RKO GENERAL, INC., Appellant,
v.
FEDERAL COMMUNICATIONS COMMISSION, Appellee,
Multi-State Communications, Inc., Intervenor.
RKO GENERAL, INC., Appellant,
v.
FEDERAL COMMUNICATIONS COMMISSION, Appellee,
Fidelity Television, Inc.,
Multi-State Communications, Inc., Intervenors.
RKO GENERAL, INC., Appellant,
v.
FEDERAL COMMUNICATIONS COMMISSION, Appellee,
Fidelity Television, Inc., New England Television
Corporation, Dudley Station Corporation,
Multi-State Communications, Inc.,
Community Broadcasting of
Boston, Inc., Intervenors.
Nos. 80-1696 to 80-1698.
United States Court of Appeals,
District of Columbia Circuit.
Argued Sept. 16, 1981.
Decided Dec. 4, 1981.
Appeals from Orders of the Federal Communications Commission.
J. Roger Wollenberg, Washington, D. C., with whom Joel Rosenbloom, A. Douglas Melamed, Barbara S. Wellbery, Bruce D. Ryan, W. Theodore Pierson, Harold David Cohen, William H. Fitz, Jack N. Goodman, Washington, D. C., and William E. Willis, New York City, were on the brief, for appellant.
L. Andrew Tollin, Counsel, F.C.C., Washington, D. C., with whom Marjorie S. Reed, Acting Gen. Counsel, David J. Saylor, Deputy Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, Lee J. Peltzman, Sue Ann Preskill and Linda L. Oliver, Counsel, F.C.C., Washington, D. C., were on the brief, for appellee.
Eugene F. Mullin, Washington, D. C., with whom B. Shelby Baetz, Nathaniel F. Emmons and Howard A. Topel, Washington, D. C., were on the brief, for intervenor, Fidelity Television, Inc., in Nos. 80-1697 and 80-1698.
Joseph M. Morrissey, Washington, D. C., was on the brief, for intervenor, Multi-State Communications, Inc., in Nos. 80-1696, 80-1697 and 80-1698.
Philip Elman, Terry F. Lenzner, James H. Davis, Joseph F. Hennessey, Edward Hayes, Jr., and Jay E. Ricks, Washington, D. C., were on the joint brief, for intervenors, New England Television Corporation, et al., in No. 80-1698.
Before TAMM, MIKVA and EDWARDS, Circuit Judges.
Opinion for the Court filed by Circuit Judge MIKVA.
MIKVA, Circuit Judge:
The Federal Communications Commission (FCC) denied renewal of television licenses to RKO General, Inc. (RKO) in Boston, Los Angeles, and New York City. Renewal of the Boston license was denied because of a finding that RKO lacked the requisite character to be a licensee of that station. The denial of license renewals in Los Angeles and New York City followed from the Commission's earlier determination that the Boston finding would be res judicata in those proceedings.
RKO is a wholly owned subsidiary of General Tire & Rubber Company (General Tire).1 General Tire, by its own admission, has engaged in a staggering variety of corporate misconduct. During the Boston proceeding, RKO withheld evidence of General Tire's conduct from the FCC, either because RKO sought to protect its parent or because the parent withheld information from the subsidiary in order to protect itself. The Commission, in turn, has disqualified RKO after years of delay in an opinion that is multifarious at best. We reject most of the grounds that the FCC used to justify its denial of RKO's license renewals. We affirm the Commission's decision that RKO lacked candor, but on a quite narrow ground that cannot automatically be applied to any other proceeding. Accordingly, although we uphold denial of the Boston license renewal, the proceedings in Los Angeles and New York City must be remanded.
The need for a remand and further action by the Commission is discomfiting in a fifteen-year-old case, but this extended proceeding has hardly been a model for the administrative process. We admonish all parties to get on with the task.
I. PROCEDURAL HISTORY
Extraordinary as it may seem, this case had its beginning in 1965, when RKO petitioned to renew its license for KHJ-TV in Los Angeles. The petition was opposed by a competing applicant on a variety of grounds, including the allegation that RKO had engaged in reciprocal trade practices.2 A comparative hearing on the two applications led to a Commission finding in 1973 in favor of RKO,3 subject to further findings on the reciprocity issue4 in the Boston proceeding discussed below. A fuller history of these events may be found in Fidelity Television, Inc. v. FCC,
In the meantime, other competing applicants had challenged RKO's license renewal application for WNAC-TV in Boston. RKO General, Inc. (WNAC),
With renewals in New York and Los Angeles conditioned upon its outcome, the Boston proceeding took on special importance. An Administrative Law Judge issued an initial decision in that proceeding on June 21, 1974, granting renewal to RKO despite affirmative findings as to RKO's reciprocal trade practices.6 Exceptions and reply pleadings were then filed before the Commission in response to that initial decision. Before the FCC could act on these administrative appeals, however, RKO's parent corporation found itself enmeshed in an investigation by the Securities and Exchange Commission (SEC) that would greatly impact RKO's petitions to the FCC.
