NextWave Prsnal Comm v. FCC

                  United States Court of Appeals

               FOR THE DISTRICT OF COLUMBIA CIRCUIT

        Argued March 15, 2001       Decided June 22, 2001 

                           No. 00-1402

            NextWave Personal Communications Inc. and 
                  NextWave Power Partners Inc., 
                           Petitioners

                                v.

              Federal Communications Commission and 
                    United States of America, 
                           Respondents

                 BellSouth Corporation, et al., 
                           Intervenors

                        Consolidated with 
                             00-1403

         On Petition for Review and Notice of Appeal of 
         Orders of the Federal Communications Commission

     Theodore B. Olson argued the cause for petitioners/appel-
lants.  With him on the briefs were Thomas G. Hungar, 

Donald B. Verrilli, Jr., Ian Heath Gershengorn and Lara M. 
Flint. Miguel A. Estrada entered an appearance.

     William H. Crispin, Emanuel Grillo, David Friedman and 
Kenneth N. Klee were on the brief for amici curiae Senator 
Robert G. Torricelli, et al. in support of petitioners/appellants.

     Daniel M. Armstrong, Associate General Counsel, Federal 
Communications Commission, argued the cause for respon-
dents/appellee.  With him on the brief were Christopher J. 
Wright, General Counsel, Joel Marcus and Stanley R. 
Scheiner, Counsel, Jacob M. Lewis and H. Thomas Byron 
III, Attorneys, U.S. Department of Justice.  Stewart A. 
Block, Counsel, Federal Communications Commission, en-
tered an appearance.

     Richard G. Taranto argued the cause for intervenors Cel-
lular Telecommunications Industry Association, et al.  With 
him on the brief were Michael F. Altschul, L. Andrew Tollin, 
Robert G. Kirk, Craig E. Gilmore, Douglas I. Brandon, 
Howard J. Symons, Sara F. Leibman, Louis Gurman, Chris-
ta M. Parker, John T. Scott III, Mark L. Evans, Lawrence J. 
Movshin, Michael Deuel Sullivan and H. Richard Juhnke. 
Matthew R. Sutherland entered an appearance.

     Before:  Sentelle, Tatel and Garland, Circuit Judges.

       Opinion for the Court filed by Circuit Judge Tatel.

     Tatel, Circuit Judge:  This case concerns the extent to 
which the Bankruptcy Code limits a federal agency--here, 
the Federal Communications Commission--acting to imple-
ment the provisions of its own statute.  Seeking to comply 
with its statutory duty to ensure small business participation 
in auctions of broadband PCS licenses, the Commission al-
lowed winning bidders to pay for their licenses in install-
ments.  As part of this scheme, the Commission took and 
perfected security interests in the licenses, and provided for 
license cancellation should a bidder fail to make timely pay-
ments.  When appellants, winning bidders on several licenses, 
declared bankruptcy and ceased making payments, the Com-

mission canceled their licenses.  Applying the fundamental 
principle that federal agencies must obey all federal laws, not 
just those they administer, we conclude that the Commission 
violated the provision of the Bankruptcy Code that prohibits 
governmental entities from revoking debtors' licenses solely 
for failure to pay debts dischargeable in bankruptcy.  The 
Commission, having chosen to create standard debt obli-
gations as part of its licensing scheme, is bound by the usual 
rules governing the treatment of such obligations in bank-
ruptcy.

                                I

     In 1993, Congress amended the Communications Act of 
1934 to authorize the Federal Communications Commission to 
award spectrum licenses "through a system of competitive 
bidding."  47 U.S.C. s 309(j)(1).  In "identifying classes of 
licenses and permits to be issued by competitive bidding," and 
in "designing the methodologies" for such bidding, Congress 
directed the Commission to promote several objectives, in-
cluding "the development and rapid deployment of new tech-
nologies, products and services," the "recovery for the public 
of a portion of the value of the public spectrum resource made 
available for commercial use," and the "efficient and intensive 
use of the electromagnetic spectrum."  Id. s 309(j)(3).  Con-
gress also directed the Commission to "promot[e] economic 
opportunity and competition and ensur[e] that new and inno-
vative technologies are readily accessible to the American 
people by ... disseminating licenses among a wide variety of 
applicants, including small businesses [and] rural telephone 
companies."  Id. s 309(j)(3)(B).  To further this last goal, 
Congress directed the Commission to "consider alternative 
payment schedules and methods of calculation, including lump 
sums or guaranteed installment payments ... or other sched-
ules or methods."  Id. s 309(j)(4)(A).

     Acting pursuant to this statute, the Commission adopted 
rules to auction licenses for "broadband PCS"--"personal 
communications services in the 2 GHz band."  In re Imple-
mentation of Section 309(j) of the Communications Act, 9 

FCC Rcd 5532 p 1 (1994).  The Commission expected broad-
band PCS to "provide new mobile communications capabili-
ties" through "a new generation of communications devices" 
including "small, lightweight, multi-function portable phones, 
portable facsimile and other imaging devices, new types of 
multi-channel cordless phones, and advanced paging devices 
with two-way data capabilities."  Id. p 3.  The Commission 
"determined that the use of competitive bidding to award 
broadband PCS licenses, as compared with other licensing 
methods, would speed the development and deployment of 
new services to the public and would encourage efficient use 
of the spectrum," as required by statute, since "auctions 
would generally award licenses quickly to those parties who 
value them most highly and who are therefore most likely to 
introduce service rapidly to the public."  Id. p 5.  The Com-
mission expected the PCS license auction to "constitute the 
largest auction of public assets in American history," recover-
ing "billions of dollars for the United States Treasury," and 
thus fulfilling another statutory mandate.  Id. p 1.

     As directed by Congress, the Commission adopted a variety 
of measures to promote small business ownership of PCS 
licenses, including setting aside two blocks of licenses, the "C" 
and "F" Blocks, for bidding by entities with annual gross 
revenues and total assets below specified amounts.  Id. p 12.  
Especially relevant to this case, the Commission allowed 
"most successful bidders within the [C and F Blocks] to pay 
for their licenses in installments."  Id. p 16.  Observing that 
"the primary impediment to participation [in license auctions] 
by designated [small business] entities is lack of access to 
capital," id. p 10, the Commission concluded that "installment 
payments are an effective means to address the inability of 
small businesses to obtain financing and will enable these 
entities to compete more effectively for the auctioned spec-
trum."  Id. p 135.  "By allowing payment in installments," the 
Commission stated, "the government is in effect extending 
credit to licensees, thus reducing the amount of private 
financing needed prior to and after the auction."  Id. p 136.  
The Commission also announced that "[t]imely payment of all 
installments will be a condition of the license[ ] grant and 

failure to make such timely payment will be grounds for 
revocation of the license."  Id. p 138.

     In 1995, a group of former telecommunications executives 
founded NextWave Personal Communications Inc. and 
NextWave Power Partners Inc. (collectively "NextWave"), 
appellants in this case, for the purpose of bidding on PCS 
licenses and operating a personal communications service. 
NextWave's founders hoped the company would become a 
"carrier's carrier," selling wireless services and airtime 
wholesale.  Appellants' Opening Br. at 5.  At C Block auc-
tions in May and July, 1996, NextWave bid $4.74 billion in 
total, winning sixty-three licenses.  The company made a 
$474 million down payment.  Several months later, the Com-
mission granted NextWave its licenses, took a security inter-
est in each, and filed UCC financing statements to perfect its 
claims.  The security agreements gave the Commission "a 
first lien on and continuing security interest in all of the 
Debtor's rights and interest in [each] License."  Security 
Agreement between NextWave and FCC p 1 (January 3, 1997).  
The licenses included the following language:  "This authori-
zation is conditioned upon the full and timely payment of all 
monies due pursuant to ... the terms of the Commission's 
installment plan as set forth in the Note and Security Agree-
ment executed by the licensee.  Failure to comply with this 
condition will result in the automatic cancellation of this 
authorization."  FCC, Radio Station Authorization for 
Broadband PCS 2 (issued to NextWave January 3, 1997).

     After the Commission awarded the C Block licenses, sever-
al successful bidders, including NextWave, experienced diffi-
culty obtaining financing, having agreed to pay on average 
almost three times what winning bidders in the prior A and B 
Block auctions had paid, and several times what winning 
bidders in subsequent D, E, and F block auctions paid.  In 
response, the Commission suspended installment payment 
obligations for C Block licensees, and then issued two Re-
structuring Orders, offering a variety of revised financing 
options that allowed C Block licensees to surrender some or 
all of their licenses for full or partial forgiveness of their 
outstanding debt.  See In re Amendment of the Comm'n's 

Rules Regarding Installment Payment Fin. for Pers. Com-
munications Servs. Licensees, Second Report and Order and 
Further Notice of Proposed Rule Making, 12 FCC Rcd 16436 
p p 6, 32-69 (1997);  In re Amendment of the Comm'n's Rules 
Regarding Installment Payment Fin. for Pers. Communica-
tions Servs. Licensees, Order on Recons. of the Second Report 
and Order, 13 FCC Rcd 8345 p p 11-15 (1998);  see also In re 
Amendment of the Comm'n's Rules Regarding Installment 
Payment Fin. for Pers. Communications Servs. Licensees, 
Second Order on Recons. of the Second Report and Order, 14 
FCC Rcd 6571 (1999).  None of the restructuring options 
allowed licensees to keep any of their licenses for less than 
the full bid price.  See In re Amendment of the Comm'n's 
Rules, Order on Recons., 13 FCC Rcd 8345 p 8.  According to 
the Commission, these options balanced the goals of introduc-
ing new spectrum services rapidly and promoting small busi-
ness participation in PCS auctions against the need to main-
tain auction integrity and treat unsuccessful bidders fairly.  
See In re Amendment of the Comm'n's Rules, 12 FCC Rcd 
16436 p p 1-5;  see also U.S. Airwaves, Inc. v. FCC, 232 F.3d 
227 (D.C. Cir. 2000) (upholding restructuring scheme).  The 
Commission gave licensees until June 8, 1998 to elect a 
restructuring option, and until July 31, 1998 to resume install-
ment payments.  Public Notice, Wireless Telecommunica-
tions Bureau Announces June 8, 1998 Election Date, 13 FCC 
Rcd 7413 (1998).  It set October 29, 1998 as the last date it 
would accept late installment payments.  Id.

