BDPCS, Inc. v. Federal Communications Commission

Notice: This opinion is subject to formal revision before publication in the
Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify
the Clerk of any formal errors in order that corrections may be made
before the bound volumes go to press.

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 6, 2003 Decided December 16, 2003

No. 00–1369

BDPCS, INC.,
PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA,
RESPONDENTS

–————
On Petition for Review of an Order of the
Federal Communications Commission
–————
Jane Michaels argued the cause for petitioner. With her
on the briefs were Elizabeth A. Phelan, Michael D. Hays,
Christina H. Burrow, and Stuart M. Gerson.
Stanley R. Scheiner, Counsel, Federal Communications
Commission (FCC), argued the cause for respondents. With
him on the brief were John A. Rogovin, General Counsel,
FCC, and Daniel M. Armstrong, Associate General Counsel,
FCC, Peter D. Keisler, Assistant Attorney General, U.S.

Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
 2

Department of Justice, and Thomas M. Bondy and H. Thom-
as Byron, III, Attorneys, U.S. Department of Justice.
Before: RANDOLPH and ROBERTS, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge ROBERTS.
ROBERTS, Circuit Judge: Petitioner BDPCS, Inc. was the
high bidder on several licenses in a Federal Communications
Commission spectrum auction, but, at the appointed hour,
was unable to make the required down payments. The
Commission’s Wireless Telecommunications Bureau promptly
declared BDPCS to have defaulted on the licenses, set them
for reauction, and, consistent with FCC auction rules, as-
sessed a default penalty. BDPCS now appeals from a final
order of the Commission dismissing in part and denying in
part BDPCS’s application for review of the default penalty
order. We conclude that the Commission acted within the
bounds of reasonableness and therefore deny the petition for
review.

I.
In 1996, the FCC auctioned the so-called ‘‘C block’’ of
spectrum, distributing 493 geographic licenses to provide
wireless personal communications services. Consistent with
a congressional mandate to distribute spectrum licenses to
small businesses, see 47 U.S.C. § 309(j)(3)(B), the Commis-
sion limited the C block auction to businesses falling beneath
certain revenue and asset thresholds, see 47 C.F.R. § 24.709
(1996). Winning C block bidders were required only to make
a down payment of five percent of their winning bid within
five days of the close of the auction, and a second five-percent
payment after the Commission officially awarded the license.
Id. § 24.711(a)(2). The remaining 90 percent of the winning
bids could be paid in installments over the term of the license.
Id. §§ 1.2110(e), 24.711(b).
The C block auction rules, though, were not all carrot and
no stick. In order to deter insincere bidding, the auction
rules set out penalties for bidders who withdrew high bids
during an auction or defaulted on winning bids after the
 3

auction’s close. A bidder who withdrew a high bid during an
auction was subject to a ‘‘withdrawal penalty’’ — ‘‘a penalty
equal to the difference between the amount bid and the
amount of the winning bid.’’ Id. § 24.704(a)(1). If the ulti-
mate winning bid exceeded the high bid of the withdrawing
bidder, no withdrawal penalty would be assessed. Id. A
winning bidder who defaulted after the close of an auction
was subject to a ‘‘default penalty’’ — equal to the withdrawal
penalty ‘‘plus an additional penalty equal to three (3) percent
of the subsequent winning bid.’’ Id. § 24.704(a)(2). If the
winning bid on reauction exceeded the defaulting bidder’s, the
additional penalty would be three percent of the defaulting
bidder’s winning bid. Id.
BDPCS was the high bidder for 17 C block licenses with
bids totaling nearly $874 million. Pursuant to C block auc-
tion rules, BDPCS thus owed its initial five-percent down
payment ($43.7 million) within five business days. Id.
§ 24.711(a)(2).1 On the fifth day, however, BDPCS found
itself without financing and unable to make the down pay-
ment. Instead of $43.7 million, BDPCS sent the Commission
an ‘‘Emergency Petition For Waiver’’ seeking a thirty-day
extension of the down payment deadline. BDPCS’s petition
cited ‘‘the unexpected inability to obtain a bridge loan’’ from
US West, one of the Baby Bell companies, as the cause of its
failure to pay. In re BDPCS, Inc., Emergency Petition For
Waiver of BDPCS, Inc., May 15, 1996, at 2. BDPCS stated
that its parent company had made arrangements for US West
to fund BDPCS’s down payment obligations until BDPCS’s
anticipated public offering. Id. at 3. These financing ar-
rangements suddenly collapsed, according to BDPCS, on May
2, four days before the close of the C block auction.2 And
1 C block auction rules required an upfront payment to partici-

