United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 1, 1999 Decided March 19, 1999
No. 98-1076
SL Communications, Inc.,
Appellant
v.
Federal Communications Commission,
Appellee
Consolidated with
No. 98-1103
Dorothy O. Schulze and Deborah Brigham,
a General Partnership,
Appellant
v.
Federal Communications Commission,
Appellee
Appeals of an Order of the
Federal Communications Commission
Barry A. Friedman argued the cause for appellant SL
Communications, Inc. With him on the briefs was Michael L.
Martinez.
Donald E. Martin was on the briefs for appellant Dorothy
O. Schulze and Deborah Brigham, a General Partnership.
Gregory M. Christopher, Counsel, Federal Communications
Commission, argued the cause for appellee. With him on the
brief were Christopher J. Wright, General Counsel, and Dan-
iel M. Armstrong, Associate General Counsel. Pamela L.
Smith, Counsel, entered an appearance.
Before: Edwards, Chief Judge, Ginsburg and Tatel,
Circuit Judges.
Opinion for the court filed by Circuit Judge Tatel.
Tatel, Circuit Judge: The Federal Communications Com-
mission disqualified appellant Dorothy O. Schulze and Debo-
rah Brigham ("S&B") from a comparative television licensing
proceeding due to serious misconduct. Because no other
qualified applicant remained, S&B proposed to "settle" the
proceeding by substituting in its place appellant SL Commu-
nications ("SL"), an established, reputable broadcaster willing
to reimburse S&B for the expenses it incurred pursuing the
license. Relying on its policy of deterring misconduct, the
Commission rejected the settlement. Because we find the
disqualification and the rejection of the settlement wholly
justified, we affirm.
I
In 1985, appellant S&B, a partnership consisting of two
sisters, applied for a television broadcast license for UHF
channel 52 in Blanco, Texas, a small town forty miles west of
San Antonio. The Commission designated S&B and two
other applicants to participate in comparative hearings before
an administrative law judge.
Following months of hearings, the ALJ disqualified S&B on
several grounds. See Opal Chadwell, 1 F.C.C.R. 120 (1986)
("ALJ Order"). First, he found that S&B improperly failed
to disclose that one of its principals, Dorothy Schulze, had
previously applied for another television broadcast license in
San Antonio. Rejecting as "pure fabrication" Schulze's expla-
nation that she never had an interest in the San Antonio
application, the ALJ found that Schulze lied during the
Blanco hearings to cover up the omission in S&B's applica-
tion. Id. at 124 pp 45-46. The ALJ also found that Schulze
lied to a different ALJ--one conducting comparative hearings
regarding a television broadcast license in Castle Rock, Colo-
rado--about her involvement in yet another application for a
license in Conroe, Texas. See id. at 125 p 66.
Second, the ALJ found that S&B was actually controlled
not by Schulze and Brigham but rather by their brother,
Richard Ozan, and that Ozan had convinced his sisters to act
as nominal applicants for the Blanco license in order to take
advantage of then-applicable affirmative action programs af-
fording preferences to women-owned license applicants. Ac-
cording to the ALJ, Ozan was the real party-in-interest not
only in S&B's Blanco application, but also in nine other
applications then pending before the Commission, including
one in the Conroe proceeding. See id. at 126 p 70.
Third, the ALJ found that in addition to lying about her
interest in the San Antonio application, Schulze had lied in
her Castle Rock application about whether she had obtained a
transmitter site in that area. Although S&B's communica-
tions consultant, Ron Baptist, had originally testified that he
had secured a Castle Rock transmitter site for Schulze,
Baptist later recanted, admitting that he actually had nothing
to do with securing a site. Baptist then testified that he and
S&B's lawyer, Donald Martin, concocted his false story over
breakfast the morning he first testified. Schulze was at that
breakfast. The ALJ found not just that Schulze lied about
the transmitter site, but also that Schulze and Martin had
suborned Baptist's perjury. See id. at 127 p 93.
After disqualifying S&B on the basis of these findings, the
ALJ disqualified a second applicant, finding that it had made
misrepresentations in its pleadings. He awarded the Blanco
license to the lone remaining applicant. The Commission's
Review Board affirmed. See Opal Chadwell, 2 F.C.C.R. 5502
(1987) ("Review Board Order"). Agreeing with the ALJ that
Ozan exercised de facto control over S&B's application, the
Review Board stated that "it was clearly demonstrated that
[Ozan] was the prime mover, principal and agent responsible
for every aspect of the prosecution of the application[ ]." Id.
at 5509 p 31. It also affirmed the ALJ's finding that Schulze
lied about the Castle Rock transmitter site. See id. at 5510
p 34. Because the real party-in-interest and Castle Rock
veracity issues each independently supported S&B's disquali-
fication, the Review Board declined to review the ALJ's other
findings, including his finding that Schulze and Martin sub-
orned Baptist's perjury. See id.