     On June 8, 1998, after failing to obtain stays of the election 
deadline from the Commission and this court, NextWave filed 
for Chapter 11 bankruptcy protection in New York.  See 
NextWave Pers. Communications, Inc. v. FCC (In re 
NextWave Pers. Communications, Inc.), 235 B.R. 263, 267 
(Bankr. S.D.N.Y. 1998) ("NextWave I").  Because the Bank-
ruptcy Code is central to this case, we pause to summarize 
certain relevant provisions.  Section 362, the "automatic stay" 
provision, provides that petitions filed under Chapter 11 
"operate[ ] as a stay, applicable to all entities" of a variety of 
acts to collect on or enforce debts.  11 U.S.C. s 362(a).  
Subsection 362(a)(3) stays "any act to obtain possession of 

property of [an] estate ... or to exercise control over proper-
ty of the estate," id. s 362(a)(3), but subsection 362(b)(4) 
provides an exception to 362(a)(3) for "governmental unit[s]" 
acting to "enforce" their "regulatory power."  Id. s 362(b)(4).  
Subsections 362(a)(4) and (5) stay "any act to create, perfect, 
or enforce any lien against property of the estate" or of the 
debtor.  Id. s 362(a)(4), (5).  The regulatory power exception 
does not apply to these subsections.  See id. s 362(b)(4).  In 
general, an automatic stay lasts only until a bankruptcy case 
is closed or dismissed, or until the bankruptcy court grants or 
denies a discharge.  See id. s 362(c)(2).  Other provisions of 
the Code, however, offer more permanent relief.  Section 525 
prohibits "governmental unit[s]" from "revok[ing]" a bank-
rupt's or debtor's license "solely because such bankrupt or 
debtor ... has not paid a debt that is dischargeable ... 
under this title."  Id. s 525(a).  Finally, under section 1123, 
11 U.S.C. s 1123, bankrupts (subject to court approval) have 
the power to "cure" their defaults--that is, to "tak[e] care of 
the triggering event and return[ ] to pre-default conditions."  
Di Pierro v. Taddeo (In re Taddeo), 685 F.2d 24, 26-27 (2d 
Cir. 1982).

     After declaring bankruptcy, and in line with the "normal 
deferment of the payment of preorganization claims until 
their disposition can be made part of a plan of reorganiza-
tion," In re Penn Cent. Transp. Co., 467 F.2d 100, 102 n.1 (3d 
Cir. 1972), NextWave made no further payments on its 
licenses.  Nor did it seek permission to make installment 
payments under the "necessity of payment" doctrine, which 
some courts have invoked to authorize payment of pre-
petition claims "if such payment [is] essential to the continued 
operation of the debtor."  In re Just For Feet, Inc., 242 B.R. 
821, 825 (Bankr. D. Del. 1999).  NextWave sought no such 
authorization, it explains, because "the Code's automatic stay 
provision generally prevents even government creditors from 
enforcing payment obligations or seizing assets of the estate," 
and thus it had "no reason to believe it would be required to 
make the October 1998 installment payment while in bank-
ruptcy."  Appellants' Opening Br. at 10 & n.8.

     Instead, NextWave alleged in the bankruptcy court that its 
$4.74 billion license fee obligation was avoidable under section 

544 of the Bankruptcy Code as a "fraudulent conveyance" 
since the company had not received reasonably equivalent 
value in exchange for incurring the obligation:  by the time 
the Commission actually conveyed the licenses to NextWave, 
the company claimed, their value had declined to less than $1 
billion.  NextWave I, 235 B.R. at 269;  see also NextWave 
Pers. Communications, Inc. v. FCC (In re NextWave Pers. 
Communications), 235 B.R. 277, 290 (Bankr. S.D.N.Y. 1999) 
("NextWave III").  Ruling on this claim, the bankruptcy 
court began by addressing its jurisdiction.  It acknowledged 
that under 47 U.S.C. s 402, it lacked jurisdiction to "enjoin[ ], 
review[ ], assess[ ] damages for or otherwise adjudicat[e] the 
consequences of the conduct of [a] Federal agency acting 
within the scope of its Congressional mandate."  NextWave I, 
235 B.R. at 268.  It nevertheless asserted jurisdiction over 
the case because, in its view, NextWave's claim against the 
Commission did not involve "any regulatory conduct on the 
part of the FCC," but rather concerned solely the debtor-
creditor relationship between the FCC and NextWave.  Id. at 
269;  see also NextWave Pers. Communications, Inc. v. FCC 
(In re NextWave Pers. Communications), 235 B.R. 305, 314 
(Bankr. S.D.N.Y. 1999) ("NextWave IV").  Nothing in the 
Communications Act, the court said, suggests that a bank-
ruptcy court lacks jurisdiction to implement the provisions of 
the Code "which affect [the Commission] as a creditor."  
NextWave I, 235 B.R. at 269-70.  Turning to the merits, the 
court found that NextWave's winning bid exceeded the fair 
market value of its licenses at the time they were conveyed, 
NextWave III, 235 B.R. at 304, and avoided $3.72 billion of 
NextWave's $4.74 billion license fee obligation, ruling in effect 
that the company could keep its licenses for the reduced price 
of $1.02 billion.  See NextWave IV, 235 B.R. 305, aff'd 
NextWave Pers. Communications, Inc. v. FCC (In re 
NextWave Pers. Communications, Inc.), 241 B.R. 311, 321 
(S.D.N.Y. 1999);  see also In re NextWave Pers. Communica-
tions, Inc., 235 B.R. 314, 316 (Bankr. S.D.N.Y. 1999) 
("NextWave V").

     The Second Circuit reversed, making four key points.  
First, it emphasized that the Commission's action, contrary to 
the bankruptcy court's finding, was regulatory:  the Commis-

sion explicitly "made 'full and timely payment of the winning 
bid' a regulatory condition for obtaining and retaining a 
spectrum license," and this condition had a purpose "related 
directly to the FCC's implementation of the spectrum auc-
tions."  FCC v. NextWave Pers. Communications, Inc. (In re 
NextWave Personal Communications), 200 F.3d 43, 52 (2d 
Cir. 1999) (quoting 47 C.F.R. s 24.708).  The Second Circuit 
explained the Commission's regulatory purpose as follows:

     [The FCC] decided that it would be 'critically important 
     to the success of our system of competitive bidding ... 
     [to] provide strong incentives for potential bidders to 
     make certain of their qualifications and financial capabili-
     ties before the auction so as to avoid delays in the 
     deployment of new services to the public that would 
     result from litigation, disqualification and re-auction.' ... 
     [Since] 'designated entities' such as NextWave ... were 
     allowed to pay in installments[,] [i]t was important for 
     the functioning of the auction ... that the FCC's default 
     rules and penalties be enforceable, because the FCC 
     relied upon them as a substitute for conducting the 
     'detailed credit checks' and other forms of due diligence 
     that otherwise would be necessary to ensure ... that the 
     licenses would be awarded to the appropriate entities.
     
Id. at 52-53 (quoting In re Implementation of Section 309(j) 
of the Communications Act--Competitive Bidding, Second 
Report and Order, 9 FCC Rcd 2348 p p 197, 194, 198 (1994)).

     Second, the court held that the bankruptcy court had 
interfered with this regulatory purpose by avoiding a substan-
tial portion of NextWave's bid price, thus allowing the compa-
ny to keep the licenses for a reduced price.  Id. at 55.  This, 
the Second Circuit held, the bankruptcy court had no jurisdic-
tion to do:  "Because jurisdiction over claims brought against 
the FCC in its regulatory capacity lies exclusively in the 
federal courts of appeals, see ... 47 U.S.C. s 402, the bank-
ruptcy 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."  In re NextWave, 200 F.3d at 54.

     Third, the Second Circuit found that besides interfering 
with the Commission's licensing function through a collateral 
proceeding, the bankruptcy court had in effect attempted to 
exercise that function itself--again exceeding its jurisdiction:

     By holding that for a price of $1.023 billion NextWave 
     would retain licenses for which it had bid $4.74 billion, 
     the bankruptcy ... court[ ] impaired the FCC's method 
     for selecting licensees by effectively awarding the Licens-
     es to an entity that the FCC determined was not entitled 
     to them.  In so doing [it] exercised the FCC's radio-
     licensing function....  [E]ven if the bankruptcy ... 
     court[ ] [was] right in concluding that granting the Li-
     censes at a small fraction of NextWave's original success-
     ful bid price best effectuated the [Federal Communica-
     tion Act's] goals, [it was] utterly without the power to 
     order that NextWave be allowed to retain them for that 
     reason or on that basis.
     
Id. at 55 (internal citations omitted).

     Finally, notwithstanding its conclusion that the bankruptcy 
court lacked jurisdiction to change the conditions under which 
NextWave could retain its licenses, the Second Circuit ac-
knowledged that the bankruptcy court might well have juris-
diction over NextWave's underlying debts themselves:  "To 
the extent that the financial transactions between [the FCC 
and NextWave] do not touch upon the FCC's regulatory 
authority, they are indeed like the obligations between ordi-
nary debtors and creditors."  Id.  Pointing out that 
NextWave "remain[ed] a debtor in bankruptcy," and that "[i]f 
the Licenses [were] returned to the FCC, the bankruptcy 
court [might] resolve resulting financial claims that the FCC 
has against NextWave," id. at 56, the Second Circuit re-
viewed the merits of the bankruptcy court's avoidance deci-
sion and concluded that NextWave should not be allowed to 
avoid $3.72 billion of its debt under the Bankruptcy Code.  
Id. at 46, 62.

     Immediately following the Second Circuit reversal, 
NextWave prepared a new plan of reorganization that provid-
ed for a single lump sum payment to satisfy its entire $4.3 
billion outstanding obligation to the Commission, including 

interest and late fees.  The Commission objected to the plan, 
alleging that NextWave's licenses had automatically canceled 
when the company missed its first payment deadline in 
October 1998.  See In re Pub. Notice DA 00-49, Auction of C 
and F Block Broadband PCS Licenses, Order on Reconsider-
ation, FCC 00-335 p 7 (Sept. 6, 2000).  Simultaneously, the 
Commission issued a public notice announcing re-auction of 
NextWave's licenses.  The notice stated that the licenses 
were "available for auction under the automatic cancellation 
provisions" of the Commission's regulations.  Public Notice, 
Auction of C and F Block Broadband PCS Licenses, DA 00-
49, 15 FCC Rcd 693 (2000).

