bankruptcy

Code with respect to any regulatory action of the FCC.

“The bankruptcy court lacked jurisdiction to declare the

Public Notice [canceling and announcing the re-auction

of NextWave’s licenses] null and void on any ground:

that the Public Notice violated the automatic stay, that

the right to cure obviates any default, or that the gov-

ernment was estopped.” App., infra, 23a (emphasis

added). Once again, the court of appeals based its juris-

dictional holding entirely on 47 U.S.C. § 402(a) and 28

U.S.C. § 2342, which it concluded grant the federal

courts of appeals exclusive jurisdiction to review the

FCC’s actions. App., infra, 25a (“Exclusive jurisdiction

to review the FCC’s regulatory action lies in the courts

of appeals.”). Thus, the Second Circuit held that “[t]he

jurisdictional statutes leave no opening for the sort of ju-

risdiction over the FCC that the bankruptcy court seeks

to exercise.” Jd. The court of appeals further declared

ee ee ET

that it had “no doubt that the Public Notice . . . is an ap-

pealable decision or order of the FCC,” but held that “its

regulatory nature requires that it be appealed in the court

of appeals.” Jd. at 28a n.10.

REASONS FOR GRANTING THE WRIT

I. The Judgment Below Conflicts With The Gov-

erning Congressional Enactment And With This

Court’s Precedents

A. The Court Of Appeals’ Rejection Of Bank-

ruptcy Jurisdiction Is Irreconcilable With

The Plain Language Of 28 U.S.C. § 1334

And The Bankruptcy Code

By the express terms of 28 U.S.C. § 1334, Congress

granted the federal district and bankruptcy courts juris-

diction over all bankruptcy-related proceedings.5

Eliminating any possible doubt about the breadth of this

jurisdictional grant, Congress also mandated that this

grant of bankruptcy jurisdiction overrides all otherwise

applicable exclusive-jurisdiction provisions set forth in

any other statutes:

Notwithstanding any Act of Congress that confers

exclusive jurisdiction on a court or courts other than

the district courts, the district courts shall have

original but not exclusive jurisdiction of all civil

proceedings arising under title 11, or arising in or re-

lated to cases under title 11.

28 U.S.C. § 1334(b) (emphases added); see also H.R.

REP. NO. 595, 95th Cong., 2d Sess. 445 (1977), re-

printed in 1978 U.S.C.C.A.N. 5963, 6400 (Section

1334(b) “is the broadest grant of jurisdiction to dispose

5 Section 1334 refers to the federal district courts, but the

bankruptcy courts are generally entitled to exercise this ju-

risdiction as well pursuant to 28 U.S.C. § 157(a) & (b).

of proceedings that arise in bankruptcy cases or under

the bankruptcy code”).

Despite Congress’s unambiguous mandate that bank-

ruptcy jurisdiction under Section 1334(b) should over-

ride other exclusive-jurisdiction statutes, the court be-

low held that the bankruptcy court lacked jurisdiction to

apply the Bankruptcy Code’s “automatic stay” and

“cure” provisions—core bankruptcy principles that lie at

the heart of the Code’s “fresh start’ policies—to the

FCC because “[e]xclusive jurisdiction to review the

FCC’s regulatory action lies in the courts of appeals.”

App., infra, 25a. In rejecting bankruptcy jurisdiction

here, the Second Circuit relied on the very type of ex-

clusive-jurisdiction statutes that Section 1334(b)’s

“notwithstanding” clause expressly trumps. See id. at

25a-26a, citing 28 U.S.C. § 2342 (granting exclusive ju-

risdiction to courts of appeals to review final orders of

the FCC), and 47 U.S.C. § 402(b) (granting exclusive

jurisdiction to the District of Columbia Circuit to review

certain FCC licensing orders). The court of appeals’ er-

ror could not be more apparent: In blatant disregard of

the unambiguous provisions of Section 1334(b), the

court chose to enforce the exclusive jurisdiction provi-

sions of other statutes that Section 1334(b) expressly

renders inapplicable in the bankruptcy context.

Further confirming the egregiously wrong nature of

the decision below, the Bankruptcy Code makes it per-

fectly clear that governmental entities like the FCC en-

joy no exemption from bankruptcy jurisdiction. Far

from immunizing federal agencies from the authority of

bankruptcy courts to enforce the Code, Congress instead

insisted that federal agencies must submit themselves to

bankruptcy court adjudication of a wide array of issues

arising under the Code. Pursuant to Section 106(a) of

the Code, for example, the district and bankruptcy

courts “may hear and determine any issue arising with

respect to the application of . . . sections [362, 525, and

1141] to governmental units.” 11 U.S.C. § 106(a) (em-

Fe nse nen ae nT nt

phasis added). The court of appeals’ rejection of bank-

tuptcy court jurisdiction over such claims nullifies this

clear grant of bankruptcy court authority .§

Likewise, the decision below makes a mockery of

Section 525(a) of the Code, a provision that expressly

addresses and squarely prohibits the very type of gov-

ernment action at issue here. Section 525(a) commands

that “a governmental unit may not ... revoke .. . a li-

' cense ... because [the] debtor ... has not paid a debt

that is dischargeable in the case under this title.” 1]

U.S.C. § 525(a). The FCC, of course, did precisely

what Section 525(a) forbids, revoking NextWave’s li-

censes for non-payment of interest during NextWave’s

bankruptcy. The Second Circuit’s rationale—that bank-

ruptcy courts lack jurisdiction to affect “regulatory” de-

cisions of federal agencies—would eviscerate Section

525(a) as a meaningful protection against federal agency

4 license revocations. That result is wholly untenable, be-

i cause Congress extended the prohibitions of Section

525(a) to all “governmental unit[s],” a Category that in-

cludes any “department, agency, or instrumentality of

: the United States.” 11 U.S.C. § 101(27).’ For this rea-

©The judgment below also conflicts with 28 U.S.C.

§ 157(b), which delegates to the bankruptcy judge jurisdic-

tion over “matters concerning the administration of the es-

tate,” “confirmations of [reorganization] plans,” and “other

proceedings affecting ... the adjustment of the debtor-

creditor .. . relationship,” and with 11 U.S.C. § 1123, which

expressly authorizes bankruptcy courts to approve plans of

reorganization that permit a Chapter 11 debtor to cure any

default and retain its assets in exchange for the satisfaction

of a debt.

7 Similarly, the court of appeals’ holding cannot be

Squared with the Code’s automatic Stay provisions, which

plainly contemplate that agency attempts to revoke the li-

censes of debtors in bankruptcy would be barred by the

automatic stay. See 11 U.S.C. § 362(a) (preventing credi-

son as well, the court of appeals’ decision is plainly

wrong.

The judgment below is also inconsistent with 28

U.S.C. § 1334(e), which provides that the district court

has “exclusive jurisdiction of all of the . . . property of

the estate,” and with decisions of other courts of appeals

holding or assuming that FCC licenses are property of

the estate for bankruptcy purposes. See Jn re Central

Ark. Broad. Co., 68 F.3d 213, 214-15 (8th Cir. 1995); Jn

re Tak Communications, Inc., 985 F.2d 916, 918 (7th

Cir. 1993); Jn re Atlantic Bus. & Community Dev.

Corp., 994 F.2d 1069, 1075 (3d Cir. 1993). The court

below did not expressly address whether FCC licenses

are property of the estate for bankruptcy purposes, but

the court’s rejection of bankruptcy jurisdiction over

FCC licenses is irreconcilable with those authorities.

B. The Judgment Below Directly Conflicts

With This Court’s Precedents

The court of appeals’ rejection of bankruptcy juris-

diction in this case is squarely at odds with this Court’s

precedents. In Board of Governors v. MCorp Fin., Inc.,

502 U.S. 32 (1991), for example, this Court unequivo-

cally declared that Section 1334(b), by its plain terms,

“authorizes a district court to exercise concurrent juris-

diction over certain bankruptcy-related civil proceedings

that would otherwise be subject to the exclusive

jurisdiction of another court.” 502 U.S. at 41 (emphasis

added). Moreover, this Court has also emphasized that

“Congress intended to grant comprehensive jurisdiction

to the bankruptcy courts so that they might deal effi-

ciently and expeditiously with all matters connected

tors, including governmental agencies, from pursuing most

civil debt enforcement activities during a debtor’s bank-

ruptcy case); H.R. REP. No. 95-595, at 340, reprinted in

1978 U.S.C.C.A.N. at 6297 (“All proceedings are stayed, in-

cluding . . . license revocation”’) (emphasis added).

oe ee vere

with the bankruptcy estate.” Celotex Corp. v. Edwards,

314 U.S. 300, 308 (1995) (citation omitted; emphases

added). Indeed, as this Court noted in Celotex, the spe-

cial importance of Chapter 11 proceedings reinforces

the jurisdictional analysis, because bankruptcy jurisdic-

tion in such cases “may extend more broadly” than in

other contexts, and must encompass any proceeding that

could affect the debtor’s ability to formulate a feasible

plan of reorganization. See Celotex, 514 U.S. at 310.

By eviscerating the authority of bankruptcy courts to en-

force the provisions of the Bankruptcy Code and adjudi-

cate a large category of bankruptcy claims relating to

the rights and obligations of debtors, the court of ap-

peals violated the principles enumerated by this Court in

Celotex and MCorp.

The decision below is also irreconcilable with this

Court’s case law governing the interpretation of federal

statutes. This Court has held that “the use of ... a

‘notwithstanding’ clause [such as that included in Sec-

tion 1334(b)] clearly signals the drafter’s intention that

the provisions of the ‘notwithstanding’ section override

conflicting provisions of any other section.” Cisneros v.

Alpine Ridge Group, 508 U.S. 10, 18 (1993) (emphasis

added). The Second Circuit’s ruling, on the other

hand—that despite the plain meaning of Section

1334(b)’s “notwithstanding” clause, the exclusive-juris-

diction provisions of the FCA and the Hobbs Act pre-

clude bankruptcy-court review—is flatly inconsistent

with this Court’s construction of such clauses.®

8 The decision below also conflicts with the well-

established principle that a claimant (including a governmen-

tal entity) that files a claim in a bankruptcy case submits to

the jurisdiction of the bankruptcy court, and likewise to ap-

plication of the bankruptcy laws. See Langenkamp v. Culp,

498 U.S. 42, 44-45 (1990); Katchen v. Landy, 382 U.S. 323,

334-36 (1966); see also Commodity Futures Trading

Comm'n v. Schor, 478 U.S. 833, 841-44, 852 (1986). It is

This Court has also recognized that bankruptcy

courts have authority to apply the provisions of the

Bankruptcy Code in bankruptcy cases to prevent gov-

ernmental agencies from seizing or otherwise exercising

control over the assets of bankrupt debtors. See United

States v. Whiting Pools, Inc., 462 U.S. 198, 209 (1983)

(affirming bankruptcy court’s enforcement of the Bank-

ruptcy Code against the IRS and concluding that

“{njothing in the Bankruptcy Code or its legislative his-

tory indicates that Congress intended a special exception

for the tax collector.”). In this instance, the bankruptcy

court did nothing more than exercise its ordinary, core

jurisdiction to prevent the forfeiture of NextWave’s li-

censes, and in doing so did nothing more than enforce

what the Bankruptcy Code expressly directs.

II. The Second Circuit’s Decision Creates A Square

Circuit Conflict

The decision below also contradicts the decisions of

every court of appeals that has considered whether Sec-

tion— 1334 confers bankruptcy-court jurisdiction over

bankruptcy-related proceedings despite the existence of

statutes purporting to grant exclusive jurisdiction to a

different court. Contrary to the decision below, for ex-

ample, the Federal Circuit in Quality Tooling, Inc. v.

United States, 47 F.3d 1569 (Fed. Cir. 1995), held that

the district court in bankruptcy has concurrent jurisdic-

tion over government contract disputes notwithstanding

the provisions of the Tucker Act, which “purports to

make the Court of Federal Claims the exclusive trial

court for hearing” such claims. Jd. at 1572-73 (citing 28

U.S.C. §§ 1346(a)(2), 1491(a)(2)). The court held that

Section 1334(b) clearly overrides any competing exclu-

sive-jurisdiction statute:

undisputed that the FCC filed a proof of claim against

NextWave in this bankruptcy case asserting a liability in ex-

cess of $4.7 billion.

Congress ... anticipated that there would be claims

involving a bankrupt’s estate that, by statute, were as-

signed exclusively to some court other than a district

court. Congress, wishing to give the district court sit-

ting in bankruptcy plenary authority over the bank-

tupt’s estate and all claims by or against it, expressly

provided that the district court would have concurrent

jurisdiction over all claims, even those which by stat-

ute were within the exclusive jurisdiction of other

federal courts.

Id. at 1573 (emphases added). The Federal Circuit thus

concluded that “[t]here can be little doubt that, by stat-

ute, both the District Court, sitting in bankruptcy, and

the Court of Federal Claims are empowered with subject

matter jurisdiction over this . . . dispute.” Jd.

The Third Circuit has similarly held that Section

1334(b) provides bankruptcy and district courts with ju-

risdiction despite the existence of a conflicting statutory

grant of exclusive jurisdiction to another court. See

Brock, 829 F.2d at 385-86. Although 29 U.S.C.

§ 660(b) purported to grant to the courts of appeals

“original and exclusive jurisdiction” to review the fed-

eral agency order at issue in that case, the Third Circuit

explained that “section 1334(b) alters the effect of the

jurisdictional grant of section 660(b) by expressly

rendering it non-exclusive.” Jd. at 385. Thus, con

to the Second Circuit’s approach, the Brock court held

that, notwithstanding any other statutory grant of exclu-

sive jurisdiction to a different court, “the effect of 28

U.S.C. § 1334(b) is to grant the district court overseeing

the bankruptcy concurrent original jurisdiction.” /d.;

see also In re University Med. Ctr., 973 F.2d 1065,

1072, 1073-74 (3d Cir. 1992). -

The Ninth Circuit has reached this same conclusion,

declaring that Section 1334(b) demonstrates Congress’s

clear intent “‘to bring all bankruptcy-related litigation

within the umbrella of the district court, . . . irrespective

of congressional statements to the contrary in the con-

text of other specialized litigation.’” In re Town &

Country Home Nursing Servs., Inc., 963 F.2d 1146,

1155 (9th Cir. 1992) (citation omitted; emphasis added).

Indeed, the Ninth Circuit has recently reaffirmed that

“the purpose of [Section 1334(b)] is . . . to allow district

courts in which the bankruptcy case is filed to adjudi-

cate bankruptcy-related actions in which jurisdiction has

been vested in other courts.” In re Gruntz, 202 F.3d

1074, 1083 (9th Cir. 2000) (emphasis added).9

In a matter strikingly similar to the instant case, the

Fifth Circuit has allowed a bankruptcy court to exercise

jurisdiction over the FCC. In United States v. GWI

PCS 1, Inc., 245 B.R. 59 (N.D. Tex. 1999) the district

court affirmed the bankruptcy court’s ruling in favor of

C-Block license holders that brought a fraudulent con-

veyance action against the FCC, concluding that the li-

cense holders were permitted to retain the licenses,

while avoiding more than $900 million of the original

$1.06 billion bid as a fraudulent conveyance. Jd. at 60-

61. In direct contrast to the Second Circuit’s rejection

of bankruptcy-court jurisdiction, the Fifth Circuit de-

clined even to grant the FCC a stay of plan confirmation

pending disposition of the FCC’s appeals. Jn re United

9 Lower federal courts have reached the same conclu-

sion. See, e.g., Jn re Kansas Personal Communications Ser-

vices, Ltd., 252 B.R. 179, 2000 WL 1199798 (Bankr. D.K.

