Goodman v. Federal Communications Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 4, 1999 Decided July 16, 1999

No. 95-1585

Daniel R. Goodman, Solely in his Capacity as Receiver,
Chadmoore Wireless Group, Inc., and
SMR Services, Inc., et al.,
Petitioners

v.

Federal Communications Commission and
United States of America,
Respondents

Consolidated with
98-1373, 98-1488, 98-1489, 98-1490

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

Rodney H. Glover argued the cause for petitioner SMR
Services, Inc., et al. Martin Lobel argued the cause for

petitioner Chadmoore Wireless Group, Inc. With them on
the joint briefs were Russell H. Fox, Laura C. Mow, Laurie
A. Holmes, Henry M. Banta and Lee E. Helfrich.

Roberta I. Cook, Counsel, Federal Communications Com-
mission, argued the cause for respondents. With her on the
brief were Joel I. Klein, Assistant Attorney General, U.S.
Department of Justice, Robert B. Nicholson and Adam D.
Hirsh, Attorneys, Christopher J. Wright, General Counsel,
Federal Communications Commission, and Daniel M. Arm-
strong, Associate General Counsel. C. Grey Pash, Jr., Coun-
sel, entered an appearance.

Before: Ginsburg, Sentelle and Randolph, Circuit Judges.

Opinion for the Court filed by Circuit Judge Ginsburg.

Ginsburg, Circuit Judge: More than 4,000 individuals ob-
tained licenses in the Specialized Mobile Radio (SMR) service
apparently without realizing that the Federal Communication
Commission's "build out" rules require a licensee to construct
and to begin operating a transmission facility within a speci-
fied period. The Commission extended the build out dead-
lines for an imprecisely specified group of the licensees,
membership in which it later construed narrowly. The peti-
tioners contend the later decision was arbitrary and capri-
cious. We do not reach the merits of the petitioners' claim
because the only one among them who sought review in time
lacks standing to challenge the Commission's decision.

I. Background

The commercial potential of an SMR license has grown
dramatically in recent years. Previously used primarily for
small-scale dispatch operations, SMR licenses have increas-
ingly been used to provide cellular and data transmission
services over a wide area. See Fresno Mobile Radio, Inc. v.
FCC, 165 F.3d 965, 967 (D.C. Cir. 1999). Seeking to capital-
ize upon this development, a number of companies began in
the early 1990s to tout SMR licenses as investment opportuni-

ties for individuals. For a substantial fee (typically around
$7,000) such promoters would prepare an SMR license appli-
cation for an individual, who hoped to sell the license for a
profit shortly after receiving it.

These so-called "application mills" neglected to tell their
customers that under the Commission's then-applicable rules
a license would lapse if the licensee failed within eight months
to build and to start operating a transmission system. Even
a licensee who successfully started operating, moreover,
would lose the right to exclusive use of any broadcasting
channel not "loaded to" (i.e., in use by) 70 mobile units within
the same eight month period. Few if any of the individuals
who obtained SMR licenses with the help of an application
mill intended to build transmission facilities or were even
capable of doing so. Nor could they sell their licenses as
planned because the Commission forbids the sale of a license
before its holder satisfied the construction requirement.
Consequently, many of the application mills' customers lost
their licenses and others were in jeopardy of losing them.

In January 1994 the Federal Trade Commission sued four
application mills for fraud. See FTC v. Metropolitan Com-
munications Corp., No. 93 CIV 0142 (S.D.N.Y. filed Jan. 11,
1994). Three days later, the district court placed the defen-
dant companies in receivership and appointed Daniel Good-
man the Receiver. In March 1994 Goodman petitioned the
FCC temporarily to waive its build out rules in order to give
the licensees who used the services of the companies in
receivership an additional eight months in which to construct
and load their systems. The Commission instead granted
those "receivership licensees" an additional four months for
construction. See Memorandum Opinion and Order, 10
F.C.C.R. 8537, p p 14-28 (1995) [Extension Order].

Even before the Extension Order could be published in the
Federal Register and thereby take effect, Goodman sought a
court order concerning its scope and proper implementation.
He complained that Commission staff, apparently being of the
view that the Order extended only the time for construction
and not the time for loading channels to mobile units, contin-

ued to strip receivership licensees of their right to exclusive
use of channels after only eight months. He also took the
position that receivership licensees who had voluntarily can-
celed their licenses were entitled to the benefit of an extended
build out period. The Commission agreed to delay the effec-
tive date of the Order while it discussed these issues with
Goodman.