     The dispute then returned to the bankruptcy court, which 
declared the Commission's cancellation of NextWave's licens-
es "null and void" as a violation of various provisions of the 
Bankruptcy Code, including the automatic stay provisions of 
section 362(a).  In re NextWave Pers. Communications, Inc., 
244 B.R. 253, 257-58, 267-68 (Bankr. S.D.N.Y. 2000) 
("NextWave VI").  In reaching this conclusion, the bankrupt-
cy court acknowledged that under the Second Circuit's ruling, 
it lacked jurisdiction to interfere with the Commission's regu-
latory acts.  Id. at 260-61.  It also acknowledged that it was 
bound by the Second Circuit's decision that "a regulatory 
purpose was implicit in the 'full payment requirement' in the 
FCC regulations."  Id. at 270.  As the bankruptcy court saw 
it, however, the "regulatory objective" behind the full pay-
ment requirement had been "fulfilled in the debtors' modified 
Plan . . . . to pay the entire $4.3 billion outstanding ... in a 
lump sum upon confirmation."  Id.  The cancellation of 
NextWave's licenses, in contrast, was a response to the 
company's failure to make a timely payment, and this re-
quirement, the court reasoned, was "purely economic," having 
to do with "the time value of money."  Id.  "[T]he economic 
consequence of delay," it stated, "will be fully cured by 
payment in full of all applicable interest, penalties and late 
fees...."  Id.  Further explaining its view that the timely 
payment requirement lacked a regulatory purpose, the bank-
ruptcy court discussed at length its reasons for believing that 
canceling licenses for failure to make a timely payment 

"conflict[ed] with the spirit and the letter of the agency's 
governing statute"--namely, section 309(j) of the Communica-
tions Act.  Id. at 281;  see also id. at 282-83, 271.  Concluding 
that the Commission "has not and cannot articulate any 
regulatory interest entailed in the 'timely payment' require-
ment," id. at 270, the court ruled that the Second Circuit's 
prior decision did not preclude it from declaring the cancella-
tion void.  Id. at 283.

     Again, the Second Circuit reversed.  In re FCC, 217 F.3d 
125 (2d Cir. 2000).  Granting a mandamus petition filed by 
the Commission, the court held that "[t]here can be little 
doubt that if full payment is a regulatory condition, so too is 
timeliness."  Id. at 136.  In the court's view, "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."  Id. 
at 135.  The conclusion that the Commission's decision "was 
in fact regulatory," the court went on, was "reinforced" by the 
fact that the bankruptcy court, in deciding that the license 
cancellation lacked a regulatory purpose, had explained at 
length that the cancellation and re-auction were contrary to 
the purposes of section 309(j) of the Communications Act.  
Id. at 136.  But according to the Second Circuit, these 
discussions, rather than explaining why the re-auction deci-
sion was not regulatory, explained why, under the Communi-
cations Act, it was arbitrary, and such a determination, the 
Second Circuit pointed out, was "outside the jurisdiction of 
the bankruptcy court."  Id.  "[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."  Id. at 137.

     As a consequence, the Second Circuit concluded that the 
bankruptcy court had both violated the appellate court's 
earlier mandate and exceeded the bankruptcy court's own 
jurisdiction.  Id.  "The bankruptcy court," the Second Circuit 
stated, "construes our mandate to mean no more than that 
the bankruptcy court may not abrogate the full-payment 
requirement on the basis of a fraudulent conveyance holding."  

Id. at 139.  But this understanding "under-reads our previous 
opinion."  Id.  That opinion "clearly instruct[ed] the bank-
ruptcy court to refrain from interfering with the licensing 
decisions of the FCC," id., and as the Second Circuit saw it, 
this is exactly what the bankruptcy court did in declaring the 
license cancellation null and void.  In addition, because "[e]x-
clusive jurisdiction to review the FCC's regulatory action lies 
in the courts of appeals" under 47 U.S.C. s 402, In re FCC, 
217 F.3d at 139, the Second Circuit found that the bankruptcy 
court's license cancellation holding exceeded that court's jur-
isdiction.  Id. at 141.  The court also noted that "NextWave 
remains free to pursue its challenge to the FCC's regulatory 
acts" in another forum, pointing out that the company had 
already filed "protective notices of appeal" in this court.  Id. 
at 140-41.

     After losing in the Second Circuit, NextWave filed a peti-
tion with the Commission, requesting reconsideration of the 
license cancellation.  Denying the petition, the Commission 
noted first that the public notice of reauction "was not an 
order or action of the Commission ... canceling NextWave's 
licenses."  Order on Reconsideration, FCC 00-335 p 10.  
Rather, "[p]ursuant to [Commission] rules, the licenses can-
celed automatically" after NextWave failed to make its first 
installment payment.  Id.  The Commission thus concluded 
that NextWave's petition was "late" and its challenge to the 
reauction notice "procedurally defective."  Id.  "Neverthe-
less, because of the importance of the issues raised in 
NextWave's petition," id., the Commission went on to address 
the company's challenge to the automatic cancellation.  The 
Commission rejected NextWave's arguments that the cancel-
lation was arbitrary and capricious and barred by estoppel 
and waiver, id. p p 11-33, and found that the company's 
Bankruptcy Code arguments, having been "summarily reject-
ed by the Second Circuit," were "precluded under the doc-
trine of res judicata."  Id. p 26.

     NextWave now challenges the Commission's decision on 
two basic grounds.  First, it claims that the license cancella-
tion is "patently unlawful," Appellants' Opening Br. at 16, 
under the provisions of the Bankruptcy Code described ear-

lier:  the anti-discrimination provision (section 525), the auto-
matic stay provision (section 362), and the provision of the 
Code allowing debtors to "cure" their defaults (section 1123).  
Second, citing our decision in Trinity Broadcasting of Flori-
da, Inc. v. FCC, 211 F.3d 618, 631 (D.C. Cir. 2000), where 
we held that an agency may not "sanction a company for its 
failure to comply with regulatory requirements" without first 
providing "fair notice" of those requirements, NextWave ar-
gues that even if the license cancellation is not barred by 
the Bankruptcy Code, it is invalid because the Commission 
failed to provide adequate notice that the timely payment 
regulations apply to Chapter 11 debtors.  The Commission, 
supported by Intervenors (the Cellular Telecommunications 
Industry Association and several telecommunications compa-
nies) defends its decision.

                                II

     We begin with three threshold issues.  Does our jurisdic-
tion in this case arise from 47 U.S.C. s 402(a) or 402(b)?  
Was NextWave's challenge to its license cancellation timely?  
And are NextWave's Bankruptcy Code arguments barred by 
res judicata?  We consider each question in turn.

                           Jurisdiction

     NextWave has filed both a petition for review under section 
402(a) and a notice of appeal under section 402(b) of the 
Communications Act.  Section 402(a) provides that "[a]ny 
proceeding to enjoin, set aside, annul, or suspend any order of 
the Commission under this chapter (except those appealable 
under subsection (b) of this section) shall be brought" in a 
court of appeals.  See 47 U.S.C. s 402(a) (cross-referencing 
28 U.S.C. s 2342(1)).  Section 402(b), in contrast, provides:

     Appeals may be taken from decisions and orders of the 
     Commission to the United States Court of Appeals for 
     the District of Columbia ... [b]y the holder of any 
     construction permit or station license which has been 
     modified or revoked by the Commission.
     
Id. s 402(b).  Acknowledging that we have previously found 
these two provisions mutually exclusive, see Friedman v. 
FCC, 263 F.2d 493, 494 (D.C. Cir. 1959), NextWave asks us to 
"dismiss the filing that relies on the incorrect jurisdictional 
provision."  Appellants' Opening Br. at 1.

     In Mobile Communications Corp. of America v. FCC, we 
decided that the term "station license" in section 402(b) 
encompasses PCS licenses.  See 77 F.3d 1399, 1403 (D.C. Cir. 
1996);  see also 47 U.S.C. s 153(42) (defining "station license" 
as "that instrument of authorization required ... for the use 
or operation of apparatus for transmission of energy, or 
communications, or signals by radio");  id. s 153(33) (defining 
"communication by radio" as "the transmission by radio of 
writing, signs, signals, pictures, and sounds of all kinds").  
Given this, we think section 402(b)'s plain language, permit-
ting appeal by "the holder of any ... station license which 
has been ... revoked by the Commission," covers this case.  
Cf. Cook, Inc. v. United States, 394 F.2d 84, 86 n.4 (7th Cir. 
1968) (" 'The language of [subsection 402(b)], when considered 
in relation to that of subsection (a) ... would make clear that 
judicial review of all cases involving the exercise of the 
Commission's radio-licensing power is limited to [the United 
States Court of Appeals for the District of Columbia Cir-
cuit].' ") (quoting S. Rep. No. 82-44, at 11 (1951));  In re FCC, 
217 F.3d at 140-41.  Even if the Commission did not formally 
"revoke" NextWave's licenses, that is certainly the effect of 
the license cancellation:  the licenses once assigned to 
NextWave are now being re-auctioned to other bidders.  Cf. 
In re FCC, 217 F.3d at 140 n.10.  We therefore dismiss the 
section 402(a) petition and proceed with the section 402(b) 
appeal.

                            Timeliness

     Section 402(c) of the Communications Act requires appeals 
under section 402(b) to be filed "within thirty days from the 
date upon which public notice is given of the decision or order 
complained of."  47 U.S.C. s 402(c).  The "decision" 
NextWave seeks to challenge is the Commission's cancellation 
of its licenses, but the formal Commission action it actually 
appeals is the public notice of re-auction, which itself cancels 

no licenses, but rather announces in passing that the compa-
ny's licenses canceled automatically at an earlier date.  Order 
on Reconsideration, FCC 00-355 p 10.

