United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 3, 1998 Decided May 22, 1998
No. 97-1263
Time Warner Entertainment Co., L.P.,
Petitioner
v.
Federal Communications Commission and
United States of America,
Respondents
On Petition for Review of an Order of the
Federal Communications Commission
R. Bruce Beckner argued the cause for petitioner, with
whom Aaron I. Fleischman, Seth A. Davidson, and Jill K.
McClelland were on the briefs.
James M. Carr, Counsel, Federal Communications Com-
mission, argued the cause for respondents, with whom Joel I.
Klein, Assistant Attorney General, United States Department
of Justice, Robert B. Nicholson and Robert J. Wiggers, Attor-
neys, Christopher J. Wright, General Counsel, Federal Com-
munications Commission, and Daniel M. Armstrong, Associ-
ate General Counsel, were on the brief.
Before: Silberman, Randolph, and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Silberman.
Opinion concurring in part and dissenting in part filed by
Circuit Judge Randolph.
Silberman, Circuit Judge: Time Warner Entertainment
Company petitions for review of an order of the Federal
Communications Commission setting forth the manner in
which cable system operators may recoup external cost in-
creases incurred between September 30, 1992 and the date
their system first became subject to rate regulation. The
Commission contends that because it had no opportunity to
pass on the issue, or to correct its error, section 405 of the
Communications Act bars our review. We grant the petition
in part and remand.
I.
The Cable Television Consumer Protection and Competi-
tion Act of 1992, Pub. L. No. 102-385, 106 Stat. 1460 (codified
in scattered sections of 47 U.S.C.), directed the FCC to
regulate the rates that cable operators not subject to "effec-
tive competition," defined at 47 U.S.C. s 543(l)(1) (1994),
could charge their subscribers. The Commission designed a
scheme intended to ensure that any system not facing such
competition would nevertheless charge approximately the
same rates as if it were in a competitive market. Put simply,
a system operator's initial permitted rate either was its rate
in effect on September 30, 1992 reduced by a "competitive
differential" (the "full reduction rate"), or was calculated in
accordance with certain FCC formulas and worksheets with-
out reference to rates in effect on September 30, 1992 (the
"transition rate"). See 47 C.F.R. s 76.922(b) (1997). Most
systems, the Commission has said, employed the former rate.
See Implementation of the Cable Television Consumer Pro-
tection and Competition Act of 1992: Rate Regulation, Mem-
orandum Opinion and Order (Order on Remand), 11
F.C.C.R. 20206, p 22 (1996).
In Time Warner Entertainment Co. v. FCC, 56 F.3d 151
(D.C. Cir. 1995), we considered consolidated petitions for
review of the FCC's orders implementing the Act. One of
the cable operators' complaints in that case (and the only one
relevant to Time Warner's instant petition) was that the FCC
unreasonably did not allow "cable operators to adjust their
rates to reflect external cost increases incurred during the
gap period." Id. at 173. "[E]xternal costs" were those
"effectively beyond the cable operator's control," including:
"(1) the retransmission consent fees cable operators pay to
broadcasters; (2) programming costs; (3) [state and local]
taxes; and (4) franchise fees and the costs associated with
other franchise requirements, including the provision of pub-
lic, educational, and governmental-access programming." Id.
at 171; see also 47 C.F.R. s 76.922(f)(1) (1997). The "gap
period" refers to the time between September 30, 1992 and
the date a system became subject to rate regulation. An
operator's initial permissible rate, at least for those using the
full reduction rate, was derived from its rate in effect on
September 30, 1992, not the actual rate in effect on the date
each system became subject to regulation, "lest [the FCC]
build into the permitted initial rates any unwarranted rate
increases that cable operators took after passage of the 1992
Cable Act." Time Warner, 56 F.3d at 173. The Commission
did not permit operators to recoup any external cost increas-
es incurred during the gap period; 1 only those incurred after
the date a system became subject to rate regulation could be
taken into account.2 The length of the gap varied among full
__________
1 The FCC's counsel, however, indicates that operators were
permitted to include one particular external cost increase--fran-
chise fees--incurred during the gap period.
2 Our first Time Warner opinion did not address whether a
system operator which used a transition rate rather than a full
reduction rate-based operators because they became subject
to rate regulation at different times, but was no shorter than
11 and no longer than 17 months long.