After more than two years of fruitless negotiations, the
Commission unilaterally resolved all the outstanding issues.
See Memorandum Opinion and Order and Order on Recon-
sideration, F.C.C. 98-167 (1998) [Implementation Order].
The agency first concluded that because Goodman represent-
ed only the application mills and not their customers, he did
not have standing on behalf of the receivership licensees to
challenge the agency's decisions. See id. at p p 28-34 (apply-
ing 47 C.F.R. s 1.106). Nevertheless, the Commission on its
own motion addressed and rejected Goodman's substantive
arguments. The agency then turned to the question whether
licensees defrauded by application mills other than the four
the FTC had sued (the so-called "similarly situated" licen-
sees) should have the benefit of the four month enlargement
of the construction period granted to the receivership licen-
sees in the Extension Order. It determined that they
should--provided they had filed a request for an extension
before the expiration of their original eight month deadline.
See id. at p p 59-60. In contrast, the agency gave the receiv-
ership licensees the extension regardless whether they had
applied for it before the expiration of their original deadlines.

Goodman petitioned for review of the Implementation Or-
der in August 1998, arguing that the Commission had arbi-
trarily and capriciously refused to revive the licenses that had
been voluntarily canceled and to extend the receivership
licensees' deadlines for loading. On October 9 of that year
the agency released a list of licensees it considered similarly
situated to the receivership licensees within the meaning of
the Implementation Order. On October 26 Chadmoore Wire-
less Group, Inc., a holder of numerous similarly situated
licenses; SMR Services, Inc., a license broker; and 22 indi-
viduals holding similarly situated licenses (collectively the

Licensee Petitioners) petitioned for review of the Implemen-
tation Order, arguing that it gives the receivership licensees
preferential treatment and that the agency unlawfully failed
to give them prior notice that the Order would affect their
interests.

II. Analysis

The Commission claims that none of the petitions for
review is properly before us. Goodman, it says, lacks stand-
ing, and the Licensee Petitioners failed to seek review in the
time allowed. We find merit in both arguments.

A. The Standing of the Receiver

According to the Commission, Goodman lacks standing
because the application mills of which he is Receiver were not
themselves affected by the agency decisions at issue. Be-
cause Goodman sues solely in his capacity as Receiver, we
first address the significance of that status.

Goodman suggests that a receiver has the power to sue on
behalf of customers and creditors of the entity in receivership
even when the entity itself would not have standing to do so.
The sole case upon which he relies, however, does not support
his position. The plaintiff in Scholes v. Lehmann, 56 F.3d
750 (7th Cir. 1995), was the receiver of a corporation (actual-
ly, more than one) that had made allegedly fraudulent con-
veyances at the direction of its controlling shareholder.
When the receiver sued to set aside the transfers, the trans-
ferees challenged his standing. The corporation in receiver-
ship, they said, had no interest in reversing a series of
fraudulent transactions in which it was complicit; hence, the
receiver was really suing on behalf of the company's innocent
creditors, which exceeded his authority to look out for the
interests of the corporation itself. See id. at 753-54.

The Seventh Circuit disagreed. The conveyances, it rea-
soned, had injured the corporation by diverting its assets to
an unauthorized use. To be sure, the company could not be
heard to complain about the conveyances while it remained
under the control of the shareholder responsible for them.

Once he was out of the picture, however, the company
regained its right to the property fraudulently conveyed "for
the benefit not of [the controlling shareholder] but of innocent
investors." Id. at 754. Because the suit was therefore one
the corporation itself could have brought, the receiver was
authorized to sue on its behalf. See id. at 754-55. As this
summary attests, nothing in Scholes supports Goodman's
expansive view of a receiver's authority to sue on behalf of
the customers and creditors of the company he represents; in
fact, the decision is a straightforward application of the rule
that a receiver has authority to bring a suit only if the entity
in receivership could itself properly have brought the same
action. See Caplin v. Marine Midland Grace Trust Co., 406
U.S. 416, 429 (1972); Jarrett v. Kassel, 972 F.2d 1415, 1426
(6th Cir. 1992); Fleming v. Lind-Waldock & Co., 922 F.2d 20,
25 (1st Cir. 1990).

