Skybridge V FCC, Motion For Rehearing, 9th Circuit, Ultra Vires Rule Change Case

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Case: 10-71808 11/08/2010 Page: 1 of 26 ID: 7539414 DktEntry: 27

IN THE
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
Case No. 10-71808

SKYBRIDGE SPECTRUM FOUNDATION, a Delaware Nonprofit


Corporation, INTELLIGENT TRANSPORTATION & MONITORING
WIRELESS LLC, a Delaware Limited Liability Company, V2G LLC, a
Delaware Limited Liability Company, and WARREN HAVENS, an
individual.

Petitioners,
v.

UNITED STATES OF AMERICA, and the FEDERAL


COMMUNICATIONS COMMISSION

Respondents.

PETITIONERS’ PETITION FOR PANEL REHEARING OR IN THE


ALTERNATIVE PETITION FOR REHEARING EN BANC

NOSSAMAN LLP
PATRICK J. RICHARD (SBN 131046)
(Counsel of Record)
prichard@nossaman.com
TAMIR D. DAMARI

50 California Street, 34th Floor


San Francisco, California 94111-4707
Telephone: (415) 398-3600
Facsimile: (415) 398-2438

Attorneys for Petitioners


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TABLE OF CONTENTS

Page
I. INTRODUCTION AND STATEMENT PURSUANT TO FRAP
35(b)(1) ................................................................................................. 1

II. ARGUMENT........................................................................................ 3

A. The Nature of the Administrative Action Sought to be


Reviewed Is The Wireless Bureau’s Alleged Unauthorized Rule
Change ............................................................................................. 3

B. The Exhaustion Requirements of 47 U.S.C. §155(c)(7) Only


Apply To Administrative Actions Undertaken Pursuant To
Delegated Authority......................................................................... 8

C. The Wireless Bureau’s Actions At Issue Are In the Nature of a


Rule Change, Not In The Nature of a Adjudication........................ 9

D. The Wireless Bureau Undisputedly Has Not Been Delegated


With Rule Change Authority......................................................... 11

E. Accordingly, The Wireless Bureau’s Alleged Ultra Vires Rule


Change Is Not Within the Class of Administrative Actions
Subject to the Exhaustion Requirements of 47 U.S.C.
§155(c)(7) ...................................................................................... 14
F. Alternatively, Assuming Arguendo That The Wireless Bureau
Acted Within Its Delegated Authority, The Exhaustion
Requirements Of 155(c)(7) Are Nonetheless Inapplicable In
Light Of 47 U.S.C. §405(a) ........................................................... 15

III. CONCLUSION................................................................................... 18

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TABLE OF AUTHORITIES

Page
Cases

Connecticut Dept. of Public Utility Control v. FCC


78 F.3d 842 (2nd Cir. 1996)................................................................................16, 17

Friends of the Bow v. Thompson


124 F.3d 1210 (10th Cir. 1997) ..................................................................................9

Petroleum Communications, Inc. v. FCC


22 F.3d 1164 (D.C. Cir. 1994) .................................................................................17

Statutes

47 U.S.C. §155.............................................................................................................17

47 U.S.C. §155(c) ................................................................................................2, 8, 12

47 U.S.C. §155(c)(1)................................................................................................8, 11

47 U.S.C. §155(c)(3)......................................................................................................2

47 U.S.C. §155(c)(7)............................................................................................ passim

47 U.S.C. §405.......................................................................................................16, 17

47 U.S.C. §405(a) ................................................................................................2, 3, 15

5 U.S.C. §551(4) ............................................................................................................9

5 U.S.C. §551(5) ............................................................................................................9

5 U.S.C. §551(6) ............................................................................................................9

5 U.S.C. §551(7) ............................................................................................................9

Other Authorities

16 Bidders Qualified To Participate In Auction 86


2009 FCC LEXIS 5271 at *25 (Oct. 8, 2009) ...........................................................5

47 C.F.R. §0.331(d) ...............................................................................................11, 14

47 C.F.R. §1.2105 ......................................................................................10, 14, 17, 18

47 C.F.R. §1.2105(a)(2).................................................................................................4

47 C.F.R. §1.2105(b) ........................................................................................... passim

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47 C.F.R. §1.2105(b)(2).................................................................................................5