In Time Warner, we held that the Commission's "decision
to preclude a rate adjustment designed to recover changes in
external costs incurred during the gap period [was] arbitrary
and capricious," id. at 174, and "vacate[d] the rule insofar as
the FCC denied [cable operators] recovery of their gap-
period external cost increases." Id. at 178. In our view, the
FCC had offered "no reason to doubt that cable operators
incurred external costs during the gap period, yet under its
regulations they would never be able to recoup those costs
short of opting for cost-of-service regulation--which would be
akin to shooting a fly with a blunderbuss." Id. at 174.3 We
also thought the Commission's defense of its rule--that allow-
ing recovery of the gap-period external cost increases would
be too administratively burdensome, both for the cable opera-
tors and the FCC--"completely unacceptable." Id.
Eighteen months after our decision, and without issuing a
proposed rule or seeking public comment on how to proceed,
the Commission issued an order in response to our remand.
See Order on Remand, WW 21-28. The order "permit[s] oper-
ators to adjust their current permissible rates to [the level]
the operators would currently be charging if they had been
__________
reduction rate was subject to the same external cost adjustment
problem, and the parties dispute the point. The FCC's counsel
argues that such an operator did not. Time Warner, however,
contends that an operator using the transition rate faced a slightly
different gap, one that began on April 1, 1993 instead of September
30, 1992, but likewise ended on the date the system first became
subject to rate regulation.
3 The rules permitted a system operator to opt into convention-
al cost-of-service regulation; we said, however, that "because a cost-
of-service regulatory proceeding is expensive for the cable operator,
the FCC can be confident that an operator will not lightly choose
that option and it will indeed remain a limited exception to the
general rule." Time Warner, 56 F.3d at 170 (citation omitted).
permitted to include increases in external costs occurring
between September 30, 1992 and their initial date of regula-
tion." Id., p 25 (emphasis added). But the Order does not
allow cable operators to recover in future rates or otherwise
the difference between the rates they would have charged in
1994, 1995, 1996, and 1997, had they been allowed to account
for external cost increases incurred during the gap period,
and their allowable rates in those years. Time Warner did
not petition for reconsideration after the Commission issued
its Order on Remand; it instead sought review here. Peti-
tioner claims that the FCC's order unreasonably denies oper-
ators the ability to recoup the revenue deficiency--which
Time Warner estimates at more than $14 million dollars--
they sustained during the four years, and that the order does
not comply with our mandate in the first Time Warner case.
It also contends that those operators which employ a transi-
tion rate are unreasonably denied the opportunity to take
advantage of the prospective relief afforded full reduction
rate-based operators.
II.
The Commission did not explain why its order permitted
cable operators to charge current rates as if the gap period
external cost increases had been included, but did not allow
them to recover their revenue deficiencies, other than to say
that "[t]he scope of relief requested is reflected in Time
Warner's Emergency Motion for Expedited Review (May 3,
1994 ...)" filed in this court before argument on the first
petition. Id., p 24 n.40. Petitioner had said in that motion
that "cable operators lose millions of dollars in revenue every
day. If they eventually succeed in persuading this Court to
rule in their favor, those losses cannot be recouped. Their
unrecoverable economic loss thus constitutes irreparable inju-
ry." The FCC construed that statement as a concession (or
waiver) that the cable operators were not even seeking to
recover their revenue loss.
Petitioner contends that it was absurd for the Commission
to have drawn a distinction between past revenue deficiencies
attributable to unrecovered external cost increases and pro-
spective rates predicated on, but not totally recovering, those
past external cost increases; its claim to the Commission
never made that distinction.4 Even worse, Time Warner
argues, the passage on which the FCC relied pertained solely
to the Commission's choice of a 17% "competitive differen-
tial," see supra at 2, not the gap period at all. The FCC's
counsel insists that it was "entirely understandable" for the
Commission to decide as it did because Time Warner never
indicated that it had "changed" its position in a submission to
the FCC after our remand, or in a petition for reconsidera-
tion. He contends that the other arguments Time Warner
raises in its petition--that it was unreasonable for the Com-
mission not to provide a way for operators to recoup all their
revenue deficiencies, that the FCC's order treated full reduc-
tion rate-based operators more favorably than those using the
transition rate, and that the order did not comply with our
remand--were never presented to the Commission (presum-
ably in a petition for reconsideration because it was not
foreseeable that the Commission would draw the remedial
distinction that it did). Petitioner therefore has not exhaust-
ed its administrative remedies and our review is foreclosed by
section 405(a) of the Communications Act. Time Warner's
primary response is that the issues it raises were directly
implicated in the reasoning of our prior decision and were
therefore covered in the remand order.