pate in the auction, which would be credited to the initial down
payments on licenses, or refunded in the event that a bidder won no
licenses. See id. §§ 1.2106, 24.711(a)(1). BDPCS made an upfront
payment of $7 million and thus the balance due on its initial down
payment was actually $36.7 million.
2For its part, US West characterized BDPCS’s description of the
negotiations as ‘‘inaccurate’’ and denied having ‘‘any obligation to
 4

despite what it describes as herculean efforts to find a new
source of funding (making ‘‘every effort to raise the necessary
funds through numerous contacts with different entities’’)
BDPCS could not come up with the goods. Id. at 6. BDPCS
needed more time.
The Commission’s Wireless Telecommunications Bureau
(WTB) was unmoved. Noting the important role that down
payment obligations play in ‘‘ensur[ing] that an applicant is
financially qualified to satisfy its obligations as a licensee,’’
the WTB denied BDPCS’s waiver petition. See In re Emer-
gency Petition for Waiver of Deadline for Submission of
Down Payment for the Broadband PCS C Block Auction
Filed by BDPCS, Inc., Order, 11 F.C.C.R. 22,450, 22,452 ¶ 7
(1996). By the end of May, the WTB had denied BDPCS’s
request for reconsideration, see In re Emergency Petition for
Waiver of Deadline for Submission of Down Payment for the
Broadband PCS C Block Auction Filed by BDPCS, Inc.,
Order on Reconsideration, 11 F.C.C.R. 12,165 (1996), and the
Commission had announced that BDPCS’s licenses would be
reauctioned, see Public Notice, 18 Defaulted PCS Licenses to
be Reauctioned, 11 F.C.C.R. 22,204 (1996).
After the July 1996 reauction, the WTB tabulated BDPCS’s
default penalty in accordance with Rule 24.704(a)(2). See In
re BDPCS, Inc., Order, 11 F.C.C.R. 14,399 (1996).3 For each
of the 17 licenses, the WTB first calculated the withdrawal
penalty — the difference between the amount bid by BDPCS
and the winning bid on reauction — and then added three
percent of the lower of BDPCS’s winning bid or the winning

fund any of BDPCS’s down payment obligations to the FCC.’’
Letter to Reed Hundt, FCC Chairman, from Solomon D. Trujillo,
US West President & CEO, at 1–2 (quoted in In re Emergency
Petition for Waiver of Deadline for Submission of Down Payment
for the Broadband PCS C Block Auction Filed by BDPCS, Inc.,
Order, 11 F.C.C.R. 22,450, 22,451 n.7 (1996)).
3Recall that because BDPCS defaulted after the close of the
auction, it owed a default penalty, rather than simply the withdraw-
al penalty (which would have applied had BDPCS withdrawn its
high bids before the auction’s close). See 47 C.F.R. § 24.704(a).
 5

bid on reauction. BDPCS incurred withdrawal penalties for
the eight licenses for which the winning bid at reauction was
lower than BDPCS’s winning bid, penalties totaling
$42,765,088.50.4 See id. at 14,404 Attachment A. The WTB
then tacked on the three-percent default penalty for all 17
licenses — $24,930,564.73 — bringing the grand total to
$67,695,653.23. Id. The Commission then credited BDPCS
for its $7 million upfront payment, leaving a balance due of
$60,695,653.23. Id. at 14,402 ¶ 6.
After the WTB denied reconsideration, see In re BDPCS,
Inc., Order, 12 F.C.C.R. 6606 (1997), BDPCS applied to the
Commission for review of the WTB’s default payment order.
BDPCS’s application repeated the arguments it had made
before the WTB on reconsideration: BDPCS was unable to
make its down payment only because ‘‘US West abruptly
refused to go forward with the bridge loan,’’ and, in any
event, ‘‘the assessment of such a large default payment on a
small entrepreneurial company is inequitable and contrary to
the public interest,’’ because ‘‘the Treasury ha[d] been made
whole’’ by the reauction of the BDPCS licenses. In re
BDPCS, Inc., Application for Review of BDPCS, Inc., June
19, 1997, at 5, 4, 1. BDPCS requested that the default
penalty be reduced either to the $7 million upfront payment,
or to the three-percent charge of $24.9 million. Id. at 1, 4.
The Commission did not immediately act on BDPCS’s
application for review. In October 1998, BDPCS filed a
supplement to its application, raising several new arguments
to support its position that ‘‘BDPCS has no outstanding
financial obligation to the FCC’’ and that ‘‘BDPCS is entitled
to a reimbursement of its $7 million upfront payment.’’ Let-
ter to Magalie Roman Salas, Secretary of FCC, from Leonard
J. Kennedy, Counsel for BDPCS, at 1, 3 (First Supplement).
BDPCS acknowledged that the supplement had not been
4 For the nine other licenses, the winning bids at reauction
exceeded BDPCS’s winning bid by a total of $73,418,392.50. See In
re BDPCS, Inc, Order, 11 F.C.C.R. at 14,404 Attachment A. Thus,
in the aggregate, winning bidders at the reauction of the 17 licenses
offered $30,653,304 more than BDPCS.
 6