Although the Commission denied review of S&B's disquali-
fication in 1989, it remanded the case to the ALJ for further
factfinding regarding the successful applicant's financial qual-
ifications. See Opal Chadwell, 4 F.C.C.R. 1215 (1989). The
ALJ then dismissed that applicant for failing to participate in
discovery. See Opal Chadwell, FCC 89M-1568, Docket No.
85-269 (Jun. 2, 1989). At that point, no applicants remained
in the Blanco proceeding.
Petitioning the Commission for reconsideration, S&B ar-
gued that the ALJ's findings, especially that Ozan exercised
de facto control over a sham application in Conroe, were
inconsistent with those of the Conroe ALJ, who had subse-
quently found otherwise. Because the Review Board had
remanded the Conroe proceeding for further consideration in
light of the Blanco findings, the Commission stayed its order
denying review of S&B's disqualification, holding S&B's peti-
tion for reconsideration in abeyance pending the Conroe
remand. See Opal Chadwell, 5 F.C.C.R. 3227 (1990). The
Conroe ALJ then reversed himself, agreeing with the Blanco
ALJ that Ozan controlled a sham application in Conroe. See
Montgomery Cty. Media Network, 6 F.C.C.R. 2963 (1991).
In 1995, while its petition for reconsideration was still in
abeyance, S&B petitioned the Commission to amend its Blan-
co application to substitute in its place SL, the other appellant
in this case. Under the proposed "settlement," the Commis-
sion would award the Blanco license to SL, and SL would pay
S&B $227,000--a sum S&B claimed was less than the ex-
penses it incurred pursuing the Blanco license. At oral
argument, SL's counsel conceded that most of the $227,000
represented Martin's fees. The Commission denied the peti-
tion to amend, stating that because S&B had not demonstrat-
ed that it was qualified to receive the license, it had nothing
to assign to SL. See Dorothy O. Schulze and Deborah
Brigham, 12 F.C.C.R. 2602 (1997) ("Commission Order I").
Moreover, the Commission explained, given S&B's unconscio-
nable behavior, allowing S&B to recover its expenses would
run counter to its policy of deterring misconduct during
agency proceedings. Id. at 2604-05 p 9 & n.1. The Commis-
sion also denied S&B's petition for reconsideration of its
disqualification; that petition had been in abeyance for seven
years.
Six months later, Congress enacted the Balanced Budget
Act of 1997. See Pub. L. No. 105-33, 111 Stat. 251 (1997).
Section 3002(a)(3) of that Act added section 309(l) to the
Communications Act of 1934. See 111 Stat. at 260 (codified at
47 U.S.C.A. s 309(l) (Supp. 1998)). Section 309(l) authorized
the Commission to resolve then-pending comparative pro-
ceedings through competitive auctions. It also required the
Commission, during the 180-day period following its enact-
ment, to "waive any provisions of its regulations necessary" to
allow competing applicants to settle conflicts between or
among their applications. Relying on this new provision,
S&B, this time joined by SL, once again petitioned the
Commission for reconsideration, arguing that section 309(l)
required the Commission to waive its normal rule against
third-party settlements of comparative proceedings. Denying
the petition, the Commission held that section 309(l) applies
only to settlements between competing applicants, not be-
tween a lone applicant and a third party. See Opal Chadwell,
13 F.C.C.R. 3259 (1998) ("Commission Order II").
S&B appeals the disqualification of its application. Joined
by S&B, SL appeals the rejection of the proposed settlement.
We review the Commission's decisions under the familiar
arbitrary and capricious standard. See 5 U.S.C. s 706(2)(A)
(1994); Serafyn v. FCC, 149 F.3d 1213, 1219 (D.C. Cir. 1998).
II
Represented in this appeal by Martin, S&B spends nearly
half its brief challenging the ALJ's finding that Martin and
Schulze suborned Baptist's perjury. We have no authority to
consider that issue, however, for the Review Board expressly
declined to reach it. See Review Board Order, 2 F.C.C.R. at
5510 p 34 (concluding that "we need not reach the more
serious question whether the applicant's conduct constitutes
'subornation of perjury' " because Schulze "proffer[ed] a false
version of the events surrounding the securing of the [trans-
mitter] site") (citation omitted).* We turn to S&B's chal-
lenges to the real party-in-interest and lack-of-candor find-
ings.
In determining that Ozan was the real party-in-interest
behind S&B's application, the ALJ credited the testimony of
Thomas Root, Schulze's former attorney, and Ronald Baptist,
S&B's communications specialist. Both had described Ozan's
behind-the-scenes role with respect to S&B's application.