Section 405(a) is worded somewhat differently than the
normal exhaustion provision. It provides:
After an order, decision, report, or action has been made
or taken in any proceeding by the Commission ... any
party thereto, or any other person aggrieved or whose
interests are adversely affected thereby, may petition for
reconsideration ... and it shall be lawful for ... the
Commission ..., in its discretion, to grant such a recon-
sideration if sufficient reason therefor be made to ap-
pear.... The filing of a petition for reconsideration
__________
4 The dissent's formulation of the issue, assertedly not present-
ed to the Commission, see Dissent at 1, is misstated.
shall not be a condition precedent to judicial review of
any such order, decision, report, or action, except where
the party seeking such review ... (2) relies on questions
of fact or law upon which the Commission, or designated
authority within the Commission, has been afforded no
opportunity to pass.
47 U.S.C. s 405(a) (1994) (emphasis added). Although we
have said that this provision codifies the normal exhaustion
doctrine, see Washington Ass'n for Television and Children
v. FCC (WATCH), 712 F.2d 677, 681 (D.C. Cir. 1983), the text
does not refer to the necessity of a party raising an argument
before the Commission--as does the typical exhaustion stat-
ute--but only that the Commission have an "opportunity to
pass" on a question of fact or law raised in the petition.5
In determining whether the Commission has had an oppor-
tunity to pass on a question, we have, to be sure, asked
whether a question was adequately presented to the Commis-
sion even if the Commission addressed the issue in some
fashion. Recently, for instance, in Bartholdi Cable Co. v.
FCC, 114 F.3d 274 (D.C. Cir. 1997), we held section 405 was
not satisfied because the party claiming the Commission
improperly rejected attorney-client and work-product privi-
leges had not raised those claims before the Commission.
The FCC discussed the privileges in dicta, but we concluded
that because the issue was not "flagged" the Commission did
not have a fair opportunity to pass on it. Id. at 279-80.
Bartholdi Cable thus fits within the category of cases in
which we have said that even where an issue has been
"raised" before the Commission, if it is done in a less than
complete way, see Northwestern Ind. Tel. Co. v. FCC, 824
F.2d 1205, 1210 n.8 (D.C. Cir. 1987) (appellant "point[ed] out"
a circumstance, but did not make an argument); WATCH,
__________
5 Our dissenting colleague does not take account of this statuto-
ry distinction, and relies on "common law" exhaustion doctrine.
But judge made notions of "common law" always yield to statutes--
particularly in administrative law, see Darby v. Cisneros, 509 U.S.
137 (1993) and Vermont Yankee Nuclear Power Corp. v. Natural
Resources Defense Council, 435 U.S. 519 (1978).
712 F.2d at 681 (appellant "never explicitly" made its argu-
ment); Alianza Federal de Mercedes v. FCC, 539 F.2d 732,
739 (D.C. Cir. 1976) (the "grist" of appellant's argument was
there, but "nothing was made of it"), or if the party seeking
review "seem[s] to abandon its argument ... by taking
inconsistent positions," Busse Broad. Corp. v. FCC, 87 F.3d
1456, 1461 (D.C. Cir. 1996), the Commission has not been
afforded a fair opportunity. Our reasoning reflects our expe-
rience as judges that unless an issue is squarely presented in
a case, any discussion of the question in the opinion (dicta) is
only a preliminary view and therefore not to be given prece-
dential weight.