In a series of civil actions brought in 1974 and 1975, the SEC had charged that questionable domestic and foreign payments by American corporations and falsification of corporate financial records to conceal such payments violated the federal securities laws.7 One of the SEC's targets was General Tire, and RKO's competing applicants in the Boston proceeding sought to take advantage of that fact. On December 10, 1975, Community Broadcasting of Boston, Inc. (Community) filed a petition to reopen the record for a hearing on "illegal and improper conduct" by General Tire in the United States and foreign countries, including bribery of officials, creation of secret accounts, misappropriation of foreign corporate funds, and deliberate concealment of these matters by General Tire and RKO.8
RKO opposed this move in a series of pleadings. On January 21, 1976, it urged that there was "no factual or legal foundation" for these charges.9 In June 1977, well after the SEC had filed a complaint and obtained a consent decree against General Tire,10 RKO continued to oppose the petition to reopen the record in oral argument before the Commission.11 The consent decree required General Tire to conduct a review of its operations and prepare a Special Report, however. This report, which was released on July 1, 1977,12 admitted a plethora of corporate misconduct, and documented inadequacies in RKO records for certain reports previously filed with the FCC. Nevertheless, RKO continued to oppose the need for further proceedings, claiming that all "essential facts" concerning its operation of WNAC were before the Commission, and that because resolution of Community's claims "turns on inferences and legal conclusions to be drawn from those facts, the Commission would be well within its authority in deciding this case without holding a further evidentiary hearing."13
For reasons that may be partially attributable to strategic maneuvering among two of the many RKO competitors,14 the FCC did not act on Community's petition to reopen the Boston proceeding until June 21, 1979. A week later, the Commission directed the parties to file summaries of their positions and present oral argument on the following questions:15
(1) Is the record in this proceeding sufficient for the Commission to make a judgment:
(a) that RKO is qualified to remain the licensee of Station WNAC-TV, Boston, Massachusetts; or
(b) that RKO is not qualified to remain the licensee of Station WNAC-TV, Boston, Massachusetts?
(2) In the event that the record is sufficient to make either of the above judgments, what should that judgment be?
Oral argument was held before the Commission en banc shortly thereafter. The FCC concluded that it could answer the first question: RKO could not be found qualified to remain a licensee on the existing record. It decided to seek further information before answering the other questions, however.16 Two days later, the FCC reopened the record to accept the Special Report into evidence, and urged that RKO "make a particularized proffer of specific evidence that it would introduce, if given the opportunity, to mitigate the findings" of that report.17 RKO proffered evidence and affidavits in September 1979. RKO also now contended that it deserved additional hearings before the Commission could find it not qualified.18
On June 6, 1980, the FCC issued three companion orders resolving the WNAC proceeding and the two other license renewals that had been conditioned upon it.19 The WNAC decision (Decision) focused on four specific areas of misconduct by RKO and General Tire: reciprocal trade practices by RKO and General Tire during the 1960s, id. at PP 58-92; General Tire's misconduct in a variety of nonbroadcast fields, id. at PP 93-162; inaccurate financial reports filed by RKO with the FCC, id. at PP 163-195; and RKO's general lack of candor during the course of the Boston proceeding, id. at PP 196-221. The Decision concluded that nothing in RKO's broadcast history mitigated these findings, id. at PP 222-32, and that absolute disqualification of RKO as a broadcast licensee was the only appropriate remedy, id. at PP 233-49. The companion orders accordingly disqualified RKO as a licensee of WOR-TV (New York) and KHJ-TV (Los Angeles).
Of the four grounds for disqualification, only reciprocal practices had been the subject of formal notice and hearing before an Administrative Law Judge. The FCC's findings as to General Tire's nonbroadcast misconduct and RKO's financial misrepresentations relied heavily on the Special Report. The findings concerning RKO's lack of candor rested on RKO's failure to make timely submission of the information contained in the Special Report, as reflected by RKO's earlier pleadings before the Commission. On each of these three points, the Decision rejected RKO's argument that it could not be disqualified without formal notice and hearing. Id. at PP 144-61 (General Tire's nonbroadcast misconduct); id. at PP 193-95 (financial inaccuracies); id. at PP 219-221 (lack of candor).
RKO appealed from all three orders denying license renewal, and the appeals were consolidated by this court.
II. INVALID BASES OF THE FCC DECISION
At the outset, we hold that the FCC has stated at least three independent grounds for its ultimate finding that RKO should be disqualified as a broadcast licensee in Boston.20 The Decision states that RKO's reciprocal dealings "alone" require disqualification, id. at P 92, that RKO's "willful and repeated (financial) misrepresentation warrants disqualification by itself," id. at P 164, and that "perhaps of greatest importance, RKO has demonstrated a persistent lack of candor with the Commission in these proceedings," id. at P 55(a). Our conclusion also follows from the structure and organization of the FCC Decision, which distinctly sets out findings of fact for each of these grounds and treats each of them as entirely separate. We must note that the FCC continues to struggle with the difficult art of drafting its opinions. In Leflore Broadcasting Co. v. FCC,
Where several violations are found, the Commission should set forth the role each plays in the assessment of penalty. Rarely should the agency be permitted to take a "gestalt" approach, one based upon a reaction to the "overall" situation rather than to each violation one at a time.
Id. at 463. Nevertheless, although we may not supply a reasoned basis for agency action that the agency itself has not given, courts "will uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned." Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc.,
This preliminary observation is important because we have grave doubts about the sufficiency of two of these grounds to support the FCC's action. The Commission's findings on reciprocal trading display a disconcerting willingness to judge the behavior of broadcast applicants by standards that had not been clearly enunciated when that behavior occurred. The finding that RKO knowingly submitted inaccurate financial reports and thereby intended to mislead the Commission raises extremely troublesome questions because of the FCC's failure to give RKO notice and a hearing on that issue. Moreover, we agree with the Commission that General Tire's nonbroadcast practices, the fourth focus of the FCC Decision, are "not disqualifying by themselves." Decision P 140. The remand on the other two license renewals is occasioned at least in part by the rejection of these decisional grounds, to whose inadequacies we now turn.