47 C.F.R. §1.2110 ..........................................................................................................3

47 C.F.R. §1.2110(a)......................................................................................................4

47 C.F.R. §1.407 ..........................................................................................................12

47 C.F.R. §1.411 ..........................................................................................................12

47 C.F.R. §1.412 ..........................................................................................................12

47 C.F.R. §1.425 ..........................................................................................................12

63 FR 2315, 2322-23 (January 15, 1998) ................................................................6, 14

87th Congress, First Session, 1961 ...............................................................................13

Auction Of 1.4 Ghz Band Licenses, FCC Rcd 605 *14 (January 23, 2007) ..................5

Auction of 700 MHz Band Licenses - Auction 73, 23 FCC Rcd 276, 281
(January 14, 2008) .....................................................................................................5

Auction Of Advanced Wireless Services Licenses, 21 FCC Rcd 8585 n. 15


(July 28, 2006) ...........................................................................................................5

Auction of Aws-1 & Broadband PCS Licenses, 23 FCC Rcd 11850, 11858
(August 4, 2008) ........................................................................................................5

Auction Of Broadband PCS Spectrum Licenses, 22 FCC Rcd 8347 *17


(May 2, 2007).............................................................................................................5

Auction of FM Broadcast Construction Permits, 24 FCC Rcd 10782, 10790


(August 19, 2009) ......................................................................................................5

Auction of LPTV and TV Translator Digital Companion Channels


23 FCC Rcd 15274, 15283 (October 24, 2008) .........................................................5

Five Bidders Qualified to Participate in Auction No. 72


2007 FCC LEXIS 4124 at *17 (June 5, 2007)...........................................................5

In Re: Amendment of Part 2 of the Commission’s Rules


22 FCC Rcd 19833 (2007).......................................................................................13

Rules

FRAP 35(a) ....................................................................................................................1

FRAP 35(b)(1) ...............................................................................................................1

FRAP 40(a)(2) ...............................................................................................................1

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I. INTRODUCTION AND STATEMENT PURSUANT TO FRAP 35(B)(1)

Petitioners request panel rehearing or alternatively rehearing en banc.

Specifically, Petitioners seek review of this Court’s determination in its order

dated September 13, 2010 (the “Order”) that the Court lacks jurisdiction under 47

U.S.C. §155(c)(7), due to Petitioners’ asserted failure to exhaust administrative

remedies before the Federal Communications Commission (the “Commission”).

A copy of this Order is attached as Exhibit 1.1

FRAP 40(a)(2) authorizes panel reconsideration where the panel has

overlooked or misapprehended a point of law or fact. FRAP 35(a) authorizes en

banc review where “the proceeding involves one or more questions of exceptional

importance.” As described infra, this Court’s conclusion that Petitioners have

failed to exhaust administrative remedies is premised upon an incorrect

assumption as to the types of orders requiring exhaustion. In particular, the Court

appears to have incorrectly presumed that the ultra vires rule change at issue (the

“Rule Change”) was an action undertaken pursuant to the Commission’s properly

1
In the Order, this Court also denied Petitioners’ Motion for Leave to File an
Amended Petition for Review (the “Motion to Amend”). Petitioners presume that
the Court’s denial of the Motion to Amend resulted from its determination that it
lacked jurisdiction, rather than being based upon a consideration of the Motion to
Amend on the merits. To the extent this is not the case (i.e., to the extent the
denial of the Motion to Amend was based upon the Court’s conclusion that
Petitioners failed to meet the liberal standard for amending their Petition for
Review), Petitioners respectfully request that the Court reconsider its denial of the
Motion to Amend, for the reasons set forth in the original Motion.
1
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delegated authority to its Wireless Telecommunications Bureau (the “Wireless

Bureau”). As a result of this erroneous threshold determination, the Court further

held that this case was governed by the exhaustion requirements of 47 U.S.C.

§155(c)(3) and (c)(7). Resolution of this issue is of paramount importance

because the ultra vires Rule Change has been, and will inevitably continue to be,

implemented by the Wireless Bureau in each of its Public Auctions, thereby

affecting the rights of many auction participants.

