Opinion for the Court filed by Circuit Judge TAMM.
TAMM, Circuit Judge:
The background of this case is a lurid episode in corporate and governmental corruption. The facts are not in dispute and need be recited only to furnish a context in which to discuss the legal issues.
TelePrompTer (hereinafter TPT or petitioner) began doing business in Johnstown in 1961, after acquiring the interest of an operator who held the exclusive franchise granted by the Johnstown City Council. In January of 1966, the City adopted Ordinance No. 3676, which required open, competitive
A subsequent investigation established, however, that on January 24, 1966, several days before TPT submitted its offer, then TPT president, Irving Kahn, met secretly with the mayor and two other members of the Johnstown City Council — three members consisting a majority — and agreed to pay them $5,000 each for their favorable vote. By reason of this transaction, Kahn and TPT were convicted for conspiracy to violate the Travel Act, 18 U.S.C. § 1952 (1961), which prohibits use of an interstate facility to further unlawful activity.
I. THE PROCEDURAL BACKGROUND
The Federal Communications Commission (hereinafter "FCC" or "Commission") first examined TPT's misconduct in the context of a radio microwave application in which TPT's character qualifications were, by statute, at issue before the Commission. See TelePrompTer Cable Systems, Inc., 40 F.C.C.2d 1027 (1973). After extensive consideration, the Commission concluded that TPT was generally qualified, stating:
Id. at 1035-36. Although the Commission found TPT generally qualified, it specifically reserved the question whether TPT should be disqualified from obtaining a franchise for its Johnstown operation, however, and further directed TPT to file an application for a Certificate of Compliance with respect to the Johnstown system. Id. at 1037. The basis for this directive was the Commission's belief that, with respect to TPT's Johnstown operation, there remained an issue as to the applicability of the doctrine enunciated in Root Refining Co. v. Universal Oil Products Co., 169 F.2d 514 (3d Cir. 1948), cert. denied, 335 U.S. 912, 69 S.Ct. 481, 93 L.Ed. 444 (1949). Broadly speaking, the Root Refining doctrine may be used as a basis for disqualification, under certain circumstances, of an applicant who seeks a public benefit through corruption of, or fraud upon, a judicial or administrative tribunal. On July 6, 1973, TelePrompTer filed the application. See Application for Certification of Compliance, FCC File No. CAC-2785 (1973); J.A. 29.
On July 11, 1974, the Commission released an Order designating TPT's application for a hearing on September 24, 1974. 47 F.C.C.2d 947 (1974). TPT responded by filing a Petition for Clarification of Issue, pointing out that the Commission had not set forth the statutory basis for the hearing.
On November 8, 1974, the Commission released a Memorandum Opinion and Order, 50 F.C.C.2d 435 (1974), which undertook to clarify certain matters raised in the TPT petition and designated the matter for oral argument on January 14, 1975. The Commission recognized that its authority would be contested and requested the parties to brief that issue. Id. at ¶¶ 7-8. Shortly thereafter, the City of Johnstown requested the Commission to defer oral argument on TPT's application until after the City had considered TPT's eligibility to continue operation. In re TelePrompTer Cable Systems, Inc., Motion To Terminate Proceeding, FCC Docket No. 20107 (November 18, 1974); J.A. 256. The City's motion argued that the Commission lacked statutory authority to decide whether TPT's character qualified it for the Johnstown franchise and, further, that the doctrine of Root Refining was inapplicable. J.A. 262-64. This position was supported by the Chief of the Commission's Cable Television Bureau, who maintained that the Commission was required to grant the request.
Despite the FCC's action, Johnstown appointed a citizen's Hearing Board to review TPT's qualifications. The City had urged the Commission to participate and assured the Commission that "[t]he hearing, which will be initiated by the City of Johnstown, will be an open and full public proceeding affording due process to all concerned." Motion To Terminate Proceedings, supra; J.A. 259.