Because section 405 is worded as it is, however, it is not
necessary that the issue of fact or law be presented to the
Commission by the petitioner itself. "There is no require-
ment that [the Commission's opportunity to pass] be afforded
in any particular manner, or by any particular party." Office
of Communication of the United Church of Christ v. FCC,
465 F.2d 519, 523 (D.C. Cir. 1972). Indeed, in United Church
of Christ we held that since two dissenting Commissioners
had raised the "very argument pressed" before us, section
405 was not an impediment to review. Id. Nor have we
required that the precise issue be presented to the Commis-
sion in order to afford it a "fair opportunity." So long as the
issue is necessarily implicated by the argument made to the
Commission, section 405 does not bar our review. For exam-
ple, in National Ass'n for Better Broadcasting v. FCC
(NABB), 830 F.2d 270 (D.C. Cir. 1987), the appellant com-
plained to the Commission that a television station had violat-
ed the Communication Act's advertising rules. The FCC
determined that the appellant's statutory claim was foreclos-
ed by its 1974 policy statement interpreting the statutory
requirements. We allowed the appellant to argue that the
FCC's policy statement was contrary to the Act, although
that exact argument was never presented to the Commission.
We said that "the Commission not only understood that the
gravamen of NABB's grievance was that [the station] was
infringing [the Act], but the Commission actually purported
to dispose of that charge in its order." Id. at 274. And in
MCI Telecommunications Corp. v. FCC, 10 F.3d 842 (D.C.
Cir. 1993), MCI claimed that AT&T had violated a "reason-
able charges" provision of the Act, and that it was therefore
entitled to damages. The Commission, however, determined
that its "IXC orders" barred damages. Because MCI never
addressed the proper interpretation of its IXC orders, the
FCC argued on appeal that it had been afforded no opportu-
nity to pass on the question, so section 405 barred review. In
accordance with our NABB decision, we said that "MCI's
claim on review that the Commission decided [the] question
[of whether it was entitled to damages] by invoking an
authority inadequate to justify the decision does not itself
raise a novel question of law; it merely asks whether the
original question was correctly decided." Id. at 845.6
The Commission properly points to an apparently conflict-
ing line of our cases in which we have been sticklers in
insisting that "a party must first present its concerns to the
Commission so that the agency is afforded an opportunity to
cure any defect" and that the FCC must be given "the
opportunity to ... correct any error" in its order as a
precursor to judicial review. See, e.g., Freeman Eng'g As-
socs., Inc. v. FCC, 103 F.3d 169, 182 (D.C. Cir. 1997). But
those are cases, as we explained, "where the challenge is
predicated upon a technical defect in a Commission decision
which could easily have been cured if called to the Commis-
sion's attention on reconsideration." NABB, 830 F.2d at 274
(emphasis added). It is in these "technical defect" or proce-
dural oversight cases that we have made the statements
about giving the agency an opportunity to correct errors.
For example, in Rogers Radio Communication Services v.
FCC, 593 F.2d 1225 (D.C. Cir. 1978), the appellant contended
that the FCC failed, in violation of 47 U.S.C. s 309(a), to
articulate its finding that a rival cellular carrier would serve
the public interest, convenience, and necessity in granting the
rival's application; we determined that "[o]ne of the purposes
of [section 405] is to afford the Commission the initial oppor-
tunity to correct errors in its decision or the proceeding
__________
6 The dissent ignores these three cases.
leading to decision." Id. at 1229. We said the same thing
where the petitioners claimed the FCC violated the APA by
failing to address comments in its rulemaking proceeding,
Action for Children's Television v. FCC, 906 F.2d 752, 755
(D.C. Cir. 1990); see also Petroleum Communications, Inc. v.
FCC, 22 F.3d 1164, 1169-71 (D.C. Cir. 1994) (FCC gave no
opportunity for notice and comment before promulgating
rule); City of Brookings Municipal Tel. Co. v. FCC, 822 F.2d
1153, 1163 (D.C. Cir. 1987) (APA and other procedural objec-
tions); American Radio Relay League v. FCC, 617 F.2d 875,
879 n.8 (D.C. Cir. 1980) (notice and comment procedures),
where a petitioner claimed the FCC ignored certain record
evidence, Freeman Eng'g, 103 F.3d at 182; see also Southern
Ind. Broad. v. FCC, 935 F.2d 1340, 1342 (D.C. Cir. 1991)
(appellant claimed a deposition that the FCC reviewed was
not part of the record), and where an appellant claimed the
Commission erroneously ascribed a rival applicant's research
methods to it. Gencom Inc. v. FCC, 832 F.2d 171, 186-87
(D.C. Cir. 1987); see also Freeman Eng'g, 103 F.3d at 182
(petitioner was required to present its claim that the FCC
failed to explain why it treated a competitor's similar proposal
differently to give the FCC "an opportunity to cure any
defect"). But cf. Alabama Power Co. v. FCC, 773 F.2d 362,
368 & n.12 (D.C. Cir. 1985) (argument that Commission used
"a wholly irrelevant percentage figure" to discount certain
costs did not need to be raised in a petition for reconsidera-
tion).