Aug. 16, 2000) (expressly rejecting the jurisdictional holding

of the Second Circuit in this case as “fundamentally wrong,”

“unprecedented,” and “without ment”); Jn re Horizon Air,

Inc., 156 B.R. 369, 377-78 (N.D.N.Y. 1993) (district court

has jurisdiction over challenge to FAA’s order revoking op-

erating certificate); Jn re Bulldog Trucking, Inc., 150 B.R.

912, 915-16 (W.D.N.C. 1992) (Section-1334(b) grants con-

current jurisdiction despite Section 2342); In re Transcon

Lines, 147 B.R. 770, 774 (Bankr. C.D. Cal. 1992) (same).

States, No. 98-11123 (Sth Cir. Oct. 7, 1998); see 245

B.R. at 61.10

Thus, unlike the Second Circuit below, the Third,

Fifth, Ninth, and Federal Circuits have given full effect

to the broad grant of bankruptcy jurisdiction set forth in

28 U.S.C. § 1334, and have recognized correctly that

Section 1334(b) confers bankruptcy jurisdiction even

over proceedings that might otherwise be subject to the

exclusive jurisdiction of another court. This Court’s re-

view is warranted to resolve the stark conflict that now

exists among the circuits over whether otherwise appli-

cable exclusive-jurisdiction provisions oust bankruptcy

and district courts of their Section 1334 jurisdiction.

III. The Question Of Federal Bankruptcy Jurisdic-

tion Presented In This Case Is Important And

Recurring, And Merits This Court’s Review

By permitting otherwise applicable exclusive-juris-

diction provisions to trump the bankruptcy court’s Sec-

tion 1334 jurisdiction, the decision below effectively

nullifies Congress’s express command and creates an

amorphous and infinitely elastic “regulatory” exception

to bankruptcy-court jurisdiction. Under the Second Cir-

cuit’s approach, every federal agency whose decisions

are reviewable pursuant to an exclusive-jurisdiction

provision could characterize a bankruptcy-related pro-

ceeding as interfering with its “regulatory” functions,

thereby obtaining immunity from bankruptcy-court ju-

risdiction. The result would be regular evasions of Con-

gress’s clear mandate that district and bankruptcy courts

hearing bankruptcy cases must possess authority to

address all aspects of the debtor’s rights and respon-

10 The FCC’s subsequent appeals in GWI were rejected

by the district court. 245 B.R. at 64. An appeal of the dis-

trict court’s decision is currently pending in the Fifth Circuit.

FCC v. GWI PCS 1, Inc., No. 99-11294 (Sth Cir. oral arg.

Feb. 3, 2000).

sibilities in order to ensure a complete and efficient

resolution of the bankruptcy.!!

Congress has enacted numerous provisions that pur-

port to vest exclusive jurisdiction in courts other than

the district courts. For example, the Second Circuit

based its decision in part on an exclusive-jurisdiction

provision of the Hobbs Act, 28 U.S.C. § 2342(1), which

grants exclusive jurisdiction over FCC final orders to

the courts of appeals. That same act, however, also

grants to the courts of appeals exclusive jurisdiction

over final orders, rules, regulations, or actions of six

other departments or agencies. See 28 U.S.C.

§§ 2342(2) (Department of Agriculture), 2342(3)(A)

(Department of Transportation), 2342(3)(B) (Federal

Maritime Commission), 2342(4) (Atomic Energy

Commission); 2342(5) (Surface Transportation Board),

2342(6) (Department of Housing and Urban Develop-

ment), and 2342(7) (Department of Transportation).

The Second Circuit also relied in part on the exclu-

sive jurisdiction of the D.C. Circuit to review FCC li-

censing orders under the FCA, 47 U.S.C. § 402(b). The

D.C. Circuit has been granted exclusive jurisdiction to

review decisions of several other administrative agen-

cies as well, including the Federal Election Commission

(see 2 U.S.C. § 437g(a)(8)(A)) and the Environmental

Protection Agency (see, e.g., Safe Drinking Water Act,

42 U.S.C. § 300j-7(a); Clean Air Act, 42 U.S.C.

§ 7607(b); Comprehensive Environmental Response,

Compensation, and Liability Act, 42 U.S.C. § 9613(a)).

In addition, several other courts, including the Court of

11 The impact of the Second Circuit’s revolutionary ju-

risdictional holding is already being felt in other pending

bankruptcy cases. In Jn re Personal Communications Net-

work, Inc., 249 B.R. 233, 236-37 (Bankr. E.D.N.Y. 2000),

the court relied on the Second Circuit’s construction in hold-

ing that it lacked jurisdiction over the debtor’s FCC licenses

because the FCC had purported to cancel them.

Federal Claims, the Federal Circuit, ‘the Court of Inter-

national Trade, and the Court of Veterans Appeals, also

possess exclusive jurisdiction over specific types of

claims. See, e.g., 28 U.S.C. § 1491 (granting the Court

of Federal Claims exclusive jurisdiction over certain

claims against government agencies); 28 U.S.C.

§ 1295(a)(6)-(14) (granting the Federal Circuit exclu-

sive jurisdiction to review certain determinations by the

Secretary of Commerce, the Merit Systems Protection

Board, agency boards of contract appeals, and various

other matters); 28 U.S.C. § 1581 (providing the Court of

International Trade with exclusive jurisdiction over the

review of certain administrative decisions involving tar-

iffs); 38 U.S.C. § 7252 (providing the Court of Veterans

Appeals with exclusive jurisdiction to review decisions

by the Board of Veterans’ Appeals); 49 U.S.C.

§ 46110(a) (granting the courts of appeals exclusive ju-

risdiction over final action by the Federal Aviation Ad-

ministration).

There is thus no principle that would limit the impact

of the Second Circuit’s decision to the FCC. Rather,

under the rule adopted below, whenever an agency

whose decisions are reviewable under an exclusive-

jurisdiction provision characterizes a bankruptcy claim

or proceeding as relating to its “regulatory” function, the

agency would be immunized from bankruptcy-court ju-

risdiction. As a result, resolution of the estate’s claims

would be fractured and dispersed over multiple courts,

despite Congress’s clear intent that the bankruptcy

courts have centralized control over the resolution of

debtors’ estates, and that the Bankruptcy Code apply to

agencies when dealing with debtors in bankruptcy.

Such a result would frustrate the paramount purposes of

the Bankruptcy Code and would dramatically alter the

careful and reticulated balance that Congress has struck

between creditors’ and debtors’ rights in the Code.

Bankruptcy courts would be powerless to apply the pro-

visions of the Bankruptcy Code to prevent federal agen-

cies from summarily seizing assets from a bankruptcy

estate. The consequences would be seriously detrimen-

tal, not only for debtors attempting reorganization, but

also for countless creditors, investors, employees, and

other innocent third parties who depend upon the equi-

table and efficient resolution of bankruptcies.

Congress, in fact, recognized the overarching impor-

tance of vesting bankruptcy courts with the broadest

~ possible jurisdiction, and the Second Circuit’s wholesale

rejection of Congress’s policy determination presents a

further compelling justification for this Court’s review.

As the House Report on Section 1334 explained, that

section’s “comprehensive” grant of bankruptcy-court

jurisdiction was “a significant change from current

law,” and was necessary to “greatly diminish the basis

for litigation of jurisdictional issues which consumes so

much time, money, and energy of the bankruptcy sys-

tem and of those involved in the administration of debt-

ors’ affairs.” H.R. REP. NO. 595 at 46, 445, reprinted in

1978 U.S.C.C.A.N. at 6007, 6400. The Senate Report

further explained, “[t]his broad grant of jurisdiction will

enable the bankruptcy courts ... to dispose of contro-

versies that arise in bankruptcy cases or under the bank-

ruptcy code ... [including] [a]ctions that formerly had

to be tried in [other courts] at great cost and delay to the

estate.” S. REP. NO. 989, 95th Cong., 2d Sess. 153

(1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5939.

This Court, moreover, has recognized that bank-

ruptcy-court jurisdiction, particularly in Chapter 11

cases, serves the important purposes of “provid[ing] for

reorganization with the aim of rehabilitating the debtor _

and avoiding forfeitures by creditors.” Pioneer Inv.

Servs. Co. v. Brunswick Assoc. Ltd., 507 U.S. 380, 389

(1993) (citation omitted). As this Court has also ex-

plained, however, those important purposes can be

achieved only by honoring the Bankruptcy Code’s care-

fully calibrated network of compromises, and thus

courts must be especially careful not to upset the bal-

ance struck by Congress: “[B]y adding through judicial

fiat, a new and powerful weapon to the creditor’s arse-

nal, the new rule could radically alter the balance be-

tween debtor’s and creditor’s rights which has been de-

veloped over centuries through many laws—including

_ those relating to bankruptcy, fraudulent conveyances,

and preferences.” Grupo Mexicano de Desarrollo, S.A.

v. Alliance Bond Fund, Inc., 527 U.S. 308, 331 (1999).

The decision below, by creating a broad exception to

bankruptcy courts’ Section 1334 jurisdiction, achieves

precisely that forbidden result.

The Second Circuit’s holding that the FCC’s pur-

ported “regulatory” functions are completely outside the

purview of bankruptcy, for example, not only frustrates

the purposes of Section 1334(b), but also contradicts

several other provisions of the Bankruptcy Code that re-

veal Congress’s intent that regulatory agencies be sub-

ject to the bankruptcy process rather than be exempted

from it ab initio. As discussed in Point I above, numer-

ous provisions of the Code demonstrate that Congress

expected bankruptcy courts to have jurisdiction to re-

view regulatory actions affecting bankruptcy proceed-

ings, specifically including agency efforts to revoke li-

censes held by debtors in bankruptcy. See 11 U.S.C.

§ 525(a); see also 11 U.S.C. §§ 101(27), 106, 362; see

generally pp. 12-13, supra. The decision below, by de-

priving bankruptcy courts of authority to enforce provi-

sions of the Bankruptcy Code expressly aimed at such

agency action, frustrates Congress’s evidence purposes

in enacting the Code.

The Code’s general applicability to federal regula-

tory agencies is also demonstrated by the presence of

specific exceptions for such agencies—including excep-

tions to the automatic stay of 11 U.S.C. § 362, a bedrock

provision of the Code. Congress has expressly ex-

empted certain limited exercises of “police or regulatory

power” from some aspects of the automatic stay, see 11

U.S.C. § 362(b)(4), and has created other, more specific

exceptions for certain acts by individual agencies. See,

e.g., id. § 362(b)(8) (Secretary of Housing and Urban

Development); id. § 362(b)(12) (Secretary of Transpor-

tation); id. § 362(b)(13) (Secretary of Commerce); id.

§ 362(b)(16) (Secretary of Education); see also id.

§ 525(a) (excepting some acts of the Department of Ag-

riculture from the license-cancellation ban); id. §§ 555,

556, 761 (creating different bankruptcy rules for liqui-

dating commodity brokers, securities contracts, com-

modities contracts, and forward contracts). No such ex-

ceptions exist for the FCC. Nor, of course, does any

bankruptcy provision broadly exempt any agency from

the Bankruptcy Code, or from bankruptcy courts’ power

to apply the Code.

As the clear and carefully limited exceptions con-

tained in the Bankruptcy Code demonstrate, if Congress

had intended to alter the fundamental purpose and bal-

ance of the Code by creating a broad exception to the ju-

risdictional provisions for certain federal agencies act-

ing in their “regulatory capacity” (App., infra, 16a, 20a),

it would have done so explicitly. See United States v.

Whiting Pools, Inc., 462 U.S. 198, 209 (1983). The

sweeping immunity for federal agencies created by the

court below thwarts Congress’s obvious desire to vest

bankruptcy courts with the widest possible jurisdiction

over all bankruptcy-related matters. The proposition

that a bankruptcy court is prevented from enforcing the

express provisions of the Bankruptcy Code against a

federal agency in the administration of a bankruptcy

case is simply inconceivable. It would engender wide-

spread confusion regarding the hitherto unquestioned

scope of bankruptcy jurisdiction, and would render cha-

otic the administration of bankruptcy cases nationwide.

The Second Circuit’s decision also creates a jurisdic-

tional Catch 22 for debtors seeking protection under the

bankruptcy laws, because it effectively authorizes fed-

eral agencies to take action against a debtor based solely

on the debtor’s compliance with the federal bankruptcy

laws. As a general rule, the Bankruptcy Code prohibits

debtors in chapter 11 cases from making payments to

creditors, including governmental agencies, outside the

terms of a confirmed chapter 11 plan.!2 NextWave’s

compliance with this rule, which is designed to ensure

fair treatment of all creditors, formed the basis for the

FCC’s purported cancellation of NextWave’s licenses.

The court of appeals nonetheless divested the bank-

ruptcy and district courts of jurisdiction to enforce the

Bankruptcy Code’s clear prohibitions against such con-

duct—which include the automatic Stay, the right to

“cure” defaults, and the prohibition against license can-

cellation for non-payment of debts. 11 U.S.C. §§ 362,

525, 1123, 1124. Thus, the effect of the decision below

is to deprive regulated companies of the opportunity to

exercise rights under the bankruptcy laws that are avail-

able to all other companies.

By permitting exclusive-jurisdiction statutes to

trump Section 1334(b)’s grant of bankruptcy jurisdic-

tion, the judgment of the Second Circuit in this Case vio-

lates the congressional plan, gives federal agencies an

overwhelming and unfair advantage over other creditors

in bankruptcy proceedings, and all but eliminates the

ability of bankruptcy courts to enforce the provisions of

the Code in the everyday administration of a bankruptcy

case when a federal agency is involved in the proceed-

ings. The decision validates even the most egregious

form of federal agency interference with the administra-

tion of bankruptcy estates, because it precludes bank-

ruptcy courts from enforcing federal agency compliance

with fundamental Code provisions designed to protect

12 See, e.g., Official Comm. of Equity Sec. Holders y.

Mabey, 832 F.2d 299, 302 (4th Cir. 1987) (“The clear lan-

guage of [chapter 11], as well as the Bankruptcy Rules appli-

cable thereto, does not authorize the payment in part or in

full, or the advance of monies to or for the benefit of ...

claimants prior to the approval of the plan of reorganiza-

tion.”); Pet. App. 68a-72a.

the debtor’s assets for the benefit of all creditors. This

Court’s review is essential to prevent the decision below

from upsetting the careful balance struck by Congress in

the Bankruptcy Code.

CONCLUSION

The judgment of the court of appeals flatly contra-

dicts Congress’s unambiguous grant of bankruptcy-

court jurisdiction, the decisions of this Court, and the

holdings of every other court of appeals that has ad-

dressed the important question at issue in this case. Ac-

cordingly, the Court may wish to consider summary re-

versal, vacating the judgment of the court of appeals and

remanding to permit the normal process of appellate re-

view of the bankruptcy court’s automatic stay order to

proceed. SuP. CT. R. 16.1. In the alternative, the peti-

tion for a wmit of certiorari should be granted and the

case set for full briefing and argument. ‘

Respectfully submitted.

Of Counsel: THEODORE B. OLSON

DEBORAH L. SCHRIER-RAPE Counsel of Record

MICHELLE V. LARSON DOUGLAS R. Cox

ANDREWS & KURTH LLP THOMAS G. HUNGAR

1717 Main Street DAVID B. SALMONS

Suite 3700 GIBSON, DUNN & CRUTCHER LLP

Dallas, TX 75201 1050 Connecticut Avenue, N.W.