On April 10, TPT filed a new application with the Commission for a Certificate of Compliance based on its new franchise. This application was denied, 52 F.C.C.2d 1263 (1975), and this appeal followed. The issues presented resolve, at least to some extent, around the scheme by which the FCC oversees the processes employed by local authorities in selecting cable television franchises.
II. LEGISLATIVE BACKGROUND: THE 1972 CABLE RULES
In its Cable Television Report and Order, 36 F.C.C.2d 143 (1972) (hereinafter 1972 Cable Rules), the FCC established a "deliberately structured dualism," a regulatory scheme where by local authorities, operating under federal guidelines,
47 C.F.R. § 76.31(a)(1) (1974) (emphasis added). See also Cable Television Report and Order, 36 F.C.C.2d 143, 207-208; Clarification of the Cable Television Rules, 46 F.C.C.2d 175, 190 (1974) (hereinafter "Clarification"). This is the only reference to character qualifications in the 1972 Rules. By way of explanation, the Commission stated:
Cable Television Report and Order, supra at ¶ 179. The Commission thus concerns itself with the quality of the local process, and not with the identity of the particular franchisee chosen, id. at ¶ 177, and it will not interfere with the decision of the local franchising authority so long as the local selection process comports with the Commission's rules. See, e. g., Western TV Cable Corp., 46 F.C.C.2d 272 (1974); Lincoln Cablevision, Inc., 47 F.C.C.2d 80 (1974); Warner Cable of Eastern Massachusetts, Inc., 47 F.C.C.2d 1248 (1974); Calvert Telecommunications Corp., 49 F.C.C.2d 200 (1974). The Commission has further stated that it will not act as "a court of last resort" in review of local franchising decisions, Clarification
III. THE COMMISSION'S DECISION
The Commission's refusal to grant TPT a Certificate of Compliance is based upon its assertion that it may take broad remedial action to vindicate the integrity of its processes. For this proposition, the Commission relies primarily upon a doctrine articulated in Root Refining Co. v. Universal Oil Products Co., 169 F.2d 514, 521-22 (3d Cir. 1948), cert. denied, 335 U.S. 912, 69 S.Ct. 481, 93 L.Ed. 444 (1949), and upon its inherent statutory authority recognized in Southwestern Cable, supra. Southwestern Cable held that the Commission may take such actions to regulate cable television as are "`imperative for the achievement of [the] agency's ultimate purposes.'" 392 U.S. at 177, 88 S.Ct. at 2005, quoting Permian Basin Area Rate Cases, 390 U.S. 747, 780, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968).
Id. at 246, 64 S.Ct. at 1001. The Commission concluded that disqualification was required in this case in order to preserve the integrity of its certification process, which was inextricably intertwined with the local franchising decision. 52 F.C.C.2d at 1269. The Commission recognized its limited role under the 1972 Rules, but asserted that
52 F.C.C.2d at 1266.
The Commission further found disqualification of TPT consistent with its limited role vis-a-vis the local process on the grounds that mere refusal to recognize the tainted franchise would not suffice, since TPT would then be free to reapply for a new franchise and a Certificate of Compliance. FCC Br. at 12-13. In order thus to vindicate its own processes, integrally related with the state franchising procedure, the Commission concluded that "it should neither defer to the decision of the local authority nor permit the wrongdoer to derive any benefit from its misconduct. Rather, `the guilty party must be deprived of any and all benefits it sought to obtain by its wrongdoing. . . .'" FCC Br. at 13, quoting 52 F.C.C.2d at 1269.
It is well established that agencies are themselves bound by their rules and regulations and that they may not deviate on an ad hoc basis. See, e.g., Vitarelli v. Seaton, 359 U.S. 535, 79 S.Ct. 968, 3 L.Ed.2d 1012 (1959); Service v. Dulles, 354 U.S. 363, 77 S.Ct. 1152, 1 L.Ed.2d 1403 (1957); Sangamon Valley Television Corp. v. United States, 106 U.S.App.D.C. 30, 269 F.2d 221 (1959). The lack of any provision in the 1972 Rules for review of local franchising decisions, combined with the Commission's frequent pronouncements respecting franchising, therefore require that the Commission's deviation from its normal standard of non-review be justified.
