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Vernal Enterprises, Inc. v. Federal Communications Commission

January 27, 2004

VERNAL ENTERPRISES, INC. AND LARRY L. SCHRECONGOST, PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS



On Petition for Review of an Order of the Federal Communications Commission

Before: Edwards, Sentelle, and Tatel, Circuit Judges.

The opinion of the court was delivered by: Edwards, Circuit Judge

Argued December 4, 2003

Bills of costs must be filed within 14 days after entry of judgment. The court looks with disfavor upon motions to file bills of costs out of time.

Petitioners Vernal Enterprises, Inc., and Larry L. Schrecongost, the company's President, seek review of an order of the Federal Communications Commission (''FCC'' or ''the Commission'') denying their request for refund of a $2,335.00 filing fee paid in connection with a permit application for construction of a broadcast station. See Vernal Enter., Inc., 17 F.C.C.R. 14,826 (2002). Vernal was one of a number of mutually exclusive applicants vying for a permit to construct a radio station in Brookville, Pennsylvania. In January 1998, Vernal and the other applicants filed a settlement agreement with the FCC pursuant to which the construction permit was awarded to another applicant. In April 2000, two years after the FCC approved the settlement agreement and dismissed Vernal's application, petitioners requested a refund of the fee paid when Vernal filed its application in 1996.

The Commission denied the refund request by memorandum opinion and order on July 23, 2002. The Commission held that, under the applicable agency policy, application fees would be refunded only to applicants who had not resolved their mutually exclusive applications through negotiated agreements within 180 days of August 5, 1997, and whose pending mutually exclusive applications would therefore be resolved pursuant to the agency's newly implemented competitive bidding process. Petitioners now seek review of the Commission's order, claiming that the agency's denial of the refund request was arbitrary and capricious. 5 U.S.C. § 706(2)(A) (2000).

The Commission first contends that the court is without jurisdiction to hear this case, because petitioners failed to appeal within the 30 days allowed under 47 U.S.C. § 402(b) (2000). See 47 U.S.C. § 402(c). We reject this argument. Petitioners are properly seeking review under 47 U.S.C. § 402(a), and their petition for review was filed within the 60-day limitation applicable to that statutory provision.

The Commission argues, in the alternative, that the agency's enforcement of the disputed fee-refund policy was reasonable and did not violate the arbitrary and capricious standard of the Administrative Procedure Act. We agree. We therefore deny the petition for review.

I. BACKGROUND

In August 1997, Congress amended § 309(j) of the Communications Act (''the Act'') to require the FCC to use competitive bidding (also known as auctions), rather than comparative hearings, in connection with mutually exclusive applications for commercial broadcast authorizations. See Balanced Budget Act of 1997, Pub. L. No. 105-33, § 3002(a)(1), 111 Stat. 251, 258-59 (1997). Congress also added a new section to the Communications Act, 47 U.S.C. § 309( l ), allowing the Commission to determine whether to use competitive bidding or comparative hearings in connection with mutually exclusive applications pending as of July 1, 1997. See § 3002(a)(3), 111 Stat. at 260. This new section also provided a 180-day period during which pre-July 1, 1997 applicants who entered into settlement agreements resolving mutual exclusivity would not be subject to FCC rules limiting the amount of settlement payments between applicants. See id.

In a notice of proposed rulemaking issued in November 1997, the FCC ''tentatively'' concluded that the use of auctions to resolve pending comparative licensing cases would ''better serve[ ] the public interest than deciding them by comparative hearingTTTT'' Implementation of Section 309(j) of the Communications Act – Competitive Bidding for Commercial Broadcast and Instructional Television Fixed Service Licenses, Notice of Proposed Rulemaking, 12 F.C.C.R. 22,363, 22,369-70 ¶ 14 (1997) [hereinafter Notice of Proposed Rule - making ]. The Commission noted that it was seeking ''comment on whether we should continue to use comparative hearings for some or all of these cases.'' Id. at 22,370 ¶ 14. In conjunction with its tentative decision to subject pending applications to competitive bidding, the Commission also proposed to refund the filing fees paid by applicants who chose not to participate in the auction process. Id. at 22,370-71 ¶ 16.

In August 1998, the FCC issued a report and order implementing its auction authority. See Implementation of Section 309(j) of the Communications Act – Competitive Bidding for Commercial Broadcast and Instructional Television Fixed Service Licenses, First Report and Order, 13 F.C.C.R. 15,920 (1998), on reconsideration, Memorandum Opinion and Order, 14 F.C.C.R. 8,724 (1999), aff'd. mem., Orion Communications, Ltd. v. FCC, 221 F.3d 196 (D.C. Cir. 2000) [hereinafter Report and Order ]. The Commission also promulgated a feerefund policy in conjunction with the Report and Order. The policy provided:

On or before the date for filing a short-form application, pending applicants in all comparative licensing cases subject to resolution by competitive bidding pursuant to § 309( l) may file a pleading disavowing any interest in participating in the auction and seeking the dismissal of their applications. Once dismissal of any such application is final, we will entertain requests for refunds of any hearing and filing fees actually paid by such applicants.

Id. at 15,957 ¶ 102.

In May 1996, Vernal Enterprises, Inc., a closely held corporation owned by Larry L. Schrecongost and his wife, filed an application for a permit to construct a new FM radio station in Brookville, Pennsylvania. Vernal payed a $2335.00 filing fee in connection with the application. Several other parties, including Robert Stevens and Renda Radio, Inc., also filled applications to construct a station in the Brookville community. Because the applicants sought to use the same FM frequency, the Commission was required to decide to whom the construction permit should be awarded. The Brookville applications were pending in August 1997 when the relevant amendments to the Communications Act were adopted.

In January 1998, within the 180-day period during which FCC limitations on settlement agreements were waived and over six months before the FCC determined that all pending pre-July 1997 applications would be subject to competitive bidding, Vernal entered into a settlement agreement with the other Brookville applicants. In April 1998, the FCC issued a public notice announcing that, pursuant to the settlement, Renda Radio, Inc. would be awarded the construction permit and all other applications, including Vernal's, would be dismissed. FM Broadcast Settlement Agreements and Applications, 1998 WL 174,855 (Apr. 16, 1998). The dismissals became final in May 1998.

In October 1998, Stevens, who, like Vernal, sought dismissal of his permit application pursuant to the settlement, requested a refund of his filing fee. A staff member of the Commission's Office of Managing Director (''OMD'') granted Stevens' request in July 1999, and notice of the refund was released in ...


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