As demonstrated infra, both the C.F.R. and the legislative history of §155(c)

establish that the Wireless Bureau does not have the authority to implement any

rule change. Since the Wireless Bureau has not been delegated with such

authority, and since the exhaustion requirements of §155(c)(7) only apply to

bureau action undertaken pursuant to a properly delegated authority,2 Petitioners

were not required to exhaust administrative remedies before seeking review of the

Rule Change. On this basis alone, dismissal of this appeal was improper.

Alternatively, assuming arguendo that the Wireless Bureau acted within its

delegated authority in the course of implementing the Rule Change, the exhaustion

requirements of §155(c)(7) are nonetheless inapplicable, in light of 47 U.S.C.

§405(a). This statute states that “the filing of a petition for reconsideration shall

not be a condition precedent to judicial review,” except where the party seeking

2
See 47 U.S.C §155(c)(3).
2
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such review either: (i) was not a party to the proceedings resulting in the action

sought to be reviewed; or (ii) relies on questions of fact or law upon which the

Commission has been afforded no opportunity to pass. Petitioners were parties to

the proceedings resulting in the action sought to be reviewed - the Wireless

Bureau’s “Auction of Lower and Upper Paging Band Licenses” AU Docket No.

09–205 (“Auction 87”). Moreover, the Commission had the opportunity to “pass

upon” (i.e., eliminate) the Rule Change prior to this appeal, but has refused to do

so. Accordingly, under §405(a), Petitioners were not required to seek further

administrative review before filing this appeal.

II. ARGUMENT

A. The Nature of the Administrative Action Sought to be Reviewed

Is The Wireless Bureau’s Alleged Unauthorized Rule Change

Substantively, this appeal arises out of a de facto legislative Rule Change

instituted by the Wireless Bureau, the terms of which directly contradict the plain

language of the Commission’s regulations with respect to “short form

applications.” These regulations require a short-form applicant who claims so-

called “Designated Entity”status to obtain a bidding credit pursuant to 47 C.F.R.

§1.2110,3 to declare under penalty of perjury that it in fact qualifies as a

3
Under this regulation, “Designated Entities,” which include small
businesses, minority and/or women-owned businesses and rural companies,
receive bidding preferences. These preferences include bidding credits which, in
3
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Designated Entity. (See 47 C.F.R. §1.2105(a)(2)). These regulations also bar

certain modifications to short form applications after their submission deadline.

Specifically, 47 C.F.R. §1.2105(b) bars “Major amendments [to short form

applications that] include . . . changes in an applicant’s size which would affect

eligibility for designated entity provisions,” and provides that “an application will

be considered to be newly filed if it is amended by major amendment and may not

be resubmitted after applicable filing deadlines.” It further states that “Major

amendments cannot be made to a short form application after the initial filing

deadline.” (emphasis added).

As argued in Petitioners’ prior filings, the Wireless Bureau has undermined

these safeguards, by instituting the Rule Change which directly contradicts the

plain language of §1.2105(b). The Rule Change has been implemented in

numerous public auctions since 2006, most recently, in connection with Auction

87, which included Petitioners. Specifically in Paragraph 43 of a May 27, 2010

Public Notice associated with Auction 87 (“DA 10–863”), the Bureau states:

43…. Bidders must immediately report any change


affecting their eligibility for bidding credit. Bidders
should clearly state the nature of the change in an
amendment to their short-form application in the
summary letter referenced above. In cases of diminished
bidding credit eligibility, the Commission will make

effect, permit Designated Entities to outbid larger entities (since the amount of the
credit is added to the entity’s bid in actual dollars to determine its competing bid in
each round of an auction). See 47 C.F.R. §1.2110(a).
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appropriate adjustments in the bidding credit prior to the


calculation of any down and final payment amounts due
[after the end of the auction].

