Certiorari Denied April 19 and June 14, 1982. See 102 S.Ct. 1974, 2931.
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
RKO is a wholly owned subsidiary of General Tire & Rubber Company (General Tire).
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.
In the meantime, other competing applicants had challenged RKO's license renewal application for WNAC-TV in Boston. RKO General, Inc. (WNAC), 20 F.C.C.2d 846 (1969). The FCC also designated a reciprocity
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.
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.
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.
For reasons that may be partially attributable to strategic maneuvering among two of the many RKO competitors,
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.
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.
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 ¶¶ 144-61 (General Tire's nonbroadcast misconduct); id. at ¶¶ 193-95 (financial inaccuracies); id. at ¶¶ 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.
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., 419 U.S. 281, 285-86, 95 S.Ct. 438, 442-43, 42 L.Ed.2d 447 (1974); WAIT Radio v. FCC, 418 F.2d 1153, 1156 (D.C.Cir.1969), cert. denied, 409 U.S. 1027, 93 S.Ct. 461, 34 L.Ed.2d 321 (1972). A fair reading of the Decision compels the conclusion that these three grounds are independent, and that in
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 ¶ 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,
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), 44 F.C.C.2d 149 (1969), aff'd sub nom. Fidelity Television, Inc. v. FCC, 515 F.2d 684. That case held that essentially the same conduct was neither disqualifying nor ground even for a comparative demerit.
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.
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
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 ¶ 164. The FCC's conclusion presumes that RKO's inaccuracies were either deliberate and intentionally deceptive, Big Valley Cablevision, Inc., 75 F.C.C.2d 702, 714 (1980); Kaye-Smith Enterprises, 71 F.C.C.2d 1402, 1415 (1979), or that RKO's reports were made with such "wanton, gross, and callous" disregard for their truth as to reflect the equivalent of such an "affirmative and deliberate intent." Golden Broadcasting Systems, Inc., 68 F.C.C.2d 1099, 1106 (1978); see Leflore Broadcasting Co. v. FCC, 636 F.2d at 462. Despite the fact that RKO had consistently denied acting with such intent or disregard, the FCC brushed aside proffered RKO affidavits to that effect and drew adverse inferences without allowing RKO to defend itself in a hearing. Such a procedure was not lawful.
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 barters
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.
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 ¶ 140. Instead, the Commission
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 ¶ 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, 628 F.2d 122, 128 (D.C.Cir.1980); Star Stations of Indiana, Inc., 51 F.C.C.2d 95 (1975). For reasons that are far from clear, however, the FCC seems to distinguish between misconduct by individual owners and misconduct by corporate entities. See, e.g., Katy Communications, Inc., 87 F.C.C.2d 764, 766-67 (1981); Southern Bell Telephone and Telegraph Co., 82 F.C.C.2d 322, 327 (1980); Cowles Florida Broadcasting, Inc., 60 F.C.C.2d 372, 406 (1976), rev'd on other grounds sub nom. Central Florida Enterprises, Inc. v. FCC, 598 F.2d 37 (D.C.Cir.1978), cert. dismissed, 441 U.S. 957, 99 S.Ct. 2189, 60 L.Ed.2d 1062 (1979); Kaiser Broadcasting Corp., 46 F.C.C.2d 589, 598 (1974).
It is difficult to discern any legitimacy for such differential treatment of individual as opposed to corporate owners.
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
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 ¶¶ 197-205. Second, RKO failed to report the initiation of a formal SEC investigation of General Tire in February 1976. Id. at ¶¶ 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 ¶¶ 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.
RKO contends that these statements were technically correct.
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., 38 F.C.C.2d 461, 464 (Rev.Bd.1972) (emphasis in original). Unlike a private party haled into court, or a corporation such as General Tire facing an investigation by the SEC, RKO had an affirmative obligation to inform the Commission of the facts the FCC needed in order to license broadcasters in the public interest. As a licensing authority, the Commission is not expected to "play procedural games with those who come before it in order to ascertain the truth," FCC Brief at 60, and license applicants may not indulge in common-law pleading strategies of their own devise.
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., 82 F.C.C.2d 291, 306 (1980). In spite of an SEC investigation that was rapidly gathering steam, and in spite of the fact that its qualifications as a licensee were at issue before the FCC, RKO failed to come forward with a candid statement of relevant facts. RKO did not inform the FCC that the SEC had issued a formal order of investigation in February 1976, even though this suggested the seriousness of the charges against General Tire.