Turning, therefore, to the critical question, we conclude the
application mills would not have standing to bring this action
on their own account. A plaintiff must, in the ordinary case,
"assert [its] own legal interests, rather than those of third
parties." Gladstone, Realtors v. Village of Bellwood, 441 U.S.
91, 100 (1979). As the Commission contends, Goodman's
petition for review on behalf of the application mills runs
afoul of this rule, for it is premised upon the Commission's
alleged maltreatment not of the application mills but of the
receivership licensees.

Goodman's response, in effect, is to claim that he has third-
party standing to assert the rights of the receivership licen-
sees because their interests and those of the application mills
are, for the purposes of this action, congruent. He has
contracted with a telecommunications company that will buy a
large number of the receivership licenses, contingent upon
the Commission first granting the receivership licensees a
four month extension of the loading deadline which, as noted
above, the agency has refused to do. (The Commission has,
however, agreed to waive its rule barring the sale of "uncon-
structed" licenses in order to make some of these transactions
possible. See Implementation Order at p p 54-58). Any sales
that occur will also benefit the application mills by reducing

the damages for which they will be liable if the receivership
licensees successfully sue them for fraud.

A mere congruence of interests between the receivership
licensees and the application mills in whose place Goodman
stands does not suffice to make Goodman a proper party to
vindicate the interests of the receivership licensees. A plain-
tiff may assert the rights of a third party only when there is
"some hindrance to the third party's ability to protect his or
her own interests," Powers v. Ohio, 499 U.S. 400, 411 (1991);
see also United States House of Representatives v. United
States Dept. of Commerce, 11 F. Supp. 2d 76, 88 (D.D.C.
1998), aff'd, 119 S. Ct. 765 (1999), but Goodman does not
suggest any reason for thinking the receivership licensees are
unable to sue the Commission themselves. It is true, as he
suggests, that having all the receivership licensees' claims
litigated in one suit would be considerably more convenient
than hearing each one separately. We do not see, however,
why a class action would be inadequate to that task. Cf. Fair
Employment Council, Inc. v. BMC Marketing Corp., 28 F.3d
1268, 1280 (D.C. Cir. 1994) (civil rights organization did not
have standing to raise claims of individual victims of discrimi-
nation; although not always aware that they had been dis-
criminated against, those individuals did not face "serious"
barrier to suit on their own behalf).

We conclude that Goodman lacks standing to sue the
Commission. He does not represent the parties who sus-
tained the injury of which he complains, nor is there anything
preventing the parties who were injured from themselves
protecting their rights.

B. The Timeliness of the Licensee Petitions

The Commission next questions our jurisdiction to consider
the claims of the Licensee Petitioners, none of whom, the
agency argues, timely sought judicial review. A party ag-
grieved by an agency order has 60 days from the "entry"
thereof in which to file a petition for review. 28 U.S.C.
s 2344. Pursuant to a regulation of the Commission, an
order (or other document) is entered when the agency gives
"public notice" thereof. 47 C.F.R. s 1.4(b). When public

notice occurs depends, in turn, upon the nature of the pro-
ceeding that gave rise to the order. The Commission deems
the public notified of an order "in [a] notice and comment rule
making proceeding[ ]" and in a "rule making[ ] of particular
applicability" when it is published in the Federal Register.
Id. at s 1.4(b)(1), (3). For a "non-rulemaking" order, in
contrast, notification occurs when the full text of the order
becomes "available to the press and public in the Commis-
sion's Office of Public Affairs." Id. at s 1.4(b)(2).

The Commission characterizes the Implementation Order
as a "non-rulemaking document" on the ground that it was
issued in the course of an adjudicatory proceeding, namely
Goodman's request for a temporary waiver of the build out
rules. The Order was made available in the Office of Public
Affairs on July 31, 1998; therefore, the Commission con-
cludes, the 60 day period for review expired on September 29,
1998, almost a month before the Licensee Petitioners sought
review in this court.