(emphasis added).
Identical language is contained in the Public Notices associated with

Auction of FM Broadcast Construction Permits, 24 FCC Rcd 10782, 10790

(August 19, 2009); Auction of LPTV and TV Translator Digital Companion

Channels, 23 FCC Rcd 15274, 15283 (October 24, 2008); 16 Bidders Qualified

To Participate In Auction 86, 2009 FCC LEXIS 5271 at *25 (Oct. 8, 2009);

Auction of Aws-1 & Broadband PCS Licenses, 23 FCC Rcd 11850, 11858 (August

4, 2008); Auction of 700 MHz Band Licenses - Auction 73, 23 FCC Rcd 276, 281

(January 14, 2008); Five Bidders Qualified to Participate in Auction No. 72, 2007

FCC LEXIS 4124 at *17 (June 5, 2007); Auction Of Broadband PCS Spectrum

Licenses, 22 FCC Rcd 8347 *17 (May 2, 2007); Auction Of 1.4 Ghz Band

Licenses, FCC Rcd 605 *14 (January 23, 2007); Auction Of Advanced Wireless

Services Licenses, 21 FCC Rcd 8585 n. 15 (July 28, 2006).

As further noted in Petitioners’ prior filings, the Wireless Bureau’s

“adjustment” scheme reflected in the Rule Change violates the spirit and letter of

§1.2105(b). Indeed, in the course of enacting §1.2105(b)(2), the Commission

expressly considered and rejected a proposal that would have permitted short-form

applicants to change their bidding credit eligibility via amendment:

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[C]ommenters’ opinions differ on what types of


amendments the Commission should categorize as major
or minor. For example, [some] argue that major
amendments should include all changes in ownership
that constitute a change in control, as well as all changes
in size that would affect an applicant’s eligibility for
designated entity provisions. [Others contend] that all
changes in ownership incidental to mergers and
acquisitions, non-substantial pro forma changes, and
involuntary changes in ownership should be categorized
as minor. [Certain commentators state] that an applicant
should not be permitted to upgrade its designated entity
status after the short form filing deadline (i.e., go from a
“small” to “very small” business), but should be
permitted to lose its designated entity status as a result of
a minor change in control (i.e., exceed the threshold for
eligibility as a small business) . . . [W]e believe that a
definition of major and minor amendments similar to
that provided in our PCS rules is appropriate. After the
short-form filing deadline, applicants will be permitted
to make minor amendments to their short-form
applications both prior to and during the auction.
However, applicants will not be permitted to make major
amendments or modifications to their applications after
the short-form filing deadline . . .Consistent with the
weight of the comments addressing the issue major
amendments will also include any change in an
applicant’s size which would affect an applicant’s
eligibility for designated entity provisions. . . In contrast,
minor amendments will include . . . the correction of
typographical errors and other minor defects, and any
amendment not identified as major.
See 63 FR 2315, 2322-23 (January 15, 1998).

The Rule Change is not only inconsistent with the intent of the Commission

in promulgating §1.2105(b), it also fosters anticompetitive practices. Specifically,

under the auction process permitted by the Rule Change, unscrupulous applicants
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can: (i) falsely certify their eligibility for Designated Entity bidding credits; (ii)

obtain bidding credits based upon these false certifications; (iii) outbid competitors

at auction based on these bidding credits; and (iv) thereafter, once they have outbid

entities properly entitled to bidding credits, amend their short-form applications to

modify their Designated Entity bidding credit status (e.g., from a 35% to a 25%

credit, or from a 25% credit to no bidding credit), subject to the Bureau’s

“adjustment” (i.e., increase) of the final payment amount for the license(s).

Unscrupulous applicants are thereby motivated, and in any case allowed, to

misrepresent their bidding credit status at the short-form application stage

(permitting them to outbid competitors at auction) because they know that the

Wireless Bureau will permit them to correct this misrepresentation with no penalty

once they have already been awarded a spectrum license. In short, bidders that are

not small businesses are allowed to bid with falsely obtained bidding credits.

Conversely, rule-abiding bidders are discouraged from raising and risking funds at

auction, a result which further undermines Congress’ goal in establishing a

competitive auction framework: to foster qualified licensees who are committed to

play by the rules.

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B. The Exhaustion Requirements of 47 U.S.C. §155(c)(7) Only Apply

To Administrative Actions Undertaken Pursuant To Delegated

Authority

In reaching its conclusion that Petitioners had failed to exhaust

administrative remedies, this Court relied exclusively upon 47 U.S.C. §155(c),

which states, in relevant part:

(1) [T]he Commission may, by published rule or by


order, delegate any of its functions . . .(4) Any person
aggrieved by any such order, decision, report or action
[undertaken pursuant to delegated authority] may file an
application for review by the Commission . . . (7) The
filing of an application for review under this subsection
shall be a condition precedent to judicial review of any
order, decision, report, or action made or taken pursuant
to a delegation under paragraph (1) of this
subsection. . .