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 investigation
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
FCC v. WOKO, Inc., 329 U.S. 223, 227, 67 S.Ct. 213, 215, 91 L.Ed. 204 (1946). As the Commission correctly emphasizes, it must rely on the applicants who come before it for the truth of their representations; it cannot countenance willingness to mislead simply because there is no evidence that the Commission was in fact misled.
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., 20 F.C.C.2d 1, 3 (1969); cf. WEBR, Inc. v. FCC, 420 F.2d 158, 167-68 (D.C.Cir.1969). But "advice of counsel cannot excuse a clear breach of duty by a licensee." Asheboro, 20 F.C.C.2d at 3. The client becomes fully responsible at some point, and that point is reached more quickly in practice before the FCC than in courts of law. E.g., Wadeco, Inc. v. FCC, 628 F.2d at 128; Lorain Community Broadcasting Co., 18 F.C.C.2d 686, 688 (1969), aff'd sub nom. Allied Broadcasting, Inc. v. FCC, 435 F.2d 68 (D.C.Cir.1970). Similarly, although we agree that "legal argument is not testimony by a party or a representation by its counsel as to facts," RKO Brief at 34, we cannot excuse the calculated omissions in RKO's legal pleadings on this basis. In modern America, parties communicate with administrative agencies almost exclusively through lawyers, but this is all the more reason why we cannot assume that RKO did not know what its lawyers were saying — particularly when the number of pleadings and other opportunities for dissembling were as great as recounted above. It is not credible that lawyers were running the strategy of RKO and General Tire to the exclusion of all the corporate chiefs.
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, 404 U.S. 496, 502, 92 S.Ct. 582, 586, 30 L.Ed.2d 632 (1972) (quoting In re Oliver, 333 U.S. 257, 273, 68 S.Ct. 499, 507, 92 L.Ed. 682 (1948)). We conclude, however, that RKO's conduct has been so egregious and so conspicuous that we cannot say the FCC's decision was an abuse of its authority. No purpose would have been served in this case by extending administrative proceedings that had already moved well into their second decade. The evidence of RKO's lack of candor was obvious from the documents that RKO itself had submitted to the FCC in this proceeding, as the applicants competing with RKO had been arguing for years. The Commission needed only to draw legal conclusions from "facts already known." Lakewood Broadcasting Service, Inc. v. FCC, 478 F.2d 919, 924 (D.C.Cir.1973). In this context, the FCC was not required to designate the candor issue and reopen the proceeding for an evidentiary hearing that would have served no purpose. See, e.g., Independent Bankers Ass'n. of Georgia v. Board of Governors of the Federal Reserve, 516 F.2d 1206, 1220-22 (D.C.Cir.1975); Municipal Light Boards v. FPC, 450 F.2d 1341, 1345 (D.C.Cir.1971), cert. denied, 405 U.S. 989, 92 S.Ct. 1251, 31 L.Ed.2d 445 (1972). This is especially true where RKO itself had urged that there was no need to reopen the proceeding because resolution of Community's claims "turns on inferences and legal conclusions" to be
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., 329 U.S. at 228, 67 S.Ct. at 215. As the Decision explains, the FCC's purpose is not to punish licensees for past wrongs, but to ensure that these "fiduciaries of a great public resource" will "satisfy the highest standards of character commensurate with the public trust that is reposed in them." Id. at ¶ 3; see id. at ¶ 249 & n.477. A broadcast license is less a property right than a privilege, Mansfield Journal Co. v. FCC, 180 F.2d 28, 35 (D.C.Cir.1950), and retention is not automatic but must be earned.