     The Commission acknowledges that "in some instances, it 
may be proper for a party to challenge the Commission's 
public notices that establish or deny rights."  Id.  Joined by 
Intervenors, however, it argues that NextWave's challenge to 
the license cancellation policy is untimely.  Intervenors claim 
that NextWave should have challenged the policy when its 
licenses were issued, since the licenses themselves stated 
explicitly that they were conditioned on timely payment, and 
as we have held, "[a]cceptance of a license constitutes acces-
sion to all [license] conditions."  P&R Temmer v. FCC, 743 
F.2d 918, 928 (D.C. Cir. 1984).  Alternatively, both Interve-
nors and the Commission suggest that NextWave should have 
challenged the automatic cancellation rule during the Re-
structuring Order proceedings because during those proceed-
ings, the Commission considered objections to its original 
installment payment plan (including some objections based on 
the Bankruptcy Code), revised the plan, and ultimately reaf-
firmed the timely payment requirement.  Intervenors' Br. at 
3;  see also, e.g., Order on Recons. of the Second Report and 
Order, 13 FCC Rcd 8345 p 24.  Having failed to challenge the 
automatic cancellation rule at one of these earlier dates, they 
argue, NextWave cannot do so now because orders denying 
reconsideration do not re-open matters that should have been 
challenged previously.  See ICC v. Bhd. of Locomotive 
Eng'rs, 482 U.S. 270, 279-80, 285-86 (1987).

     As NextWave points out, however, we have held that "a 
party against whom a rule is applied may, at the time of 
application, pursue substantive objections to the rule ... even 
where the petitioner had notice and opportunity to bring a 
direct challenge within statutory time limits" but failed to do 
so.  Indep. Cmty. Bankers of Am. v. Bd. of Governors of the 
Fed. Reserve Sys., 195 F.3d 28, 34 (D.C. Cir. 1999).  Thus 
even if NextWave could have challenged the automatic cancel-
lation policy at an earlier date--either when its licenses 
issued or during the Restructuring Order proceedings--the 
company remained free to do so "within thirty days from the 

date upon which public notice [was] given" that the policy had 
been applied to it.  47 U.S.C. s 402(c).

     According to NextWave, the thirty-day period was trig-
gered by the public notice of re-auction because, prior to the 
re-auction notice, "the FCC had done nothing whatsoever to 
announce the cancellation of NextWave's licenses."  Appel-
lants' Reply Br. at 6.  Because it filed a precautionary appeal 
with this court 30 days after the notice of re-auction, 
NextWave claims, its appeal was timely.  Disagreeing, Inter-
venors argue that NextWave already had notice in October 
1998 that its licenses would cancel automatically if and when 
it failed to make an installment payment.  Thus, they argue, 
no further Commission statement was required to trigger the 
period for seeking judicial review.

     Intervenors' argument assumes that notice of a future 
event's automatic effect (here, the explicit warning that the 
licenses would cancel for failure to make a timely payment) is 
by itself sufficient notice to mean that the occurrence of the 
future event (failing to make a timely payment) will trigger 
the period for seeking judicial review under section 402(c).  
To resolve the timeliness issue in this case, however, we need 
not decide whether that assumption is correct, for we think it 
was unclear prior to the notice of re-auction that the automat-
ic cancellation policy would apply to licensees who had filed 
for bankruptcy.  To begin with, the Bankruptcy Code gave 
NextWave reason to doubt that the automatic cancellation 
would actually occur when the company missed its first 
payment in October 1998:  the automatic stay triggered by a 
Chapter 11 filing generally blocks most efforts by creditors to 
exercise control over or repossess property of a debtor.  See 
11 U.S.C. s 362(a);  cf. NextWave VI, 244 B.R. at 266-68 
(finding that the automatic stay applied to NextWave's license 
fee obligations).  Neither the Commission nor Intervenors 
point to any instance prior to the re-auction notice in which 
the Commission actually announced that NextWave's licenses 
had canceled despite the stay.  Moreover, the Commission's 
own conduct suggests that it was at best unsure whether the 
automatic stay blocked cancellation of the company's licenses.  
After the bankruptcy court's fraudulent conveyance holding, 

and several months after NextWave missed the October 
payment deadline, the Commission moved the bankruptcy 
court to lift the stay "so that the ... automatic cancellation 
provisions may take effect."  Mot. to Lift Automatic Stay at 
2, NextWave V, 235 B.R. 314 (No. 98 B 21529).  And in the 
bankruptcy court, Commission counsel suggested that the 
automatic stay blocked cancellation of NextWave's licenses, 
stating for example that although "[t]he regulations provide 
that upon failure to make the payments the license is auto-
matically canceled[,] ... [t]hat hasn't [happened] in this case 
due to the automatic stay."  See Hearing Tr. at 30, In re 
NextWave Pers. Communications, Inc., No. 98 B 21529 
(Bankr. S.D.N.Y. Nov. 12, 1998);  NextWave VI, 244 B.R. at 
277 (noting that transcript erroneously attributes this quota-
tion to the Court).

     These circumstances suggest that the Commission believed 
NextWave's licenses had not canceled prior to the notice of 
re-auction.  At the very least, they created doubt about the 
matter, and as we have held, "when an agency leaves room 
for genuine and reasonable doubt as to the applicability of its 
orders or regulations, the statutory period for filing a petition 
for review is tolled until that doubt is eliminated."  Recre-
ation Vehicle Indus. Ass'n v. EPA, 653 F.2d 562, 569 (D.C. 
Cir. 1981).  Because the "genuine and reasonable doubt" 
about the status of NextWave's licenses continued until the 
Commission issued the notice of re-auction, we conclude that 
NextWave's petition is timely.

                           Res Judicata

     This brings us to the final and most difficult threshold 
issue:  whether NextWave's Bankruptcy Code arguments are 
barred by res judicata.  "The doctrine of res judicata pre-
vents repetitious litigation involving the same causes of action 
or the same issues."  I.A.M. Nat'l Pension Fund v. Indus. 
Gear Mfg. Co., 723 F.2d 944, 946 (D.C. Cir. 1983).  According 
to the Commission, because NextWave litigated and lost its 
Bankruptcy Code arguments in the Second Circuit mandamus 
proceedings, it may not relitigate them here.  Asserting a 

right to make these arguments here, NextWave argues that 
the Second Circuit's decision was jurisdictional--a decision 
about "where NextWave's bankruptcy challenges should be 
decided, not how they should be resolved."  Appellants' Open-
ing Br. at 26 (emphasis added).  As a result, the company 
argues, res judicata does not bar it from presenting its 
Bankruptcy Code arguments in this court.

     The doctrine of res judicata "usually is parsed into claim 
preclusion and issue preclusion."  I.A.M. Nat'l Pension 
Fund, 723 F.2d at 946.  Because the Commission raises 
arguments based on both theories, and because the two 
theories differ in subtle but significant respects, we consider 
each separately.  "Under the claim preclusion aspect of res 
judicata, a final judgment on the merits in a prior suit 
involving the same parties or their privies bars subsequent 
suits based on the same cause of action."  Id. at 946-47.  
Claim preclusion prevents parties from relitigating issues 
they raised or could have raised in a prior action on the same 
claim.  See Allen v. McCurry, 449 U.S. 90, 94 (1980).  "[D]is-
missals for lack of jurisdiction," however, "are not decisions 
on the merits and therefore have no [claim preclusive] effect 
on subsequent attempts to bring suit in a court of competent 
jurisdiction."  Kasap v. Folger Nolan Fleming & Douglas, 
Inc., 166 F.3d 1243, 1248 (D.C. Cir. 1999);  see also Fed R. 
Civ. P. 41(b) ("a dismissal under this subdivision and any 
dismissal not provided for in this rule, other than a dismissal 
for lack of jurisdiction ... operates as an adjudication upon 
the merits").

     No one disputes that the Second Circuit thought the bank-
ruptcy court lacked authority to declare the notice of re-
auction invalid.  In re FCC, 217 F.3d at 141.  The question 
dividing the parties is why the Second Circuit thought this.  
According to NextWave, the Second Circuit reversed the 
bankruptcy court because under section 402 of the Communi-
cations Act, "the FCC's licensing decisions are subject to the 
exclusive jurisdiction of the federal courts of appeals."  Id. at 
129.  In other words, the company claims, the Second Circuit 
held that any arguments directly or collaterally challenging 
the Commission's regulatory actions--including arguments 

based on the Bankruptcy Code--must be brought in a court 
of appeals.  Cf. In re NextWave, 200 F.3d at 55.  The 
Commission has a different view of the Second Circuit's 
decision.  It argues that the Second Circuit decided not that 
the bankruptcy court lacked jurisdiction to determine wheth-
er the license cancellation violated the Bankruptcy Code, but 
rather that "the [Bankruptcy Code] provisions on which 
NextWave relies do not reach regulatory actions such as 
those at issue here."  Appellee's Br. at 15.  In other words, 
the Commission claims that the Second Circuit reviewed the 
bankruptcy court's Bankruptcy Code conclusions on the mer-
its and found that because the Commission's actions were 
regulatory, the automatic stay, right to cure, and anti-
discrimination provisions of the Code did not reach those 
actions.

     We agree with NextWave's interpretation of the Second 
Circuit's decision.  As we read that decision, the court princi-
pally held that the Commission's license cancellation was a 
regulatory act reviewable only by a court of appeals under 
section 402 of the Communications Act, and thus that the 
bankruptcy court lacked jurisdiction to apply the Code to 
these acts.  With one exception (which we shall explain later), 
we do not understand the Second Circuit to have decided as a 
substantive matter that nothing in the Bankruptcy Code 
prevents the Commission from canceling NextWave's licens-
es.

     To begin with, and most obviously, the Second Circuit 
repeatedly stated that it was making a "jurisdictional" deci-
sion based on section 402.  Here are just three examples:  
"We recognized that pursuant to ... 47 U.S.C. s 402, review 
of the FCC's regulatory decisions and orders is entrusted 
solely to the federal courts of appeals and is therefore outside 
the jurisdiction of the bankruptcy and district courts," In re 
FCC, 217 F.3d at 131 (describing initial opinion);  " '[b]ecause 
jurisdiction over claims brought against the FCC in its regu-
latory capacity lies exclusively in the federal courts of ap-
peals, see ... 47 U.S.C. s 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. at 137 
(quoting initial opinion);  "[e]xclusive jurisdiction to review 
the FCC's regulatory action lies in the courts of appeals," id. 
at 139 (citing cases discussing section 402).  Reinforcing the 
jurisdictional nature of its opinion, the Second Circuit also 
disavowed any intent to rule on the merits of NextWave's 
challenges to the Commission's acts, stating explicitly that 
NextWave was "free to pursue its challenge to the FCC's 
regulatory acts" in an appropriate forum, id. at 140, and that 
the court was making "no comment on the prospects" of such 
an appeal.  Id. at 129;  see also id. at 138 n.8 ("we have no 
occasion to opine on whether the Public Notice is valid or 
whether the Licenses automatically canceled at some prior 
date");  id. at 139 ("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.").