(emphasis added).
As the italicized language makes clear, the exhaustion requirement of

§155(c)(7) only applies to responsibilities properly delegated under §155(c)(1).

Conversely, if a particular function has not been delegated, the administrative

exhaustion requirement of §155(c)(7) is ipso facto inapplicable. Otherwise, the

final phrase of the statute, “pursuant to a delegation under paragraph (1) of this

subsection,” would be rendered entirely superfluous.

Therefore, the exhaustion issue in this case is reduceable to the following

question: “Were the Wireless Bureau’s actions which are alleged by Petitioners as

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constituting the ultra vires Rule Change within the properly delegated authority of

the Wireless Bureau?” Petitioners maintain that the answer to this question is

clearly “No.”

C. The Wireless Bureau’s Actions At Issue Are In the Nature of a

Rule Change, Not In The Nature of a Adjudication

Under the Administrative Procedures Act (the “APA”), agency action is

typically categorized as either rulemaking or adjudication. 5 U.S.C. §551(4)-(7));

Friends of the Bow v. Thompson, 124 F.3d 1210, 1214 (10th Cir. 1997) (“The APA

governs agency procedures in all administrative proceedings. Under the APA,

agency functions are characterized as either ‘rulemakings’ or ‘adjudications.’”).

The APA defines “adjudication” as “agency process for the formulation of order.”

5 U.S.C. §551(7). The term “order,” in turn, is defined by the APA as “the whole

or a part of a final disposition, whether affirmative, negative, injunctive or

declaratory in form, of an agency in a matter other than rulemaking but including

licensing.” 5 U.S.C. §551(6). The term “rule” is defined in the APA as “the whole

or a part of an agency statement of general or particular applicability and future

effect designed to implement, interpret, or prescribe law or policy or describing the

organization, procedure, or practice requirements of an agency.” 5 U.S.C.

§551(4).

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The agency action embodied by the “Rule Change,” is in the nature of de

facto rulemaking, not adjudication. The Rule Change is the Wireless Bureau’s

implementation of a specific procedure in connection with 47 C.F.R. §1.2105, and

is concomitantly an interpretation of this regulation. Under this procedure/rule

interpretation: (i) all auction short-form applicants4 are allowed to procure licenses

via undeserved bidding credits obtained through false information in their short-

form applications; (ii) these applicants are allowed to correct their

misrepresentations via de facto short-form application amendment, by disclosing

their true size in their post-auction long form applications; and (iii) the Wireless

Bureau thereupon “adjusts” the payment amount for wrongfully-obtained licenses,

by eliminating the applicant’s bidding credit after the fact. This “Allowance with

Adjustment” scheme established by the Rule Change is intended to have both

“particular applicability” (in individual auctions) and “future effect” (in future

auctions). As to the latter point, this policy has not simply been implemented in a

single isolated auction, but has instead been implemented in a series of auctions

ranging back four years.

The Rule Change is also clearly “designed to implement, interpret, or

prescribe law or policy.” The “allowance and adjustment” system established by

4
The fact that this policy applies across the board to all applications likewise
distinguishes this case from “adjudications” of licensing determinations made in
connection with individual applicants.
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the Rule Change is essentially the Wireless Bureau’s unilateral policy judgment

that, notwithstanding the “major amendment” bar of 47 C.F.R. §1.2105(b), there is

no harm (to the auction process, or to individual bidders) caused by allowing

parties who have falsely claimed and obtained Designated Entity status and

resultant bidding credits at the inception of an auction, to keep and use the credits

in actual bidding, subject to post-auction adjustment. This allowance and

adjustment policy also is a rule of procedure and practice, since it has been, in fact,

employed by the Wireless Bureau in multiple auctions.