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, 354 F.2d 608, 620 (2d Cir. 1965), cert. denied, 384 U.S. 941, 86 S.Ct. 1462, 16 L.Ed.2d 540 (1966). The FCC has an affirmative obligation to license more than 10,000 radio and television stations in the public interest, each required to apply for renewal every three years. FCC Brief at 60 n.114. As a result, the Commission must rely heavily on the completeness and accuracy of the submissions made to it, and its applicants in turn have an affirmative duty to inform the Commission of the facts it needs in order to fulfill its statutory mandate. This duty of candor is basic, and well known. See, e.g., Sea Island Broadcasting Corp. v. FCC, 627 F.2d 240, 243 (D.C.Cir.), cert. denied, 449 U.S. 834, 101 S.Ct. 105, 66 L.Ed.2d 39 (1980); Golden Broadcasting Systems, Inc., 68 F.C.C.2d at 1101-04. The Commission has said before that "no specific misrepresentation or lack of candor issues are needed to consider these matters, since the Commission always has authority to deny a license or application where the record reveals such misconduct." Radio Carrollton, 69 F.C.C.2d 1139, 1146 n.20 (1978), aff'd mem. sub nom. Faulkner Radio, Inc. v. FCC, No. 79-1749 (D.C.Cir. October 15, 1980), cert. denied, 450 U.S. 1041, 101 S.Ct. 1758, 68 L.Ed.2d 238 (1981). See Grenco, Inc., 39 F.C.C.2d 732, 737 (1973) ("no one is allowed `one bite' at the apple of deceit").
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, 337 U.S. 265, 69 S.Ct. 1097, 93 L.Ed. 1353 (1949), a unanimous Court held that the FCC was not required to provide oral argument before ruling that a radio station's petition in a pending proceeding did not state facts sufficient to raise legal issues concerning the possible modification of that station's license rights. "[T]he right of oral argument as a matter of procedural due process varies from case to case in accordance with differing circumstances, as do other procedural regulations." Id. at 276, 69 S.Ct. at 1103. Subsequent cases have never departed from this proposition. See, e.g., Goldberg v. Kelly, 397 U.S. 254, 268 n.15, 90 S.Ct. 1011, 1020, n.15, 25 L.Ed.2d 287 (1970); Joint Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 163, 71 S.Ct. 624, 644, 95 L.Ed. 817 (1951) (Frankfurter, J., concurring) ("The Court has responded to the infinite variety and perplexity of the tasks of government by recognizing that what is unfair in one situation may be fair in another.").
Section 4(j) of the Communications Act, as amended, 47 U.S.C. § 154(j) (1976), empowers the FCC to "conduct its proceedings
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, 655 F.2d 297, 310 (D.C.Cir.1981); United States v. FCC, 652 F.2d 72, 88-92 (D.C.Cir.1980). But such a literal approach to the words of the Act cannot govern this case, in which RKO had already been the subject of FCC proceedings that had lasted for years. The question is not whether RKO was entitled to a hearing under Section 309, but whether during the course of agency proceedings in which this candor issue arose in the most obvious and unavoidable manner, the Commission was required to call a halt to its proceedings, designate the issue formally, and begin again.
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, 401 F.2d 398, 401 (D.C.Cir.1968) ("elemental fairness" used to judge whether FCC application requirements were sufficiently clear to obviate need for hearing on incomplete submission) with Ranger v. FCC, 294 F.2d 240 (D.C.Cir.1961) (where application fails in material respects to comply with FCC rules concerning application contents, agency can reject application without hearing). Nevertheless, in appropriate situations, agency resolution of "subordinate questions of procedure" will be respected. In Ranger, we held that Section 309 requires a hearing only if, "with the required information before it," the FCC still cannot make a determination as to whether granting the application would be in the public interest. Id. at 242. We thereby recognized the FCC's authority to determine without an evidentiary hearing whether applicants had submitted "the required information." Cf. Guinan v. FCC, 297 F.2d 782, 785 (D.C.Cir.
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, 441 U.S. 520, 536 n.17, 99 S.Ct. 1861, 1872 n.17, 60 L.Ed.2d 447 (1979).