A. Reciprocal Trade Practices
There are several reasons to doubt that reciprocal trade practices during the early 1960s can justify outright disqualification of RKO as a broadcast licensee in 1980. First and foremost, the conduct of RKO at issue has been found to be clearly improper only in retrospect. Although it has been understood since the 1930s that "coercive" reciprocity was anticompetitive,22 it was not until the late 1960s that a series of judicial decisions began to cast increasing doubt on the legality and propriety of unleveraged "mutual patronage" agreements.23 Even then, however, questions remained.24 As late as 1979, the FCC itself recognized that a per se rule was probably inappropriate because "it is still somewhat uncertain whether a non-coercive unleveraged reciprocal agreement ... necessarily and in every case is anticompetitive and a Sherman § 1 violation." Domestic Public Message Services,
We are particularly concerned that in retroactively applying its "greater appreciation" for the adverse effects of reciprocal trading, the FCC has abruptly reversed its decision to the contrary in RKO General, Inc. (KHJ-TV ),
Finally, we doubt the Commission's claim that it can predict RKO's future character and performance from evidence concerning conduct that took place between 1961 and 1964.29 Only the unusual nature of these proceedings allows the FCC to argue that such evidence is at all relevant. FCC precedents consider a licensee's behavior during the preceding license term relevant to renewal requests for the following term. Central Florida Enterprises, Inc. v. FCC,
Nothing in our opinion diminishes the force of the FCC's now clear statement that reciprocity by broadcast licensees is a prohibited practice. The Commission has laid down the rule that those who induce others to advertise on their stations for reasons unrelated to the station's programming or audience will do so at their peril. We agree that the purposes of the Communications Act are best served by leaving stations to obtain advertising and customers on the basis of their rates and audience, and that even unleveraged reciprocal trading distorts the normal free market process in the broadcast industry by which the demand for advertising time helps ensure that radio and television programming is responsive to public desires. See Decision PP 66-74. Competition in the broadcast industry means that a broadcaster should "survive or succumb according to his ability to make his programs attractive to the public," FCC v. Sanders Bros.,
B. Financial Misrepresentations
The Commission's finding that RKO submitted intentionally false financial reports is equally insufficient to support RKO's disqualification. The Decision states that "RKO knowingly certified to the Commission that certain financial reports were complete and accurate when RKO knew otherwise." Id. at P 164. The FCC's conclusion presumes that RKO's inaccuracies were either deliberate and intentionally deceptive, Big Valley Cablevision, Inc.,
The FCC justifies its finding on the basis of the Special Report, which included numerous corporate admissions that RKO's recordkeeping had been sloppy and inaccurate. Specifically, General Tire conceded in the Special Report that RKO's accounting for trades and barters30 had been incomplete for the previous five years. The FCC seized on the repeated attempts by RKO's controller to improve the recording of such information to infer that he "had to know that RKO's barter information was inaccurate" as early as 1972. Decision P 179. This inference was unwarranted. RKO's objections to such summary factfinding are well taken, because the admitted inaccuracy of the reports still left issues as to RKO's motive and intent that could only have been determined in what the FCC itself has called "the crucible of an evidentiary hearing." Walton Broadcasting, Inc.,
The Special Report does demonstrate a pervasive failure to maintain adequate records at RKO stations, a failure that does nothing to recommend RKO as a broadcast licensee. But it is a far leap from this to the finding that RKO intentionally or knowingly misrepresented financial information to the Commission. Section 309 of the Communications Act, 47 U.S.C. § 309(e) (1976), requires the Commission to hold a hearing in cases where "a substantial and material question of fact is presented," and to specify "with particularity the matters and things in issue but not including issues or requirements phrased generally." Whether RKO submitted inaccurate reports knowingly and with intent to mislead the Commission remains an unresolved and material question of fact, and it was therefore error for the Commission to disqualify RKO without following the procedures outlined by the statute.32
C. General Tire's Nonbroadcast Misconduct
The FCC found it unnecessary to reach the question of whether RKO would have been disqualified had the only adverse character evidence been that relating to General Tire's nonbroadcast misconduct. Decision P 140. Instead, the Commission found that General Tire's misconduct had "an adverse effect on RKO's qualifications" and lent "substantial weight" to the Commission's decision to disqualify RKO on each of the other grounds. Id. at PP 93, 140. We find nothing unlawful in this approach, although it raises other questions.
As General Tire's own admissions in the Special Report illustrate, its conduct in nonbroadcast fields hardly enhances RKO's character assessment. General Tire's misconduct, ranging from bribery and fraud abroad to the maintenance of secret cash funds for political contributions at home, inevitably casts a shadow on the character of its wholly owned subsidiary. We have no reason to doubt that "General Tire is institutionally inclined to sacrifice obedience to law and proper business ethics in pursuit of corporate revenue and political influence." Decision P 2(f). Were RKO's owner a single individual as opposed to a corporation, it appears that a far lesser showing of character flaws would support disqualification. See, e.g., Wadeco, Inc. v. FCC,
It is difficult to discern any legitimacy for such differential treatment of individual as opposed to corporate owners.33 It is to be hoped that pending FCC efforts to clarify the character standards to be applied in comparative hearings will cast more light on this point. See Policy Regarding Character Qualifications in Broadcast Licensing: Notice of Inquiry,
In short, three of the four areas on which the FCC focused in its Decision will not serve as a basis for RKO's outright disqualification, at least on this record. It is not necessary to underscore our criticism too pointedly, however. We uphold the Commission's disqualification of RKO in the Boston proceeding because we conclude that the Decision's ultimate basis, RKO's lack of candor before the FCC, fully and independently supports that judgment.
III. RKO'S LACK OF CANDOR
The Commission found that three instances demonstrated RKO's lack of candor before the agency during a period from 1975 to 1977. First, RKO failed to inform the FCC that there was a factual basis to the allegations first made against General Tire by Community in late 1975. Decision PP 197-205. Second, RKO failed to report the initiation of a formal SEC investigation of General Tire in February 1976. Id. at PP 206-12. Finally, RKO failed to concede that it had inaccurately reported trade and barter revenues when pressed to do so by Community in April 1977, despite the indication in General Tire's 1976 Annual Report that there might be some problems with these accounts. Id. at PP 213-18.