To sum up, in our section 405 cases we have asked whether
the issue that a petitioner brings to us was "flagged," or to
use a sports metaphor, "teed up," before the Commission.
But if petitioner complains of only a technical or procedural
mistake, such as an obvious violation of a specific APA
requirement, we have insisted that a party raise the precise
claim before the Commission--if necessary, in a motion for
reconsideration--because we assume the Commission simply
overlooked the requirement. In those instances, we are
concerned that the petitioner, by bringing the issue first to
us, is playing a game of "gotcha." If, however, a petitioner
makes a basic challenge to a Commission policy, but the
formulation of the issue presented to us was not precisely as
presented to the Commission, we ask whether a reasonable
Commission necessarily would have seen the question raised
before us as part of the case presented to it.
We think it a close question here whether our remand itself
should be thought to have, at least, adequately presented to
the Commission the "issue" of whether petitioner was entitled
to fully recover the excluded gap period external cost increas-
es. We never explicitly addressed the scope of the remedy,
but the logic of our opinion--that it was unreasonable for the
Commission to justify its refusal to permit cable operators to
recover gap external cost increases on administrative burden
grounds--applies equally to past losses and future ones. If
the Commission had relied on a new consideration, other than
the discredited administrative burden, that would be another
matter, but it did not; it offered no reasoning beyond its
"concession" rationale. Surely if the FCC had merely said
that "we do not wish to grant full relief, as the court's opinion
suggests we should, because it might prove politically unpopu-
lar" or, because "we do not like petitioner," it could not be
argued that a petition seeking review brought into question a
truly new issue of law. On the other hand, we have warned
that a party must be careful on remand to raise issues before
the Commission before they come back to us. See Illinois
Bell Tel. Co. v. FCC, 988 F.2d 1254, 1264 n.12 (D.C. Cir.
1993).7
It is unnecessary for us to decide whether our remand put
the issue to the FCC, however. The Commission apparently
recognized that the rationale of our decision did not easily
support the distinction it wished to draw, and that petitioner's
supposed "concession" allowed it to avoid confronting the
problem. But there is no question that the Commission
expressly decided the concession issue--whether petitioner
was even seeking to recover its revenue deficiency. And, in
that regard, we agree with petitioner that the FCC's inter-
pretation of petitioner's motion for expedition filed in this
court was a disingenuous gimmick used to avoid a principled
response to our remand. (Indeed, as we have noted, it
__________
7 Given the apparent tension in our cases, a prudent counsel
when in doubt should seek reconsideration before the Commission.
appears that the Commission took Time Warner's statement
in its motion to expedite out of context.) The truth is that
parties often claim that drastic harm will occur when seeking
expedited consideration. But it is rather farfetched to inter-
pret such predictions as consent to their imposition. In this
case, we suspect petitioner was reflecting a natural fear that
convincing the Commission to authorize cable operators to
fully recover their past losses from consumers was a chancy
proposition--at a minimum, that action is politically trouble-
some. It appears to us that by seizing upon Time Warner's
purported concession, the Commission avoided addressing the
scope of relief question in an unfair way. Cf. Illinois Public
Telecommunications Ass'n v. FCC, 117 F.3d 555, 565-66
(D.C. Cir. 1997) (rejecting FCC's argument that petitioner
had abandoned its argument because the FCC had selectively
quoted from petitioner's petition). We do not look sympa-
thetically to the Commission playing "gotcha" either. The
Commission had an opportunity to pass on the question of
whether operators should be allowed to recover their revenue
deficiencies, but chose to duck--its failure to address the
point was not an accidental mistake.
