FCC v. Nextwave Personal Communications, Inc. (01-653)

Two items of interest from the Court. First, the Court issued its opinion in FCC v. Nextwave Personal Communications, Inc. (01-653). After today, there is only one opinion still outstanding from the October sitting (Miller-El v. Cockrell), and since Kennedy hasn’t issued a majority opinion from October yet, it’s a good bet that he has the majority assignment in Miller-El. (In fact, Kennedy hasn’t issued any majority opinions this Term.)

Second, the Court approved new Supreme Court rules effective May 1, 2003. The revisions are primarily addressed to timing issues (i.e., time for filing briefs), and so not that interesting unless you will have a case pending on May 1, 2003. Let me know if you have any questions.On to the decision. In Nextwave, Scalia (in all relevant respects for everyone but Breyer) held that the FCC violated Section 525 of the Bankruptcy Code when it revoked Nextwave’s licenses for failure to make timely payments on the purchase of those licenses. Section 525 provides (with ellipses removed) that “a governmental unit may not revoke a license to a person that is a debtor under this title solely because such debtor has not paid a debt that is dischargeable in the case under this title.” The facts of this case are somewhat complicated, so I’ll try to simplify: Nextwave purchased licenses for broadband personal communications services in FCC-sponsored auctions. Nextwave made a down payment on the purchase price, promising to pay the rest under an installment plan, and the FCC took a security interest in the licenses. The licenses provided that they were conditioned on full and timely payment of the purchase price. Predictably (this is a bankruptcy case), Nextwave declared bankruptcy instead of making its payments. After some procedural wrangling (not important here), the FCC asserted that Nextwave’s licenses had been cancelled automatically when it failed to make its first payment, and announced that Nextwave’s licenses were available for auction. The FCC refused to reconsider this position, so Nextwave appealed to the D.C. Circuit, claiming that the FCC’s action was in violation of the Administrative Procedure Act and Section 525 of the Bankruptcy Code. The D.C. Circuit agreed, and the Supreme Court affirmed.

The Court began with the basic proposition that agency action can be set aside if it is “not in accordance with law,” and that this command applies to all laws, not just those laws that the agency is charged with administering. Thus, if the FCC’s action violates the Bankruptcy Code, it must be set aside. The balance of the Court’s opinion addresses the FCC’s arguments for why its action did not violate the Bankruptcy Code, and then responds to the dissent.First, the Court rejected the FCC’s argument that Section 525 does not apply because it had a valid regulatory motive for the cancellation. According to the Court, the FCC’s motive for the cancellation is irrelevant. Section 525 means “nothing more or less than that the failure to pay a dischargeable debt must alone be the proximate cause of the cancellation — the act or event that triggers the agency’s decision to cancel, whatever the agency’s ultimate motive in pulling the trigger may be.” The Court held that an exception for cancellations that have a valid regulatory purpose (as argued by the FCC) would swallow the rule and, moreover, would render the stated exceptions to Section 525 superfluous. Second, the Court rejected the FCC’s argument that Nextwave’s license obligations are not “dischargeable” “debts” under the Code because they were merely financial conditions attached to a license. According to the Court, under the plain language of the Bankruptcy Code, Nextwave’s obligation was a debt. “In short, a debt is a debt, even when the obligation to pay it is also a regulatory condition.” The fact that bankruptcy courts cannot alter regulatory conditions is irrelevant to whether the debt is “dischargeable.” Under the Bankruptcy Code, all debts are dischargeable unless they fall within a listed exception, none of which were applicable here. Third, the Court rejected any suggestion that its interpretation created a conflict between the Bankruptcy Code and the Communications Act. The Communications Act does not require the FCC to cancel licenses for failure to pay, and thus the FCC’s decision to do that was merely a policy preference. The Court concluded with the well-established principle that “when two statutes are capable of coexistence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective.” Finally, the last part of the opinion (a part that Stevens did not join) responded to Breyer’s dissent. Suffice it to say that Scalia reads Breyer’s dissent as insufficiently anchored in the plain language and inordinately tied to the purposes and legislative history of the statute.

Stevens concurred in part and concurred in the judgment. He thought the statutory question was very close, but was persuaded to concur in the judgment by 3 exceptions to Section 525. Those exceptions, according to Stevens, create an ambiguity. Ultimately, Stevens does not believe that the Court’s holding will be unfair to the FCC, and thus he concurred.

Breyer dissented. Do all of you lawyers remember that classic statutory interpretation hypo from 1st year law school: “No vehicles in the park”? This hypo plays a prominent part in Breyer’s dissent, which basically argues that you have to interpret the language of the statute consistent with the purpose of the statute. To make his point, Breyer goes into a long discussion of the text, purposes, and legislative history of Section 525. In sum, Breyer argues that the statute should not be read to prohibit the FCC’s action because it was not covered by the statute’s purpose (to forbid discrimination against those who are, or were, in bankruptcy).