     According to the Commission, these repeated references to 
the bankruptcy court's lack of jurisdiction mean only that the 
bankruptcy court lacked jurisdiction to decide whether the 
Commission had applied the auction requirements of section 
309(j) of the Communications Act arbitrarily and capriciously, 
not that it lacked jurisdiction to review the Commission's 
actions for compliance with the Bankruptcy Code.  Likewise, 
the Commission suggests, the Second Circuit's references to 
the prospects of NextWave's appeal refer only to an appeal 
based on section 309(j).  In support of this interpretation, the 
Commission points to language in the Second Circuit's opin-
ion suggesting that the bankruptcy court lacked jurisdiction 
to question the Commission's regulatory judgments under 
section 309(j).  See, e.g., id. at 131-32 (" '[E]ven if the bank-
ruptcy 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 [Federal 
Communication Act's] goals, they were utterly without the 
power to order that NextWave be allowed to retain them for 
that reason or on that basis.' ") (quoting initial opinion);  see 
also id. at 136-37.

     The Second Circuit, however, had good reason to address 
section 309(j) directly:  the bankruptcy court devoted several 
paragraphs to evaluating the Commission's conduct in light of 
that section.  See NextWave VI, 244 B.R. at 271, 281-83.  
Moreover, it is perfectly consistent to hold that section 402 
prohibits the bankruptcy court from reviewing Commission 
action both under section 309(j) and under the Bankruptcy 
Code.  True, as the Commission points out, other circuits 
have recognized the jurisdiction of bankruptcy courts to 
determine whether provisions of the Code such as the auto-
matic stay apply to agency actions.  See, e.g., Commerce Oil 
Co. v. Word (In re Commerce Oil Co.), 847 F.2d 291 (6th Cir. 
1988);  Universal Life Church, Inc. v. United States (In re 
Universal Life Church, Inc.), 128 F.3d 1294 (9th Cir. 1997).  
But that is irrelevant to the question we face here:  how did 
the Second Circuit view the bankruptcy court's jurisdiction?  
Regardless of how other circuits--or even we--might inter-
pret section 402, we think the Second Circuit construed the 
provision to confer "exclusive jurisdiction" on courts of ap-
peals to review even Bankruptcy Code challenges to the 
Commission's regulatory acts.  Many of the court's refer-
ences to section 402 are not clearly restricted to bankruptcy 
court power under section 309(j).  See, e.g., In re FCC, 217 
F.3d at 139 ("Exclusive jurisdiction to review the FCC's 
regulatory action lies in the courts of appeals.").  And at least 
once in its opinion, the Second Circuit expressly stated that 
"[t]he bankruptcy court lacked jurisdiction to declare the 
Public Notice [of reauction] null and void on [the] ground[s] 
that the Public Notice violated the automatic stay, [or] that 
the right to cure obviates any default"--that is, on Bankrupt-
cy Code grounds.  Id. at 139 (emphasis added).

     The Second Circuit's reasoning in granting mandamus fur-
ther illustrates the jurisdictional nature of its opinion.  The 
court overturned the bankruptcy court's decision on two 
"independently sufficient" grounds, each discussed in a sepa-
rate section of the opinion.  See id. at 141.  One ground was 
that the bankruptcy court lacked "statutory jurisdiction" to 
nullify the Commission's license cancellation.  Id.  Entitled 
"Jurisdiction," this section of the opinion consists entirely of a 

discussion of sections 402(a) and (b) of the Communications 
Act--it never mentions the Bankruptcy Code.  Id. at 139-41.  
If, as the Commission maintains, the Second Circuit thought 
the bankruptcy court lacked authority to invalidate the li-
cense cancellation principally because the Code does not 
reach the Commission's regulatory acts (and if, as the Com-
mission also maintains, the Second Circuit's discussion of 
"jurisdiction" merely refers to the peripheral issue of the 
bankruptcy court's jurisdiction to review Commission actions 
under section 309(j) of the Communications Act) it is difficult 
to explain why the court failed to discuss the Bankruptcy 
Code in this section of its opinion, given that the reasons 
discussed here provide an "independently sufficient" basis for 
mandamus.

     The Second Circuit's other reason for granting mandamus 
was that the bankruptcy court violated the appellate court's 
earlier mandate.  But as the Second Circuit made clear, its 
initial opinion too was jurisdictional:

     Our extraordinary mandamus power has two purposes:  
     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 bank-
     ruptcy court on the ground that that court lacked juris-
     diction.  The bankruptcy court again seeks to control 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 conditions placed 
     by the FCC upon its retention of the Licenses.'  Thus a 
     writ of mandamus protecting this Court's mandate also 
     confines the inferior court to the lawful exercise of its 
     jurisdiction.
     
Id. at 137 (quoting In re NextWave, 200 F.3d at 54).

     To be sure, in the "mandate" section of its opinion, the 
Second Circuit appeared to decide on the merits that at least 
some parts of the automatic stay provision of the Bankruptcy 

Code, 11 U.S.C. s 362, do not apply to the facts of this case.  
See In re FCC, 217 F.3d at 138 ("Undoubtedly, the [Commis-
sion] is a governmental unit that is seeking 'to enforce' its 
'regulatory power' [under subsection 362(b)(4)].");  id at 138 
n.8 ("[W]e hold that the FCC's regulatory decisions fall within 
[subsection] 362(b)(4).").  But leaving aside for the moment 
the effect of this discussion under the doctrine of issue 
preclusion, this portion of the Second Circuit's opinion does 
not change our view that the court's decision was primarily 
jurisdictional, for the court expressly couched its discussion of 
the automatic stay in jurisdictional terms:  the court prefaced 
its discussion by noting that "[t]he bankruptcy court founds 
its jurisdiction [to interfere with the FCC's enforcement of 
its payment schedule] chiefly on the automatic stay provision 
of [section 362]...."  Id. at 138 (emphasis added).  We need 
not decide whether this jurisdictional interpretation of section 
362 is correct--the Supreme Court has declined to express an 
opinion on the issue, see Bd. of Governors of the Fed. Reserve 
Sys. v. MCorp Fin., Inc., 502 U.S. 32, 41 n.11 (1991)--because 
the Commission's res judicata argument requires only that we 
determine what the Second Circuit meant, and here we think 
it clear that the court treated section 362 as though it 
provided a potential basis for bankruptcy court jurisdiction.

     In addition to this direct evidence of the jurisdictional 
nature of the Second Circuit opinion, the Commission's alter-
nate view of the opinion--that the court decided as a substan-
tive matter that nothing in the Bankruptcy Code prevents the 
Commission from canceling NextWave's licenses--is implausi-
ble.  Not only does this interpretation fail to account fully for 
the opinion's jurisdictional language, see supra at 21-22, but 
the Second Circuit never actually states that the Bankruptcy 
Code as such does not reach the Commission's regulatory 
acts:  the entire opinion concerns the power and jurisdiction 
of the bankruptcy court.  Perhaps most telling, the Second 
Circuit does not discuss any provision of the Bankruptcy 
Code besides section 362, despite the fact that the bankruptcy 
court discussed section 525 and made a ruling based on 
sections 1123 and 1124.  As NextWave argues, "[t]he exclu-
sively jurisdictional character of the Second Circuit's ruling 

provides a complete explanation for its ... silence respecting 
NextWave's principal bankruptcy arguments."  Appellants' 
Reply Br. at 4.

     Faced with the Second Circuit's silence about sections 525 
and 1123, the Commission suggests that even though the 
court failed to mention these provisions, it necessarily decided 
that they do not bar the license cancellation because "manda-
mus relief is warranted only where the petitioner has demon-
strated that its right to such relief is clear and indisputable," 
and "the Second Circuit would not have granted our request 
for extraordinary relief if it had thought that the bankruptcy 
court's decision was sustainable on the basis of [section] 525" 
or 1123.  Appellee's Br. at 21 n.13 (internal quotation omit-
ted);  id. at 24 n.15.  The assumption that the Second Circuit 
"necessarily" resolved these arguments, however, is valid only 
if the Commission's view of the case is correct--that is, if the 
Second Circuit meant to decide as a substantive matter that 
the Bankruptcy Code did not reach the Commission's actions.  
If instead the Second Circuit principally decided, as much of 
the opinion's language suggests, see supra at 20-22, that the 
bankruptcy court lacked jurisdiction to hear these arguments, 
that conclusion would also have provided a basis for manda-
mus, without requiring the court to consider or decide any-
thing about sections 525 and 1123 at all.

     The Commission offers a second, equally unpersuasive ex-
planation for the Second Circuit's silence regarding sections 
525 and 1123.  The bankruptcy court's analysis of those 
provisions, the Commission says, "hinges on its characteriza-
tion of the FCC as an ordinary creditor," Appellee's Br. at 24, 
and by rejecting decisively this characterization, the Second 
Circuit in effect decided that these parts of the Code do not 
apply.  Apart from the fact that it seems odd that the Second 
Circuit would have decided that sections 525 and 1123 do not 
apply without ever mentioning them, this argument fails 
because, like the previous argument, it assumes the correct-
ness of the Commission's reading of the Second Circuit's 
opinion.  But the alternate reading of the opinion--that the 
bankruptcy court lacked jurisdiction to hear challenges to the 
Commission's regulatory actions based on the Bankruptcy 

Code or otherwise--also relies upon the notion that the 
Commission is not an ordinary creditor but a regulator in this 
situation.  The fact that the Second Circuit decided that the 
Commission was not acting as an ordinary creditor when it 
canceled the licenses thus does not indicate that the court 
implicitly decided that sections 525 and 1123 are inapplicable 
to this case.