The ALJ rejected as "sheer fabrication"--a "web of lies," as
he also put it--the contrary testimony of three S&B wit-
nesses, including Schulze. ALJ Order, 1 F.C.C.R. at 124-25
p 55, 125-26 p 69. We disturb credibility findings affirmed by
__________
* Perhaps Martin's belief that he needed to defend his own
conduct led him to place so much emphasis on an issue irrelevant to
his client's appeal. Cf. Model Rules of Professional Conduct Rule
1.7 cmt. 6 (1983) ("The lawyer's own interests should not be
permitted to have an adverse effect on representation of a
client.... If the probity of a lawyer's own conduct in a transaction
is in serious question, it may be difficult or impossible for the
lawyer to give a client detached advice.").
the Commission only if "patently unsupportable." Williams
Enterprises v. NLRB, 956 F.2d 1226, 1232 (D.C. Cir. 1992).
S&B argues that Root's testimony should not have been
credited because shortly after the Commission first denied
review of S&B's disqualification Root was convicted on nu-
merous state and federal charges of fraud, racketeering, and
conspiracy. See Petroleum V. Nasby Corp., 10 F.C.C.R.
6029, 6030 p 6 (1995). Rejecting this argument, the Commis-
sion observed that the Review Board had determined (after
the Conroe remand) that Root had testified credibly regard-
ing Ozan's role in the Blanco and Conroe proceedings--a
determination that the Review Board made with full knowl-
edge of Root's subsequent convictions. See Commission
Order I, 12 F.C.C.R. at 2607 pp 13-14. The Commission
ruled that the Review Board had given adequate reasons for
crediting Root's testimony, pointing out not only that his
testimony was corroborated by two other witnesses and by
documentary evidence, but also that he had no apparent
motive to lie. S&B offers no reason why Root's convictions,
which were weighed by the Commission, render the ALJ's
credibility determination "patently unsupportable."
S&B next argues that Baptist's testimony should not have
been credited because he lied about the Castle Rock trans-
mitter site. Despite Baptist's admitted perjury, the ALJ
credited his account of Ozan's involvement in S&B's Blanco
application. Affirming the ALJ's credibility determination,
the Review Board stated: "The fact that Baptist voluntarily
exposed himself to penal sanctions [by recanting] lends cre-
dence to his claim of truthfulness the second time he testi-
fied." Review Board Order, 2 F.C.C.R. at 5510 p 34. Again,
S&B offers no reason for questioning the ALJ's credibility
determination.
Having considered S&B's remaining arguments and finding
none persuasive, we affirm the Commission's determination
that Ozan was the real party-in-interest behind S&B's Blanco
application. Because the Commission found the real party-in-
interest determination independently sufficient to justify
S&B's disqualification, we need not consider S&B's challenge
to the Commission's alternative determination that Schulze
lied about the Castle Rock transmitter site.
III
This brings us to SL's challenge to the agency's refusal to
approve the proposed third-party settlement agreement.
Joined by S&B, SL argues that the Commission's refusal to
approve the settlement violates the 1997 Budget Act, conflicts
with its own precedent, and is contrary to the public interest.
Section 3002(a)(3) of the Budget Act, which added section
309(l) to the Communications Act, authorized the Commission
to resolve competing applications in then-pending compara-
tive licensing proceedings through competitive auctions. See
Pub. L. No. 105-33, s 3002(a)(3), 111 Stat. at 260. Entitled
"Applicability of competitive bidding to pending comparative
licensing cases," section 309(l) provides:
With respect to competing applications for initial li-
censes or construction permits for commercial radio or
television stations that were filed with the Commission
before July 1, 1997, the Commission shall--
(1) have the authority to conduct a competitive bidding
proceeding ... to assign such license or permit;
(2) treat the persons filing such applications as the
only persons eligible to be qualified bidders for pur-
poses of such proceeding; and
(3) waive any provisions of its regulations necessary to
permit such persons to enter an agreement to procure
the removal of a conflict between their applications
during the 180-day period beginning on the date of
enactment of the Balanced Budget Act of 1997.
47 U.S.C.A. s 309(l). Subsection (l)(3) required the Commis-
sion to waive any rules that would otherwise have prevented
competing applicants in then-pending comparative proceed-
ings from avoiding an auction by reaching a settlement.