The case law tracing the Root Refining doctrine clearly establishes that the power to disqualify the corrupter stems from the inherent power of a tribunal to vacate its own tainted judgments. See Hazel-Atlas Glass Co. v. Hartford Empire Co., supra; England v. Doyle, 281 F.2d 304 (9th Cir. 1960); A. B. Dick Co. v. Marr, 197 F.2d 498 (2d Cir. 1952). See also, Taft v. Donellan Jerome, Inc., 407 F.2d 807, 809 (7th Cir. 1969); 7 J. Moore, Federal Practice ¶ 60.33 at 505-506 (2d ed. 1974).
The applicability of the Root Refining doctrine to this case therefore depends upon two assumptions: first, that local franchising decisions are so integrally related to the federal regulatory scheme that any corruption of the local process impacts upon the federal scheme as well; secondly, that this is true even when the corruption of the local process preceded the establishment of the federal regulatory scheme. We agree with the first proposition, and believe
The corruption of the 1966 Johnstown decision took place six years before the Commission promulgated the current regulatory scheme. Consequently, in 1966 there was no federal process to corrupt. The corruption was confined to the Johnstown proceeding, and Johnstown was the proper authority to invoke the Root Refining doctrine. In addition, there is no indication that the corruption in any way "carried over" to affect the federal scheme after the passage of the 1972 Rules. The record is clear that all parties involved in the 1966 episode were removed in the ensuing proxy fight and that new management gained control. The Commission argues that TPT benefited from its entrenched position, a result of the tainted 1966 franchise. Although this argument is not without some persuasive force, we believe it would have been more properly directed to the Johnstown Hearing Board. We do not understand the Commission to contest the fairness or integrity of the 1975 Johnstown proceeding; rather, the Commission apparently rests its entire argument upon its interpretation of the Root Refining doctrine as a per se rule of disqualification. We do not interpret it as such, especially when applied to a predominantly legislative, rather than judicial, proceeding like the Johnstown franchising decision.
In addition, certain other circumstances of this case argue against the Commission's disqualification of TPT. First, the rule proposed by the Commission lacks standards of application. At oral argument, the Commission was unable to inform the court for how long TPT would be disqualified, except to say that for some period of time an intervening franchise would be required. The Commission also took the position that TPT's purge of all those involved in the 1966 scandal was worth nothing in terms of its eligibility for the Johnstown franchise, despite the fact that TPT was generally qualified to hold FCC certification. From this it is clear that the Commission relied for authority to refuse TPT's request solely on its interpretation of the Root Refining doctrine, and not on a theory of residual authority to review the character of franchisees selected by local entities. Indeed, TPT's present character was not even at issue in this proceeding. Finally, by the time the Commission refused TPT's request for a Certificate of Compliance, TPT had obtained a new franchise from an untainted proceeding by the City of Johnstown, which had carefully reviewed TPT's character qualifications and had fully considered its conduct in 1966.
In closing, we wish to make it clear that, by remanding this case to the Commission, we are not "winking at fraud," as the Commission would characterize granting a Certificate of Compliance to TPT; rather, we are simply requiring the Commission to follow the rules it has established for regulating cable television. In order to gain the benefits of allowing localities to make their own franchising decisions, not subject to appellate review before the Commission, the FCC accepted some risk that it might, on occasion, disagree with local franchising determinations. This does not mean that the Commission is forced to award a Certificate of Compliance where the local franchise process is tainted by bribery or other corrupt practices. The due process requirement of Section 76.31 prevents this result by authorizing non-certification of franchisees where local proceedings do not comport with due process. In this case, however, the taint in the process was detected and erased long before the Commission's promulgation of the existing federal regulatory scheme. This does not make TPT's conduct any less repugnant, but it does make it a matter of concern to the decision-making authority whose decision it tainted, rather than to the Commission. The Commission has rested its entire action not on any defect in the Johnstown franchising decision, but on a desire to "vindicate" the integrity of the federal regulatory scheme when that scheme was in reality never affected.