     Having thus concluded that the Second Circuit's opinion 
was jurisdictional and that claim preclusion does not bar 
NextWave from re-litigating its Bankruptcy Code arguments 
in this court, we turn to the Commission's second major res 
judicata argument:  that each of NextWave's Bankruptcy 
Code arguments is barred by issue preclusion.  "Under the 
issue preclusion aspect of res judicata, a final judgment on 
the merits in a prior suit precludes subsequent relitigation of 
issues actually litigated and determined in the prior suit, 
regardless of whether the subsequent suit is based on the 
same cause of action."  I.A.M. Nat'l Pension Fund, 723 F.2d 
at 947.  Issue preclusion is most often invoked where "a 
subsequent action is brought on a different claim," id. at 947 
n.3, and as a result claim preclusion does not apply.  Issue 
preclusion, however, may also apply to subsequent actions 
brought on the same claim:  if a judgment "does not preclude 
relitigation of all or part of the claim on which the action was 
brought"--if, for example, as here, the judgment was jurisdic-
tional--it may still preclude relitigation of any issues "actual-
ly litigated and determined" in the first action.  Id.  For 
issue preclusion to apply, however, "the issue must have been 
actually and necessarily determined by a court of competent 
jurisdiction in the first trial."  Connors v. Tanoma Mining 
Co., 953 F.2d 682, 684 (D.C. Cir. 1992) (internal quotation and 
emphasis omitted).  If the "basis" of a prior decision is 
"unclear, and it is thus uncertain whether the issue was 
actually and necessarily decided in [the prior] litigation, then 
relitigation of the issue is not precluded."  Id.

     It may appear that the only issue potentially barred by 
issue preclusion from a case dismissed for lack of jurisdiction 
is the jurisdictional determination itself.  Cf. Kasap, 166 F.3d 
at 1248.  In this case, it may thus seem that the Second 

Circuit cannot have ruled on the merits of any of NextWave's 
Bankruptcy Code arguments, because the court only decided 
that the bankruptcy court lacked jurisdiction to hear them.  
And indeed, under our jurisdictional interpretation of the 
Second Circuit's decision, we do not think the court "actually 
and necessarily" decided whether sections 525 and 1123 bar 
the license cancellation.  We thus conclude that issue preclu-
sion does not bar relitigation of these issues.

     Far less clear, however, is whether issue preclusion bars 
NextWave's section 362 argument.  As we have seen, the 
Second Circuit explicitly discussed section 362's automatic 
stay, finding that the bankruptcy court could not rely on the 
provision as an independent basis for jurisdiction because the 
license cancellation was a regulatory act exempt under sub-
section 362(b)(4).  See supra at 23-24.  It is true, as we have 
said, that this was a jurisdictional discussion, but this does 
not preclude it from having issue preclusive effect:  if a court 
makes a substantive determination in order to arrive at a 
jurisdictional holding, the substantive determination can have 
issue preclusive effect so long as it was "actually litigated and 
determined in the prior action."  See I.A.M. Nat'l Pension 
Fund, 723 F.2d at 947 n.3.  The Restatement gives the 
following example:

     A brings an action against B for personal injuries arising 
     out of an automobile accident.  Jurisdiction is asserted 
     over B, a nonresident, on the basis that the automobile 
     involved in the accident was being operated in the state 
     by or on his behalf.  After trial of this issue, the action is 
     dismissed for lack of jurisdiction.  In a subsequent action 
     by A against B for the same injuries, brought in the state 
     of B's residence, the prior determination that the auto-
     mobile was not being operated by or on behalf of B is 
     conclusive.
     
Restatement (Second) of Judgments s 27, illustration 3 
(1980).

     Here, the Second Circuit appears to have decided that 
section 362 does not confer jurisdiction on the bankruptcy 
court because subsection 362(b)(4)'s "regulatory power" ex-

ception applies as a substantive matter.  We thus agree with 
the Commission that issue preclusion bars NextWave from 
relitigating the question of whether the license cancellation 
falls within subsection 362(b)(4).  The Second Circuit spoke 
clearly and unequivocally about this issue, stating that "[u]n-
doubtedly, the FCC is a governmental unit that is seeking 'to 
enforce' its 'regulatory power,' " In re FCC, 217 F.3d at 138, 
and that "we hold that the FCC's regulatory decisions fall 
within [subsection] 362(b)(4)."  Id. at n.8.  And under the 
Second Circuit's jurisdictional reading of section 362, this 
decision was necessary to the case:  if subsection 362(b)(4) did 
not apply, section 362 could have provided a basis for the 
bankruptcy court to assert jurisdiction over the license can-
cellation.  In considering NextWave's Bankruptcy Code argu-
ments, see Section III infra, we will thus assume that the 
license cancellation falls within the regulatory power excep-
tion to the automatic stay.

     We are less sure, however, that the Second Circuit "actual-
ly and necessarily" decided as part of its jurisdictional deci-
sion that all provisions of section 362 do not apply to the 
license cancellation.  In particular, as the Second Circuit 
implicitly acknowledged, subsection 362(b)(4)'s "regulatory 
power" exception does not apply to subsections 362(a)(4) and 
(5), which stay actions to enforce liens.  See In re FCC, 217 
F.3d at 138.  Although the bankruptcy court thought the 
cancellation of NextWave's licenses "unarguably violate[d]" 
these subsections, NextWave VI, 244 B.R. at 267, and explicit-
ly quoted the language in the security agreements creating a 
"first lien on and continuing security interest in" the licenses, 
id. at 267 n.7, the Second Circuit, in a footnote, simply observed:  
"Subsections (4) and (5) are concerned with liens.  The bank-
ruptcy court does not explain why they are implicated here."  
In re FCC, 217 F.3d at 138 n.7.  Thus, unlike in its subsection 
362(b)(4) discussion, the Second Circuit never said it was 
"hold[ing]" that subsections 362(a)(4) and (5) do not apply to 
the cancellation of NextWave's licenses.  Cf. id. at 138 n.8.  
Instead, the court merely observed that the bankruptcy court 
did not explain why they are implicated.  It is thus unclear 
whether the Second Circuit decided that subsections 362(a)(4) 

and (5) do not block cancellation of NextWave's licenses, or 
whether it simply concluded that it had no need to reach the 
issue because the bankruptcy court failed adequately to ad-
dress it.  Since under our decision in Connors, if it is "uncer-
tain whether [an] issue was actually and necessarily decided 
in [prior] litigation, then relitigation of the issue is not 
precluded," 953 F.2d at 684, we conclude that NextWave is 
not barred from arguing that subsections 362(a)(4) and (5) 
prohibit cancellation of its licenses.

     Having resolved these threshold issues, we turn to the 
merits of NextWave's appeal.

                               III

     NextWave argues that the Commission's cancellation of its 
licenses violated sections 525, 1123, and 362 of the Bankrupt-
cy Code.  Under the Administrative Procedure Act, we must 
"hold unlawful and set aside agency action ... found to be 
... not in accordance with law [or] ... in excess of statutory 
jurisdiction, authority, or limitations."  5 U.S.C. s 706(2).  
This provision requires us to invalidate agency action not only 
if it conflicts with an agency's own statute, but also if it 
conflicts with another federal law.  See, e.g., Scheduled Air-
lines Traffic Offices, Inc. v. Dep't of Def., 87 F.3d 1356, 1361 
(D.C. Cir. 1996) (applying 5 U.S.C. s 706(2)(A) and declaring 
Department of Defense policy invalid under Miscellaneous 
Receipts statute);  see also Cousins v. Sec'y of the U.S. Dep't 
of Transp., 880 F.2d 603, 608 (1st Cir. 1989) (stating that the 
quoted passages from section 706 are "general in their mean-
ing" and "do not restrict the courts to consideration of the 
agency's own enabling statute").

     We begin with section 525:

     [A] governmental unit may not deny, revoke, suspend, or 
     refuse to renew a license ... or other similar grant to, 
     ... discriminate with respect to such a grant against, 
     deny employment to, terminate the employment of, or 
     discriminate with respect to employment against, a per-
     son that is ... a bankrupt or a debtor under the Bank-
     ruptcy Act ... solely because such bankrupt or debtor 
     
     ... has not paid a debt that is dischargeable in the case 
     under this title or that was discharged under the Bank-
     ruptcy Act.
     
11 U.S.C. s 525(a).  No one disputes that the Commission is 
a "governmental unit" that has "revoke[d]" a license for 
purposes of section 525, nor that NextWave is a "bankrupt or 
a debtor under the Bankruptcy Act."  Pointing to the fact 
that the Commission has filed proofs of claim in bankruptcy 
court based on its security interests in PCS licenses, see, e.g., 
Proof of Claim, In re NextWave Pers. Communications, Inc., 
No. 98 B 21529 (Bankr. S.D.N.Y. Dec. 16, 1998) (filed on 
behalf of creditor The United States of America), NextWave 
argues that the installment payment obligations were dis-
chargeable debts under the Bankruptcy Code.  See 11 U.S.C. 
s 1141(d) (stating that dischargeable debts under Chapter 11 
generally include "any debts that arose before the date of ... 
confirmation" of the debtor's reorganization plan).  And be-
cause failure to make installment payments was the "sole 
triggering mechanism" for automatic cancellation, NextWave 
continues, its licenses canceled "solely because" it failed to 
pay dischargeable debts.  Appellants' Reply Br. at 8.

     The Commission never denies that if NextWave had made 
its payments, the company could have retained its licenses.  
Nor does the Commission dispute that NextWave's license fee 
obligations were at least in part genuine, enforceable debts--
indeed, the Commission's own regulations provide for their 
collection if left unpaid.  See 47 C.F.R. s 1.2110(g)(4)(iv) ("A 
licensee in the PCS C or F [B]locks shall be in default, its 
license shall automatically cancel, and it will be subject to 
debt collection procedures, if the payment due on the payment 
resumption date ... is more than ninety (90) days delin-
quent.") (emphasis added).  Instead, the Commission offers a 
series of unpersuasive arguments intended to demonstrate 
why, notwithstanding section 525's apparent applicability, the 
provision does not bar cancellation of NextWave's licenses.