The Commission interprets section 309(l) as not applying to
the settlement in this case because SL and S&B are not
"competing applica[nts]." See Commission Order II, 13
F.C.C.R. at 3264-65 pp 13-15; see also Implementation of
Section 309(j) of Communications Act, 13 F.C.C.R. 15,920,
15,949 p 78 (1998) ("SL Communications urges that the waiv-
er [of the prohibition against non-party settlements] should
apply to all comparative proceedings ... even proceedings in
which there is only one remaining applicant.... However,
... the special settlement provisions of Section 309(l)(3) apply
only to competing [i.e. mutually exclusive] applications.") (in-
ternal quotation omitted). SL was not even a party to the
Blanco proceeding, the Commission observes, and as the lone
remaining applicant S&B was "competing" with no one. Ac-
cording to the Commission, the unambiguously clear language
of section 309(l) compelled this conclusion. See Chevron
U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837, 842-43 (1984) ("If the intent of Congress is clear,
that is the end of the matter; for the court, as well as the
agency, must give effect to the unambiguously expressed
intent of Congress."). We agree.
To begin with, the Commission correctly determined that
S&B was not "competing" with anybody when it proposed the
settlement. Webster's defines "competing" as "seek[ing] or
striv[ing] for something ... for which others are also con-
tending." Webster's Third New International Dictionary
463 (3d ed. 1993) (emphasis added). None of the other
Blanco applicants was contending for the license; the Com-
mission had disqualified them. SL could not have been
contending for the license either, for it never became a party
to the proceeding.
In support of its interpretation of the Act, the Commission
also points out that subsection (l)(3) contemplates settlement
agreements to "remov[e] ... a conflict between ... applica-
tions." Here there could have been no "conflict" between
applications because S&B was the only remaining applicant.
Finally, subsection (l)(2) prohibits the Commission from
allowing parties other than competing applicants to partici-
pate in auctions to resolve pending comparative proceedings.
If section 309(l) covered S&B's lone application, as SL argues,
and if the Commission chose to auction off the Blanco license,
then (l)(2) would entitle S&B to "bid" for that license without
any competition whatsoever. We have no doubt that Con-
gress never intended such a perverse result.
Next, SL argues that even if section 309(l) does not apply,
the Commission's rejection of the proposed settlement was
arbitrary and capricious because it conflicted with agency
precedent. To be sure, the Commission has recognized that
voluntary settlements of comparative proceedings are gener-
ally in the public interest because they conserve agency
resources and expedite broadcasting service. See Rebecca
Radio of Marco, 4 F.C.C.R. 830 (1989), modified by Rebecca
Radio of Marco, 5 F.C.C.R. 937 (1990). But the Commission
rejected the proposed settlement in this case on the ground
that allowing S&B to recoup its expenses after acting so
mendaciously before the agency would run counter to its
policy of "deterring misconduct." Commission Order I, 12
F.C.C.R. at 2604-05 p 9 & n.1. According to SL, the Com-
mission has approved third-party settlements even where the
agency questioned the propriety of the settling applicant's
conduct. It cites two cases for support: Allegan County
Broadcasters, 83 F.C.C.2d 371 (1980), and Gonzales Broad-
casting, 12 F.C.C.R. 12,253 (1997). We are satisfied that the
Commission has adequately distinguished both cases.
In Allegan, the Commission approved a settlement despite
unresolved character allegations against one of the withdraw-
ing applicants. See 83 F.C.C.2d at 373 p 6. Here, the
Commission refused to follow Allegan because while in that
case there had been no hearings regarding the character
allegations, in this case the ALJ actually found S&B guilty of
serious misconduct. See Commission Order II, 13 F.C.C.R.
at 3264 p 12. It is true, as SL points out, that at the time the
Commission rejected the settlement in this case the ALJ's
findings were still subject to judicial review. But surely
there is nothing irrational about the Commission's determina-
tion that its policy of deterring misconduct controls where
there are actual agency findings of misconduct--as opposed
to mere allegations (the situation in Allegan)--whether or not
those findings remain subject to judicial review.
In Gonzales Broadcasting, a post-Budget Act case, the
Commission approved a settlement among six competing
applicants through which the license was awarded to a newly-
created corporation jointly owned in part by all six applicants,
even though the ALJ had found two of the applicants guilty
of misrepresentation and abuse of process. See 12 F.C.C.R.
at 12,256-57 pp 11-13. As the Commission explained, newly-
enacted section 309(l) controlled the Gonzales settlement
because, unlike here, it involved six "competing" applicants.
See Commission Order II, 13 F.C.C.R. at 3265 p 14.
Finally, SL argues that the proposed settlement is in the
public interest because it would result in prompt initiation of
broadcast service to an unserved community. But we find
nothing irrational in the Commission's expert determination
that deterring the kind of serious misconduct engaged in by
S&B better serves the public interest than expediting UHF
service to Blanco.
III
The disqualification of S&B and the rejection of the pro-
posed settlement between S&B and SL are affirmed.
So ordered.