UCC Rep.Serv.2d 869
In the Matter of TAK COMMUNICATIONS, INCORPORATED, Debtor-Appellee.
Appeal of NEW BANK OF NEW ENGLAND, N.A., individually and as
agent for Chemical Bank, the New Connecticut Bank and Trust
Company, N.A., Heller Financial, Incorporated, the Bank of
Nova Scotia, Ameritrust Company National Association, and
Norwest Bank Minnesota, National Association.
No. 92-1961.
United States Court of Appeals,
Seventh Circuit.
Argued Oct. 22, 1992.
Decided Feb. 9, 1993.
Roy L. Prange, Quarles & Brady, Madison, WI, and Peter A. Fine (argued), Choate, Hall & Stewart, Boston, MA, for appellant.
David G. Walsh, Michael B. Van Sicklen (argued), and Joan L. Eads, Foley & Lardner, Madison, WI, for appellee.
Brady C. Williamson, Margaret J. Vergeront (argued), Timothy F. Nixon, Lafollette & Sinykin, Madison, WI, and Ralph W. Hardy, Jr., and Thomas J. Hutton, Dow, Lohnes & Albertson, Washington, DC, for debtor-appellee.
Before MANION and ROVNER, Circuit Judges, and ESCHBACH, Senior Circuit Judge.
ILANA DIAMOND ROVNER, Circuit Judge.
The secured creditors of Tak Communications, Inc. ("Tak") have asserted liens against the broadcasting licenses issued to Tak by the Federal Communications Commission ("FCC").1 After Tak filed a voluntary bankruptcy petition under Chapter 11 of the Bankruptcy Code, these creditors initiated an adversary proceeding in the bankruptcy court seeking to have their liens declared valid. The bankruptcy court ultimately granted summary judgment in favor of Tak and its official committee of unsecured creditors, concluding that the FCC prohibits creditors from holding security interests in broadcast licenses. In re Tak Communications, Inc., No. MM 11-91-00031, Adv. No. 91-0078-11,
The secured creditors mount two principal challenges to the district court's ruling. First, they contend that contrary to the conclusion of both the bankruptcy and district courts, FCC policy does not preclude third-party lenders from holding security interests in broadcast licenses. Second, they argue that the courts below lacked jurisdiction to assess FCC policy and to decide whether the secured creditors' interests are contrary to that policy.
Having considered all of the arguments raised by the secured creditors, we conclude that the district court's reasoning was correct in all respects. Accordingly, we affirm for the reasons set forth in Judge Crabb's opinion.2 We write further only to briefly discuss an opinion issued after Judge Crabb ruled: In re Ridgely Communications, Inc.,
Ridgely does lend limited support to the secured creditors' position. Like the appellants in this case, one of Ridgely Communications' creditors, Ameritrust Company National Association ("Ameritrust"), was a fully secured creditor and held a first priority lien on all of the debtor's tangible and intangible assets. When the debtor's two radio stations (including the broadcasting licenses) were sold, Ameritrust claimed entitlement to the bulk of the proceeds. Relying on FCC policy, the debtor objected, contending that Ameritrust's lien reached no further than the "hard" assets of the stations themselves and did not extend to the proceeds of the licenses. The bankruptcy court disagreed:
[A] creditor may perfect a security interest in a debtor's F.C.C. broadcasting license, limited to the extent of the licensee's proprietary rights in the license vis a vis private third parties. The right of the licensee crucial to this decision (and the only right recognized by the Court in this case) is the right of the creditor to claim proceeds received by the debtor licensee from a private buyer in exchange for the transfer of the license to that buyer. The right to receive such proceeds is a private right of the licensee that constitutes a proprietary interest in which a creditor may perfect a security interest.
Id. at 379. The court emphasized that its holding was narrow and did not confer a broad right to assert blanket security interests in broadcasting licenses or to use a secured interest to force the debtor to transfer the license to the creditor or a third party. Id.4
Ridgely discussed Judge Crabb's opinion at some length and found it to be overbroad.
We decline to adopt the rationale of Ridgely for two reasons. First, contrary to Ridgely's interpretation, Judge Crabb did not reject the notion that a broadcasting license may fall within the broad range of assets that qualify as property of the estate. Indeed, she expressly assumed that it did constitute property of the estate. See
Whatever the practical benefits might be to creditors in permitting these interests, even to the limited extent permitted by Ridgely, we agree with the district court that the FCC has consistently and unequivocally refused to recognize such interests. No clearer statement of the FCC's position can be found than the Commission's remark in In re Twelve Seventy, Inc.,
With these added comments, we affirm on the basis of the district court's opinion,
AFFIRMED.
Notes
These liens arise from revolving credit and security agreements between Tak (as well as another corporation that later merged with Tak, Tak-WGRC) and Bank of New England, N.A. ("Bank of New England"), Chemical Bank, The Connecticut Bank and Trust Company, N.A. ("Connecticut Bank"), Heller Financial, Inc., The Bank of Nova Scotia, Ameritrust Company National Association ("Ameritrust"), and Norwest Bank Minnesota, National Association ("Norwest") (collectively, "the Banks"). The Banks extended a $175 million line of credit to Tak, and Tak currently owes the Banks $169 million in principal and over $9 million more in accrued interest. Certain entities have succeeded to the Banks' rights under the agreements. The claims of Ameritrust and Norwest have been assigned to TCW Special Credits and Cargill Financial Services Corporation, respectively. Bank of New England and Connecticut Bank were closed by the Federal Deposit Insurance Company (the "FDIC"). Their rights were transferred to two "bridge" banks pursuant to the Financial Institutions Reform, Recovery and Enforcement Act--New Bank of New England, N.A. ("New Bank of New England") and New Connecticut Bank and Trust Company, N.A. These banks eventually were dissolved, and the FDIC was appointed receiver. Chemical Bank has succeeded New Bank of New England as agent for the Banks in this action
Both Tak and the official committee of Tak's unsecured creditors have contested the validity of the Banks' liens.
We note that at oral argument, counsel for the secured creditors disavowed any contention that the district court had failed to reach any of the issues presented to it
The Ridgely court originally had issued only a brief unpublished order before Judge Crabb ruled in this case. See
Because Ridgely recognized a security interest only in the proceeds from the sale of a license, the case lends only partial support to the secured creditors' position here. There has been no sale of Tak's licenses and, as of the date of oral argument in this case, no such sale was contemplated
But see also In re Omega Cellular Partners, 5 F.C.C.R. 7624 (Mobile Services Div.1990) (noting that a financial commitment letter purporting to grant the creditor of a cellular phone license applicant a future security interest in the broadcast license was improper: "[i]t is well established that a license is not an asset of the licensee and does not give any property rights in the license itself, that the Commission does not recognize a security interest in a license, and that credit cannot be extended in reliance upon the license as an asset from which a licensee's obligations may be satisfied")