According to the Licensee Petitioners, this reasoning is
flawed in two respects. First, they say that even if the
Implementation Order is a non-rulemaking order, the Com-
mission failed to provide meaningful "public notice" of its
decision until October 9, when it released the list of those
licensees it regarded as being situated similarly to the receiv-
ership licensees. This argument unjustifiably assumes that a
reasonably acute licensee, upon reading the Implementation
Order, would not have been able to determine whether his
interests were affected. Anyone who obtained his license
with the help of an application mill, however, should have
realized that he was, or at least might be, affected by the
Implementation Order. See Implementation Order at 9 n.50
("individuals who obtained their licenses through SMR appli-
cation preparation companies similar to the Receivership
Companies" qualify as similarly situated licensees). Although
the Implementation Order is not a model of clarity in every
respect, there is nothing mysterious about the identity of the
licensees to which it applies. Nor can the order be deemed
unclear even if, as the Licensee Petitioners allege, the Com-
mission's October 9 list of licensees in the "similarly situated"

category omits some who qualify under the criterion in the
Implementation Order. That the agency may have applied
the Order erroneously does not retroactively import ambigui-
ty into the Order itself.

The Licensee Petitioners next argue that the proceeding in
question looked sufficiently like a rulemaking, as opposed to
an adjudication, that the Implementation Order should not be
deemed a "non-rulemaking" order. In this vein they point
out that the Commission sought public comment before
reaching its decision, as it is required to do in a rulemaking
but not in an adjudication, and published the Implementation
Order in the Federal Register under the heading "Final
Rules." The Order itself, moreover, is rule-like in that it
affects the interests of a broad class of licensees. Most
striking of all, the Licensee Petitioners argue, although they
were not parties to the proceeding and did not have adequate
notice of it, the Order determines the validity of many of their
licenses. Accordingly, they say, the Order was issued in
either a "notice and comment rule making proceeding[ ]" or in
a "rule making[ ] of particular applicability." Id. at
s 1.4(b)(1), (3). In either case the period for seeking review
did not begin to run until August 27, 1998, when the Order
was published in the Federal Register, making their October
26 petitions for review timely. At the very least, they argue,
the Commission's failure to make clear whether the proceed-
ing was a rulemaking or an adjudication should not now serve
to insulate its decision from judicial review.

We think the Commission's characterization of the Imple-
mentation Order as a "non-rulemaking" order is proper. For
one thing, Goodman never sought a change in the agency's
build out rules; he consistently identified his request as one
for a "temporary waiver" of those rules. That is a strong
reason to conclude the proceeding was not a rulemaking,
which is defined in the Administrative Procedure Act as an
"agency process for formulating, amending, or repealing a
rule." 5 U.S.C. s 551(5). Also like an adjudicatory decision,
and unlike a rule, the Implementation Order was retrospec-
tive in that it extended the build out deadline applicable to
licenses that had already been issued. A rule, in contrast, is

defined in the APA as an "agency statement of ... future
effect." Id. at s 551(4); see also Bowen v. Georgetown Univ.
Hosp., 488 U.S. 204, 216-17 (1988) ("central distinction" be-
tween rulemaking and adjudication is that rules have legal
consequences "only for the future.") (Scalia, J., concurring).
The manner in which the Commission conducted the proceed-
ing revealed its adjudicatory nature as well. Recall that the
agency determined Goodman lacked standing pursuant to 47
C.F.R. s 1.106. See Extension Order at p p 28-34. Had the
proceeding been a rulemaking, the agency's extensive discus-
sion of the standing issue would have been inexplicable:
Section 1.106 expressly provides that it "does not govern" in
"notice and comment rulemaking proceedings." See also 1
Kenneth Culp Davis & Richard J. Pierce, Jr., Administrative
Law Treatise, s 6.7, 266 (3rd ed. 1994) (agency rulemaking
proceedings typically open to any interested member of the
public).

Such aspects of the proceeding as gave it any semblance of
a rulemaking were, we think, comparatively superficial. That
the Implementation Order appeared under the heading "Final
Rules" may reveal something about the care taken in writing
headings when documents are published in the Federal Reg-
ister but does not alter the clearly adjudicatory nature of the
Order itself. Cf. Brotherhood of R.R. Trainmen v. Baltimore
& Ohio R.R. Co., 331 U.S. 519, 528-29 (1947) (headings of
sections in U.S. Code can resolve, but not create, ambiguity in
text). The Commission's solicitation of public comment be-
fore deciding whether to grant the waiver Goodman was
seeking is still less probative for, as the petitioners concede,
the agency may seek comment in either a rulemaking or an
adjudicatory proceeding. In fact, we have gone so far as to
suggest that notice and comment is sometimes required in an
adjudication. See Independent U.S. Tanker Owners Comm.
v. Lewis, 690 F.2d 908, 922-23 (1982) ("The distinct and
steady trend of the courts has been to demand in informal
adjudications procedures similar to those already required in
informal rulemaking.... [namely,] notice, comment, and a
statement of reasons"). Neither does the petitioners' obser-
vation that the Implementation Order affected a large num-