A. The Merits of the FCC's Finding
The record fully supports the Commission's finding that RKO did not display full candor before the Commission during the period from late 1975 to July 1976. Uncontroverted documentary evidence shows that General Tire responded to the initial phase of the SEC's inquiry regarding overseas operations in May 1975. Special Report at 30, J.A. 1270. As the SEC investigation progressed, RKO's competitors began pressing the FCC to reopen the Boston proceeding, alleging facts that were similar or identical to the admissions later made by General Tire in the consent decree and its Special Report.35 RKO's first response was to seek an extension of time in which to respond, citing the need to consult with "persons who may have knowledge of the pertinent facts." RKO Motion for Extension of Time, December 12, 1975, J.A. 582-83. More than a month later, in January 1976, RKO clearly decided to stonewall the opposition and the FCC. This seems the only explanation for RKO's decision to file a document opposing the suggestion that the Boston proceeding be reopened on the ground that "there is no factual or legal foundation for this pyramid of charges," that "the charges, as we show below, are groundless," and that other charges were "essentially unsupported."36
RKO contends that these statements were technically correct.37 Brief for Appellant RKO (RKO Brief) at 33. It adds that because the burden lay on Community to establish grounds for reopening the proceeding,38 RKO's pleadings "in context" merely claimed that this burden had not been met. Both arguments are irrelevant, because the question before the FCC was not so much what RKO said as what it had failed to say.
Section 1.65 of the Commission's Rules requires applicants to inform the Commission within thirty days whenever "there has been a substantial change" regarding any matter that may be "of decisional significance in a Commission proceeding involving the pending application." 47 C.F.R. § 1.65 (1979). This requires that an applicant inform the Commission "of all facts, whether requested in (renewal) Form 303 or not, that may be of decisional significance so that the Commission can make a realistic decision based on all relevant factors." Southern Broadcasting Co.,
The Decision and the record on which it is based demonstrate irrefutably that RKO did not meet these standards, and that RKO's conduct thus threatened "the integrity of the Commission's processes." RKO General, Inc.,
The record suggests that RKO had ample motive for its failure to act with total candor during this period. There are numerous indications that General Tire initially decided to oppose the SEC investigation43 and did not begin to cooperate with that agency until sometime in the spring of 1976. Clearly, it would have been pointless for General Tire to resist the SEC inquiry at one level while RKO came forward with damaging evidence against General Tire before the Commission. See Decision P 202. But such conjecture is not relevant, because the documents speak for themselves. It is also unnecessary to show that RKO officials had actual knowledge in early 1976 of the improprieties and illegalities to which General Tire later admitted, or that RKO officials willfully intended to misrepresent these facts to the FCC. Whether RKO sought to protect its parent, or whether the parent withheld information from the subsidiary in order to protect itself, the result is the same. We cannot improve on the language of FCC counsel: "It is obvious that where a complete disclosure of facts will militate against the interests of this organization, the Commission will be deprived of that information. It is irrelevant where in the RKO-General Tire organizational structure this breakdown in candor first occurs. In the end, RKO, as the public trustee, is responsible for the reliability of the information and representations furnished by it to the Commission." FCC Brief at 70; see Decision P 122 n.248.
B. RKO's Defenses
RKO objects to the FCC's finding on a variety of grounds. First, it contends that "there is not a shred of evidence that ... the Commission was in fact 'misled' " by RKO. RKO Brief at 33. Such an argument has no pertinence to this appeal, as the Supreme Court observed forty years ago:
The fact of concealment may be more significant than the facts concealed. The willingness to deceive a regulatory body may be disclosed by immaterial and useless deceptions as well as by material and persuasive ones. We do not think it is an answer to say that the deception was unnecessary and served no purpose.
FCC v. WOKO, Inc.,
Equally unpersuasive is RKO's objection that its decision not to inform the Commission of the SEC investigation was made on advice of counsel. RKO Brief at 38 & n.102. It is true that reliance on counsel may render a severe sanction such as disqualification too harsh in some circumstances. See Asheboro Broadcasting Co.,
RKO's most persuasive objection to the FCC finding that it lacked candor is that the finding was made without giving RKO formal notice and a hearing on the charge. The FCC acknowledges a "technical failure to issue such a formal designation order," FCC Brief at 113 n.234, and admits that "(i)n the normal case a hearing probably would have been warranted." Id. at 97. Ordinarily, such an admission would constitute grounds for reversal, for courts "have stated time and again that reasonable notice of a charge and an opportunity to be heard in defense before punishment is imposed are 'basic in our system of jurisprudence.' " Groppi v. Leslie,
In reaching this determination, we start with the emphatic differences between a broadcast applicant before the FCC and one who faces the possibility of punishment. RKO has suffered a hardship as a result of the FCC's action, but it has not been punished; denial of a renewal application "is not a penal measure." FCC v. WOKO, Inc.,
In practical terms, this means that "proceedings before the Commission are not private law suits," and that the Commission does not function "as an umpire blandly calling balls and strikes for adversaries appearing before it." See Scenic Hudson Preservation Conference v. FPC,
Ultimately, of course, the procedures of the Commission must be measured against the demands of due process as well as the statutory requirements of the Communications Act. But it is a truism that due process standards in this context are fluid rather than fixed. In WJR, The Goodwill Station, Inc. v. FCC,
Section 4(j) of the Communications Act, as amended, 47 U.S.C. § 154(j) (1976), empowers the FCC to "conduct its proceedings in such a manner as will best conduce to the proper dispatch of business and to the ends of justice." In FCC v. Pottsville Broadcasting Co.,
It is true that these recognitions of the FCC's discretion over certain questions of procedure have been cited most frequently to support agency control over dockets and hearing formats. When a statute dictates that parties receive notice and a hearing, of course, the provision of those basic procedural rights is not left to be decided by administrative "flexibility" or "discretion." For that reason, RKO contends that Section 309 of the Act, 47 U.S.C. § 309 (1976), requires a hearing prior to the denial of a renewal application even when there are no substantial or material questions of fact. RKO Brief at 15-23. See Gottfried v. FCC,
We conclude that such an approach in this case would not have promoted "the proper dispatch of business" and "the ends of justice." At some point in any administrative process, someone must determine whether the remaining issues are factual or legal, and whether hearings that have already been held must be supplemented by further proceedings. The initial answer must come from the agency, subject always to judicial review, but courts may defer to agency expertise and discretion here no less than on questions of docket management and the need for oral argument. Our decisions show the inherent difficulty of defining this administrative discretion. Compare Radio Athens, Inc. (WATH) v. FCC,
We find a compelling if imperfect analogy between this case and "historical exceptions to the general principle that punishment can only follow a determination of guilt after trial or plea-exceptions such as the power summarily to punish for contempt of court." Bell v. Wolfish,
Where the contempt is committed directly under the eye or within the view of the court, it may proceed "upon its own knowledge of the facts, and punish the offender, without further proof, and without issue or trial in any form."