timely filed and requested that the Commission exercise its
discretion to consider its arguments, but did not otherwise
offer any excuse for the pleading’s tardiness or for the fact
that its arguments had not been first presented to the WTB.
Id. at 1–2 n.2. Less than two months later, BDPCS followed
with a second supplemental pleading. This pleading ostensi-
bly requested a waiver of the default penalty — the same
relief requested in BDPCS’s initial Application for Review —
but, this time, presented as reasons for granting the waiver
yet more new arguments that the default penalty was invalid
or unenforceable.
In July 2000, the Commission denied all of BDPCS’s re-
quests for relief, rejecting on the merits BDPCS’s initial
application for review and the waiver request presented in
the Second Supplement, and dismissing all the other legal
arguments raised in the First and Second Supplements as
procedurally barred. See In re BDPCS, Inc., Memorandum
Opinion and Order, 15 F.C.C.R. 17,590, 17,611 ¶¶ 38–41
(2000) (Order). The Commission agreed with the WTB that
the sudden collapse of BDPCS’s financing arrangements did
not warrant a waiver or reduction of the default penalty. Id.
at 17,605–07 ¶¶ 27–31. The Commission took special note of
the fact that ‘‘BDPCS ha[d] admitted that four days prior to
the close of the auction, it began to experience financial
difficulties, and yet it remained active in the auction.’’ Id. at
17,605 ¶ 28. BDPCS, the Commission concluded, ‘‘should
have been cognizant of the risk that it was assuming by not
withdrawing.’’ Id. at 17,607 ¶ 31.
Concerning the legal arguments first raised in the First
and Second Supplements, the Commission found that they
were untimely and had not been first presented to the WTB,
as required by Commission rules. See id. at 17,596 ¶ 10 (citing
47 C.F.R. § 1.115). The Commission therefore concluded
that BDPCS’s supplements to its Application for Review were
‘‘procedurally deficient and warrant[ed] dismissal on their
face.’’ Id. at 17,597 ¶ 10; see also id. at 17,611 ¶ 41 (‘‘It is
FURTHER ORDERED that the First Supplement TTT and
the Second Supplement TTT ARE DISMISSED.’’). The Com-
mission then considered and rejected BDPCS’s supplemental
 7

legal arguments on their merits, ‘‘assum[ing] that the First
and Second Supplements TTT were timely filedTTTT’’ Id. at
17,597 ¶ 10; see id. at 17,597–604 ¶¶ 10–25, 17,608–11 ¶¶ 32–37
(consideration of BDPCS’s substantive claims on their mer-
its). This timely petition for review followed.