D. The Wireless Bureau Undisputedly Has Not Been Delegated With

Rule Change Authority

Notwithstanding §155(c)(1)’s seemingly broad mandate authorizing the

Commission to delegate “any of its functions” to subordinate bodies, the Wireless

Bureau has not been delegated any rulemaking authority, including to make and

implement the Rule Change. The Commission’s implementing regulation, at 47

C.F.R. §0.331(d), clearly indicates that the Bureau does not have delegated

authority to engage in rulemaking (including any material changes to any rules):

Authority concerning rulemaking proceedings. The


Chief, Wireless Telecommunications Bureau shall not
have the authority to act upon notices of proposed
rulemaking and inquiry, final orders in rulemaking
proceedings and inquiry proceedings, and reports arising
from any of the foregoing except such orders involving
ministerial conforming amendments to rule parts, or

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orders conforming any of the applicable rules to formally


adopted international conventions or agreements . . .
(emphasis added).

To the contrary, under these regulations, rule-making authority is vested in

the Commission as a whole. See 47 C.F.R. §1.407; 47 C.F.R. §1.411

(“Rulemaking proceedings are commenced by the Commission, either on it own

motion or on the basis of a petition for rulemaking.”) (emphasis added); 47 C.F.R.

§1.412; 47 C.F.R. §1.425 (“The Commission will consider all relevant comments

and material of record before taking final action in a rulemaking proceeding and

will issue a decision incorporating its finding and a brief statement of the reasons

therefor.”) (emphasis added).

The conclusion that the Wireless Bureau lacks rulemaking authority is also

mandated by the legislative history of 47 U.S.C. §155(c). The legislative reports

accompanying this legislation, in the course of discussing the delegation and

administrative review provisions of the statute, presumed that the delegation to the

Wireless Bureau and other subordinate bodies extends only to matters involving

“adjudications,” not to matters involving “rule-making.” For example, Senate

Report 576 began by indicating:

[T]he purpose of this legislation is to amend the


Communications Act of 1934 so that the Federal
Communications Commission will be able . . . to handle
its large workload of adjudication cases with greater
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speed and efficiency than is presently possible. This


would be done by authorizing the FCC to delegate
functions in adjudicatory cases.

87th Congress, First Session, 1961, at pages 2462-63. (emphasis added).5

The “General Statement” accompanying Senate Report 576 likewise

indicated that the statute “would authorize the Commission to delegate review

functions in adjudicatory cases.” Id., at 2463 (emphasis added). The Senate

Report goes on to state that:

The strengthening of the Communications Act provided


by the grant of additional authority to the Commission to
delegate its adjudicatory review functions should be of
material assistance to the Commission in increasing its
efficiency, cutting down on its backlog of pending cases,
and permitting the Commissioners to concentrate on the
more important and far-reaching policy problems with
which they are faced. . .
Id., at 2465. (emphasis added).

In its own decisions, the Wireless Bureau has itself acknowledged that it has

no rule-making authority. For example, in In Re: Amendment of Part 2 of the

Commission’s Rules, 22 FCC Rcd 19833 (2007), the Wireless Bureau rejected a

Petition for Reconsideration by the Society of Broadcast Engineers requesting a

5
This legislative history also incorporates by reference the APA’s definition
of “adjudication” (described above). See Conference Report 996: “Under this
legislation, the Commission would be authorized delegate review functions in
cases of adjudication (as defined in the Administrative Procedure Act) to boards of
employees.”
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modification to emission suppression requirements. The Wireless Bureau, citing

to 47 C.F.R. §0.331(d), held “the Clearinghouse Order was released by the Bureau

under delegated authority and SBE’s request for rule changes exceeds the

Bureau’s delegated authority.” Id., at 19839. (emphasis added).

For each of these reasons, it is clear that the Wireless Bureau does not have

rule change authority.

E. Accordingly, The Wireless Bureau’s Alleged Ultra Vires Rule

Change Is Not Within the Class of Administrative Actions

Subject to the Exhaustion Requirements of 47 U.S.C. §155(c)(7)

Since the Wireless Bureau does not have rule-making authority, it logically

follows that it lacks authority to promulgate a de facto rule (i.e., the ultra vires