In re Savin,
Because the Commission had "so perfect a knowledge" of the RKO misconduct that was evident from the documents directly before it, we cannot say that the Commission's action was erroneous. Forty years ago, in FCC v. Pottsville Broadcasting Co., Justice Frankfurter reflected on the "movement for administrative regulation." He observed:
Perhaps the most striking characteristic of this movement has been the investiture of administrative agencies with power far exceeding and different from the conventional judicial modes for adjusting conflicting claims-modes whereby interested litigants define the scope of the inquiry and determine the data on which the judicial judgment is ultimately based. Administrative agencies have power themselves to initiate inquiry, or, when their authority is invoked, to control the range of investigation in ascertaining what is to satisfy the requirements of the public interest .... These differences in origin and function preclude wholesale transplanation of the rules of procedure, trial, and review which have evolved from the history and experience of courts.
Our decision to affirm the FCC's action should not be read to include situations not covered by this unique record. The Commission concedes that "this case is unprecedented," FCC Brief at SA-1, and we expect that successors if any will be rare. Before the FCC can take action of this sort in the future, we believe that at least three conditions must be met in order to protect the parties. First, not only must the misconduct occur directly before the agency, but it should be of such a blatant and unacceptable dimension that its existence cannot be denied. The FCC has satisfied itself that this is the case with regard to RKO, whose lack of candor "is abundantly clear." Decision P 196. Second, although formal notice may not always be necessary, it should be evident that the party has some form of actual notice of the conduct said to be at issue, and must not be prejudiced by surprise. Finally, the party must be given an "opportunity to speak in (its) own behalf in the nature of a right of allocution." Groppi v. Leslie,
IV. THE LOS ANGELES AND NEW YORK CITY PROCEEDINGS
The narrow basis of our decision concerning RKO's Boston license illustrates why the FCC may not deny license renewals in Los Angeles and New York City simply because it happened to condition those proceedings on the Boston outcome. RKO's lack of candor during the Boston proceeding justifies its disqualification there because the misconduct took place directly before the trier of fact and has bearing on its general character, but the same cannot be said of the Los Angeles and New York City proceedings. The latter was conditioned on the Boston outcome in order to avoid making the parties "relitigate those issues" that had already been specified with regard to Boston.
This conclusion is buttressed by the Commission's own discussion of what effect, if any, RKO's Boston disqualification should have on its other broadcast licenses. In an order released on November 26, 1980, the FCC designated thirteen RKO stations for hearing, but held those proceedings in abeyance until resolution of this appeal. RKO General, Inc.,
Now that the issues in the Boston proceeding have been sorted out, the same treatment is appropriate for RKO's New York City and Los Angeles licenses.48 The judgment that RKO showed a lack of candor in the Boston proceeding is res judicata, of course, and is not subject to collateral attack in these subsequent proceedings. See id. at 312-18. The Commission may give that finding whatever weight it considers appropriate. Indeed, it may well be that such a finding is inconsistent with a licensee holding a license anywhere, although that decision is for the Commission in the first instance. At the same time, our remand of these proceedings is more than just an empty exercise. Each of RKO's renewal applications arises in different contexts and presents different levels of complexity.49 For example, the Los Angeles renewal was tentatively granted in 1973 subject only to future reciprocity findings. Because we have rejected reciprocity as a legitimate basis for disqualification of RKO in Boston, the Los Angeles situation may seem quite different when that proceeding is remanded. As the FCC noted, "We do agree with RKO that collateral estoppel will only apply to those grounds on which the court bases its decision." Id. at 317. Similarly, individual stations have different broadcast histories and policies. Although the FCC found that WNAC in Boston had a "mediocre to poor record with respect to news, public affairs, and local programming," Decision P 227, it made no new findings at all with regard to KHJ in Los Angeles and WOR in New York City. These stations are entitled to an opportunity to appear directly before the Commission and to argue that they deserve different treatment than RKO's Boston station. After such a proceeding, of course, the Commission's broad latitude in "the choice of remedies and sanctions" must be respected. Leflore Broadcasting Co. v. FCC,
CONCLUSION
This opinion will not close a sorry chapter in the history of American communications law. We must remand the Los Angeles and New York City proceedings because the FCC has not yet provided a principled explanation for RKO's disqualification as a licensee of those stations. The FCC's findings that RKO intentionally misrepresented financial information and engaged in unlawful reciprocal trade practices cannot stand, for one was reached without notice or hearing and the other constitutes an ex post facto application of new standards to conduct that is long past.
We affirm the FCC's decision in the Boston proceeding, however, because the Commission's finding that RKO displayed an egregious lack of candor in that proceeding does not suffer from either of these infirmities. During an administrative review that had already lasted for years, the FCC suddenly was confronted by documentary evidence establishing beyond doubt that RKO had been less than candid with the Commission in the very proceeding under way. The FCC could observe all material facts for itself, simply by comparing the documents that had already been submitted with those that were now before it.