(214) 659-4400 Washington, D.C. 20036

(202) 955-8500

G. ERIC BRUNSTAD, JR.

BINGHAM DANA LLP DONALD B. VERRILLI

One State Street JENNER & BLOCK

Hartford, Connecticut 06103 691 Thirteenth Street, N.W.

(860) 240-2700 Washington, D.C. 20005

(202) 639-6000

Counsel for Petitioner

September 21, 2000

APPENDIX

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

In re FEDERAL COMMUNICATIONS COMMIS-

SION, Petitioner.

No. 992, Docket No. 99-5063.

217 F.3d 125

May 25, 2000

, OPINION:

JACOBS, Circuit Judge:

The Federal Communications Commission (“FCC”)

petitions this Court for a writ of mandamus to the United

States Bankruptcy Court for the Southern District of

New York (Hardin, B./.). On February 7, 2000, the

bankruptcy court issued an order prohibiting the FCC

from re-auctioning spectrum licenses previously held by

debtor NextWave Personal Communications, Inc.

(“NextWave”). The FCC argues that the bankruptcy

court’s order violated this Court’s mandate, expressed in

In re NextWave Personal Communications, Inc., 200

F.3d 43 (2d Cir. 1999) (NextWave Appeal), which held

that it was beyond the bankruptcy court’s jurisdiction

“to mandate that a licensee be allowed to keep its license

despite its failure to meet the conditions to which the

license is subject.” Jd. at 54.

In our NextWave decision, this panel (1) rejected the

bankruptcy court’s determination that the FCC’s re-

quirement of full payment as a condition for spectrum

licensure lacked a regulatory purpose, and (2) reversed a

judgment modifying that condition. On remand, the

bankruptcy court has (1) determined that the FCC’s re-

quirement of timely payment as a licensing condition is

without regulatory purpose, and (2) nullified an FCC de-

cision based on an asserted violation of that condition.

The FCC contends that the timely-payment requirement

(like the ful]-payment requirement) is (1) a regulatory

condition for licensure, (2) within this Court’s NextWave

mandate, and (3) in any event, outside the limited juris-

diction of the bankruptcy court.

Because we conclude that the bankruptcy court’s rul-

ing violates our prior mandate, and that the FCC’s li-

censing decisions are subject to the exclusive jurisdic-

tion of the federal courts of appeals and outside the lim-

ited jurisdiction of the bankruptcy court, the petition is

GRANTED. We make no comment on the prospects of

the (precautionary) appeals filed by NextWave in the

Court of Appeals for the District of Columbia Circuit.

BACKGROUND

A. The previous appeal!

In summer 1996, Next'Wave was the high bidder at

FCC auctions for 63 personal communications services

(“PCS”) spectrum licenses (the “Licenses’’).

NextWave’s winning bids aggregated $4.74 billion. Be-

cause NextWave enjoyed the status of a “small busi-

ness,” only ten percent of the amount bid was required

to be paid in cash. See 47 C.F.R. § 24.711(b)(3). On

February 14, 1997, following some further proceedings

to correct NextWave’s noncompliance with statutory

ownership requirements, the FCC granted the Licenses

to NextWave, conditioned upon issuance of a series of

promissory notes for the $4.27 billion balance of

NextWave’s obligations. NextWave promptly executed

the notes.

1This Court’s previous opinion contains a more com-

plete recounting of relevant events that occurred prior to the

December 22, 1999 issuance of that opinion. See NextWave

Appeal, 200 F.3d at 46-50.

By the time these notes were executed, further auc-

tions had been conducted at which similar licenses had

been auctioned at prices significantly lower than

NextWave’s winning bids. Alarmed that as a result it

had bid beyond its capacity to obtain financing,

NextWave sought relief from the FCC and the Court of

Appeals for the District of Columbia Circuit. Those ef-

forts were unsuccessful.2 On June 8, 1999, NextWave

filed a bankruptcy petition under Chapter 11 and com-

menced an adversary proceeding against the FCC. See

NextWave Personal Communications, Inc. v. FCC (In re

NextWave Personal Communications, Inc.), 235 B.R.

_ 263, 267 (Bankr. S.D.N.Y. 1998) (NextWave J).

2See NextWave Telecom Inc. v. FCC, No. 98-1255, 1998

WL 389116 (D.C. Cir. June 5, 1998) (order denying stay

pending review); Jn the Matter of Petition of NextWave Tele-

com, Inc. for a Stay of the June 8, 1998, Personal Communi-

cations Services C Block Election Date (Order), 13 F.C.C.R.

11880, 1998 WL 278735 (FCC June 1, 1998); see also In the

Matter of Amendment of the Commission’s Rules Regarding

Installment Payment Financing for Personal Communications

Services (PCS) Licensees, Second Report and Order and Fur-

ther Notice of Proposed Rule Making, 12 F.C.C.R. 16436,

1997 WL 643811 (FCC Oct. 16, 1997); In the Matter of

Amendment of the Commission's Rules Regarding Install-

ment Payment Financing for Personal Communications Ser-

vices (PCS) Licensees, (Order on Reconsideration of the Sec-

ond Report and Order), 13 F.C.C.R. 8345, 1998 WL 130176

(FCC Mar. 24, 1998); Jn the Matter of Amendment of the

Commission's Rules Regarding Installment Payment Fi-

nancing for Personal Communications Services (PCS) Licen-

sees, (Second Order on Reconsideration of the Second Re-

port and-Order), FCC 99-66, 14 F.C.C.R. 6571, 1999 WL

183822 (FCC Apr. 5, 1999).

In the adversary proceeding, NextWave alleged that

the transaction by which it was granted the Licenses was

a fraudulent conveyance and therefore avoidable under

§ 544 of the Bankruptcy Code. See id. at 269 (citing 11

U.S.C. § 544). The FCC argued that the bankruptcy

court lacked subject matter jurisdiction over

NextWave’s claim because exclusive jurisdiction to re-

view FCC regulatory actions is lodged in the courts of

appeals pursuant to 28 U.S.C. § 2342 and 47 U.S.C.

§ 402. The bankruptcy court rejected this argument,

holding that in its effort to collect the full auction price

of the Licenses, the FCC was acting solely as a creditor,

and not as a regulator. See NextWave I, 235 B.R. at 269-

71. The bankruptcy court thus concluded that subject

matter jurisdiction was sound and proceeded to try

NextWave’s claims.

At the conclusion of trial, the bankruptcy court found

that at the time the Licenses were granted, they were

worth only $1.023 billion (determined by comparison to

similar licenses auctioned subsequently), and that any

obligation in excess of that amount was avoidable as a

constructive fraud. See NextWave Personal Communi-

cations, Inc. v. FCC (In re NextWave Personal

Communications, Inc.), 235 B.R. 277, 304 (Bankr.

S.D.N.Y. 1999) (NextWave IV.A). In effect, the

avoidance remedy reduced by more than three-quarters

the total amount NextWave had bid at auction. See 11

U.S.C. § 544; NextWave IV.A, 235 B.R. at 304;

NextWave Personal Communications, Inc. v. FCC (In re

NextWave Personal Communications, Inc.), 235 B.R.

305, 306-07 (Bankr. S.D.N.Y. 1999) (NextWave IV.B).

The FCC appealed the bankruptcy court’s judgment

to the United States District Court for the Southern Dis-

trict of New York (Brieant, J/.), which affirmed for rea-

sons substantially the same as those stated by the bank-

ruptcy court. See NextWave Personal Communications,

Inc. v. FCC (In re NextWave Personal Communications,

Inc.), 241 B.R. 311, 315-16, 319-21 (S.D.N.Y. 1999).3

The FCC appealed to this Court. On November 24,

1999, we issued an order (with opinion to follow) re-

versing the ruling that NextWave’s obligation to the

FCC was a fraudulent conveyance, and we remanded the

case to the bankruptcy court for further proceedings.

See NextWave Appeal, 200 F.3d at 45-46, 62.

Our opinion issued on December 22, 1999. We ex-

plained that spectrum licenses (of which PCS licenses

form a subset) are distributed by auction because “a

method was needed that would direct licenses toward

those entities and technologies that would put them to

the best use,” and because “Congress came to the con-

clusion that using market forces to allocate spectrum”

3The district court affirmed five decisions of the bank-

ruptcy court: Jn re NextWave Personal Communications,

Inc., 235 B.R. 314 (Bankr. S.D.N.Y. 1999) (June 16, 1999

decision denying the motion to lift the automatic stay)

(NextWave V); NextWave IV.A, 235 B.R. 277 (May 12, 1999

decision on the fraudulent conveyance claim), supplemented

by NextWave IV.B, 235 B.R. 305 (June 22, 1999 decision on

remedy); NextWave Personal Communications, Inc. v. FCC

(In re NextWave Personal Communications, Inc. ), No. 98-

21529 (Bankr. S.D.N.Y. Apr. 2, 1999) (oral denial of the

FCC’s motion to dismiss) (NextWave III); NextWave Per-

sonal Communications, Inc. v. FCC (In re NextWave Per-

sonal Communications, Inc.), 235 B.R. 272 (Bankr. S.D.N.Y.

1999) (Feb. 16, 1999 decision denying to the FCC and grant-

ing to the debtor partial summary judgment with regard to the

date upon which the obligations were incurred) (NextWave

Il); and NextWave I, 235 B.R. 263 (Dec. 7, 1998 decision

granting in part and denying in part the FCC’s motion to

dismiss).

would best achieve such a distribution. Jd. at 51. In au-

thorizing the FCC to develop a system of spectrum auc-

tions, Congress had regulatory objectives, and was not

chiefly interested in maximizing license-holders’ contri-

butions to the fisc:

[T]he broader purpose of [47 U.S.C. § 309(j), the

statutory provision authorizing spectrum auc-

tions,] was to create an efficient regulatory re-

gime based on the congressional determination

that competitive bidding is the most effective way

of allocating resources to their most productive

uses. The FCC was not asked to sell off the spec-

trum (something it did not own) in an effort to

raise as much money as possible; it was not asked

to develop a free-market system to maximize

revenue. Instead, it was told to auction licenses

to the highest bidder because such a system was

thought likely to promote the development of

new technologies and encourage efficient use of

the spectrum, while simultaneously recouping

some of the value of the spectrum for the public.

NextWave Appeal, 200 F.3d at 52 (emphasis added;

footnote omitted).

Congress mandated that spectrum licenses be dis-

tributed by auction because auction “bids constitute a

reliable index of the bidders’ commitments to exploit

and make the most of the license at issue.” Jd. at 59.

The auction-based scheme “reflect[s] a classical belief in

the efficacy of market forces,” the “fundamental ration-

ale” of which is that “[t]hose qualified bidders” most

likely to make efficient, technologically dynamic use of

the spectrum are, on average, those to whom the spec-

trum licenses are most valuable, and therefore are “those

who should be awarded the licenses.” Jd. at 52-53. Thus

the spectrum auctions are “a regulatory tool for ensuring

that licenses are distributed in the way that fulfils the

goals of the [Federal Communications Act (‘FCA’)].”

Id. at 53 (emphasis added).

- eee

TN nT ae Ee ee ee eee en

Having determined that the purpose of spectrum auc-

tions was chiefly regulatory, not fiscal, we then turned to

the FCC’s exclusive jurisdiction over regulation of the

spectrum. Noting that the FCC’s exclusive jurisdiction

over licensing matters extended to the conditions placed

on licenses, we held that “[w]hen the FCC decides

which entities are entitled to spectrum licenses under

tules and conditions it has promulgated,” it is exercising

a quintessentially regulatory power. Jd. at 54. We rec.

ognized that pursuant to 28 U.S.C. § 2342 and 47 U.S.C.

§ 402,-review of the FCC’s regulatory decisions and or-

ders is entrusted solely to the federal courts of appeals

and is therefore outside the jurisdiction of the bank-

ruptcy and district courts. See id.

Finally, we examined the bankruptcy court’s deci-

sions to determine whether they intruded upon the

FCC’s exclusive jurisdiction over spectrum licensing

and the courts of appeals’ exclusive jurisdiction to re-

view the FCC’s licensing decisions. We determined that

the full payment of winning bids was a regulatory condi-

tion for the retention of licenses by successful bidders:

NextWave’s inability to follow through on its fi-

nancial undertakings had more than financial im-

plications. It indicated that under the predictive

mechanism created by Congress to guide the

FCC, NextWave was not the applicant most

likely to use the Licenses efficiently for the bene-

fit of the public in whose interest they were

granted. It meant, in regulatory terms, that

NextWave was not entitled to the Licenses.

Id. (emphasis added). Because “(t]he FCC’s auction

tules . .. have primarily a regulatory purpose,” we held

that the approach taken by the bankruptcy and district

courts--which allowed NextWave to keep PCS licenses

under conditions that the FCC considered non-

compliant--was “fundamentally mistaken.” Jd.

We thus held that even where the regulatory condi-

tions imposed on a license take the form of a financial

obligation, the bankruptcy and district courts lack juris-

diction to interfere in the FCC’s allocation. Therefore,

“even if the bankruptcy and district courts were right in

concluding that granting the Licenses at a small fraction

of NextWave’s original successful bid price best effec-

tuated the FCA’s goals, they were utterly without the

power to order that NextWave be allowed to retain them

for that reason or on that basis.” Jd. at 55 (emphasis

added; internal citations omitted).

B. Subsequent events

On December 16, 1999--after this Court held that the

FCC’s licensing requirements were not subject to altera-

tion in the bankruptcy court--NextWave filed modifica-

tions to its proposed plan of reorganization. Until then,

NextWave had been contending that payment of the

$4.27 billion still owed was beyond its capacity and that

the incurring of the debt was a constructive fraud. But

under its proposed modifications to the plan, NextWave

would pay in full its overdue obligation to the FCC and

~ undertake to pay the notes as they come due.4 See In re

NextWave Personal Communications Inc., 244 B.R. 253,

262 (Bankr. S.D.N.Y. 2000) (“NextWave VI’).

On January 11, 2000, NextWave sweetened its offer

to the FCC and proposed to pay in a single lump sum the

4The bankruptcy court characterizes the modifications

proposed on December 16 as an offer made “regardless of the

outcome of the appeal in the Circuit Court.” Jn re NextWave

Personal Communications Inc., 244 B.R. 253, 262 (Bankr.

S.D.N.Y. 2000). The order reversing the judgment below was

issued on November 24, however, so the outcome of the

FCC’s appeal was known at the time of the proposed modifi-

cations. See NextWave Appeal, 200 F.3d at 45-46.

present value of its billions of dollars in notes. The

lump-sum payment proposal was new and not part of

NextWave’s proffered modifications.

The day after NextWave’s lump-sum offer, on Janu-

ary 12, 2000, the FCC issued a Public Notice of an

“Auction of C and F Block Broadband PCS Licenses”

(the “Public Notice”), in which the FCC announced the

- re-auction of the Licenses then held by NextWave. The

Public Notice made no mention of the previous licensee,

but the FCC’s memorandum objecting to the modified

reorganization plan explains that the cancellation of the

Licenses was occasioned by NextWave’s default under

the terms of the Licenses. According to the FCC, that

default resulted in the “automatic[] cancel[I]ation” of the

Licenses. See id.

In particular, NextWave had failed to make timely

payments on the Licenses, as the licensing agreements

obligated it to do. The FCC maintains that such a failure

results in automatic license cancellation:

In light of the Second Circuit’s ruling, it is clear

that the Debtors’ C and F block PCS licenses

automatically canceled pursuant to the terms and

conditions upon which they were granted. Given

that a licensee’s failure to comply with a license’s

full and timely payment condition automatically

results in the termination of a spectrum authoriza-

tion, requiring no affirmative steps by the FCC,

see 47 C.F.R. §1.2110,...the automatic stay

provisions of the Bankruptcy Code, 11 U.S.C.

