696 F.3d 1051
10th Cir.2012Background
- Tracy Broadcasting, a Nebraska company, operated an FCC-licensed FM station and executed a security agreement (Dec 13, 2007) granting Valley Bank a security interest in general intangibles and their proceeds as part of a May 5, 2008 loan.
- Spectrum Scan obtained a Nebraska judgment against Tracy for $1.4 million; Tracy filed Chapter 11 in Colorado; Tracy’s schedules list the license as the most valuable asset, with proceeds noted as secured to Valley Bank.
- Bankruptcy court and district court held Valley Bank had no priority in postpetition license sale proceeds; the core issue was whether a prepetition security interest could attach to the license proceeds or to the right to future proceeds.
- The Bankruptcy Code’s § 552(a) generally bars postpetition property from prepetition security interests, but § 552(b)(1) allows attachment if the security interest extends to property and its proceeds; the courts examined whether Tracy had a prepetition property interest in the license proceeds under Nebraska law.
- The court ultimately held that Tracy could grant a security interest in the right to proceeds of a future FCC license sale, and under Nebraska law such an interest can attach before a sale contemplates, with the FCC policy permitting liens on proceeds and Nebraska § 9-408 supporting attachment; the case was reversed and remanded for proceedings consistent with this opinion.
- Notes indicate the decision rests on a mixture of federal policy (FCC) and state property/UCC interpretation (Nebraska).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Nebraska law permits attachment of a security interest in the license proceeds before a sale. | Valley Bank: yes, the right to proceeds can be pledged and attach prepetition. | Spectrum Scan: no, the right to proceeds is too speculative before sale or FCC approval. | Yes; Nebraska law allows attachment of the right to proceeds pre-sale. |
| Whether the FCC's policy on liens in license proceeds justifies priority over unsecured creditors. | FCC policy supports liens on license proceeds to facilitate lending. | FCC policy is not controlling if statute/clear language prohibits such liens. | FCC policy is reasonable; Chevron deference applies; supports attachment. |
| Whether § 9-408 supports security interests in a license proceeds right despite federal licensing constraints. | § 9-408 contemplates securing proceeds from government licenses, overriding state licensing barriers. | Non-U.C.C. law may restrict enforcement of such interests. | § 9-408 supports attachment and treatment of proceeds-right as collateral. |
Key Cases Cited
- Butner v. United States, 440 U.S. 48 (U.S. 1979) (state law governs property interests in bankruptcy)
- Travelers Cas. & Sur. Co. of Am. v. Pacific Gas & Elec. Co., 549 U.S. 443 (U.S. 2007) (state law governs property rights in bankruptcy unless federal interest dictates otherwise)
- MLQ Investors, L.P. v. Pac. Quadracasting, Inc., 146 F.3d 746 (9th Cir. 1998) (security interest in license proceeds treated as general intangible and attachable)
- In re Miller, 666 F.3d 1255 (10th Cir. 2012) (state law determines rights to payment in bankruptcy context)
- Sovereign Bank v. Hepner (In re Roser), 613 F.3d 1240 (10th Cir. 2010) (de novo review; state law governs property rights in bankruptcy)