DC Circuit Upholds FCC in Debt Default Case; Company May Not Have to Pay
The FCC won Tuesday in a court challenge by former 700 MHz C-block spectrum licensee GLH in a defaulted debt case in the U.S. Court of Appeals for the D.C. Circuit. Still, GLH has options for reducing the payment demand by the regulator, said its lawyer. A judge appeared somewhat skeptical of FCC arguments at oral argument in January (see 1901090057).
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“While they rejected most of GLH’s arguments, they did make it clear that we can seek debt compromise by going through that process with the FCC and DOJ,” said Donald Evans of Fletcher Heald, who argued the case for the company. “Under the FCC’s governing principles, a credit for the FCC’s take in the reauction should be applied,” Evans told us.
“Nice win today for the @FCC in the D.C. Circuit affirming our authority to cancel and reauction spectrum when a licensee defaults on installment payments,” tweeted FCC General Counsel Tom Johnson.
Two of the winning bidders in a 1996 auction were NTCH, its then-parent GLH, and a subsidiary of Leap Wireless, the court said. Three years later, the companies agreed to trade some of the licenses including six Leap licenses bought via an installment program. Leap agreed to pay GLH the money to make the installment payments each quarter. In 2003, Leap failed to make payments to GLH and that company missed payments to the FCC, the D.C. Circuit said. The FCC canceled the licenses and reauctioned them for $9.3 million, recovering more than the $6.9 million owed.
The FCC’s “retroactive reinterpretation of its debt repayment rules was impermissible,” GLH argued in its final pleading (in Pacer) in case No. 18-1176. The court rejected that and other arguments.
“GLH contends that the Commission’s denial of its request for a waiver of the installment-payment deadline was arbitrary and capricious,” Judge Sri Srinivasan wrote for the panel that heard the case: “The FCC found that GLH hadn’t demonstrated an ongoing financial ability and willingness to fulfill [its] payment obligations post-default.”
Srinivasan said the FCC acted reasonably. “The Commission’s explanation of its decision, at least on its face, is more than adequate to survive arbitrary-and-capricious review,” he said: “The Commission appropriately explained the legal standard, examined the particular facts of GLH’s case, and reasonably applied that standard to those facts. The Commission concluded that granting GLH’s request therefore would serve neither the purposes of the automatic-cancellation rule nor the public interest.” Judith Rogers and Cornelia Pillard were the panel's other members.
DOJ, not the FCC, should decide whether to forgive the debt under the Federal Claims Collection Standards, the D.C. Circuit said. GLH “can raise its debt-forgiveness argument in a petition for debt compromise that it can submit to the Commission … or as a defense in any future debt-collection action (the Commission has not initiated any collection action), rather than as a subsidiary argument in this license-cancellation proceeding,” Srinivasan wrote.