ber of licensees carry much weight: Just as a class action can
encompass the claims of a large group of plaintiffs without
thereby becoming a legislative proceeding, an adjudication
can affect a large group of individuals without becoming a
rulemaking. See NLRB v. Bell Aerospace Co., 416 U.S. 267,
292 (1974) (agency may in an adjudication "promulgate a new
standard that would govern future conduct" of non-parties).

As for the petitioners' complaint that the Implementation
Order affected the rights of licensees who were not parties to
the proceeding--and it would be more accurate to say that
the Order gave relief to some licensees who had not appeared
before the agency to ask for it--the nature of adjudication is
that similarly situated non-parties may be affected by the
policy or precedent applied, or even merely announced in
dicta, to those before the tribunal. See NLRB v. Wyman-
Gordon Co., 394 U.S. 759, 765-66 (1969) ("Adjudicated cases
may ... serve as vehicles for the formulation of agency
policies, which are applied and announced therein. They
generally provide a guide to action that the agency may be
expected to take in future cases"). Even assuming that the
proceeding was somehow an imperfect exemplar of adjudica-
tion, however, it was not thereby transformed into a rulemak-
ing. Particularly in view of the deference we afford an
agency's interpretation of its own regulations, see Associated
Builders & Contractors, Inc. v. Herman, 166 F.3d 1248, 1254
(1999), we think the Commission's decision to treat the Imple-
mentation Order as a "non-rulemaking document" within the
meaning of s 1.4(b)(2) was justified.

Falling back to their last line of defense, the petitioners
protest that it is not enough for the Commission's interpreta-
tion of s 1.4(b)(2) to be reasonable ex post; if it is to cut off a
party's right to seek judicial review, then the agency must
have made its characterization of the Implementation Order
reasonably apparent ex ante. We agree with this statement
of the law. See Adams Telcom, Inc. v. FCC, 997 F.2d 955,
956-57 (D.C. Cir. 1993) (although petition would have been
untimely under agency's reasonable conclusion that order at
issue was "non-rulemaking document," court had jurisdiction
because petitioner reasonably believed that longer limitation

period provided by s 1.4(b)(1) would apply). We disagree,
however, that in this instance the agency failed to make the
nature of the proceeding sufficiently manifest.

A comparison with Adams, the case upon which the peti-
tioners principally rely, is instructive. The Commission there
had denied an application for a "pioneer's preference" in
obtaining licenses. The agency moved to dismiss the appli-
cants' petition for review as untimely, claiming that its order
denying the application was a "non-rulemaking document"
under s 1.4(b)(2). The applicants, pointing out that the Com-
mission released the order in the course of what it conceded
was a rulemaking, argued that the order was actually a
"document[ ] in ... [a] rule making proceeding[ ]" under
s 1.4(b)(1), and therefore that they had sought review in time.
The court acknowledged that the Commission's interpretation
of s 1.4(b)(2) was reasonable. Because the applicants' read-
ing was equally reasonable, however, and because the proper
classification of the order would not have been clear to them
"even upon [a] careful reading of the Commission's regula-
tions," id. at 957, the court refused to bind the applicants to
the agency's interpretation.

Here, as we have discussed, a reasonably careful reader of
the Implementation Order and the Commission's regulations
would have readily discerned the adjudicatory nature of the
proceeding. Although bearing some superficial resemblance
to a rule, the Implementation Order addressed a proposal
made on behalf of certain licensees only for a temporary,
remedial waiver of the agency's build out rules--not for their
general, prospective amendment. Furthermore, in the Order
the agency applied a regulation on standing that by its terms
applies only in an adjudication. Unlike the complaining
licensees in Adams, therefore, the petitioners here had no
reasonable expectation that they would enjoy the longer
period for review provided by ss 1.4(b)(1) or (3).

III. Conclusion

For the foregoing reasons, the petitions for review are

Dismissed.