In re Savin, 131 U.S. 267, 277, 9 S.Ct. 699, 701, 33 L.Ed. 150 (1889) (quoting Ex parte Terry, 128 U.S. 289, 309, 9 S.Ct. 77, 81, 32 L.Ed. 405 (1888)). In these extraordinary situations, "[t]here is no need of evidence or assistance of counsel before punishment, because the court has seen the offense. Such summary vindication of the court's dignity and authority is necessary." Cooke v. United States, 267 U.S. 517, 534, 45 S.Ct. 390, 394, 69 L.Ed. 767 (1925). The rule is as old as Blackstone, see 4 W. Blackstone, Commentaries *282-*285, and continues to have vitality in this day. E.g., Roadway Express, Inc. v. Piper, 447 U.S. 752, 765, 100 S.Ct. 2455, 2463, 65 L.Ed.2d 488 (1980). Modern jurisprudence may reveal a greater sensitivity for the notice and hearing requirements of due process than did an earlier age, of course. See Taylor v. Hayes, 418 U.S. 488, 498, 94 S.Ct. 2697, 2703, 41 L.Ed.2d 897 (1974). Nevertheless, the cases continue to suggest the existence of a dividing line between events that take place "before the judge's own eyes," id. at 499, 94 S.Ct. at 2703, or "in the face of the court," Ex parte Terry, 128 U.S. at 313, 9 S.Ct. at 82, and situations in which "some essential elements of the offense are not personally observed by the judge, so that he must depend upon statements made by others for his knowledge about these essential elements ...." Johnson v. Mississippi, 403 U.S. 212, 215, 91 S.Ct. 1778, 1779, 29 L.Ed.2d 423 (1971). There is no doubt here as to which side of that line RKO's conduct falls. The Commission has drawn legal conclusions after comparing what RKO said in its earlier pleadings — and what it did not say — with RKO's subsequent admissions, such as General Tire's Special Report. RKO does not for a moment contend that it has in fact been candid with the Commission, nor do we see how it possibly could. No evidence remains to be introduced; no witnesses have been denied a chance to speak. There are no further issues to try. The FCC has not assumed the answers to any questions of fact, but has simply examined uncontested and uncontestable documents that are in the record at RKO's own election.
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:
309 U.S. at 142-43, 60 S.Ct. at 441. The cases upholding summary punishment for
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 ¶ 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, 404 U.S. at 504, 92 S.Ct. at 587. The procedure adopted by the FCC in this case satisfies these requirements, at least insofar as the Boston renewal is concerned. RKO does not contend that it was prejudiced by the lack of notice, for it undoubtedly had actual notice of the candor issue, as the pleadings filed prior to the Commission's decision demonstrate.
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. 46 F.C.C.2d at 249. By contrast, the former had been conditioned on the reciprocity issue only, in order to "enable the Commission to proceed with the Los Angeles matter and bring it to a conclusion with no risk to the public interest." RKO General, Inc. (KHJ-TV), 31 F.C.C.2d 70, 74 (1971). The FCC could not have known, when it conditioned either of these proceedings as it did, that the Boston outcome would turn on a lack of candor issue that had not even been designated in the Boston proceeding. RKO's misconduct did not occur directly before the trier of fact in either the Los Angeles or New York City proceedings. Accordingly, these decisions must be remanded to the Commission for further consideration as it deems appropriate.
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
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.
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
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.
Special Report at 27, J.A. 1267.
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) ¶ 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, 356 U.S. 1, 5-6, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958); International Salt Co. v. United States, 332 U.S. 392, 396, 68 S.Ct. 12, 15, 92 L.Ed. 20 (1947). Judge Bazelon's dissent to denial of rehearing in Fidelity Television, Inc. v. FCC, 515 F.2d at 698, contended that reciprocal trading was manifestly illegal. He agreed, however, that there was a question about "the degree of market power necessary to make reciprocity illegal. There is some confusion in the cases, particularly when one refers to the tie-in cases, on whether some kind of market leverage must be shown to make reciprocity illegal." Id. at 720 n.59. It has been suggested recently that in some cases reciprocity may be innocuous and that in others it may have "economic virtues." Industria Siciliana Asfalti, Bitumi v. Exxon, 1977-1 Trade Cas. ¶ 61,256, at 70,779 n.4 (S.D.N.Y. 1977).
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, 466 F.2d 455, 461 (D.C.Cir.1972). The FCC cannot make such a showing here, and certainly has not given the requisite notice. Indeed, in 1977 the Commission rejected a Freedom of Information Act request by Community for RKO's Form 324 reports because "[w]e cannot see how the Special Review Committee has placed RKO's financial reports in issue before this Commission." See Decision ¶ 194 n.393.
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), 64 F.C.C.2d 713, 718 (1977), but its refusal to act on the proposal because of "the undesirable possibility of impeding the conduct of an adjudicatory proceeding" by eliminating "adversarial development of the facts," id. at 718, 719, must be considered notice to RKO of the seriousness of its situation.
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.