Rule Change) which expressly conflicts with a properly promulgated regulation

(i.e., 47 C.F.R. §1.2105(b)). As described above, this is exactly what occurred

here. The Wireless Bureau has implemented an “allowance and adjustment”

policy in multiple auctions which directly contravenes the “major amendment” bar

of §1.2105(b). In doing so, the Bureau has flouted the Commission, by adopting

the very same procedure rejected by the Commission in formulating §1.2105; i.e.,

one permitting short-form applicants to change their bidding credit eligibility

status via amendment. See 63 FR 2315, 2322-23 (January 15, 1998). As

discussed, this procedure is essentially the Wireless Bureau’s policy judgment that,

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notwithstanding the “major amendment” bar of §1.2105(b), there is no harm in

permitting parties who have claimed Designated Entity status at the inception of an

auction to jettison their bidding credit status post-auction. Not only is this

judgment unfounded as a matter of substance (for the reasons discussed above) it

far exceeds the Wireless Bureau’s limited non-adjudicatory authority “involving

ministerial conforming amendments to rule parts.” (emphasis added).

F. Alternatively, Assuming Arguendo That The Wireless Bureau

Acted Within Its Delegated Authority, The Exhaustion

Requirements Of 155(c)(7) Are Nonetheless Inapplicable In Light

Of 47 U.S.C. §405(a)

Alternatively, assuming arguendo that the Wireless Bureau acted within its

delegated authority in the course of implementing the Rule Change, the exhaustion

requirements of §155(c)(7) would nonetheless be inapplicable, in light of 47

U.S.C. §405(a), which states:

After an . . . action has been . . . taken in any proceeding


by the Commission, or by any designated authority
within the Commission pursuant to a delegation under
section 155(c)(1) . . . any party thereto . . . may petition
for reconsideration. . .The filing of a petition for
reconsideration shall not be a condition precedent to
judicial review of any such . . .action, except where the
party seeking such review (1) was not a party to the
proceedings resulting in such . . . action, or

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(2) relies on questions of fact or law upon which the


Commission, or designated authority within the
Commission, has been afforded no opportunity to pass.

See also, Connecticut Dept. of Public Utility Control v. FCC, 78 F.3d 842,

849 (2nd Cir. 1996) (exhaustion requirements of §405(a) inapplicable where, in the

administrative proceedings below, the Commission “necessarily considered” the

point raised by the petitioner on appeal). In this case, both elements are met.

While the Rule Change did not formally arise out of a specific proceeding,

Petitioners were parties to Auction 87, in which the Rule Change was most

recently implemented. Moreover, the Commission (including the Wireless

Bureau) has had the opportunity to “pass upon” (i.e., eliminate) the Rule Change

prior to this appeal, but has failed to do so. As noted in Petitioners’ previous

filings, prior to the start of Auction 87 (immediately after DA 10-863 was issued),

Petitioners requested that the Bureau rescind the Rule Change.6 Nonetheless, the

Bureau refused to do so, proceeded with Auction 87 (with the Rule Change intact)

and allowed two bidders who had taken advantage of the Rule Change and who

had successfully bid for licenses in Auction 87 (Silke Communications, Inc. and

Two Way Communications, Inc.) to file long-form applications in Auction 87.

Furthermore, exhaustion of administrative remedies is not required under

§405 where “agency action is patently in excess of the agency’s authority.”

6
See Docket No. 3, at 5-6.
16
Case: 10-71808 11/08/2010 Page: 21 of 26 ID: 7539414 DktEntry: 27

Petroleum Communications, Inc. v. FCC, 22 F.3d 1164, 1170 (D.C. Cir. 1994).

For the reasons discussed above, the Wireless Bureau patently exceeded its

authority by engaging in rule-making; and, in particular, by effectively amending

§1.2105 in a manner which contradicts the intent of that rule to bar all major

amendments to short-form applications (as described in the regulation’s legislative

history).

Finally, any administrative exhaustion requirements that might otherwise be

applicable are inapplicable here under §155, as they would be futile. Courts have

recognized futility exceptions to administrative exhaustion requirements. In

Connecticut Dept. of Public Utility Control, for example, the Court held that under

§405:

[E]ven if the DPUC should have sought reconsideration


with the Commission, the futility exception to the
exhaustion requirement applies in this instance. Before
this Court, the Commission contends that the DPUC had
full notice that the Commission would rely for its
evaluation on the type of evidence to which petitioner
now objects. Accordingly, by its arguments before this
Court, “the Commission has made clear that it believes
that it had the legal authority to decide what it did and in
the manner it did.” The application of section 405’s
exhaustion requirement would serve no purpose in this
case.