Our view is different as to whether the Commission had a
fair opportunity to consider Time Warner's argument that the
Order on Remand unreasonably denied transition rate-based
operators any recovery of their gap period external cost
increases. Petitioner does not claim that it or any party ever
raised this argument to the Commission, arguing again that
our decision in the first case put this issue before the Com-
mission. While that may have been true as to the scope of
relief argument, our opinion did not even recognize a distinc-
tion between full reduction rate-based and transition rate-
based operators, so it can hardly be said that our opinion put
this second issue before the Commission. Indeed, our opin-
ion only considered the problem as it affected the former
class of operators. Nor is this issue necessarily implicated by
petitioner's more general argument. As we noted above,
supra note 2, Commission's counsel explains that transition
rate-based operators' rates, set without reference to Septem-
ber 30, 1992, already reflect any external cost increases
incurred during the gap period. Time Warner objects that
this is a "post-hoc explanation," and argues that transition
rate operators do have a gap, albeit a different one. But
counsel's explanation is legitimate and persuasive as to why
the Commission would not have thought this issue essential to
resolving petitioner's more general complaint. Unlike the
scope of relief question, we do not perceive that here the
Commission was trying to avoid a vexing problem. It simply
went unaddressed because the Commission apparently did
not understand that it was an issue. Time Warner therefore
should have raised it to the Commission in a petition for
reconsideration.
* * * *
We grant the petition with respect to the scope of relief
question. Because the Commission chose not to argue the
merits in the alternative, we have no choice but to vacate the
challenged portions of the order in so far as the Commission
has not allowed full reduction rate operators to recover their
revenue deficiencies. The remainder of the petition is denied.
So ordered.
Randolph, Circuit Judge, concurring in part and dissent-
ing in part: Time Warner's claim--that the Federal Com-
munications Commission should have allowed it to recoup
external cost increases occurring during the so-called "gap"
period--should not have been considered by this court.
Not once during the administrative and judicial proceedings
leading up to this case did Time Warner make that claim, or a
single argument in support of it--not during the original
rulemaking, not in its first petition for review in this court,
not in its motion for expedited consideration, not in its briefs
in this court, not during the Commission's proceedings on
remand, and not in a petition for administrative reconsidera-
tion. Our opinion in Time Warner Entertainment Co. v.
FCC, 56 F.3d 151 (D.C. Cir. 1995), said nothing on the
subject, and for good reason. We usually do not pronounce
on questions no one has presented.
After we remanded the case, Time Warner could have
placed its claim and its supporting arguments before the
Commission. Time Warner surely knew of the rules allowing
this. See 47 C.F.R. s 1.1206 (1995). Yet during the ensuing
eighteen months, while the case remained pending before the
Commission, Time Warner chose to do nothing. We have
held time and again, in cases involving this and other adminis-
trative agencies, that if a party does not raise and argue an
issue before the agency, the court will not consider it. See,
e.g., the cases cited below. That "common law" or nonstatu-
tory rule of exhaustion, a rule we also apply on appeals from
the district court, is enough to preclude Time Warner's claim
in this court. There is still another reason why we should not
consider the claim. Even after the Commission issued its
Order on Remand, Time Warner could have filed a motion for
reconsideration. Again, it chose to remain silent. Section
405 of the Communications Act therefore stands as an addi-
tional bar to judicial review of Time Warner's recoupment
claim. In the words of s 405, 47 U.S.C. s 405, the Commis-
sion had "no opportunity to pass" upon the "legal questions"
raised by arguments Time Warner is now making for the first
time in this court. Those legal arguments consist of analo-
gies to Commission decisions dealing with the "Exchange
Network Facilities for Interstate Access," to decisions of the
Federal Energy Regulatory Commission allowing gas pipe-
lines to impose retroactive surcharges, and so on. To state
the obvious, the Commission never had a chance to pass on
Time Warner's legal arguments concerning the agency's re-
medial discretion because Time Warner never presented
those arguments to the Commission. "It is," we recently
reiterated, "only through the adversarial process (or analo-
gous circumstances) that the Commission is afforded such an
opportunity within the meaning of s 405." Bartholdi Cable
Co. v. FCC, 114 F.3d 274, 280 (D.C. Cir. 1997). We also
stressed that it is not up to the Commission to "sift pleadings
and documents" in an effort to predict what might have been
argued if the litigant had taken the trouble to present the
claim. Id. at 279; see also, e.g., Russian River Vintage
Broadcasting v. FCC, 5 F.3d 1518, 1521 (D.C. Cir. 1993).1
__________
1 The majority is quite mistaken in supposing that s 405 ousts
the judicially-imposed requirement that parties present their claims
to the Commission before the agency decides the matter. Maj. op.
at 7 n.5. Section 405 deals only with petitions for agency reconsid-
eration, which necessarily come after the Commission's decision.