The denial of a license renewal to a major licensee in a major market is of manifest moment and financial impact. The FCC's decision has not been reviewed callously, and we have tried not to lose sight of the difficult issues in this case by sweeping the reasoning of the Commission under a rug of agency expertise or administrative convenience. The record presented to this court shows irrefutably that the licensee was playing the dodger to serious charges involving it and its parent company. The Commission was entitled to ask whether such conduct, however convenient for corporate purposes, was consistent with the candor required of an applicant for a license to the public airwaves. We believe the Commission's answer is not open to doubt. The disqualification of RKO as a licensee of WNAC in Boston is affirmed.
It is so ordered.
Notes
General Tire, which owns 100 percent of RKO's stock, was founded in 1915 by William O'Neil. Three of his sons and one daughter owned or controlled over nine percent of General Tire's stock as of July 1979, and each of the sons is a director of the company. T. F. O'Neil is Chairman of the Board of both General Tire and RKO, and is the Chief Executive Officer of RKO. M. G. O'Neil is President and Chief Executive Officer of General Tire. The Commission concluded that the two companies "are owned, controlled, and operated as a single integrated company." RKO General, Inc. (WNAC),
See RKO General, Inc. (KHJ-TV) (Initial Decision),
RKO General, Inc. (KHJ-TV),
In 1967, the Department of Justice had brought a civil suit against General Tire, RKO, and two other General Tire subsidiaries, charging that their reciprocal trade practices violated the Sherman Antitrust Act. United States v. General Tire & Rubber Co., No. C-67-155 (N.D.Ohio, filed March 2, 1967). This action was still pending when the FCC designated a comparative hearing on renewal of WNAC in 1969. A consent decree was entered on October 21, 1970. 1970 Trade Cas. § 73,303 (1970)
RKO General, Inc. (WOR-TV),
RKO General, Inc. (WNAC-TV) (initial decision),
See, e.g., SEC, Report on Questionable and Illegal Corporate Payments and Practices, submitted to the Senate Comm. on Banking, Housing and Urban Affairs, May 12, 1976, reprinted in 642 Fed.Sec.L.Rep. (CCH), Part II (May 19, 1976)
Community Petition to Reopen the Record, Enlarge the Issues and Remand for Further Hearing (Community Petition), December 10, 1975, J.A. 535. The petition was triggered by newspaper reports of an investigation of General Tire by the government of Chile. Id. at 4, J.A. 538
RKO Opposition to the Petition to Reopen the Record, Enlarge the Issues, and Remand for Further Hearing (RKO Opposition), January 21, 1976, at 5, J.A. 588
Final Judgment of Permanent Injunction against the General Tire & Rubber Company and M. G. O'Neil, No. 76-0799 (D.D.C. May 10, 1976)
Transcript, WNAC-TV Proceeding, at 15406-08, J.A. 2641-43
The consent decree required creation of a Special Review Committee, composed of five non-management directors assisted by Special Counsel, who were to conduct
an extensive investigation into the use of corporate funds for unlawful political contributions, gifts, entertainment or other disbursements for similar improper purposes; and use of corporate funds for improper payments to governmental employees and officials, foreign or domestic; the establishment and maintenance of, and transactions in, any secret or unrecorded funds; the use of agents and consultants for unlawful or improper purposes or in connection with unlawful or improper conduct; and such other similar matters as may be revealed during the course of the investigation.
Special Report at 27, J.A. 1267.
RKO Response to Community Motion to Deny (RKO Response), October 28, 1977, at 34-36, J.A. 805-07
In 1978, the New England Television Corporation (NE-TV) was formed as the result of a merger between two of RKO's competing applicants for the Boston station, Community Broadcasting of Boston, Inc. (Community) and The Dudley Station Corporation (Dudley). After lengthy negotiations, Community and Dudley entered into a settlement agreement with RKO whereby RKO would sell its Boston license to NETV upon a finding by the FCC that RKO possessed the requisite qualifications to be a broadcast licensee. Brief for Intervenors NETV, Dudley, and Community at 5. When the Commission could not find RKO minimally qualified, however, General Tire rejected NETV's offer to buy RKO's unlicensed assets. Id
FCC Order 79-403, June 28, 1979, J.A. 350. RKO reiterated its earlier claim that "(t)he record in this proceeding is fully sufficient for the Commission to adjudge that RKO is qualified to be a broadcast licensee and thus qualified to remain the licensee of WNAC-TV." Summary of RKO's Position, July 9, 1979, J.A. 834. It now urged, however, that the record was not sufficient for the FCC to adjudge RKO "unqualified." J.A. 839
Decision P 43; see J.A. 352 (informal FCC announcement that "tentative" 4-2 vote had found record insufficient to permit finding RKO qualified)
FCC Order 79-453, July 20, 1979, J.A. 353
J.A. 857, 869, 875, 880, 889, 1083 (proposed findings and conclusions filed by RKO, Broadcast Bureau, and four competing applicants)
RKO General, Inc. (WNAC-TV),
Were these grounds not independent, a remand would probably be required so that the Commission could articulate the "relative weight" of "the factors that affect its decision," and determine whether the disqualification of RKO is still appropriate. Leflore Broadcasting Co. v. FCC,
Our conclusion is consistent with the FCC's subsequent argument, see FCC Brief at 97 n.215 (candor, misrepresentation, and reciprocal trade practices are "independent pillars" of Decision), and subsequent Commission opinions describing this RKO Decision. See, e.g., RKO General, Inc.,
E.g., California Packing Corp.,
E.g., FTC v. Consolidated Foods Corp.,
In Consolidated Foods, the Supreme Court observed that reciprocity "is one of the congeries of anticompetitive practices at which the antitrust laws are aimed,"
Commentators also interpreted Consolidated Foods as requiring that companies be demonstrated to have the "necessary purchasing power." Kintner, The Anatomy of Reciprocity, 56 A.B.A.J., 232, 234 (1970). An Assistant Attorney General in the Antitrust Division later wrote that there was "respectable support for the proposition that mutual patronage reciprocity was legal" at least until 1967. Tire Company Cases-U.S. Information Memorandum, Trade Reg.Rep. (CCH) P 50,259, at 55,504 (1967). The Supreme Court had shown a related concern for market leverage in the tying cases, e.g., Northern Pacific Ry. Co. v. United States,
See, e.g., Hausman, supra note 2, at 882 (despite widespread reciprocal trading, most businessmen detested the practice); Turner, supra note 2, at 1390 & n.100 (1965) (predicting rough treatment for nonleveraged reciprocal trading "when appropriate cases reach the courts"). By 1970, when test suits against a number of corporations including General Tire had established the illegality of noncoercive reciprocity, most businessmen had already abandoned their "trade relations" voluntarily. Kintner, supra note 24, at 233
See Pressley v. FCC,
In the original KHJ-TV proceeding in Los Angeles, the Commission had found that "the relevant legal and economic concepts were in a state of flux at the time covered by this record, that neither responsible officials nor the courts had given any clear explanation of the applicability of the broadly drawn (antitrust) statutes, and that there was accordingly no certainty that trade relations practices were improper." RKO General, Inc. (KHJ-TV),
In Fidelity Television, Inc. v. FCC, this court noticed that there was "a fairly substantial record ... on the reciprocity practices of RKO, not merely in its operation of KHJ, but throughout the entire broadcast side of its business."