II.
BDPCS has two central arguments on appeal. First,
BDPCS argues that the Commission erred by not granting a
waiver to reduce or eliminate the default penalty assessed by
the WTB. Alternatively, BDPCS contends that although the
First and Second Supplements were procedurally defective,
the Commission nevertheless considered the arguments
raised there on their merits, and the arguments are therefore
preserved for judicial review. We are unpersuaded by these
contentions and deny the petition for review.
A. Waiver Requests.
Our review of an agency’s denial of a waiver is extremely
limited; we vacate such denials only when ‘‘the agency’s
reasons are so insubstantial as to render that denial an abuse
of discretion.’’ Mountain Solutions, Ltd. v. FCC, 197 F.3d
512, 517 (D.C. Cir. 1999) (internal quotation marks omitted).
The Commission’s rules allow the grant of a waiver only
upon a showing that enforcement of the rule would not serve
the rule’s underlying purpose or otherwise would be inequita-
ble, and that a waiver would be in the public interest. 47
C.F.R. §§ 24.819(a)(1)(i), (ii) (1996). Tellingly, the Commis-
sion’s rules never compel the Commission to grant a waiver.
Here, the Commission concluded that the abrupt collapse of
BDPCS’s financing did not constitute adequate grounds for a
waiver. See Order, 15 F.C.C.R. at 17,605–07 ¶¶ 28–31. The
Commission noted that the purpose of the default penalty
rule — ‘‘central to the integrity of the Commission’s auction
process’’ — was to encourage bidders ‘‘to make certain of
their qualifications and financial capabilities before the auc-
tion so as to discourage default and avoid delays in the
deployment of new services to the public.’’ Id. at 17,606
 8

¶¶ 29, 30. BDPCS frustrated this objective when it continued
to participate actively in the C block auction even after it had
become aware that its financing was, at the very least,
seriously imperiled. Id. at 17,607 ¶ 31. This course of con-
duct, the Commission concluded, was exactly ‘‘the sort our
rules are intended to deter.’’ Id. The Commission thus
denied the waiver request, rejecting outright BDPCS’s argu-
ment that such a waiver would serve the public interest. Id.
The Commission did not abuse its discretion in denying the
waiver request. Far from it. As the Commission pointed
out, BDPCS’s behavior in the auction is exactly the kind of
conduct the default penalty rule was designed to deter.
Enforcement of the default penalty rule was appropriate, to
borrow from Voltaire, ‘‘pour encourager les autres.’’ Before
the auction had closed, BDPCS knew its financing arrange-
ments were in jeopardy. It could have withdrawn its bids
then, subject only to the possibility of a withdrawal penalty.
BDPCS chose another course; it not only remained in the
auction, but it submitted ever-higher bids on at least one
license, see id., and did so resting only on the unsecured hope
that the ability to pay would materialize in the end. In short,
BDPCS gambled and lost. Its argument that it should not
now be made to pay thus rings quite hollow.
B. Arguments Raised in Supplemental Pleadings.
BDPCS next contends that even if the Commission dis-
missed the new arguments raised in the First and Second
Supplements as procedurally defective, they are nevertheless
preserved for judicial review because the Commission also
rejected those arguments on their merits — erroneously, says
BDPCS. BDPCS is half right, but unfortunately for BDPCS
it is the other half that matters here.
Section 405 of the Communications Act precludes judicial
review of ‘‘questions of fact or law upon which the Commis-
sion, or designated authority within the Commission, has been
afforded no opportunity to pass.’’ 47 U.S.C. § 405(a)(2). We
thus generally lack jurisdiction to review arguments that have
not first been presented to the Commission. See, e.g., Wash-
ington Ass’n for Television & Children v. FCC, 712 F.2d 677,
 9

680–81 (D.C. Cir. 1983). Conversely, our jurisdiction is pre-
served so long as the Commission has been afforded a ‘‘fair
opportunity’’ to pass on the arguments in question. See
Omnipoint Corp. v. FCC, 78 F.3d 620, 635 (D.C. Cir. 1996)
(citing Washington Ass’n for Television & Children, 712 F.2d
at 680–82). Here, the Commission not only enjoyed a fair
opportunity to review the arguments in BDPCS’s First and
Second Supplements, it actually did review them. So BDPCS
is right when it says that we have jurisdiction to review those
arguments.
But that jurisdiction does not aid BDPCS here. While the
Commission did address and reject BDPCS’s arguments on
their merits, it also dismissed those arguments as procedural-
ly barred. See Order, 15 F.C.C.R. at 17,596–97 ¶ 10, 17,611
¶ 41. When an agency offers multiple grounds for a decision,
we will affirm the agency so long as any one of the grounds is
valid, unless it is demonstrated that the agency would not
have acted on that basis if the alternative grounds were
unavailable. See Mail Order Ass’n of Am. v. U.S. Postal
Serv., 2 F.3d 408, 434 (D.C. Cir. 1993); see also SEC v.
Chenery Corp., 318 U.S. 80, 88 (1943). So, although we have
jurisdiction to review the merits of BDPCS’s substantive
arguments, BDPCS — to prevail — must also circumvent
each of the two independent procedural grounds upon which
the Commission dismissed those same arguments. This
BDPCS cannot do.
We review an agency’s dismissal of pleadings on procedural
grounds under the familiar standards of the Administrative
Procedure Act, setting aside such dismissals only if they are
‘‘arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.’’ 5 U.S.C. § 706(a)(2). Citing this
Court’s decision in Graceba Total Communications v. FCC,
115 F.3d 1038 (D.C. Cir. 1997), BDPCS seems to assert that
the Commission’s consideration of the merits of its supple-
mental arguments has the effect of abrogating the dismissal,
on procedural grounds, of those same arguments. This mis-
characterizes our holding in Graceba. There, the Commis-
sion had rejected Graceba’s constitutional objection to an
FCC order as untimely, but went on to consider (briefly) the
merits of the argument. See id. at 1040–41. We found that
 10