     First, the Commission urges us to read section 525 in light 
of section 362.  The latter section, the Commission suggests, 
"serves the important purpose of providing a debtor with 

some breathing room in the situations to which it applies.  
Accordingly, [section] 362 should be broader than [section] 
525, providing for breathing room even in some situations 
where cancellation ultimately would be permitted."  Appel-
lee's Br. at 21-22.  Thus, the Commission argues, because (on 
its reading) the automatic stay does not apply to this case, 
section 525 should not apply either.  Fleshing out this argu-
ment, Intervenors suggest that "[i]t would make little sense 
for Congress to exempt governmental 'regulatory' actions 
from the stay [under subsection 362(b)(4)] but then flatly 
forbid them in [section] 525.  Basic structural coherence 
requires the conclusion that [section] 525 does not prevent a 
license cancellation already correctly found exempt from the 
stay as regulatory."  Intervenors' Br. at 18.

     This is an interesting argument, but it fails for several 
reasons.  To begin with, it is inconsistent with section 525's 
plain language.  Section 525 clearly and explicitly prohibits 
governmental units, for whatever reason, from canceling li-
censes for failure to pay a dischargeable debt:  "a governmen-
tal unit may not ... revoke ... a license ... to ... a 
bankrupt ... solely because such bankrupt ... has not paid a 
debt that is dischargeable ... under this title."  11 U.S.C. 
s 525(a).  Nothing in section 525 or 362 states that section 
525 is subject to subsection 362(b)(4)'s regulatory power 
exception, or that the exception should be read to limit 
section 525's clear reach.  Thus, while interpretation of the 
Bankruptcy Code is a "holistic endeavor," and "[a] provision 
that may seem ambiguous in isolation" can often be "clarified 
by the remainder of the statutory scheme," United Sav. Ass'n 
of Tex. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 
365, 371 (1988), here we see no such ambiguity.  Various 
bankruptcy and district courts, accordingly, have held that 
section 525 can apply even if the automatic stay does not.  
See, e.g., William Tell II, Inc. v. Illinois Liquor Control 
Comm'n (In re William Tell II, Inc.), 38 B.R. 327, 330 (N.D. 
Ill. 1983) ("even if a state proceeding is not automatically 
stayed, a bankruptcy court has authority to enjoin certain 
conduct under 11 U.S.C. s 525");  In re The Bible Speaks, 69 
B.R. 368, 373 n.5 (Bankr. D. Mass. 1987) ("[Section] 525(a) is 

directed at governmental units and may apply even where the 
automatic stay has no effect.").

     Moreover, contrary to Intervenors' argument, this interpre-
tation of section 525 does not render the Code "structural[ly] 
[in]coheren[t]."  Though this reading does mean that an 
action exempted under subsection 362(b)(4) might nonetheless 
be barred by section 525, it does not render subsection 
362(b)(4) meaningless, because that subsection covers a differ-
ent and wider variety of actions than section 525.  For 
example, subsection 362(b)(4) exempts from the automatic 
stay (among other things) "any act" by a governmental unit 
to "obtain possession of property of the estate ... or to 
exercise control over property of the estate," so long as the 
act is taken to enforce the unit's "regulatory power."  11 
U.S.C. s 362(a)(3), (b)(4) (emphasis added).  Section 525, in 
contrast, prohibits governmental units only from taking cer-
tain specific actions with respect to an extremely limited 
subset of a debtor's property--licenses and similar grants--
or with respect to employment opportunities.

     Even if the Commission were correct that section 525 
should be read to permit all actions exempted from the 
automatic stay by subsection 362(b)(4), that argument would 
be inapplicable to this case because subsection 362(b)(4) does 
not apply to the stay of acts to "create, perfect, or enforce" 
liens against property of the estate or of the debtor imposed 
by subsections 362(a)(4) and (5).  Here, NextWave executed 
security agreements giving the Commission a "first lien" on 
the company's interest in the licenses, and under subsections 
362(a)(4) and (5), "a creditor holding a lien on property of the 
estate may not enforce the lien by seizure, foreclosure, or 
otherwise."  3 Collier on Bankruptcy p 362.03[6] (15th ed. 
rev. 2000).  Stayed actions include "self-help remedies against 
collateral" such as "repossession."  Id. p 362.03[6][b].  Before 
the bankruptcy court, Commission counsel acknowledged that 
canceling the licenses and seeking to collect on the debt was 
"tantamount ... to foreclosing on collateral."  Hearing Tr. at 
14, In re NextWave Pers. Communications, Inc., No. 98 B 
21529 (Bankr. S.D.N.Y. May 26, 1999).  Thus, contrary to the 
Commission's argument, and notwithstanding the applicability 

of the regulatory power exception, section 362's automatic 
stay does apply here.  This is thus not a case in which section 
525, if applicable, would bar an action exempt from the 
automatic stay.

     The Commission next argues that section 525 is inapplica-
ble because NextWave's license fee obligation was not a 
"dischargeable" debt.  In support of this proposition, the 
Commission offers two arguments.  First, it claims that the 
New York bankruptcy court could not have discharged 
NextWave's debt because the Second Circuit, whose decisions 
are binding on that court, held in its initial opinion that so 
long as NextWave retained its licenses, its payment obligation 
was subject to neither modification nor discharge in bank-
ruptcy.  As a result, the Commission concludes, the payment 
obligation was not a debt "dischargeable" in bankruptcy while 
the license was held.

     We disagree.  To begin with, it is unclear that the Second 
Circuit in fact thought the bankruptcy court lacked power to 
alter or discharge the payment obligation while NextWave 
held the licenses.  Though parts of its initial opinion do 
suggest this, see In re NextWave, 200 F.3d at 56, other parts 
suggest that the court simply thought the bankruptcy court 
had no authority to require the Commission to allow 
NextWave to keep its licenses after modification of its pay-
ment obligation.  See, e.g., id. at 54 ("It is beyond the 
jurisdiction of a court in a collateral proceeding to mandate 
that a licensee be allowed to keep its license despite its failure 
to meet the conditions to which the license is subject.").  If 
the latter reading is correct, then insofar as NextWave's 
payment obligation was a debt (as opposed to a license 
condition), it was dischargeable by the bankruptcy court.  
Even if the Commission's reading of the Second Circuit's 
opinion is correct, the Commission's argument assumes that 
the phrase "debt that is dischargeable ... under this title" in 
section 525(a) refers to the bankruptcy court's power to 
modify or discharge a payment obligation.  The provision's 
plain language, however, refers to a payment obligation that 
can be modified or discharged under the Bankruptcy Code;  
and as we read the Second Circuit's opinion, the court merely 

decided that insofar as timely payment was a condition for 
license retention, the bankruptcy court had no authority to 
modify it.  It never decided that a court of competent juris-
diction (such as this one) could not modify or discharge it 
under section 525.

     The Commission also argues that because "[a] licensee's 
full and timely payment of its winning bid installments is an 
essential condition of its license grant[,] [p]ayment ... is a 
regulatory requirement, not a dischargeable debt."  Appel-
lee's Br. at 22.  At oral argument, Commission counsel con-
ceded that the payment obligation also has the character of a 
dischargeable debt.  As we indicated earlier, the Commission 
could seek to collect its license fee, and in so doing it would be 
subject (as the Second Circuit held) to the constraints im-
posed on creditors by the Bankruptcy Code.  See In re 
NextWave, 200 F.3d at 56.  But here, the Commission con-
tends, it seeks only to revoke NextWave's licenses, not to 
collect on the debt, and insofar as timely payment is a 
condition of license retention, it is a regulatory requirement, 
not a dischargeable debt, and section 525 is inapplicable.

     As Commission counsel also acknowledged, this claim 
amounts to a request for a regulatory purpose exception to 
section 525:  the Commission in effect argues that because 
(for legitimate regulatory motives) it made timely payment a 
regulatory requirement, it should be permitted to cancel 
licenses for failure to meet that requirement despite section 
525's plain language ("a governmental unit may not ... 
revoke ... a license ... to ... a bankrupt ... solely because 
such bankrupt ... has not paid a debt that is dischargeable 
... under this title").  But basic principles of statutory 
interpretation preclude such a result.  To begin with, section 
525 contains several exceptions, but none for agencies fulfill-
ing regulatory purposes.  See 11 U.S.C. s 525(a) ("Except as 
provided in the Perishable Agricultural Commodities Act ... 
the Packers and Stockyards Act ... and section 1 of ... 'An 
Act making appropriations for the Department of Agriculture 
for the fiscal year ending June 30, 1944, and for other 
purposes' ... a governmental unit may not deny, revoke, 
suspend ... a license....").  This in itself suggests that 
Congress did not intend to provide a regulatory purpose 
exception to section 525.  See Tenn. Valley Auth. v. Hill, 437 
U.S. 153, 188 (1978) (relying on fact that Endangered Species 

Act "creates a number of limited 'hardship exemptions' " but 
none for federal agencies to conclude "under the maxim 
expressio unius est exclusio alterius ... that these were the 
only 'hardship cases' Congress intended to exempt").  More-
over, other parts of the Bankruptcy Code contain explicit 
regulatory purpose exceptions.  Section 362, as we have seen, 
exempts from certain provisions of the automatic stay any 
"governmental unit" exercising its "police or regulatory pow-
er."  11 U.S.C. s 362(b)(4).  Section 362 also contains a series 
of narrower exceptions for certain named agencies that have 
entered lending relationships, allowing them to engage in 
particular acts of foreclosure and other actions.  See, e.g., 11 
U.S.C. s 362(b)(8) (exception permitting HUD Secretary to 
foreclose on certain mortgages insured under the National 
Housing Act).  To us, these express exceptions demonstrate 
that section 525 contains neither an implied regulatory power 
exception for governmental units in general nor an implied 
agency-specific exception allowing the Commission to enforce 
an automatic cancellation policy pursuant to an installment 
payment scheme under section 309(j) of the Communications 
Act.  See Russello v. United States, 464 U.S. 16, 23 (1983) 
("Where Congress includes particular language in one section 
of a statute but omits it in another section of the same Act, it 
is generally presumed that Congress acts intentionally and 
purposely in the disparate inclusion or exclusion.") (internal 
quotation omitted).