§ 362, are not implicated by the cancellation of

the Debtors’ C and F block PCS licenses... .

Accordingly, the Debtors are divested of their C

and F block PCS spectrum rights. . . .

Objection of Federal Communications Commission to

Debtors’ Modified First Amended Joint Plan of Reor-

ganization, Jn re NextWave Personal Communications,

Inc., No. 98 B 21529 (ASH), at 3-4 (Bankr. S.D.N.Y.

10a

Jan. 12, 2000) (FCC Objection). According to the Pub-

lic Notice, the auctions are scheduled for July 26, 2000.

NextWave moved by order to show cause for an or-

der declaring the Public Notice null and void. See

NextWave VI, 244 B.R. at 257. The bankruptcy court

granted NextWave’s motion on January 31, 2000, stat-

ing the following three reasons:

(1) Because the Licenses constituted “property of

the estate,” their revocation (via the Public No-

tice) violated the automatic stay of the Bank-

ruptcy Code. See NextWave VI, 244 B.R. at 266-

68 (citing 11 U.S.C. § 362(a)(1), (3)-(6)).

(2) Because the cure provisions of the Bank-

ruptcy Code, 11 U.S.C. §§ 1123(a)(5)(G) and

1124(2)(A), allow NextWave to cure any default-

-i.e., they allow NextWave to “revers[e]” the

event that triggers default--the FCC cannot rely

on any default as a premise for revoking the Li-

censes. Jd. at 268-69 (citing Di Pierro v. Taddeo

(In re Taddeo), 685 F.2d 24, 26-27 (2d Cir.

1982)).

The bankruptcy court further held that the default

cited by the FCC was in fact no default, regard-

less of the opportunity to cure, because

NextWave was barred from making payments ab-

sent an order of the bankruptcy court, given sub-

sequent to a hearing: “[T]he debtors had neither

the authority nor the ability to make [those] pay-

ments absent notice and court approval.”

NextWave VI, 244 B.R. at 274-76; see also 11

U.S.C. §§ 102(1), 363. According to the bank-

ruptcy court, NextWave’s non-payment was

compelled by the automatic stay and therefore

cannot be an event of default: “Any notion of a

legally cognizable ‘default’ presupposes that the

debtors could have lawfully made post-petition

payments to the FCC in the first instance.” Jd. at

lla

274. The bankruptcy court therefore considered

it “senseless to speak of a ‘default’” in this case.

Id. at 276.

(3) Under the doctrines of waiver and equitable

estoppel, the FCC is now barred from revoking

the Licenses because it failed earlier to contend

that the Licenses were forfeit. See id. at 276-81.

By order dated February 7, 2000, the bankruptcy court

granted NextWave’s motion for an order enforcing the

automatic stay and decreed that the FCC’s Public Notice

was “null, void, and without force or effect.” Jn re

NextWave Personal Communications Inc., No. 98 B

21529 (ASH) (Bankr. S.D.N.Y. Feb. 7, 2000) (order en-

forcing the automatic stay with respect to the Licenses).

The FCC promptly petitioned this Court for a writ of

mandamus on the ground that the bankruptcy court’s

ruling obstructs our mandate.

DISCUSSION

This Court has the authority to grant writs of man-

damus under Rule 21(a) of the Federal Rules of Appel-

late Procedure; but the standard for issuance is stringent,

and such writs are rarely issued. Mandamus is not used

simply to correct error. See Will v. United States, 389

U.S. 90, 98 n.6, 88 S. Ct. 269, 275 n.6, 19 L. Ed. 2d 305

(1967); In re Steinhardt Partners, L.P. (Salomon Bros.

Treasury Litig. v. Steinhardt Partners, L.P.), 9 F.3d 230,

233-34 (2d Cir. 1993). It is reserved for “judicial usur-

pation[s] of power” by inferior courts. Will, 389 U.S. at

95, 88 S. Ct. at 273 (citation and internal quotation

marks omitted); accord Mallard v. United States Dist.

Court, 490 U.S. 296, 309, 109 S. Ct. 1814, 1822, 104 L.

Ed. 2d 318 (1989). Mandamus is properly granted for

two purposes:

(1) Protection of a superior court’s mandate, see

General Atomic Co. v. Felter, 436 U.S. 493, 497,

98 S. Ct. 1939, 1941, 56 L. Ed. 2d 480 (1978), to

12a

assure that “the terms of the mandate [are] scru-

pulously and fully carried out,” and that the infe-

rior court’s “actions on remand [are] not. . . in-

consistent with either the express terms or the

spirit of the mandate,” Jn re Ivan F. Boesky Sec.

Litig. (Kidder, Peabody & Co. v. Maxus Energy

Corp.), 957 F.2d 65, 69 (2d Cir. 1992) (citation

and internal quotation marks omitted); or

(2) Restraining an inferior court from detours into

areas in which it lacks jurisdiction (or, in some

instances, forcing an inferior court to take an

obligatory action), see Ex parte Republic of Peru,

318 U.S. 578, 583, 63 S. Ct. 793, 796-97, 87 L.

Ed. 1014 (1943).

Generally, mandamus is appropriate only where no other

remedy adequately protects the petitioner’s interest. See

In re von Bulow (von Bulow ex rel. Auersperg v. von Bu-

low), 828 F.2d 94, 98 (2d Cir. 1987). Such a situation

exists where the time required for the ordinary appeals

process would deprive the petitioner of the mght it

claims (here, to re-auction the Licenses on the an-

nounced date, July 26, 2000). See Jn re King World

Prods., 898 F.2d 56, 58-59 (6th Cir. 1990) (listing

among the factors to be considered when determining

the propriety of mandamus whether “(t]he petitioner will

be damaged or prejudiced in a way not correctable on

appeal,” as well as whether “[t]he district court’s order

is an oft-repeated error, or manifests a persistent disre-

gard of the federal rules”); cf. Jn re Cooper, 971 F.2d

640, 641 (11th Cir. 1992) (holding an alternative rem-

edy to be inadequate where it would have caused great

delay in the vindication of the petitioners’ rights). This

Court will grant a mandamus petition only where the pe-

titioner’s right to relief is “clear and indisputable.” Jn re

International Bus. Machs. Corp., 45 F.3d 641, 643 (2d

Cir. 1995) (quoting Moses H. Cone Mem'l Hosp. v.

Mercury Constr. Corp., 460 U.S. 1, 18, 103 S. Ct. 927,

938, 74 L. Ed. 2d 765 (1983)) (internal quotation marks

omitted). -

The questions presented by this petition are whether

the bankruptcy court’s decision amounted to review of

the FCC’s “regulatory” actions, as we used that term in

our opinion of December 22, 1999, see, e.g., NextWave

Appeal, 200 F.3d at 54; if so, whether that court’s ac-

tions derogated from “either the express terms or the

spirit of the mandate,” Jn re Boesky, 957 F.2d at 69; and

whether (even absent that mandate) the bankruptcy court

exceeded its statutory jurisdiction by engaging in such

review. We conclude that the bankruptcy court’s deci-

sion: (1) amounted to the review of an order or decision

of the FCC, for which the bankruptcy court lacks juris-

diction, and (2) contravened this Court’s mandate. We

therefore grant the petition.

A. The bankruptcy court’s decision

The FCC argues that the requirement of timely pay-

ment, like the requirement of payment in full, is driven

by regulatory considerations. The Commission further

argues that the regulatory nature of the disputed re-

quirement is manifest in this Court’s opinion of Decem-

ber 22, 1999.

In the previous appeal, the district court had held that

the FCC’s claim to full payment “ha[d] nothing to do

with the FCC’s organization, execution, or implementa-

tion of the radio spectrum auction. Neither did the claim

implicate the FCC’s power to regulate the issuance or

use of spectrum licenses.” NextWave Personal Commu-

nications, Inc. v. FCC (In re NextWave Personal Com-

munications, Inc.), 241 B.R. 311, 315 (S.D.N.Y. 1999)

(internal quotation marks omitted). We held that such

an approach “was fundamentally mistaken.” NextWave

Appeal, 200 F.3d at 54. Recognizing that “NextWave’s

inability to follow through on its financial undertakings

had more than financial implications,” we held that the

FCC’s decision as to “which entities are entitled to spec-

l4a

trum licenses under rules and conditions it has promul-

gated” is a paradigmatic instance of the FCC’s exclusive

regulatory power over licensing. Jd.

The FCC’s Public Notice of re-auction presented the

bankruptcy court with a variation on the same question:

whether it could undo the consequences of NextWave’s

failure to fulfill the timely-payment requirement under

the Licenses, as determined by the FCC. The bank-

ruptcy court properly characterized the issue as whether

timely payment was a regulatory condition for licensure,

and it then held that this Court’s previous mandate does

not control that question, see NextWave VI, 244 B.R. at

283, that is, that while full payment is a regulatory con-

dition, timely payment is not. The bankruptcy court’s

reasoning on this issue is set forth in the margin.

SJudge Hardin rejected, as follows, the FCC’s contention

that this Court’s mandate controlled the issue of whether

timely payment was a regulatory condition:

Little need be said of the FCC’s contention that the in-

stant motion is governed by the Second Circuit Decision.

Ultimately, it will be for the Court of Appeals to resolve

this controversy, if the parties do not sooner settle it

among themselves. In the meantime, the matter has been

remanded to the Bankruptcy Court, and it is the respon-

sibility of this Court to address the issues raised by this

motion for review by the District and Circuit Courts.

The Court of Appeals rulings in respect of NextWave I,

concerning subject matter jurisdiction, and NextWave II,

conceming fraudulent conveyance analysis, are the law

of the case in these proceedings. But they do not touch

upon the issues now before this-Court, which arise from

a subsequent event, the January 12 Declaration. Indeed,

in remanding to the Bankruptcy Court, the Court of Ap-

peals specifically referred to the possibility that the FCC

might, in the future, seek to revoke the Licenses.

[Footnote continued on next page]

15a

Recognizing that it lacked power to review FCC

regulatory actions, the bankruptcy court sought to cast

the dispute in non-regulatory terms. Thus the court con-

cluded that the FCC’s declaration of a default (1)

“lack[ed] any comprehensible regulatory objective,” id.

at 270, and (2) was therefore simply the action of an or-

dinary creditor:

The Court of Appeals has held that there is a

“regulatory” aspect in the FCC’s “payment in

full” requirement. But no such aspect can be in-

ferred with respect to the FCC’s “timely pay- .

ment” requirement. No rational explanation has

been offered to show that timeliness has any ob-

jective other than pure debtor-creditor economics.

Id. at 281.

[Footnote continued from previous page]

The FCC relies upon the statement in the Circuit Court

Decision that “the FCC made ‘full and timely payment

of the winning bid’ a regulatory condition for obtaining

and retaining spectrum license” (200 F.3d at 52). How-

ever, the very next sentence states: “This ‘payment in

full’ requirement has a regulatory purpose . . .” (id.), and

the entire balance of the Circuit Court Decision bearing

on the question of regulatory purpose and subject matter

jurisdiction is concerned solely with the “payment in

full” requirement, which was the only matter before the

Court. The Court of Appeals did not consider the ques-

tion whether the “timely payment” requirement was in-

vested with a regulatory purpose, because the FCC had

never asserted any legal position based upon

NextWave’s failure to make post-petition payments on

its pre-petition claims.

NextWave VI, 244 B.R. at 283 (internal citation omitted).

l6a

This statement is at odds with our previous opinion.

We expressly deferred to the FCC’s “expert judgment as

to the course that would best promote congressional ob-

jectives and serve the public interest,” NextWave Ap-

peal, 200 F.3d at 53; and we ultimately held that “when

the FCC decides which entities are entitled to spectrum

licenses under rules and conditions it has promulgated, it

therefore exercises the full extent of its regulatory ca-

pacity.” Id. at 54 (emphasis added). The bankruptcy

court finds that “[n]Jo rational explanation has been of-

fered to show that timeliness has any objective other

than pure debtor-creditor economics.” NextWave VI,

244 B.R. at 281. This misses the point. The FCC need

not defend its regulatory calculus in the bankruptcy

court; whenever an FCC decision implicates its exclu-

sive power to dictate the terms and conditions of licen-

sure, the decision is regulatory. And if the decision is

regulatory, it may not be altered or impeded by any

court lacking jurisdiction to review it.

The FCC’s decision to re-auction the Licenses previ-

ously granted to NextWave is one that implicates the

conditions of licensure, in itself a circumstance sufficient

to require the bankruptcy court’s deference. Moreover,

the regulatory purpose for requiring payment in full--the

identification of the candidates having the best prospects

for prompt and efficient exploitation of the spectrum--is

quite obviously served in the same way by requiring

payment on time. Given this evident analogy, our analy-

sis of the full-payment obligation (in our previous opin-

ion) should have alerted the bankruptcy court that the

FCC’s determination as to prompt payment was by na-

ture regulatory. Time of payment and amount of pay-

ment are alike functions of value. Cf Thinking Machs.

Corp. v. Mellon Fin. Servs. Corp. # 1 (In re Thinking

Machs. Corp.), 67 F.3d 1021, 1022 (ist Cir. 1995)

(“Time is money ... .”). There can be little doubt that if

full payment is a regulatory condition, so too is timeli-

ness. See NextWave Appeal, 200 F.3d at 59-60 (detailing

the regulatory purpose behind the FCC’s general insis-

EC Ql EE

17a

tence on payment according to the terms set at auction,

so that the “bids constitute a reliable index of the bid-

ders’ commitments to exploit and make the most of the

license at issue”); Mountain Solutions, Ltd. v. FCC, 197

F.3d 512, 522 (D.C. Cir. 1999) (“[T]he Commission . . .

gave fair notice of the importance it attaches to meeting

payment dates . . . .”); FCC Objection at 2-4. “The

Commission has long noted the importance it attaches to

timely payment.” Mountain Solutions, 197 F.3d at 519

(citing Jn re Implementation of Section 309(j) of the

Communications Act, (Second Report and Order), 9

F.C.C.R. 2348 9 197, 1994 WL 412167 (FCC Apr. 20,

1994)).

We therefore conclude that the FCC’s decision was

in fact regulatory. This conclusion is reinforced by the

bankruptcy court’s own statement of reasons. In the

course of deciding that the FCC’s re-auction decision

lacked any regulatory purpose, the bankruptcy court was

in effect and in fact questioning the FCC’s regulatory

judgments:

What regulatory principle or public interest does

the FCC invoke to outweigh the investment in

these debtors of over $1 billion in debt and eq-

uity? What public policy is served by an act of

the United States Government which violates ba-

sic notions of equity, due process and the Bank-

ruptcy Code? What purpose is served by the

FCC’s relinquishment of over $4.7 billion for the

C Licenses? How does the [Public Notice] coex-

ist with 47 U.S.C. § 309(4)(3)(A) looking to

“rapid deployment” of spectrum “without admin-

istrative. or judicial delays,” or 47 U.S.C.

§ 309(j)(7)(A) and (B) prohibiting the FCC from

exercising its regulatory discretion “on the expec-

tation of Federal revenues[“?]