To read s 405 as the majority does sub silentio is to render it
senseless: parties would be free to hide their contentions, to say
nothing while the proceedings wind their way to a final agency
decision, and then, only after the decision comes down, spring their
arguments on the Commission and march into court when the
Commission refuses to consider them. The courts of appeals do not
allow anything of the sort. New arguments--that is, arguments
that could have been made but were not--may not be raised in
petitions for rehearing.
Section 405 thus does not deal with the question whether, in
order to have claims considered on judicial review, parties must
present those claims to the Commission before it renders its rule-
making or adjudicatory decision. In light of this statutory gap, the
federal courts may fill it by insisting that if parties fail to raise their
claims prior to final agency action, those claims will not be consid-
ered on judicial review. McCarthy v. Madigan, 503 U.S. 140, 144
(1992), made this very point, adopting Justice White's statement in
Patsy v. Board of Regents of Florida, 457 U.S. 496, 518 (1982)
(concurring in part), that "exhaustion is a 'rule of judicial adminis-
The majority refuses to follow this well-marked path. In-
stead, it heads up a blind alley searching for a distinction
between something called a "technical" defect and something
described as a "policy" difference. See maj. op. at 9-10. As
best I can make out, the majority thinks it has discovered a
trend: litigants trying to raise "technical" defects in court
without having raised them before the Commission will lose,
but litigants raising "policy" differences for the first time in
court, without having presented their arguments to the Com-
mission, might just get away with it.2
So far as I can tell, this technical-policy trend winds up
playing no discernible role in the outcome. Still, a few words
about the majority's digression are in order. For starters,
the distinction lacks any coherent rationale. The majority
suggests that requiring a litigant to raise a procedural or
"technical" point with the agency may allow the agency to
correct its error before the case reaches the court. See maj.
op. at 9-10. This is true, but it is also true about "policy" or
"substantive" mistakes. Besides, as any student of adminis-
trative law knows, allowing an agency the chance to correct
its errors is only one of many reasons behind the raise-it-or-
waive-it rule. For instance, the "exhaustion doctrine recog-
nizes the notion, grounded in deference to Congress' delega-
tion of authority to coordinate branches of Government, that
agencies, not the courts, ought to have primary responsibility
for the programs that Congress has charged them to adminis-
ter." McCarthy v. Madigan, 503 U.S. 140, 145 (1992); see,
e.g., McKart v. United States, 395 U.S. 185, 192-95 (1969).
"Exhaustion concerns," the Supreme Court added, "apply
with particular force when the action under review involves
exercise of the agency's discretionary power or when the
agency proceedings in question allow the agency to apply its
special expertise." McCarthy, 503 U.S. at 145. In its brief,
__________
tration,' ... and unless Congress directs otherwise, rightfully sub-
ject to crafting by judges." Here, Congress has not directed
otherwise.
2 The majority suggests that exhaustion is entirely controlled
by statute, see maj. op. at 7 n.5, and then contradicts itself by
proposing a technical-policy distinction found in no statute.
Time Warner treats the Commission's authority to allow
recoupment as a matter of agency "discretion" and so the
Court's words in McCarthy should have had particular force
here. Of all things, remedial claims of the sort Time Warner
raises in this court ought to be at the top of the list of items a
litigant must first raise before the Commission.3
It is therefore hardly surprising that careful attention to
our decisions reveals that the majority's technical-policy line
does not exist. Take, for instance, Petroleum Communica-
tions, Inc. v. FCC, 22 F.3d 1164 (D.C. Cir. 1994), a case in
which the petitioners claimed the Commission had failed to
give notice and an opportunity to comment before promulgat-
ing a rule--a mere "technical defect" according to the majori-
ty. See maj. op. at 10. The majority seems to have forgotten
the balance of the case. The Petroleum Communications
petitioners also argued that the rule had been applied in a
discriminatory fashion. See Petroleum Communications, 22
F.3d at 1171. Both claims were raised for the first time in
the petition for review. We refused to reach the merits of
either issue for "substantially the same reasons," namely that
"petitioners failed to exhaust their remedies ... by declining
to bring [the alleged error] first before the Commission." Id.