     Next, Intervenors argue that even if the license fee obli-
gation itself is a dischargeable debt, the Commission did not 
cancel NextWave's licenses "solely because" of failure to pay 
that debt.  "The 'solely because' language," they argue, "lim-
its the bar on license revocation to circumstances where a 
government [agency] is simply advancing creditor interests in 
receiving the money due."  Intervenors' Br. at 16-17.  Since 
here, license cancellation was intended not to induce payment 
but instead to "protect[ ] the integrity of [the] auction[ ] and 
select[ ] the applicant most likely to use the Licenses effi-
ciently for the benefit of the public," section 525 is not 
implicated, because "it is not the 'debt' character of the 
defaulted obligation that is the 'sole' basis for the cancella-
tion."  Id. (internal quotation omitted).

     We are unconvinced.  Intervenors argue that "solely be-
cause" should be read to mean "solely because of creditor 
interests in receiving the money due."  But the statute says 
nothing about an agency's motives in canceling a license for 
failure to pay a dischargeable debt--it simply says govern-
mental units may not cancel licenses "solely because" a 
debtor "has not paid" such a debt.  See 11 U.S.C. s 525(a) 
(emphasis added).  It may be true, as the Second Circuit 
decided, that the Commission had a regulatory motive for 
examining NextWave's timely payment record and canceling 
its licenses on that basis, but as we pointed out earlier, 
neither the Commission nor Intervenors dispute that 
NextWave could have retained its licenses if it had made 
timely installment payments.  NextWave's failure to make its 
payments was thus the "sole" trigger of the license cancella-
tion, in the sense that the Commission looked to no other 
factor in determining whether NextWave should retain its 
licenses;  and we think this is exactly the kind of conduct 
barred by section 525's plain text.  Adopting Intervenors' 
intent-based reading of section 525 would allow governmental 
units to escape section 525's limitations simply by invoking a 
regulatory motive for their concern with timely payment, and 
as we have already explained, section 525 contains no implicit 
regulatory purpose exception.

     To support their view that the phrase "solely because" 
permits license cancellation based on failure to pay a dis-
chargeable debt so long as the cancellation is motivated by a 
non-pecuniary regulatory purpose, Intervenors point to legis-
lative history stating that section 525 "does not prohibit 
consideration of ... factors[ ] such as future financial respon-
sibility or ability ... if applied nondiscriminatorily," H.R. 
Rep. No. 95-595, at 367 (1977), and that "in those cases where 
the causes of the bankruptcy are intimately connected with 
the license grant ... an examination into the circumstances 
surrounding the bankruptcy will permit governmental units to 
pursue appropriate regulatory policies and take appropriate 
action without running afoul of bankruptcy policy."  Id. at 
165.  But these passages do not lead us to conclude that 
section 525 is inapplicable here.  To begin with, we may not 

"resort to legislative history to cloud a statutory text that is 
clear."  Ratzlaf v. United States, 510 U.S. 135, 147-48 (1994).  
Moreover, while the quoted passages do suggest that agencies 
may make regulatory decisions (including perhaps canceling 
the licenses of bankrupt debtors) based on factors such as 
future financial responsibility or ability, they do not state that 
an agency may use timely payment of a dischargeable debt as 
the sole indicator of such responsibility, as the Commission 
has done here.  Cf. H.R. Rep. No. 95-595, at 165 ("The 
purpose of [section 525] is to prevent an automatic reaction 
against an individual for availing himself of the protection of 
the bankruptcy laws.").

     Duffey v. Dollison, 734 F.2d 265 (6th Cir. 1984), which 
Intervenors invoke, reinforces rather than undermines this 
interpretation of section 525.  In Duffey, the court upheld as 
applied to a bankrupt debtor a state law suspending the 
driver's license of anyone who failed to make timely payment 
of a state tort judgment until that person provided proof of 
future financial responsibility.  The statute at issue there 
specifically required extrinsic "evidence of financial responsi-
bility," such as a certificate of insurance or a bond, in order to 
reinstate a license, and was specifically re-written not to 
require payment of discharged debts as a precondition for 
reinstatement:  "the registrar shall vacate the order of sus-
pension upon proof that such judgment is stayed, or satisfied 
in full ... and upon such person's filing ... evidence of 
financial responsibility...."  Id. at 269 (quoting Ohio Rev. 
Code s 4509.45 (Baldwin 1975)).  The Commission's automat-
ic cancellation policy, in contrast, refers to no analogous 
extrinsic evidence of fitness to hold a license, and allows 
license cancellation to rest solely on failure to pay a dis-
chargeable debt.

     Finally, noting that section 525 is entitled "Protection 
against discriminatory treatment," and that the House Report 
on the bankruptcy bill provides that section 525 "extends only 
to discrimination or other action based solely ... on the basis 
of nonpayment of a debt discharged in the bankruptcy case," 
H.R. Rep. No. 95-595, at 366-67, the Commission suggests 
that the provision is inapplicable here because "[a]ll licensees 

lost their licenses if they failed to meet the payment dead-
line."  Appellee's Br. at 23.

     The text of section 525, however, includes "discriminat[ion]" 
only as an item in a series of prohibited actions:  "a govern-
mental unit may not deny, revoke, suspend, or refuse to 
renew a license ... to, [or] condition such a grant to, [or] 
discriminate with respect to such a grant against, [or] deny 
employment to, [or] terminate the employment of, or discrim-
inate with respect to employment against[ ] a person that is 
... a debtor under this title...."  11 U.S.C. s 525(a) (em-
phasis added).  Another prohibited action in the series is (as 
we have just seen) to "revoke" the license of a bankrupt 
"solely because such bankrupt" has "not paid a debt dis-
chargeable" under the Bankruptcy Code--precisely what hap-
pened in this case.  And the House Report itself explicitly 
states that section 525 "extends only to discrimination or 
other action based solely ... on the basis of nonpayment of a 
debt discharged in the bankruptcy case...."  H.R. Rep. No. 
95-595, at 366-67 (emphasis added);  see also Walker v. Wilde 
(In re Walker), 927 F.2d 1138, 1142-43 (10th Cir. 1991) 
(invalidating under section 525 a license cancellation policy 
that applied to bankrupts and non-bankrupts alike).

     We have no doubt that in developing its installment pay-
ment plan, the Commission made a good faith effort to 
implement Congress's command to encourage small busi-
nesses with limited access to capital to participate in PCS 
auctions.  We are also mindful that, as the Commission 
suggests, allowing NextWave to retain its licenses may be 
"grossly unfair" to losing bidders and licensees who "complied 
with the administrative process and forfeited licenses or made 
timely payments despite their financial difficulties."  Appel-
lee's Br. at 9.  Any unfairness, however, was inherent in the 
Commission's decision to employ a licensing scheme that left 
its regulatory actions open to attack under Chapter 11 of the 
Bankruptcy Code, the very purpose of which is "to permit 
successful rehabilitation of debtors."  NLRB v. Bildisco & 
Bildisco, 465 U.S. 513, 527 (1984);  see also H.R. Rep. No. 
95-595, at 220 ("The purpose of a business reorganization 
case, unlike a liquidation case, is to restructure a business's 

finances so that it may continue to operate, provide its 
employees with jobs, pay its creditors, and produce a return 
for its stockholders.").  The Code expressly contemplates that 
bankrupts will sometimes avoid the consequences of late or 
non-payment they might have faced had they not filed for 
bankruptcy.  See, e.g., 11 U.S.C. s 1123(a)(5)(G) (stating that 
a reorganization plan may, among other options, provide for 
"curing or waiving of any default");  United States v. Whiting 
Pools, Inc., 462 U.S. 198, 204 (1983) ("The creditor with a 
secured interest in property included in the estate must look 
to [the provisions of the Bankruptcy Code] for protection, 
rather than to the nonbankruptcy remedy of possession.").  
And the Code's restrictions have been applied even to the 
official actions of Government agencies.  See, e.g., Whiting 
Pools, 462 U.S. at 209 (enforcing the Bankruptcy Code 
against the IRS to prevent seizure of property under a tax 
lien and concluding that "[n]othing in the Bankruptcy Code or 
its legislative history indicates that Congress intended a 
special exception for the tax collector").  Here, as we have 
explained, we think section 525 prevents the Commission, 
whatever its motive, from canceling the licenses of winning 
bidders who fail to make timely installment payments while in 
Chapter 11.

     We do not think this conclusion frustrates the purposes of 
the Communications Act, because nothing in the Act required 
the Commission to choose the licensing scheme at issue here.  
Although section 309(j) suggests the possibility of using guar-
anteed installment payments of some kind, the statute also 
suggests alternative methods of facilitating small business 
participation.  See 47 U.S.C. s 309(j)(4)(A).  Indeed, in 1998, 
the Commission decided that "until further notice, installment 
payments should not be offered in auctions as a means of 
financing small businesses and other designated entities seek-
ing to secure spectrum licenses."  See Competitive Bidding 
Proceeding, 63 Fed. Reg. 2315, 2318-19 (Jan. 15, 1998).  
Moreover, irrespective of the Commission's decision to use 
installment payments as part of its licensing scheme, nothing 
in the Act required it to enter a creditor relationship with 
winning bidders, take liens on licenses, or--most important 

for our decision here--make timely payment a license condi-
tion.  For example, the Commission could have required 
winning bidders to obtain third party guarantees for their 
license fee obligations, or required full upfront payment from 
C Block licensees and helped them obtain loans from third 
parties.  The Commission could also have made license 
grants conditional on periodic checks of financial health, a 
more extensive credit check, or some other evidence that 
winning bidders were capable of using their licenses in the 
public interest.  Having chosen instead a scheme that put it 
in a creditor-debtor (and lienholder) relationship with its 
licensees and conditioned licenses on timely payment of their 
debts, and having as a consequence run afoul of section 525 of 
the Bankruptcy Code, the Commission may not escape that 
provision's clear command simply because it acted for a 
regulatory purpose.

                                IV

     In view of our conclusion that the Commission violated 
section 525 of the Bankruptcy Code in canceling NextWave's 
licenses, we need not consider NextWave's remaining Bank-
ruptcy Code arguments, nor its arguments that the cancella-
tion violated principles of due process and fair notice.  We 
therefore reverse and remand to the Commission for proceed-
ings not inconsistent with this opinion.

                                                      So ordered.