the Commission’s consideration of Graceba’s argument was
sufficient to satisfy the exhaustion requirements of Section
405, thus preserving our jurisdiction to review Graceba’s
substantive claims. Id. at 1041. Rather than opine on the
merits, we remanded the case to the Commission for a fuller
consideration of Graceba’s constitutional claim. Id. at 1041–
42. Critically, though, we remanded on the merits only after
we had held that the Commission’s dismissal of the argument
as untimely was improper. Id. at 1040–41. It is only because
we had found error in the Commission’s procedural ground
that we could grant relief on the merits.
Missing from BDPCS’s citations to authority is any case in
which we granted relief on the merits, notwithstanding the
fact that the Commission had properly dismissed the pleading
on procedural grounds. BDPCS points to our decision in
Office of Communication of the United Church of Christ, Inc.
v. FCC, 911 F.2d 803, 809 (D.C. Cir. 1990), but that case
offers no assistance to its cause. There, the FCC had
dismissed the petitioner’s challenge on procedural grounds,
but nevertheless considered the merits of the argument.
Just as in Graceba, we concluded that the Commission’s
consideration of the merits preserved our jurisdiction under
Section 405. Id. at 809. We moved immediately to the
merits and rejected the petitioner’s argument. Id. at 812.
That consideration of the merits, however, did not sub silen-
tio undermine the force of the Commission’s procedural dis-
missal. If we had concluded that the petitioner had the
better of the argument on the merits, we then would have had
to confront the Commission’s procedural ground, and, if the
petitioner were ultimately to be granted relief, to find it
invalid. Our conclusion that the petitioner’s claim failed on
the merits, however, rendered unnecessary further discussion
of the Commission’s procedural ground.
Here, we can find no error in the Commission’s procedural
rulings. BDPCS concedes that the arguments in the First
and Second Supplements were not timely raised to the Com-
mission and never had been presented to the WTB. On the
timeliness issue, this Court has held often enough that the
Commission does not abuse its discretion when it ‘‘decline[s]
 11

to entertain a late-filed petition in the absence of extenuating
circumstances prohibiting a timely filing.’’ 21st Century Tel-
esis Joint Venture v. FCC, 318 F.3d 192, 200 (D.C. Cir. 2003).
In fact, we have gone so far as to discourage the Commission
from entertaining late-filed pleadings ‘‘in the absence of ex-
tremely unusual circumstances.’’ Id. at 199–200. Here, we
need not question whether the circumstances presented by
BDPCS are adequately ‘‘extenuating’’ because BDPCS has
never presented any excuse for its failure to raise its argu-
ments in a timely manner. It follows that the Commission
did not abuse its discretion by dismissing the untimely argu-
ments.
If that were not sufficient, there remains the second proce-
dural basis for the Commission’s dismissal — BDPCS’s fail-
ure to present the supplemental arguments to the WTB.
This is an equally open-and-shut case: the Commission’s
rules do not permit the Commission to grant an application
for review ‘‘if it relies on questions of fact or law upon which
the designated authority has been afforded no opportunity to
pass.’’ 47 C.F.R. § 1.115(c). The Commission abuses its
discretion when it arbitrarily violates its own rules, not when
it follows them.
Because we uphold the Commission’s order on these proce-
dural grounds, we have no occasion to reach the merits of
BDPCS’s arguments on the invalidity of the WTB’s default
payment order.
The petition for review is denied.