NextWave VI, 244 B.R. at 282-83. Whatever the force of

these rhetorical questions, the answers entail regulatory

18a

decisions and are outside the jurisdiction of the bank-

., ruptcy court.®

In considering another of NextWave’s arguments,

the oankruptcy court explicitly questioned the rationale

behind the FCC’s decision to re-auction the Licenses:

Finally, one of the important statutory objectives

of FCA § 309(j), rapid deployment and utilization

of C and F block spectrum by designated entities,

would be undermined by cancellation and reauc-

tion of the Licenses. Judging by the C, D, E and

F block auctions, it is highly unlikely that li-

censes auctioned beginning on July 26, 2000

would result in final grant of the Licenses to the

high bidders before winter or spring 2001, at

which time the designated entity licensees would

have to raise the necessary funding to begin

building out their PCS systems. NextWave is a

designated entity. It was awarded the Licenses in

6 See also, e.g., NextWave VI, 244 B.R. at 263 (in reject-

ing the FCC’s finding of a default, reasoning that “[t]he exis-

tence of a default here depends upon an interpretation of the

FCC’s regulations”); id. (“Transcendent considerations of

fairness and due process, as expressed in the very statute that

governs the FCC, compel the conclusion that the FCC cannot

summarily eviscerate the debtors’ estate on the basis of a

purported ‘regulatory default.’”’); id. at 264 (“The FCC ar-

gued that, despite the language ‘will be declared in default,’

it was incumbent on the debtors, before a ‘default’ occurred,

to seek an extension or waiver before any discretion of the

FCC could be invoked. The history of this regulation indi-

cates otherwise.”); id. at 281 n.26 (“[O]ne must wonder what

was the impact on [the FCC’s regulatory] objective of . . . the

FCC’s numerous regulations, orders, notices and instructions

rescheduling and repeatedly changing payment dead-

lines. ...”).

19a

January 1997. It represents that it has already

developed the necessary infrastructure to a con-

siderable degree. It is prepared to put the Li-

censes into use almost immediately. And all this

must be considered in light of the fact that PCS

and wireless telephone is developing at lightning

speed, such that another year’s delay is of great

significance.

Id. at 271.

Although the bankruptcy court’s opinion is stated in

terms of whether timely payment is a regulatory condi-

tion, the question posed and answered is whether the

regulatory condition of timely payment is arbitrary.

Elsewhere, the bankruptcy court flatly rejects the idea

that the FCC can have anything to say about communi-

cations licenses in the hands of debtors: “[O]ne must ask

whether there is any regulatory concern of such conse-

quence that it should override the protections and policy

considerations that lie at the very core of the Bankruptcy

Code, or bar jurisdiction of the Bankruptcy Court from

enforcing the Code.” Jd. at 282 (emphasis added).

In short, the FCC made timely payment a regulatory

condition; and the bankruptcy court has concluded that

such a condition is arbitrary, in the sense that it serves

no regulatory purpose that the bankruptcy court is pre-

pared to recognize. However, a regulatory condition is a

regulatory condition even if it is arbitrary. It is for the

FCC to state its conditions of licensure, and for a court

with power to review the FCC’s decisions to say if they

are arbitrary or valid.

B. Mandamus

Our extraordinary mandamus power has two pur-

poses: to achieve compliance with the terms and spirit of

our mandates, and to constrain inferior courts to proper

exercises of their jurisdiction. In this case, the two uses

of mandamus overlap and reinforce one another. This

Court’s previous opinion reversed a decision of the

20a

bankruptcy court on the ground that that court lacked

jurisdiction. The bankruptcy court again seeks to con-

trol the FCC’s allocation of licenses, notwithstanding

this Court’s express holding that “the bankruptcy and

district courts lack[] jurisdiction to decide the question

of whether NextWave had satisfied the regulatory condi-

tions placed by the FCC upon its retention of the Li-

censes.” NextWave Appeal, 200 F.3d 43 at 54. Thus a

writ of mandamus protecting this Court’s mandate also

confines the inferior court to the lawful exercise of its

jurisdiction.

1. The mandate

Our prior opinion clearly and repeatedly emphasizes

that the bankruptcy court is without power to review the

FCC’s regulatory actions:

If the conditions to which a license is subject are

not met, the FCC may revoke the license. It is

beyond the jurisdiction of a court in a collateral

proceeding to mandate that a licensee by allowed

to keep its license despite its failure to meet the

conditions to which the license is subject.

When the FCC decides which entities are entitled

to spectrum licenses under rules and conditions it

has promulgated, it therefore exercises the full

extent of its regulatory capacity. Because juris-

diction over claims brought against the FCC in its

regulatory capacity lies exclusively in the federal

courts of appeals, see 28 U.S.C. § 2342; 47

U.S.C. § 402, the bankruptcy and district courts

lacked jurisdiction to decide the question of

whether NextWave had satisfied the regulatory

conditions placed by the FCC upon its retention

of the Licenses.

Id. (emphasis added).

2la

In supporting this jurisdictional holding, this Court

discussed the “spheres of authority” within which agen-

cies and courts operate:

For over fifty years the Supreme Court has rec-

ognized that under the FCA the division of au-

thority between these “spheres” requires that “no

court can grant an applicant an authorization

which the Commission has refused.” Scripps-

Howard Radio, Inc. v. FCC, 316 U.S. 4, 14, 62 S.

Ct. 875, 86 L. Ed. 1229, (1942). Under the FCA,

it is the FCC and not the courts that “must be sat-

isfied that the public interest will be served by . . .

the license.” FCC v. WOKO, Inc., 329 U.S. 223,

229, 67 S. Ct. 213, 91 L. Ed. 204 (1946).

Id.

Our mandate required the bankruptcy court to refrain

from impeding the regulatory actions of the FCC, in par-

ticular, the FCC’s enforcement of the payment schedule

established by its regulations, orders, and decisions. The

bankruptcy court founds its jurisdiction for doing so

chiefly on the automatic stay provision of 11 U.S.C.

§ 362 and on that court’s power under the provision to

decide what acts are prevented. The bankruptcy court

declared the Public Notice to be null and void because:

The [Public Notice] implicates subsections (1)

and (6) and it unarguably violated subsections

(3), (4) and (5) [of 11 U.S.C. § 362(a)]. Accord-.

ingly, the [Public Notice] was void. -

NextWave VI, 244 B.R. at 267-68. The extensive brief-_

ing on this petition for mandamus is largely directed to

this question.

The automatic stay has its limits. Here, the applica-

ble limit is set forth in 11 U.S.C. § 362(b)(4), which

22a

provides an exception under paragraphs (1), (2), (3) and

(6)? for:

the commencement or continuation of an action

or proceeding by a governmental unit . . . to en-

force such governmental unit’s or organization’s

police and regulatory power, including the en-

forcement of a judgment other than a money

judgment, obtained in an action or proceeding by

the governmental unit to enforce such govern-

mental unit’s or organization’s police or regula-

tory power.

11 U.S.C. § 362(b)(4) (West Supp. 1999). Undoubtedly,

the FCC is a governmental unit that is seeking “to en-

force” its “regulatory power.” Nevertheless, the bank-

ruptcy court decided that “[ § ] 362(b)(4) is not applica-

ble here. The FCC’s action is nothing other than a direct

attempt to enforce its pecuniary interests.” NextWave

VI, 244 B.R. at 274. This observation is flatly incom-

patible with this Court’s mandate, as expressed in our

earlier opinion. Because the timing of NextWave’s pay-

ment obligation--like the amount of it--was a subject of

FCC regulation, and therefore within our NextWave

mandate, the bankruptcy court’s decision violated that

mandate.

In short, notwithstanding the automatic stay provi-

sion, the bankruptcy court lacks jurisdiction to decide

whether the FCC’s regulatory decision is a proper exer-

7Subsections (4) and (5) are concerned with liens. See

11 U.S.C. § 362(a)(4), (5). The bankruptcy court does not

explain why they are implicated here.

8Though we hold that the FCC’s regulatory decisions

fall within § 362(b)(4), we have no occasion to opine on

whether the Public Notice is valid or whether the Licenses

automatically canceled at some prior date.

23a

cise of discretion, or to decide whether it is provident

and in the public interest. All of these decisions are

within the exclusive jurisdiction of the federal courts of

appeals:

[Petitioner] contends that in order for § 362(b)(4)

to obtain, a court must first determine whether the

proposed exercise of police or regulatory power

is legitimate and that, therefore, in this litigation

the lower courts did have the authority to exam-

ine the legitimacy of the [agency’s] actions and to

enjoin those actions. We disagree. [Petitioner’s]

broad reading of the stay provisions would re-

quire bankruptcy courts to scrutinize the validity

of every administrative or enforcement action

brought against a bankrupt entity. Such a reading

is problematic, both because it conflicts with the

broad discretion Congress has expressly granted

many administrative entities and because it is in-

consistent with the limited authority Congress has

vested in bankruptcy courts.

Board of Governors v. MCorp Fin., Inc., 502 U.S. 32,

40, 112 S. Ct. 459, 464, 116 L. Ed. 2d 358 (1991). The

bankruptcy court lacked jurisdiction to declare the Pub-

lic Notice null and void on any ground: that the Public

Notice violated the automatic stay, that the right to cure

obviates any default, or that the government was es-

topped.

NextWave and various amici curiae emphasize that

our mandate was limited by the disclaimer in our

NextWave opinion that “since we do not know what

steps the FCC will take vis-a-vis the obligations owed to

it by NextWave, any issues created by the FCC’s at-

tempts to collect on those obligations are not yet ripe.”

Id. at 59. But the bankruptcy court’s latest opinion was

not prompted by any collection effort; the whole thrust

of the opinion is that the FCC is unjustifiably refusing to

take NextWave’s money. In any event, this passage

cannot be read as a limitation on the scope or effect of

24a

what our opinion actually decided. It is sufficiently

clear that the issue raised by the timely-payment re-

quirement was decided in our opinion: “We are merely

holding that NextWave may not collaterally attack or

impair in the bankruptcy courts the license allocation

scheme developed by the FCC.” Jd. at 55. Even if the

bankruptcy court is right on the merits of its arguments

against revocation--we have no occasion to express an

opinion--it is without power to act on its determination:

[E]ven if the bankruptcy and district courts were

right in concluding that granting the Licenses at a

small fraction of NextWave’s original successful

bid price best effectuated the FCA’s goals, they

were utterly without the power to order that

NextWave be allowed to retain them for that rea-

son or on that basis.

Id. (citation omitted; emphasis added).

The bankruptcy court construes our mandate to mean

no more than that the bankruptcy court may not abrogate

the full-payment requirement on the basis of a freudu-

lent-conveyance holding. This under-reads our previous

opinion. True, the immediate effect of the mandate was

to prohibit abrogation of the full-payment requirement;

but the opinion clearly instructs the bankruptcy court to

refrain from interfering with the licensing decisions of

the FCC.

2. Jurisdiction

Just as this Court may use its mandamus power to

require compliance with its mandates, it may also issue

the writ to restrain an inferior court to proper exercises

of that court’s jurisdiction-—See Ex parte Republic of

Peru, 318 U.S. 578, 583, 63 S. Ct. 793, 796-97, 87 L.

Ed. 1014 (1943). Our previous decision was founded on

congressionally imposed limits on jurisdiction. As dis-

cussed below, those jurisdictional limitations apply here

with equal force.

25a

Exclusive jurisdiction to review the FCC’s regula-

tory action lies in the courts of appeals. See FCC v. ITT

World Communications, Inc., 466 U.S. 463, 468, 104 S.

Ct. 1936, 1939, 80 L. Ed. 2d 480 (1984); Telecommuni-

cations Research & Action Ctr. v. FCC, 750 F.2d 70, 75

(D.C. Cir. 1984) (“Exclusive jurisdiction over review of

final FCC orders is vested in the Court of Appeals...

.”); see also NextWave Appeal, 200 F.3d at 54

(“[JJurisdiction over claims brought against the FCC in

its regulatory capacity lies exclusively in the federal

courts of appeals, see 28 U.S.C. § 2342: 47 U.S.C. § 402

.... ). This exclusivity extends as well to collateral at-

tacks: “A defensive attack on [an FCC decision] is as

much an evasion of the exclusive jurisdiction of the

Court of Appeals as is a preemptive strike by seeking an

injunction.” United States v. Any & All Radio Station

Transmission Equip., 207 F.3d 458, 463 (8th Cir. 2000).

The jurisdictional statutes leave no opening for the

sort of jurisdiction over the FCC that the bankruptcy

court seeks to exercise. Each statutory provision that

governs appeals and petitions for review from FCC de-

cisions is broadly phrased, as foliows:

Jurisdiction over all but a few FCC regulatory ac-

tions is restricted to the courts of appeals:

Any proceeding to enjoin, set aside, annul, or sus-

pend any order of the Commission under this

chapter (except those appealable under subsection

(b) of this section) shall be brought as provided

by and in the manner prescribed in chapter 158

of Title 28.

47 U.S.C. § 402(a) (emphasis added). The “manner pre-

scribed in chapter 158 of Title 28” confines such peti-

tions to the courts of appeals:

The court of appeals (other than the United States

Court of Appeals for the Federal Circuit) has ex-

clusive jurisdiction to enjoin, set aside, suspend

26a

(in whole or in part), or to determine the validity

of--

(1) all final orders of the Federal Communica-

tions Commission made reviewable by section

402(a) of title 47....

28 U.S.C. § 2342 (emphasis added).

Section 402(a) makes an exception for cases that fall

under § 402(b), but again offers no opening.to the bank-

ruptcy court. Cases that fall within § 402(b) are appeal-

able only in the Court of Appeals for the District of Co-

lumbia Circuit:

Appeals may be taken from decisions and orders |

of the Commission to the United States Court of |

Appeals for the District of Columbia in any of the }

following cases: |

xk |

(5) By the holder of any construction permit or |

station license which has been modified or re- |

voked by the Commission.

47 U.S.C. § 402(b)(5) (emphasis added). PCS licenses

are “station licenses” within the technical meaning of .

§ 402(b)(5), and fall within its ambit.? |

9The statutory definitions clarify that the term “station ‘

license” means the “instrument of authorization required . . .

for the use or operation of apparatus for transmission of en-

ergy, Or communications, or-signals by radio.” 47 U.S.C.

§ 153(42) (Supp. 1999). Transmission by radio is defined

broadly to include all electromagnetic broadcast transmis-

sions, not just those transmitting traditional broadcast-radio

content. See id. § 153(33). The FCC has “‘unified jurisdic-

tion’ and ‘regulatory power over all forms of electrical com-

munication, whether by telephone, telegraph, cable, or ra-

dio.’” United States v. Southwestern Cable Co., 392 U.S.

[Footnote continued on next page]

27a

Section 402(b) is applicable to all appeals from the

FCC’s licensing actions: “The language of this subsec-

tion [i.e., § 402(b)], when considered in relation to that

of subsection (a), also would make it clear that judicial

review of all cases involving the exercise of the Com-

mission's radio licensing power is limited to [the Court

of Appeals for the D.C. Circuit].” Cook, Inc. v. United

States, 394 F.2d 84, 86 n.4 (7th Cir. 1968) (quoting S.

Rep. No. 82-44, at 10 (1951)) (emphasis added; internal

quotation marks omitted). NextWave remains free to

pursue its challenge to the FCC’s regulatory acts.19 In

[Footnote continued from previous page]

157, 168, 88 S. Ct. 1994, 2000, 20 L. Ed. 2d 1001 (1968)

(quoting S. Rep. No. 73-781, at 1 (1934)) (referring to 47

U.S.C. §153(b), (cc) (1965), recodified at 47 U.S.C.

§ 153(33), (42) (Supp. 1999)).