The Root Refining doctrine cannot ne stretched to cover the Commission's refusal to grant TPT a Certificate of Compliance under these circumstances. Because the Commission rested its authority entirely on that doctrine, and apparently found no defect with the Johnstown proceeding which would make it fail to meet the standards of Section 76.31, we must remand for further proceedings consistent with this opinion.
BAZELON, Chief Judge (concurring):
I concur in Judge Tamm's opinion for the court, but wish to highlight my understanding of the rationale for our decision.
We recognize today that the FCC may apply the Root Refining doctrine to protect the integrity of its certification procedure by depriving a party that has gained a certificate of compliance through fraud of all the benefits of that fraud. However, we hold that the Commission may not apply Root Refining in this case because its certification process has not be impaired. Since the Commission played no role in local franchising in 1966 and since the 1966 bribery played no role in the 1975 hearing for which a certificate of compliance is sought, the Commission was not the "deciding tribunal" within the meaning of Root Refining and thus lacks the power to vindicate the fraud.
Of course, the case would be otherwise if TPT had bribed the Johnstown officials in order to acquire the 1975 franchise. The Commission then would have authority to deny a certificate of compliance under its reserved powers. 47 C.F.R. § 76.31(a)(1). Or if the Commission were not to become aware of the bribery until after the certificate issued, it would then be able to apply Root Refining to vindicate the integrity of its certification process.
One point does, however, require clarification. Judge Tamm mentions the Commission's argument that its processes had been indirectly affected because TPT benefitted in the 1975 hearing from an entrenched position directly attributable to the 1966 bribery. With respect to this argument he concludes, "we believe it would have been more properly directed to the Johnstown hearing board." (Majority Opinion at ___ of 178 U.S.App.D.C., at 1386 of 543 F.2d.) This does not mean of course that the FCC can protect its certification procedure through the Root doctrine only if the local government is first consulted on the merits of disqualifying the defrauding party. Rather, it reflects our basic holding that the Commission's processes were not impaired in this case.
The Commission has in this case attempted to avoid the impact of rules it has itself promulgated. Perhaps the Commission was unwise in delegating away the power to pass on the qualifications of cable television systems. But it has done so, and the City of Johnstown was well within its rights in determining that it preferred continued service from a repentant sinner instead of service supplied by fifty bishops or no service at all.
In re Teleprompter Cable Systems, Inc., Brief for Cable Television Bureau, F.C.C. Docket No. 20107 (December 6, 1974).
It is well established that an administrative body once tainted can become untainted through passage of time and change of membership. See, e. g., Pillsbury Co. v. FTC, 354 F.2d 952 (5th Cir. 1966); Fort Harrison Telecasting Corp. v. FCC, 116 U.S.App.D.C. 347, 324 F.2d 379, 384 (1963); Sangamon Valley Television Corp. v. United States, 106 U.S.App.D.C. 30, 269 F.2d 221 (1959). There is no basis to believe, and the Commission does not contend, that the Johnstown proceeding was in any way tainted by the corruption surrounding the 1966 bribery scandal. The only member of the current City administration who had been a councilman in 1966 was the Mayor, who had voted against awarding the franchise to TelePrompTer.
52 F.C.C.2d at 1267.
FCC Br. at 33-34 n.29 (citations omitted).
It is not entirely clear from this whether the Commission has entirely rejected any notion that the 1975 Johnstown hearing failed to conform with the due process requirement of Section 76.31(a)(1). The Commission appears to rest its entire case on the Root doctrine, finding that, as a matter of law, no hearing affording TPT standing to reapply for the Johnstown franchise could conform with the Commission's due process requirements. FCC Br. at 14. This absolutist position is not supportable by the Root Refining doctrine.