RKO contends that the bulk of its trade relations practices ended before 1965, and the rest by 1966. See Initial Decision,
Trade and barter transactions are exchanges of a station's broadcast time for goods, products, and other services. RKO's controller criticized internal accounting procedures for these barters in December 1972. Special Report at 223, J.A. 1463. On May 13, 1974, an internal audit discovered "failures to fully comply with ... prior directives," Affidavit of RKO Controller John B. Fitzgerald, August 23, 1979, J.A. 970, and found "serious deficiencies" in financial records. The controller issued another directive on July 10, 1974, but a second internal audit in 1976 revealed that "many of the problems found in 1974 still exist." Special Report at 225, J.A. 1465. An investigation by an outside accountant confirmed these findings. The Special Report concluded: "RKO's files were found by Arthur Young to be incomplete and unreliable, which created inaccuracies on the FCC Form 324 reports as well as on internal trade status reports." Id. at 226, J.A. 1466
The FCC did not require reports of trade and barter information until 1971, in Rand Broadcasting Co., 22 Rad.Reg.2d (P&F) 155 (1971) (interpreting 47 C.F.R. § 73.3611). On February 17, 1972, the FCC issued a Public Notice reminding licensees of the requirement that this information be included in the annual financial reports (Form 324). Reporting "Trade Outs,"
The FCC relies on a lengthy line of cases upholding its discretion to decide whether hearings on petitions to deny are necessary. E.g., United States v. FCC,
Similarly, the FCC's procedures for summary judgment require Commission notice that summary disposition is intended on "issues set for hearing," 47 C.F.R. § 1.251(a)(1) (1979). Before an agency may use such procedures, it must be able to show that evidentiary hearings could serve no purpose. USV Pharmaceutical Corp. v. Secretary of HEW,
But see FCC v. WOKO, Inc.,
RKO correctly observes that the record provides no basis for finding that any RKO officer or director participated in the General Tire misconduct or knew of that misconduct until the disclosures arising from the SEC investigation and the related internal inquiries of the General Tire board. RKO Brief at 71. See RKO Proposed Findings, Conclusions and Proffered Evidence, August 27, 1979, Aff. 1 (T.F. O'Neil) at 1-2, J.A. 940-41. The ALJ found that General Tire leaves the operation of RKO stations to the RKO Board of Directors and management. Initial Decision,
Based on three volumes of exhibits totaling 640 pages, Community alleged that General Tire had engaged in "illegal, unethical and improper conduct in the United States ... and in foreign countries," including the bribery of foreign public officials, establishment of secret accounts to evade banking and tax codes of foreign nations, and defrauding stockholders of its partially owned subsidiaries. Community further alleged that these activities violated securities and tax laws of the United States, and that RKO had attempted "to conceal, mislead and deceive" the FCC as well as the public by failing to disclose material information relevant to these allegations. Community Petition, supra note 8, J.A. 535. General Tire ultimately admitted all of these practices in its Special Report, after acknowledging the preliminary findings of several investigations in its 1975 Annual Report and 10-K. J.A. 686
RKO Opposition, supra note 9, at 5, 17, J.A. 588, 600. RKO also noted gratuitously that Community had failed to "assert any improper political contributions by General Tire in the United States." Id. at 5 n., J.A. 588 n
See RKO Brief at 33 & n.92 (Opposition was "a straight-forward pleading"). This appears to have been the interpretation of the FCC's Broadcast Bureau. See Broadcast Bureau's Comments on Supplement to Reply, March 22, 1976, at 4, J.A. 693. In a later statement, the Broadcast Bureau suggested that RKO's Opposition "presented arguments relating to the inadequacy of Community's showing and not factual assertions." Broadcast Bureau Reply of September 24, 1979, at 16, J.A. 1207. The Commission also concedes that RKO's statements "may have been technically correct." FCC Brief at 63
Congress amended the Communications Act in 1960 to require that petitioners seeking to deny a license renewal must provide a more substantial evidentiary showing than had previously been required in order to force the Commission to designate a hearing. See S.Rep.No.690, 86th Cong., 1st Sess. 3 (1959), U.S.Code Cong. & Admin.News 1960, p. 3516. The FCC's rules require that factual showings necessary to meet this burden be made by affidavit. 47 C.F.R. § 1.229 (1979)
The FCC contends that had the SEC investigation continued only a few months longer, "the Commission might never have known about the investigation or been in a position to condition any renewal on the outcome of the investigation and any resulting litigation." FCC Brief at 78-79. RKO responds that it would have been "absurd" for RKO to "cover up" the SEC investigation in light of contemporary newspaper reports of that investigation. RKO Reply Brief at 17; see Wall Street Journal, Feb. 12, 1976, at 4, col. 2, J.A. 569; Washington Post, Feb. 13, 1976, at A6, col. 1. But other, more prominent parties have attempted such cover-ups in the past despite even greater attention from the media, and in any event the Commission cannot be expected to reply only on hearsay sources for the information required under section 1.65
General Tire's 10-K reported investigations in Morocco, Romania, Chile, and "yet another foreign country" that raised issues concerning the possibility of "improper or illegal payments to foreign government employees." It added that a pending internal investigation "includes the matter of political contributions in the United States by executive level employees" of General Tire. J.A. 686-89