10Section 402 specifies exclusive jurisdiction for ap-

peals from FCC “decisions” and “orders.” Here, the FCC has

issued no order formally announcing the cancellation of the

Licenses; revocation is made explicit in a filing before the

bankruptcy court (which filing is not itself an order) and is

implicit in the Public Notice announcing the re-auction of the

Licenses previously held by NextWave. Nevertheless, as this

Court’s prior opinion makes clear, we think that the FCC ac-

tion in question is unmistakably regulatory in nature. But

even if the FCC’s acts do not amount to “decisions” or “or-

ders” of the Commission, subject to the jurisdiction of the

courts of appeals, that would not expose the FCC’s acts to

review in the bankruptcy court. A regulatory action short of a

decision or order is an exercise of regulatory discretion that is

not subject to review. See Bethesda-Chevy Chase Broadcast-

ers, Inc. v. FCC, 385 F.2d 967, 968 (D.C. Cir. 1967) (holding

that a regulatory action that did not impose an obligation,

“deny a right, or fix a legal relationship was not reviewable);

see also, e.g., Telecommunications Research & Action Cr.

[Footnote continued on next page]

_—DDLmdmdmL

28a

response to the FCC’s revocation of the Licenses,

NextWave has filed protective notices of appeal in the

D.C. Circuit, one under § 402(a) and the other under

§ 402(b). Cases within § 402(a) and cases within

§ 402(b) are “mutually exclusive.” Freeman Eng’g As-

socs. v. FCC, 103 F.3d 169, 177 (D.C. Cir. 1997) (cita-

tion and internal quotation marks omitted). But as noted

in those notices of appeal, NextWave expects that the

D.C. Circuit will simply dismiss whichever appeal is

{Footnote continued from previous page]

750 F.2d at 78-79 (“[W]here a statute commits review of

agency action to the Court of Appeals, any suit seeking relief

that might affect the Circuit Court’s future jurisdiction is

subject to the exclusive review of the Court of Appeals.”

(emphasis added)); J//inois Citizens Comm. for Broad. v.

FCC, 515 F.2d 397, 402 (D.C. Cir. 1975) (“[T]o be final an

order must impose an obligation, deny a nght or fix some

legal relationship . . . .” (citation and internal quotation marks

omitted)).

In this case, we have no doubt that the Public Notice of

the Auction of C and F Block Broadband PCS Licenses is an

appealable decision or order of the FCC. See, e.g., Mountain

Solutions, Ltd. v. FCC, 197 F.3d 512, 520 n.12 (D.C. Cir.

1999) (treating denial of a waiver as an “adjudicatory deci-

sion”); Fidelity Television, Inc. v. FCC, 502 F.2d 443, 452

(D.C. Cir. 1974); cf Mesa Airlines v. United States, 951 F.2d

1186, 1188 (10th Cir. 1991); California Assoc. of the Physi-

cally Handicapped, Inc. v. FCC, 833 F.2d 1333, 1334 (9th

Cir. 1988).

The FCC’s Notice announced that specified licenses-- a

those formerly possessed by NextWave--were to be re-

auctioned. It is easy to conclude that this “den[ies] a mght.”

Illinois Citizens Comm., 515 F.2d at 402. And if that decision

is appealable, its regulatory nature requires that it be ap-

pealed in the court of appeals.

29a

improper. See, e.g., Tribune Co. v. F CC, 328, 133 F.3d

61, 66 n.4 (D.C. Cir. 1998); Kessler v. FCC, 326 F.2d

673, 679 n.4 (D.C. Cir. 1963).

CONCLUSION

We conclude that the bankruptcy court acted in

derogation of this Court’s mandate and beyond its statu-

tory jurisdiction when it nullified the FCC’s Public No-

tice. The violation of our mandate and the jurisdictional

defect are independently sufficient to justify mandamus.

Accordingly, the petition for a writ of mandamus jis

GRANTED. The bankruptcy court is directed to vacate

its order of February 7, 2000, and to enter an order deny-

ing NextWave’s motion for enforcement of the auto-

matic stay with respect to the Licenses.

30a

In re NEXTWAVE PERSONAL COMMUNICA-

TIONS ING., et al., Debtors.

Bankruptcy No. 98 B 21529 (ASH).

UNITED STATES BANKRUPTCY COURT,

S.D. OF NEW YORK.

244 B.R. 253,

Jan. 31, 2000

Following declaration by the Federal Communica-

tions Commission (FCC) that it considered debtors’ li-

censes to provide telecommunications services as having

been automatically cancelled for debtors’ nonpayment

of prepetition debt, debtors moved for order holding the

FCC’s declaration as void by virtue, among other things,

of automatic stay. The Bankruptcy Court, Adlai S. Har-

din, Jr., J., hold that: (1) conduct of the FCC, in declar-

ing debtors in default of their obligation to make in-

stallment payments to the FCC, and in notifying debtors

that licenses had been automatically cancelled, violated

automatic stay as attempt by the FCC to exercise control

over licenses constituting “property of the estate”; (2)

allegedly “automatic” cancellation of debtors’ licenses

also violated stay; (3) FCC, in seeking to declare a can-

cellation of debtors’ licenses based upon their nonpay-

ment of prepetition debt, was not exercising its “police

or regulatory power’; (4) debtors’ obligation to pay sum

of $4.7 billion to the FCC was not obligation that debt-

ors could pay postpetition, in ordinary course of their

business; and (5) FCC waived its nght to assert that

debtors’ licenses had been cancelled.

Motion granted.

Andrews & Kurth, L.L.P., By Deborah L. Schrier-Rape,

Gregory H. Bevel, Dallas, TX, for Debtors.

Mary Jo White, United States Attorney For The Southern

District Of New York, By Daniel S. Alter, Neil M.

3la

Corwin, New York, for Creditor Federal Communica-

tions Commission.

Kasowitz, Benson, Torres & Friedman, LLP, By

David S. Rosner, New York, for Unsecured Creditors

Committee.

Salans Hertzfeld Heilbronn Christy & Viener, By Wil-

liam F. Gray, Emanuel C. Grillo, New York, for DIP

Lender, D&P NextWave Partners, L.P.

DECISION ON MOTION TO ENFORCE

THE AUTOMATIC STAY

ADLAI S. HARDIN, Jr., Bankruptcy Judge.

On January 12, 2000 the Federal Communications

Commission (“FCC”) gave public notice (the “Janu-

ary 12 Declaration”) to the debtors (collectively, the

“debtors” or “NextWave”) in these jointly administered

Chapter 11 cases that all of NextWave’s C block and F

block licenses (the “Licenses”) for broadband personal

communications service (“PCS”) had been automatically

cancelled under FCC regulations as of late 1998 or

January 1999. The January 12 Declaration was issued a

scant nine days before the scheduled January 21, 2000

hearing on NextWave’s Modified First Amended Joint

Plan of Reorganization (the “Plan”), under which

NextWave proposed to pay in full the balance of its out-

standing installment obligations to the FCC and all

amounts owing to unsecured creditors.

Aside from the Draconian economic consequences of

cancellation to other creditors and equity, the January 12

Declaration was shocking because it followed over one

year of intense litigation costing the debtors’ estates up-

wards of $10 million in professional fees and other ex-

penses in three Federal courts entailing expenditure of

untold hours of judicial resources by one Bankruptcy

Judge (Hardin), at least four District Judges (Brieant,

Parker, Pollack, Chin) and at least three Circuit Judges

(McLaughlin, Jacobs, Sack), all of which was premised

32a

on the assumption that the Licenses were vested in

NextWave, and all of which was utterly unnecessary and

incomprehensible if the Licenses had in fact and law

been automatically cancelled over a year ago. The

January 12 Declaration conflicted with countless written

and oral utterances and acts of the FCC throughout the

past year. And, astonishingly, the January 12 Declara-

tion followed by one day a letter from the President of

NextWave to the Chairman of the FCC offering to sat-

isfy NextWave’s entire ten-year installment obligation

to the FCC by making a single lump sum payment upon

confirmation in excess of $4.3 billion.

Faced with catastrophic consequences to all parties

in interest in these debtors’ estates, NextWave moved by

order to show cause returnable January 21, 2000 for an

order holding the FCC’s January 12 Declaration null and

void on the grounds, inter alia, that it violated the auto-

matic stay, 11 U.S.C. § 362(a). As amplified below, the

motion is granted for three quite separate reasons: (I) the

January 12 Declaration violated the Bankruptcy Code;

(II) the debtors cannot be held to have defaulted for fail-

ure to make payments on a pre-petition claim which they

could not make under the Code without a court order;

and (III) the FCC is barred by its own conduct from as-

serting a retroactive forfeiture under the doctrines of eq-

uitable estoppel and waiver.

Jurisdiction

This Court has jurisdiction over this contested matter

under 28 U.S.C. §§ 1334(a) and 157(a) and the “Stand-

ing Order of Referral of Cases to Bankruptcy Judges” of

the United States District Court for the Southern District

of New York dated July 10, 1984 (Ward, Acting C.J.).

This is a core proceeding under 28 U.S.C. § 157(b).

Background

The material facts in these Chapter 11 proceedings

have been set forth in varying detail in five published

decisions of this Court, one decision of the District

33a

Court and one published decision of the Court of Ap-

peals, all briefly described below. This decision will set

forth the factual and decisional background only to the

extent necessary to give context to the issues presented

and decided on this motion. For a more comprehensive

statement of facts, see NextWave IV.A, 235 B.R. 277.

On May 6 and July 16, 1996, NextWave was de-

clared the high bidder for 63 licenses in the FCC’s auc-

tion and reauction, respectively, of C block licenses (the

“C Licenses”). NextWave filed the required long form

applications seeking FCC approval, to which objections

were filed. On January 3, 1997 the FCC announced that

NextWave would receive its C Licenses, conditioned on

compliance with its financial obligations to the FCC.

On January 9, 1997 NextWave made an additional

deposit with the FCC bringing its total cash deposits to

$474,364,806, or 10% of its total bid price. On Febru-

ary 19, 1997 NextWave executed notes (the ““Notes’’)

and accompanying security agreements in the aggregate

face amount of $4,269,283,223 (rounded, $4.3 billion),

dated as of January 3, 1997. The FCC awarded the C

Licenses to NextWave affiliate NPCI.

Another NextWave affiliate was high bidder for cer-

tain F block licenses (the “F Licenses”) which were is-

sued to NextWave in the spring of 1997. The litigation

with the FCC concerned only the C Licenses, until the

January 12 Declaration.

Between the conclusion of the C block auction and

reauction on May 6 and July 16, 1996 and the actual is-

suance of the C Licenses in January/February 1997 in

exchange for $4.7 billion of cash and Notes, the value of

PCS spectrum as perceived in the marketplace plum-

meted. As a consequence, NextWave and the other C

block license winners were unable to raise a single dol-

lar of the estimated $1.6 billion of public financing

which the C block licensees needed to build out their

PCS systems. Recognizing this fact, the FCC issued or-

34a

ders suspending all payments on both C block and F

block licenses in the spring of 1997, conducted public

hearings and issued certain restructuring orders.

The NextWave entities filed voluntary petitions un-

der Chapter 11 on June 8, 1998. On the same date

NextWave filed the complaint in an adversary proceed-

ing against the FCC alleging two separate causes of ac-

tion. Count I alleged a claim under Section 544 of the

Bankruptcy Code for constructive fraudulent convey-

ance; Count II sought equitable subordination of the in-

debtedness to the FCC under Section 510 of the Bank-

ruptcy Code by reason of the FCC’s “de facto control”

over NextWave and its alleged “inequitable, uncon-

scionable and unfair conduct” between July 1996 and

January 1997 (in essence, flooding the market with spec-

trum in order to drive the “scarcity value” out of spec-

trum). This Court made six substantive rulings in the

adversary proceeding, five memorialized in written deci-

sions. The District Court affirmed all six rulings, and

the Court of Appeals reversed the District Court and this

Court in a published decision. Each of these rulings will

be discussed to the extent appropriate in the context of

this motion.

Prior Court Decisions

NextWave I (235 B.R. 263)

In response to the complaint, the FCC simultane-

ously filed a motion in the District Court to withdraw

the reference and a motion to dismiss the adversary

proceeding for lack of subject matter jurisdiction. The

District Court denied the motion to withdraw the refer-

ence in October 1998 and remanded to this Court to de-

cide the motion to dismiss. After a hearing in Novem-

ber, this Court issued its decision denying the motion to

dismiss as to Count I (fraudulent conveyance) and grant-

ing the motion to the extent of dismissing Count II (eq-

uitable subordination). NextWave I, 235 B.R. 263

(Bankr. S.D.N.Y. Dec. 7, 1998). Count II was dismissed

35a

because “the second cause of action is based upon con-

duct of the FCC acting in its regulatory capacity [and]

[t]his Court will decline to review or adjudicate the con-

sequences of the FCC’s acts and omissions in matters

over which Congress has granted the FCC primary ju-

risdiction.” 235 B.R. at 265. The motion to dismiss

Count I was denied because “the first cause of action

arises solely out of the FCC’s status as a creditor of

NextWave and does not seek to challenge any act or

omission of the FCC or to affect the FCC in any manner

except in its capacity as a creditor.” Jd. This Court con-

cluded that nothing in the enabling statute, Federal

Communications Act (“FCA”) § 309(j), or elsewhere in

the FCA manifested an intention of Congress to preempt

the operation of the Bankruptcy Code in cases where the

FCC was acting in the capacity of a creditor, whose ac-

tions, rights and obligations as a creditor would affect

the rights and obligations of other creditors and parties

in interest in a debtor’s estate.

NextWave II (235 B.R. 272)

The FCC next made a motion for partial summary

judgment fixing the date on which NextWave became

obligated to pay the $4.7 billion of its winning bids, a

crucial determination in a constructive fraudulent con-

veyance proceeding where the central issue is whether

the consideration given by the debtor (cash plus debt)

exceeded the value of the property transferred to the

debtor in exchange therefor (the C Licenses). Since

NextWave’s financial obligation to the FCC under the

FCC’s auction regulations would not have been $4.7 bil-

lion but some indeterminable lower figure if for any rea-

son the FCC did not grant NextWave the C Licenses

(less than 5% of the $4.7 billion if, for example, the C

Licenses were reauctioned for amounts exceeding

NextWave’ s bids), and since the actual transfer of the C

Licenses in exchange for $473 million cash and $4.3 bil-

lion of Notes did not take place until January/February

36a

1997, this Court fixed January 3, 1997 as the critical

date for constructive fraudulent conveyance purposes.

NextWave IIT

On April 2, 1999 this Court denied the FCC’s second

motion to dismiss in an unpublished decision from the

bench.

NextWave IV.A (235 B.R. 277)

On May 12, 1999, after a trial on the issue of valua-

tion of the Licenses, this Court issued its Decision on

Constructive Fraudulent Conveyance Claim concluding

that “$1,023,211,000 may be said to constitute the fair

market value of the entire consideration received by

NPCI in exchange for the entire $4.7 billion of Trans-

fers, for purposes of fraudulent conveyance analysis.”

235 B.R. at 304.

NextWave IV.B (235 B.R. 305)

After a further hearing, on June 22, 1999 this Court

issued its Decision on Remedy. Noting the “utter irra-

tionality of the FCC’s proposed remedy,” 235 B.R. at

311, and rejecting the remedy of rescission which the

FCC expressly stated was “not what we seek,” 235 B.R.

at 308, this Court adopted the traditional constructive

fraudulent conveyance remedy of avoidance, the effect

of which was to reduce the NextWave obligation from

$4.7 billion (10% of which has been paid) to

$1,023,000,000, being the actual fair market value of the

C Licenses in January/February 1997.