To take another recent case, Freeman Engineering Associ-
ates, Inc. v. FCC, 103 F.3d 169, 182 (D.C. Cir. 1997), treated a
so-called "technical defect" (petitioner argued that the Com-
mission failed to address certain record evidence) and an
__________
3 Darby v. Cisneros, 509 U.S. 137 (1993), cited by the majority in
a footnote, see maj. op. at 7 n.5, has nothing to do with this case.
Darby interpreted s 10(c) of the Administrative Procedure Act, 5
U.S.C. s 706(2)(A), to mean that an "an appeal to 'superior agency
authority' is a prerequisite to judicial review only when expressly
required by statute or when an agency rule requires appeal before
review and the administrative action is made inoperative pending
that review." 509 U.S. at 154. See Marine Mammal Conservancy,
Inc. v. Department of Agric., 134 F.3d 409, 411 (D.C. Cir. 1998).
No one is saying Time Warner should have, or could have, perfected
an intra-agency appeal--the Commission rendered the decision
under review and the Commission, of course, is the superior agency
authority.
alleged substantive error (petitioner claimed the Commission
treated him different than other similarly situated applicants)
identically: the court held that both claims were waived
because petitioner failed to raise them first before the Com-
mission. In Alianza Federal de Mercedes v. FCC, 539 F.2d
732, 739 (D.C. Cir. 1976), we held that the Commission had
not been given a "fair opportunity" to pass on petitioner's
argument, raised for the first time before this court, that a
television station's broadcast license should not have been
renewed because it offered a minimal amount of public inter-
est programming devoted to minority community problems
where minorities comprised 40% of the market. In Washing-
ton Ass'n for Television & Children v. FCC, 712 F.2d 677,
680-81 (D.C. Cir. 1983), we held that s 405 precluded our
considering the challenge to the Commission's license renew-
als on the ground that the television stations had provided
inadequate weekday programming for children. In Illinois
Bell Telephone Co. v. FCC, 988 F.2d 1254, 1264 n.12 (D.C.
Cir. 1993), we invoked the exhaustion doctrine to refuse to
pass on allegations that the Commission had been "impermis-
sibly inconsistent." In Northwestern Indiana Telephone Co.
v. FCC, 824 F.2d 1205, 1210 n.8 (D.C. Cir. 1989), we declined
to reach the merits of petitioners' last minute argument that
the Commission violated the First Amendment. Petitioners,
we held, could not "bypass statutory exhaustion require-
ments." Id. And in ASTV v. FCC, 46 F.3d 1173, 1177 (D.C.
Cir. 1995), we refused to consider ASTV's argument that
"wireless cable is a 'cable system' under the Act, because
ASTV failed to raise it before the Commission"--surely a
substantive, "policy" matter rather than what the majority
would treat as a mere "technical" peccadillo.
The majority ultimately comes to rest on grounds other
than its technical-policy dichotomy. The Commission loses
because it was playing something called "gotcha," it was
"unfair," its view of the matter was "farfetched," it relied on a
"disingenuous gimmick." Maj. op. at 11-12. All this excite-
ment is directed at a footnote in the Commission's decision on
remand. The footnote quoted a Time Warner motion conced-
ing that cable operators could not recoup the losses they were
incurring even if "they ultimately succeed in persuading this
Court to rule in their favor," Memorandum of Law of Time
Warner Entertainment Company, L.P. in Support of Its
Emergency Motion for Expedited Consideration, at pp. 17-18.
That concession directly contradicts Time Warner's current
position. The Commission rightly took the statement in
context: Time Warner was referring to the effect of delaying
review of the entire "rate-regulation rulemaking." Id. at 17.
"The truth is," according to the majority, "that parties often
claim that drastic harm will occur when seeking expedited
consideration." Maj. op. at 12. Maybe so, but that misses
the point. If Time Warner believed that it was entitled to
recoup its losses, if the company thought the question was
still open despite what it told this court, it was incumbent
upon Time Warner to make its views known to the Commis-
sion. It had ample opportunity to do so, not only while the
matter was pending before the agency on remand, but also
after the Commission handed down its decision. Time War-
ner nevertheless remained mute.
Pure and simple, the majority has offered no good reason
for rejecting the Commission's determination not to decide a
legal claim Time Warner neither raised nor supported with
pertinent authorities. If "gotcha" and "disingenuous gim-
mick" are meant to embody a legal principle, I confess--the
principle eludes me. I therefore dissent from this portion of
the majority opinion.