Community Supplement to Reply (Supplement to the Reply), March 16, 1976, & Att. A., J.A. 678, 686. RKO argues that even if § 1.65 applied, Community performed RKO's task for it by filing copies of General Tire's 10-K with the Commission before the rule's 30-day limit had expired, and thus "RKO's candor cannot be faulted because it failed to duplicate that filing." RKO Brief at 39. The argument is specious to a fault. When candor is the question, the actions of the intervenor can hardly be used to bear witness. Community's filing in no way diminished RKO's responsibility to be candid and forthcoming with the Commission, yet this omission by RKO even in the face of continual promptings by its competitors is symptomatic of RKO's attitude through early 1976
RKO argues, for example, that it was not required by contemporaneous FCC precedents to report the SEC investigation until it culminated in "formal charges" against General Tire. See Lake Erie Broadcasting Co.,
See Decision P 202 ("in refusing to be more forthcoming, RKO adopted a posture consistent with General Tire's SEC defense strategy. General Tire was resisting SEC document and other enforcement demands at least into February 1976."). General Tire's Special Report admitted that the SEC's Division of Enforcement had sought particular information from the corporation on December 5, 1975, but that "(n)o substantively complete answer was ever given to the SEC letter" of that date. Special Report at 31, J.A. 1271. A second letter was sent by Enforcement on January 22, 1976, and SEC staff members met with General Tire representatives on February 3. At this meeting, General Tire's vice president and former general counsel made "(s)harp, sarcastic comments" and at one point "advised an Enforcement staff member against holding his breath while waiting for submission of additional material because 'you'll turn blue.' " Id. at 32, J.A. 1272
We also agree that the Commission properly refused to consider a General Tire stock spin-off proposal that would have passed RKO's stock through General Tire to that company's 45,000 shareholders. See note 45 infra. This proposal threatened to violate the FCC policy that "a licensee cannot act improperly in the broadcast field and, when challenged, simply sell his station at a profit or without a loss; if this were permitted, such a licensee would have little reason to obey the Act ...." Tidewater Teleradio, Inc., 24 Rad.Reg. (P&F) 653, 657 (1962); cf. Grayson-Enterprises, Inc.,
Community had contended since 1975 that General Tire and RKO attempted "to conceal, mislead and deceive" the FCC, corporate shareholders, and the public by failing to disclose material information pertaining to Community's allegations. Community Petition, supra note 8, at 5-6, J.A. 539-40. Community repeated that charge in its Supplement to the Reply, supra note 41, at 6-7, J.A. 683-84 ("the Commission must now seriously question the lack of good faith and candor of RKO.... RKO has failed to meet the minimal standards of candor, required of Commission licensees."). More than a year later, Community referred to RKO's "dissembling and lack of candor in this proceeding" and argued that lack of candor was "the darkest blot on RKO's record ...." Community Motion to Deny, September 13, 1977, at 2, 22, J.A. 737, 757. Community also reiterated this charge in its reply to RKO's Response, note 13 supra. Community Reply, December 16, 1977, J.A. 811
The FCC also foreshadowed the candor issue in May 1977 when it denied General Tire's proposal to spin-off its RKO stock. The FCC cautioned that it had "not yet ruled on the merits of Community's petition to enlarge issues," RKO General, Inc. (WNAC-TV),
Indeed, in October 1977, RKO spent several pages answering the lack of candor charge. RKO Response, supra note 13, at 14-19, J.A. 785-90. In September 1979, when RKO responded to FCC Order 79-453, see note 17 supra, it made the same claims to the Commission that it has on this appeal, arguing that "the procedural context in which RKO's responses were made disproves Fidelity's claims that RKO has not been candid." RKO Response, September 24, 1979, at 56, J.A. 1183; see id. at 51-61, J.A. 1178-88. The FCC contends that these pleadings and other materials show that "RKO had far more actual notice than the typical designation order would provide." FCC Brief at 113 n.234.
The full transcript of the oral argument held before the Commission on July 18, 1979, is not in the record before us. Nevertheless, the pleadings submitted by RKO before that proceeding amply demonstrate RKO's opportunity to address any factual or legal issues concerning its lack of candor. See note 45 supra
Indeed, RKO's interpretation of Section 309 would create the possibility that an incorrigible applicant could prolong hearings indefinitely, as each instance of egregious conduct in one proceeding would require new designation and a subsequent proceeding. Renewal applicants have an obvious financial stake in delaying unfavorable resolutions of their applications as long as possible. RKO, for example, is still operating the stations involved in this case, pending resolution of this appeal. See Brief of Intervenor Multi-State Communications, Inc. at 35 ("the abundant 'due process' already accorded RKO has provided it with licenses (and income) for many more years than it should have had.")
We express no view, in light of the pending appeal of this FCC order, as to whether a separate proceeding is the appropriate format for the introduction of such evidence or whether the matter should be addressed in the context of license renewal proceedings. See New South Media Corp. v. FCC,
KHJ-TV in Los Angeles and WOR-TV in New York City stand in very different positions, although this may be a distinction without a difference. KHJ's license renewal was granted, subject only to the FCC finding on reciprocity in the Boston proceeding that we now reject. WOR's license renewal was held in abeyance pending the resolution of the Boston renewal. Cf. KFPW Broadcasting Co.,