NextWave V (235 B.R. 314)

Following the Decision on Remedy, NextWave IV.B,

the FCC moved to lift the automatic stay under

11 U.S.C. § 362(d)(1) for “cause.” The “cause” relied

upon was the failure, or rather the prospective failure, of

NextWave to pay the full amount ( $4.7 billion) of its

winning auction bids by reason of this Court’s Decision

on Remedy in NextWave IV.B. As a consequence of the

37a

prospective default, the FCC sought an order for relief

from stay from this Court so that the Licenses could be

automatically cancelled under the terms of the FCC

regulations. Considering the issue thus raised to be gov-

ered by the initial decision on subject matter jurisdic-

tion in NextWave I, this Court ruled that, since the FCC

is subject to the Bankruptcy Code in its Capacity as a

creditor, the reduction in NextWave’s obligation to the

FCC in the Decision on Remedy did not result in a pre-

sent or prospective default and, lacking any default,

there was no “cause” to lift the stay. Accordingly, the

motion was denied.

The District Court Decision

On July 27, 1999 the District Court (Hon. Charles L.

Brieant) issued a decision and order affirming all six

aforementioned rulings of the Bankruptcy Court.

NextWave Personal Communications, Inc. v. FCC (In re

NextWave Personal Communications, Inc.), 241 B.R.

311 (S.D.N.Y. 1999).

The Court of Appeals Decision

On November 24, 1999 the Court of Appeals for the

Second Circuit issued an order reversing the judgment

of the District Court and remanding the case for further

proceedings, with an opinion to follow. The opinion

(the “Circuit Court Decision”) was issued on Decem-

ber 22, 1999. Federal Communications Commission v.

NextWave Personal Communications, Inc. (In re

NextWave Personal Communications, Inc.), 200 F.3d 43

(2d Cir. 1999). It is not clear whether the FCC appealed

NextWave III, NextWave IV.A, NextWave IV.B or

NextWave V. But it is clear that none of those decisions

was addressed in the Circuit Court Decision. The Cir-

cuit Court Decision reversed the Bankruptcy Court and

the District Court in respect of NextWave J and II.

With respect to the former, the Circuit Court Deci-

sion disagreed with the basic premise of NextWave I

which distinguished between the FCC acting in its ca-

38a

pacity as a regulatory agency, as to which the District

Court/Bankruptcy Court would have no subject matter

jurisdiction, and the FCC as a creditor, as to which the

District Court/Bankruptcy Court would have jurisdiction

to adjudicate debtor-creditor issues arising under the

Bankruptcy Code. While recognizing the FCC’s dual

role as creditor and regulator under FCA § 309(j), the

Court of Appeals concluded that the “payment in full”

requirement of the FCC regulations, while a credit pro-

vision in the context of a C block licensee paying in in-

stallments, was also related to a regulatory function as to

which the FCC had primary jurisdiction. Starting with

the Congressional premise, articulated in the legislative

history, that “[b]ecause-new licenses would be paid for,

a competitive bidding system [would] ensure that spec-

trum is used more productively and efficiently than if

handed out for free,” the Circuit Court Decision con-

cluded:

. . . the FCC made “full and timely payment of

the winning bid” a regulatory condition for ob-

taining and retaining a spectrum license required

through a § 309(j) auction. See 47C.F.R.

§ 24.708.!

This “payment in full” requirement has a regula-

tory purpose related directly to the FCC’s imple-

mentation of the spectrum auctions.

147 C.F.R. § 24.708 states, in relevant part:

(a) Except with respect to entities eligible for

installment payments (see § 24.711), each winning

bidder will be required to pay the balance of its

winning bid in a lump sum payment within five (5)

business days following the award of the license.

Grant of the license will be conditioned upon full

and timely payment of the winning bid amount.

(Emphasis supplied) ‘

39a

200 F.3d at 52. Rejecting the Bankruptcy Court’s prem-

ise that the fraudulent conveyance claim “concern[ed]

solely the debtor-creditor relationship between the FCC

and [NextWave]” and the District Court’s premise that

the fraudulent conveyance claims did not “implicate the

FCC’s power to regulate the issuance or use of spectrum

licenses,” the Circuit Court Decision said:

This approach was fundamentally mistaken. The

FCC’s auction rules promulgated under § 309(j)

have primarily a regulatory purpose: to insure

that spectrum licenses end up in the hands of

those most likely to further Congressionally de-

fined objectives. The fact that market forces are

the technique used to achieve that regulatory pur-

pose does not turn the FCC into a mere credi-

OM...

Id. at 54. Having so ruled, the Circuit Court Decision

went on to say the following:

This is not to say that [the District Court and

Bankruptcy Court] lacked jurisdiction over every

aspect of the relationship between the FCC and

NextWave. To the extent that the financial

transactions between the two do not touch upon

the FCC’s regulatory authority, they are indeed

like the obligations between ordinary debtors and

creditors. !

Id. at 55. And in footnote 11 on the same page, the Cir-

cuit Court Decision said:

11. The bankruptcy court held: “The basic defect

in the FCC’s argument is that Congress did not

confer upon the FCC the power to determine uni-

laterally its own rights as a creditor in competi-

tion with and to the detriment of other creditors.”

NextWave I, 235 B.R. at 270. That is surely true.

But as we have repeatedly stated, that analysis is

misplaced if it allows the bankruptcy court to ad-

judicate claims against the FCC not as a creditor,

40a

but as an allocator of licenses. Such was the case

here. ...

Thus, the Circuit Court Decision “remand[ed] the case

to the bankruptcy court for further proceedings consis-

tent with this opinion, if any are necessary.” Jd. at 62.

Turning to NextWave II, the Circuit Court Decision

concluded that “NextWave became obligated to the FCC

for the full amount of its winning bids at the close of the

C-block auction, and that the transaction in which the

Licenses were issued was therefore not constructively

fraudulent.” Jd. at 56.

The Circuit Court Decision agreed with the proposi-

tion (quoting from NextWave IV.A, 235 B.R. at 290)

“that the question of reasonably equivalent value is de-

termined by the ‘value of the consideration exchanged

between the parties at the time of the conveyance or in-

currence of the debt which is challenged.“ Jd.; empha-

sis in Circuit Court Decision. Accordingly, “[t]he date

on which the payment obligation arose is therefore cru-

cial to whether this obligation is avoidable.” Jd. at 56.

The Circuit Court Decision framed the issues as follows:

When did NextWave take on the obligation to

pay $4.74 billion for what it bid at auction? And

that question suggests another: What did

NextWave bid $4.74 billion to get?

Id. at 57. The Circuit Court Decision answered the latter

question: “We conclude that NextWave bid $4.74 billion

for the right -- excluding other bidders -- to be the quali-

fied licensee of the licenses.” Jd. at 57.2. On this prem-

2This Court ruled in NextWave II that NextWave’s cash

payments and Notes aggregating $4.74 billion were consid-

eration not for the mere right to be the qualified licensee, but

for the actual C Licenses themselves. In fact, as shown in

NextWave IV.A, 235 B.R. at 291-93, NextWave’s only ir-

[Footnote continued on next page]

a .

ise, the Circuit Court Decision held that “NextWave be-

came obligated to the FCC for the full amount of its

winning bids at the close of the C-block auction.” Jd. at

56.

Confirmation Proceedings

Next Wave’s First Amended Disclosure Statement

was approved by order dated July 27, 1999. Over 99%

of all creditors and equity interest holders who submit-

ted ballots voted in support of the debtors’ Plan, and a

hearing on confirmation of the Plan was scheduled for

September 8, 1999. On August 31, 1999 the Court of

Appeals granted the FCC’s motion for a stay of the con-

firmation hearing pending appeal.

[Footnote continued from previous page]

| revocable financial commitment (its “ticket of admission” to

the approval process) at the close of the auctions was the 3%

penalty (equating to $142,309,000) under the FCC regula-

tions, 47 C.F.R. § 1.204(g)(2), although its contingent liabil-

ity was much greater. See footnote 3.

3In NextWave II this Court concluded that, at the close

of the C block auctions, NextWave did not incur a liability

for its $4.74 billion aggregate winning bids -- it incurred a

contingent liability, necessarily less than $4.7 billion, for

penalties including the difference-between NextWave’s win-

ning bids and the winning bids in a subsequent reauction of

the C Licenses. Thus, if the C Licenses had been reauctioned

for $4.74 billion or more, the contingent liability could have

been reduced to less than 5% of $4.74 billion. Moreover, the

issue in the fraudulent conveyance proceeding did not con-

cern a hypothetical, unquantifiable and non-existent contin-

gent liability for penalties; it concerned the value of the con-

sideration actually received by NextWave (the C Licenses) in

exchange for its actual cash payments and Notes issued in

February 1997 aggregating $4.74 billion.

42a

On December 16, 1999, NextWave filed modifica-

tions to the Plan, providing inter alia that the debtors

would pay all unsecured creditors and the FCC in full,

regardless of the outcome of the appeal pending in the

Circuit Court. The confirmation hearing on NextWave’s

modified Plan was further adjourned, ultimately to Janu-

ary 21, 2000.

Seeking to persuade the FCC to reach an agreement,

NextWave’s President wrote to the FCC Chairman on

December 29 explaining that under its modified Plan

NextWave would pay the FCC, at confirmation, “an

amount equal to all principal, and interest accrued to

date, plus-any applicable late payment fees,” and there-

after NextWave “would resume quarterly payments of

its $4.3 billion principal and over $1.5 billion interest

obligation in accordance with the Commission’s sched-

ules, lasting through the Company’s PCS license term”

(NextWave letter dated December 29, 1999 to the FCC

Chairman, Exhibit A annexed to Bevel Declaration).

Continuing its negotiations with the FCC, by letter to

the FCC Chairman dated January 11, 2000 and delivered

on that date, NextWave proposed

an arrangement under which NextWave would

make a single lump sum payment at confirmation

to satisfy its entire obligation [in excess of $4.3

billion] to the FCC. Accelerating all our pay-

ments in this manner would eliminate any future

installment payments, and would provide the

Commission with absolute assurance that it will

never have to deal with the issue of collecting any

additional license payments from NextWave.

Exhibit B to Bevel Declaration.

The January 12 Declaration

The FCC responded to NextWave’s January 11 letter

by issuing the January 12 Declaration. This consisted of

three documents, all dated and issued January 12: the

43a

FCC’s formal objection to NextWave’s Modified Plan; a

news release bearing the headline “FCC Informs Court

That NextWave Licenses Have Cancelled and Sets Date

for Auction; “ and a Public Notice of “Auction of C and

F Block Broad Band PCS Licenses” scheduled for July

26, 2000.

It is important to note that at no time prior to the

January 12 Declaration did the FCC ever assert the posi-

tion, or even intimate, that NextWave’s C and F Li-

censes had automatically cancelled in late 1998 or early

1999 or at any other time on account of a default result-

ing from the passage of some ambiguous deadline for

the payment of some unquantified amount in respect of

the FCC’s pre-petition claims against NextWave. To the

contrary, the FCC made repeated declarations in judicial

proceedings utterly inconsistent with the notion that

NextWave’s Licenses automatically cancelled in Janu-

ary 1999, and all three Federal courts which have issued

tulings in these proceedings have done so upon the as-

sumption that the licenses were not cancelled.4

The Alleged “Default” \

The foundation of the January 12 Declaration of can-

cellation of the Licenses is a “default” by NextWave in

its installment obligations under the Notes. The thresh-

4For example, the Court of Appeals said:

a ... [T]he FCC has not yet sought to take any ac-

tion vis-a-vis the Licenses. While it would probably

be fair to assume that the FCC will seek to revoke

the Licenses and collect on its debts, we cannot pre-

sume to know in advance the course that the agency

will ultimately follow .. . . It is possible that if the

FCC chooses to pursue some of these options -- say,

collection on the notes -- it may find itself acting as

a creditor. (200 F.3d at 59 n.15).

44a

old question is whether there was a “default,” in the

sense of a legal breach of duty having enforceable legal

consequences, as distinguished from a “default” in the

colloquial sense of failure to pay timely under some le-

gally suspended, superceded or otherwise unenforceable

obligation.

It is, of course, true that there has been a delay in

payment of principal and interest under the Notes, and

that delay will persist until the debtors’ Plan becomes

effective, if it ever does. It is also true that past due in-

stallments, interest and penalties have not been waived

or forgiven and will have_to be paid, or the Licenses ul-

timately will be cancelled. But it does not follow that

NextWave’s failure to pay timely under the terms of the

Notes or the FCC regulations constituted a legal “de-

fault” triggering forfeiture of the Licenses.

The alleged “default” is phantom for two quite dif-

ferent reasons.

First, the retroactive declaration of forfeiture for fail-

ure to pay an unquantified and possibly unquantifiable

amount, within an unspecified and possibly undetermin-

able deadline, with no prior notice and therefore no op-

portunity to comply with the obligation (whatever the

obligation was) raises serious questions of Constitu-

tional deprivation of property without due process of

law. The existence of a default here depends upon an

interpretation of the FCC’s regulations, because all

payments by C and F block licensees were suspended by

FCC orders in March and April 1997. As shown in Ap-

pendix A to this decision, the FCC regulations concern-

ing resumption of payment obligations are numerous,

complex and confusing both as to payment deadlines

and amounts due. It appears that the FCC itself is inca-

pable of determining even now, long after the fact, either

the date(s) of NextWave’s default(s) or the amount(s)

then due. It is offensive to due process to make a retro-

active declaration of cancellation of property rights

based upon a “default” ions tae a year ago which can-

45a

not be identified either as to date or amount due, of

which the debtors had no fair notice and no opportunity

to cure.

Transcendent considerations of fairness and due

process, as expressed in the very statute that governs the

FCC, compel the conclusion that the FCC cannot sum- -

marily eviscerate the debtors’ estate on the basis of a

purported “regulatory default.” The FCA requires notice

and an opportunity to be heard where violations touch-

ing its regulatory purview warrant the revocation or sus-

pension of a license. See 47 U.S.C. § 312 (“Administra-

tive Sanctions” - requiring the FCC to serve an order to

show cause on thirty days’ notice for station license

revocation procedures or cease and desist orders) and 47

U.S.C. § 303 (“Powers of the Commission” - requiring

fifteen days’ notice and opportunity to request a hearing

for actions taken to suspend an operator’s license). The

Bankruptcy Code also requires, as an element of basic

fairness and due process, notice, a hearing and court ap-

proval before actions impacting vital interests may be

taken. The FCC’s reliance upon a purported “regula-

tory” default, itself premised upon constantly shifting

and sometimes inconsistent agency interpretations, only

exacerbates the fundamental unfairness of its action.

Deprivation of property by agency fiat, without any pro-

cedural or due process safeguards, cannot be counte-

nanced.

Second, the debtors’ failure to make post-petition

payments on the Notes cannot be deemed a legal “de-

fault” triggering a forfeiture of the Licenses because

such payments were prohibited under the Bankruptcy

Code. Even if the FCC regulations suspending the 1997

Suspension orders clearly and unambiguously specified

payment deadlines and amounts due for C and F block

licensees, the payment obligations thus identified were

necessarily suspended for the NextWave debtors upon

their filing petitions under Chapter 11 on June 8, 1998.

As shown in point II, below, the Bankruptcy Code pro-

46a

hibits a debtor from making payments on pre-petition

claims to a select creditor or creditors. With exceptions

not here applicable, under Section 363 and other provi-

sions of the Code the debtors’ property can be used to

pay pre-petition claims only pursuant to court order or in

the context of a confirmed plan of reorganization. Since

a Chapter 11 debtor is precluded from making post-

petition payments on a pre-petition claim, NextWave’s

failure to make payments on the Notes in accordance

with a time schedule set by the Notes or by the FCC

regulations cannot be deemed a legal “default” trigger-

ing automatic cancellation of the Licenses.