Id.
Likewise, administrative remedies would have been futile to Petitioners. As

in Connecticut Dept. of Public Utility Control, Respondents herein “ha[ve] made

17
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clear that [they] believe that [they have] the legal authority to decide what [they]

did and in the manner [they] did.” In their prior filings with the Court,

Respondents have not merely challenged this appeal on procedural exhaustion

grounds, they have also steadfastly maintained that the Rule Change embodied a

proper construction and implementation of §1.2105.7 As such, they have

unambiguously taken the position that the Wireless Bureau had the authority to

take the action embodied by the Rule Change. Petitioners should not be beholden

to the empty formalism of exhausting administrative remedies where it is clear that

such exhaustion would have been utterly futile.8

III. CONCLUSION

For these reasons, the exhaustion requirements of §155(c)(7) are

inapplicable, Petitioners were not required to further exhaust administrative

remedies before filing this appeal and the panel’s dismissal of this case on the

basis of a failure to exhaust administrative remedies should be reconsidered and

vacated.

7
See, e.g., Docket No. 12, at pages 14-18.
8
Similarly, Courts have noted that administrative exhaustion is not required
where an agency is so “wedded to the procedures it has employed” as to establish
futility. See, e.g., Petroleum Communications Inc, at 1170. The Wireless Bureau
is “wedded” to the procedures established via the Rule Change, as evidenced by
the fact that it has implemented the Rule Change in nearly a dozen public auctions
over the past four years. Furthermore, Respondents, by virtue of the positions they
have taken in this appeal, have provided their imprimatur to these procedures. On
this additional basis, exhaustion of administrative remedies would be utterly futile.
18
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Dated: November 8, 2010

Respectfully submitted,

/S/
NOSSAMAN LLP
PATRICK J. RICHARD (SBN 131046)
(Counsel of Record)
prichard@nossaman.com
TAMIR D. DAMARI

50 California Street, 34th Floor


San Francisco, California 94111-4707
Telephone: (415) 398-3600
Facsimile: (415) 398-2438

Attorneys for Petitioners

19
Case: 10-71808 11/08/2010 Page: 24 of 26 ID: 7539414 DktEntry: 27

CERTIFICATE OF COMPLIANCE WITH CIRCUIT RULE 40-1(a)

Pursuant to Circuit Rule 40-1(a), Petitioners report to the Court that the brief

is proportionately spaced, utilizing 14 point Times New Roman typeface and

containing 4,190 words, as indicated by the computerized word count of counsel’s

word processing system.

Dated: November 8, 2010 NOSSAMAN LLP

By: /s/
Patrick J. Richard

Attorneys for Petitioners

1
252785_1.DOC
Case: 10-71808 11/08/2010 Page: 25 of 26 ID: 7539414 DktEntry: 27

CERTIFICATE OF SERVICE

I hereby certify that on November 8, 2010 a copy of the foregoing document

has been served on the following:

Via U.S. Mail and Electronic Filing

Austin Schlick, General Counsel


Daniel M. Armstrong, Associate General Counsel
Office of General Counsel
Federal Communications Commission
445 12th Street S.W.
Washington, DC 20554

Via U.S. Mail

United States Department of Justice


Civil Division, Appellate Staff
950 Pennsylvania Avenue NW
Washington, DC 20530

Marlene Dortch, Secretary


Office of the Secretary
Federal Communications Commission
9300 East Hampton Drive
Capital Heights, Md. 20743

Lester L. Boihem
Two Way Communications, Inc.
1704 Justin Road
Metairie, LA 70001

Frank W Ruth
Two Way Communications, Inc.
2819 East Simcoe Street
Lafayette, LA 70501

252785_1.DOC
Case: 10-71808 11/08/2010 Page: 26 of 26 ID: 7539414 DktEntry: 27

James D. Silke
Silke Communications, Inc.
680 Tyler Street
Eugene, Oregon 97402

Robert Schwaninger, Esq.


6715 Little River Turnpike, Suite 204
Annandale, Va. 22003
Attorney for Silke Communications, Inc.

/S/
Maura Bonal

252785_1.DOC

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