The Alleged “Automatic” Cancellation

The FCC’s authority for automatic cancellation is 47

C.F.R. § 1.2110(f)(4)(iv), which provides:

(iv) Any eligible entity that submits an install-

ment payment after the due date but fails to pay

any late fee, interest or principal at the close of

the 90-day non-delinquency period and subse-

quent automatic grace period, if such a grace pe-

riod is available, will be declared in default, its

license will automatically caricel, and will be sub-

ject to debt collection procedures. (emphasis

supplied)

Under the regulation, a “default” must “be declared”

before “automatic” cancellation can occur.

The FCC argued that, despite the language “will be

declared in default,” it was incumbent on the debtors,

before a “default” occurred, to seek an extension or

waiver before any discretion of the FCC could be in-

voked. The history of this regulation indicates other-

wise. As originally promulgated in 1994, the default

and cancellation provision read as follows:

(4) A license granted to an eligible entity that

elects installment payments shall be conditioned

upon the full and timely performance of the li-

47a

censee’s payment obligations under the install-

ment plan.

(i) If an eligible entity making installment pay-

ments is more than ninety (90) days delinquent in

any payment, it shall be in default.

(11) Upon default or in anticipation of default of

one or more installment payments, a licensee may

request that the Commission permit a three to six

month grace period, during which no installment

payments need be made. In considering whether

to grant a request for a grace period, the Commis-

sion may consider, among other things, the licen-

see’s payment history, including whether the li-

censee has defaulted before, how far into the li-

cense term the default occurs, the reasons for de-

fault, whether the licensee has met construction

build-out requirements, the licensee’s financial

condition, and whether the licensee is seeking a

buyer under an authorized distress sale policy. If

the Commission grants a request fora grace pe-

riod, or otherwise approves a restructured pay-

ment schedule, interest will continue to accrue )

and will be amortized over the remaining term of

the license.

(ili) Following expiration of any grace period

without successful resumption of payment or

upon denial of a grace period request, or upon de-

fault with no such request submitted, the license

will automatically cancel and the Commission

will initiate debt collection procedures pursuant

to Part 1, Subpart O.

59 FR 44272-01 at 44298 (Implementation of Section

3094) of the Communications Act -- Competitive Bid-

ding, August 26, 1994) (emphasis supplied). As origi-

nally promulgated, it was indeed up to the licensee to

actively request a grace period, and there was no re-

quirement that a default be “declared.” But this language

48a

was changed to the now applicable “will be declared in

default.” The FCC never declared a default.

The FCC has argued that the “automatic” cancella-

tion provision is analogous to the regulations in Jn re

Gull Air, Inc., 890 F.2d 1255 (1st Cir. 1989) and Jn re

Yellow Cab Co-op. Ass’n, 132 F.3d 591 (10th Cir.

1997), where cancellation involved no action and no ex-

ercise of judgment or discretion on the part of the ad-

ministrative agency. The licenses for airport landing

slots in Gull Air and taxicab medallions in Yellow Cab,

by their terms, depended for their continued existence on

actual utilization of the landing slots and taxicab medal-

lions and lapsed when no longer used. Thus, termina-

tion of the licenses took place with no act, declaration,

judgment or discretion exercised or exercisable by the

regulatory agency.

The facts are quite different here. Cancellation in

this case is not predicated on a “use it or lose it” re-

quirement, but upon delay in payment. The regulation

involved requires the FCC to do something (declare a

default), and the FCC has the power, in its sole judg-

ment and discretion, to suspend, reinstate and repeatedly

change deadlines for payment of C and F block spec-

trum licenses, both generally and for specific licensees,

and to waive payment defaults, and it has repeatedly ex-

ercised that power, all as documented in Appendix A.

Moreover, even if the regulation did not require a

declaration of default and the FCC did not have discre-

tion to suspend, reinstate, extend and waive payment

deadlines, it is still not accurate to say that cancellation

is truly “automatic.” This is so because, in the real

world, unless and until the FCC takes some affirmative

action to assert dominion over the licenses of a default-

ing licensee, life will go on as before and the parties (in-

cluding the FCC) will go on spending millions of dollars

in litigation costs, DIP lenders will continue lending mil-

lions of dollars secured by the licenses, the licensee will

continue to expend money in preparation to build out its

49a

PCS systems and the courts will continue to expend

countless hours of judicial resources, all on the assump-

tion that the licenses have not cancelled. And that is ex-

actly what happened in this case.

Finally, it is not true that no agency discretion is in-

volved in the cancellation. The Restructuring Orders

themselves are replete with agency considerations justi-

fying decisions to either extend or refuse to extend the

automatic grace periods. If the FCC has sufficient dis-

cretion to suspend payments, extend grace periods and

grant waivers in the cases of individual licensees, then

the contention that the automatic cancellation provision

involves no agency discretion is untenable. The very

timing of the January 12 Declaration shows a calculated

act designed to divest the debtors of the Licenses imme-

diately after the January 11 letter, and before the January

21 confirmation hearing. The cancellation may be

“automatic,” but it must nevertheless be invoked. It is

that invocation, on January 12, 2000, which is the sub-

ject of the debtors’ motion.

Discussion

I. The FCC’s January 12 Declaration violated

the Bankruptcy Code.

The FCA does not preempt the Bankruptcy Code. 5

One cannot point to any language in the FCA that ex-

pressly or impliedly purports to limit, abridge or affect

the Code insofar as it would apply to the FCC as a credi-

tor. Before turning to the FCC’s arguments in opposi-

tion, we shall examine the Bankruptcy Code implica-

tions of the January 12 Declaration.

“The FCC makes no claim that the FCA supercedes the

Bankruptcy Code.” FCC Memorandum in Opposition at 11

fin. 3.

50a

A. The automatic stay

The automatic stay provided for in Section 362(a) of

the Bankruptcy Code is one of the statutory cornerstones

of the bankruptcy énd reorganization process. It ensures

(i) that the assets of a debtor’s estate remain intact for

adjudication by th: Bankruptcy Court and (ii) equality

of distribution to creditors in accordance with the prior-

ity and distribution scheme of the Code.® See e.g., In re

Parr Meadows Racing Association, Inc., 880 F.2d 1540,

1545 (2d Cir. 1989) (Bankruptcy Code “requires that all

creditors, both public and private, be subject to the

automatic stay”), cert. denied sub nom., Suffolk County

Treasurer v. Barr, 493 U.S. 1058, 110 S. Ct. 869, 107 L.

Ed. 2d 953 (1990). It also ensures that contractual and

State or Federal law rights and remedies such as accel-

eration, forfeiture, imposition of judgment liens and

~ foreclosure will be precluded, held in abeyance or in

some cases “cured’ and thereby reversed, in order that

the ultimate objective of reorganization in Chapter 11 or

Chapter 13 for the benefit of all creditors will not be

6The legislativehistory states:

The automatic stay is one of the fundamental

debtor protections provided by the bankruptcy laws.

It gives the de>tor a breathing spell from his credi-

tors. It stops «ll collection efforts, all harassment,

and all foreclosure actions. It permits the debtor to

attempt a repayment or reorganization plan, or sim-

ply to be relieved of the financial pressures that

drove him intobankruptcy.

H.R. Rep. No. £95, 95th Cong., Ist Sess. 340 (1977),

U.S. Code Cong. & Admin. News p. 6296, reprinted in Col-

lier on Bankruptcy App. Pt. 4(d)(); S. Rep. No. 989, 95th

Cong., 2d Sess. 54-55 (1978), U.S. Code Cong. & Admin.

News pp. 5840-5841, reprinted in Collier on Bankruptcy

App. Pt. 4(e)(i).

S5la

thwarted by the action of a single creditor. Jn re Monroe

Park, 18 B.R. 790, 791 (Bankr. D. Del. 1982) (“It is

clear that Congress intended a financially troubled

debtor to be able to reorganize after there has been a de-

fault and acceleration even in the face of state law which

requires the consent of the creditor for cure and rein-

statement once the entire amount has become due.”’) See

point I B, below. As noted in Collier on Bankruptcy:

In reorganization cases, the stay is particularly

important in maintaining the status quo and per-

mitting the debtor in possession or trustee to at-

tempt to formulate a plan of reorganization.

Without the stay, the debtor’s assets might well

be dismembered, and its business destroyed, be-

fore the debtor has an opportunity to put forward

a plan for future operations. Secured creditors

and judgment creditors might race to seize and

sell the debtor’s assets in order to obtain satisfac-

tion of their claims, without regard to the interests

of other creditors or the value of keeping assets

together in an operating business. The stay pre-

vents this piecemeal liquidation, offering the

chance to maximize the value of the business.

3 Collier on Bankruptcy J 362.03[2] at pp. 362-15 (15th

Ed. rev. 1999).

The courts inthis Circuit hold that any action taken

in violation of the automatic stay is void and without

force or effect. 48th Street Steakhouse, Inc. v. Rockefel-

ler Group, Inc. (In re 48th Street Steakhouse, Inc.), 835

F.2d 427, 431 (2d Cir. 1987) (“actions taken in violation

of the stay are void and without effect” (quoting Collier

on Bankruptcy)), cert. denied, 485 U.S. 1035, 108 S. Ct.

1596, 99 L. Ed. 2d 910 (1989). See also Shimer v. Fu-

gazy (In re Fugazy Express, Inc.), 114 B.R. 865, 873

(Bankr. S.D.N.Y. 1990) (“[s]ince § 362 of the Code

stays all enforcement activity automatically, the 1988

FCC letter [purportedly canceling the license] is accord-

ingly without effect” (citing Jn re Garnett, 47 B.R. 170,

52a

171 (Bankr. E.D.N.Y. 1985) (“[t]he action of a party in

violation of the stay without court approval is void and

without effect”))), aff'd, 124 B.R. 426 (S.D.N.Y. 1991).

The automatic stay is embodied in 11 U.S.C.

§ 362(a)._ Section 362(a) provides as follows, in relevant

part:

(a) Except as provided in subsection (b) of this

section, a petition filed under section 301... of

this title... operates as a stay, applicable to all

entities, of -

(1) the commencement or continuation... of

a([n]... administrative, or other action or pro-

ceeding against the debtor .. . to recover a claim -

against the debtor that arose before the com-

mencement of the case under this title;

* * *

(3) any act to obtain possession of property of

the estate or of property from the estate or to ex-

ercise control over property of the estate;

(4) any act to...enforce any lien against prop-

erty of the estate; -

(5) any act to... enforce against property of the

debtor any lien to the extent that such lien secures

a claim that arose before the commencement of

the case under this title;

(6) any act to collect, assess, or recover a claim

against the debtor that arose before the com-

mencement of the case under this titie.

All of the quoted subsections of Section 362(a) are

implicated by the FCC’s issuance of the January 12 Dec-

laration. There can be no question that the FCC’s act is

claim-based -- the January 12 Declaration of cancella-

tion was explicitly and exclusively predicated upon

NextWave’s failure to make timely payment of install-

ments due post-petition on the FCC’s pre-petition claim

53a

under the Notes. There can be no doubt that the Li-

censes constitute “property of the estate” under Section

541 of the Bankruptcy Code.? The January 12 Declara-

7The FCC has never argued that the licenses are not

property of the estate. Section 541 is broadly construed to

encompass all conceivable interests of the debtor in property,

United States v. Whiting Pools, 462 U.S. 198, 103 S. Ct.

2309, 76 L. Ed. 2d 515 (1983). Although the Circuit Court

Decision stated in a different context that a license “does not

convey a property right” in the traditional sense (200 F.3d at

51), the law is clear that possessory and intangible interests

in general and FCC licenses in particular do constitute prop-

erty of the estate in bankruptcy. See e.g., In re Central Ar-

kansas Broadcasting Company, 68 F.3d 213, 214 (8th Cir.

1995) (interests of debtor in FCC license property of the es-

tate); In re Tak Communications Inc., 985 F.2d 916 (7th Cir.

1993) (same); Jn re PBR Communications Systems, Inc., 172

B.R. 132, 134 (Bankr. S.D.Fla. 1994) (same); In re Ridgely

Communications, Inc., 139 B.R. 374 (Bankr. D. Md. 1992)

(same); Shimer v. Fugazy (In re Fugazy Express, Inc.), 114

B.R. 865, 870-71 (Bankr. S.D.N.Y. 1990), aff'd, 124 B.R.

426 (S.D.N.Y. 1991) (same). Upon the grant of the licenses,

the debtors were required to execute not only the Notes but

security agreements giving the FCC “a first lien on and con-

tinuing security interest in all of the Debtor’s rights and in-

terests in the License and all proceeds, profits and products

of any sale of or other disposition thereof. . . .” The FCC

filed UCC financing statements in several jurisdictions, put-

ting the world on notice of its security interest in the licenses.

A “security interest” is an “interest in property obtained pur-

suant to a security agreement.” Black’s Law Dictionary (6th

ed. 1990) at 1357. Uniform Commercial Code § 1-201(37)

provides ““Security Interest’ means an interest in personal

property or fixtures which secures payment or performance

of an obligation.”

54a

tion implicates subsections (1) and (6), and it unarguably

violated subsections (3), (4) and (5).

Accordingly, the January 12 Declaration was void.

B. The right to cure defaults and reinstate ob-

ligations to avoid forfeiture and facilitate

reorganization

One of the essential objectives of the automatic stay

under Section 362(a) is to avoid the effective nullifica-

tion of other provisions of the Bankruptcy Code de-

signed to facilitate the central Code objective of reor-

ganization, including the right to cure defaults under

Sections 1123(a)(S)(G) and 1124(2)(A). Section

1123(a)(5)(G) provides that “a plan shall . . . (5) provide

adequate means for the plan’s implementation, such

as...(G) curing or waiving any default.” Section

1124(2)(A) expressly contemplates a plan which

“(A) cures any such default that occurred before or after

the commencement of the case under this title,” and this

applies “(2) notwithstanding any contractual provision

or applicable law that entitles” a creditor to demand or

receive accelerated payment.

Thus, even if there was a default in the “timely”

payment of installments under the Notes, the Bank-

ruptcy Code explicitly provides for the right to cure the

default and reinstate the obligation. The “cure,” al-

though not defined, is “reversal” of the event that trg-

gered the default and a return to a pre-default status quo.

DiPierro v. Taddeo (In re Taddeo), 685 F.2d 24, 26-27

(2d Cir. 1982); In re Liberty Warehouse Assocs. Ltd.

Partnership, 220 B.R. 546, 548 (Bankr. S.D.N.Y. 1998)

(“Under § 1124(2), a debtor can cure its pre-petition de-

fault under a note or other debt instrument”). As con-

cisely stated by the Second Circuit, “[c]uring a default

commonly means taking care of the triggering event and

returning to pre-default conditions. The consequences

are thus nullified.” Zaddeo, 685 F.2d at 27.

55a

Although Taddeo was a Chapter 13 case, its holding

applies with equal force in the Chapter 11 context, as the

language in both Chapters is substantially similar. Com-

pare 11 U.S.C. § 1322(b)(5) (stating that a chapter 13

plan may “provide for the curing of any default within a

reasonable time. . . .”) with 11 U.S.C. § 1123(a)(5)

(quoted above) and 11 U.S.C. § 1124(2)(A) (quoted

above) and 11 U.S.C. § 1222(B)(5) (stating that

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.