FCC 94-335 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In re Applications of ) MM DOCKET NO. 88-306 ) Henry R. Malloy, Jr. d/b/a ) File No. BPH-860627MH REM MALLOY BROADCASTING ) ) PEEBLES BROADCASTING ) File No. BPH-860603ME COMPANY ) ) James S. Lee and ) File No. BPH-860707MS Donald L. Baker d/b/a ) INTERACTIVE MEDIA ) ) FREE AIR CORPORATION ) File No. BPH-860707NH ) BERNARD DAWSON ) File No. BPH-860707NW ) SPECIAL MARKETS MEDIA, INC. ) File No. BPH-860703MH ) For Construction Permit for a ) New FM Station on Channel 275A ) in Raleigh, North Carolina ) MEMORANDUM OPINION AND ORDER Adopted: December 22, 1994 ; Released: January 9, 1995 By the Commission: 1. By this action we dismiss on procedural grounds the requests for extraordinary relief filed by Rem Malloy and Free Air Corporation, deny the motion to disqualify counsel filed by Free Air, and dismiss as moot related motions to stay filed by Rem Malloy and by Free Air. In dismissing the requests for extraordinary relief that ask us to reverse a Review Board's order remanding this case for further hearings, we find that neither Rem Malloy nor Free Air has demonstrated urgent and compelling circumstances warranting a waiver of the prohibition against interlocutory appeals under 47 C.F.R.  1.115(e), and that the ongoing rulemaking proceeding that proposes to revise the criteria for selecting among fully qualified applicants is not a basis for reviewing the Board's interlocutory order at this time. Finally, for the reasons set forth herein, we find nothing improper about Lawrence Bernard continuing to serve as legal counsel for Bernard Dawson. BACKGROUND 2. This case involves six applicants, three of which were disqualified by the presiding judge. Of the three applicants found qualified, the ALJ preferred Bernard Dawson over Rem Malloy Broadcasting and Free Air based upon its comparative showing. Free Air, which did not propose any integration, ranked far behind Dawson. While exceptions were pending before the Review Board, the Commission imposed a freeze on comparative proceedings in response to Bechtel v. Federal Communications Commission, 10 F.3d 875 (D.C. Cir. 1993). In a Memorandum Opinion and Order, released on September 12, 1994, the Review Board specified financial qualifications issues against Rem Malloy Broadcasting and against Free Air Corporation and remanded this case to the Presiding Judge for the preparation of a second further supplemental initial decision on these basic qualifications issues. Rem Malloy Broadcasting, 9 FCC Rcd 4822 (Rev. Bd. 1994). 3. The issue against Malloy was specified in connection with Free Air's exceptions to the ALJ's denial of its December 1, 1988 Petition to Enlarge Issues Against Rem Malloy. See Order, FCC 89M-116 (released Jan. 13, 1989). The Board determined that a financial issue was warranted because there were substantial and material questions of fact: (1) as to whether Malloy lost reasonable assurance of financing between 1986 (when he relied solely on his father's promise of a $250,000 loan) and 1988 (when he secured a $375,000 bank loan and relied in addition on a reduced $150,000 loan commitment from his father), given the substantial decline in his father's net liquid assets between 1986 and 1988; and (2) as to whether Malloy's bank letter remains valid given the financial difficulties of Malloy's father, who has personally guaranteed the bank loan. Rem Malloy, 9 FCC Rcd at 4825-26  15-16. 4. The issue against Free Air was specified in connection with the Review Board's consideration of Bernard Dawson's January 11, 1994 Motion to Reopen the Record and Enlarge the Issues. The Board determined that there is a substantial and material question of fact as to whether Free Air has been continuously financially qualified. Rem Malloy, 9 FCC Rcd at 4829  27-29. It cited: (1) Free Air's Opposition to the Motion to Reopen the Record and Enlarge the Issues which, in the Board's view, lent credence to the allegations that Free Air's 50% owner, Sara J. Estrada, was responsible for financing at least part of Free Air's application and that she was depending upon her husband's assets to meet her financial commitment to Free Air; (2) the imposition of a $2.6 million tax lien against assets allegedly jointly owned by Mrs. Estrada and her husband, who had entered guilty pleas to tax evasion and conspiracy to defraud the government for which he was fined $20,000 and received a prison term of forty eight months in 1991; and (3) information presented to the tax court characterizing Mr. Estrada's economic resources as only modest. 5. The Board saw no reason to postpone hearings into these issues during the comparative freeze, since resolution of these issues might make it possible to decide this case without any comparative analysis. In the Board's view, a remand is consistent with the Freeze Orders, which had directed the Board to continue issuing decisions "in those cases in which consideration of the applicants' comparative qualifications is unnecessary to resolve the case." Rem Malloy, 9 FCC Rcd at 4822  3, citing FCC Freezes Comparative Proceedings, 9 FCC Rcd at 1055; Modification, FCC-204 at 2. REQUESTS FOR EXTRAORDINARY RELIEF 6. Rem Malloy and Free Air [hereafter Movants] seek a waiver of 47 C.F.R.  1.115(e) to permit an immediate appeal of the Board's interlocutory remand order, and request further that the Commission stay the effectiveness of the Board's remand order. In their respective pleadings, Rem Malloy and Free Air urge that the Board's action is contrary to the comparative freeze, and that, in any event, the issues specified against Rem Malloy and Free Air are not warranted under Commission precedent. 7. Peebles Broadcasting Company, Interactive Media, and Bernard Dawson (Joint Opponents) oppose the requests filed by Rem Malloy and Free Air. They urge that neither has shown the urgent and compelling circumstances necessary to warrant a waiver of section 1.115(e), let alone satisfied the more stringent requirements for a stay. Turning to the merits, Joint Opponents submit that the Board's action remanding the proceeding was consistent with the spirit, as well as the letter, of the Freeze Orders, that the Board's interpretation of the Freeze Orders deserves deference given the substantial public interest in ending litigation, and that the Board correctly specified financial issues against Rem Malloy and Free Air. 8. Discussion: We will dismiss on procedural grounds the requests for extraordinary relief and dismiss as moot the Movants' requests to stay this proceeding pending termination of the comparative freeze. The Board's remand order is an interlocutory action that neither denied the applications filed by Rem Malloy and Free Air nor terminated either applicant's right to participate in this proceeding. Under 47 C.F.R.  1.115(e) appeals of interlocutory rulings are deferred until after the Board has issued a final decision in the proceeding. As we indicated in Sound Broadcasting Company, 6 FCC Rcd 6903, 6903-04  6 (1991), "[a] party seeking to proceed other than in a manner prescribed by our procedural rules, including 47 C.F.R.  1.115(e)(1), has a heavy burden of establishing that the resulting disruption of the proceeding is outweighed by urgent and compelling circumstances which could not be considered by their timely presentation in accordance with those rules." See also Great Lakes Broadcasting, Inc., 6 FCC Rcd 4331  3 (1991), citing George E. Cameron, Jr. Communications, 51 RR 2d 1419, 1420 (1982). 9. Neither Rem Malloy nor Free Air has met this burden. Great Lakes, which both applicants cite, is readily distinguishable. As we noted in Sound Broadcasting, the heavy burden of demonstrating compelling and urgent circumstances was met in Great Lakes because the petition to enlarge issues was grossly untimely and was based on facts readily discoverable by the moving party, and because, "based on undisputed facts, the motion was without merit." 6 FCC Rcd at 6904  7. 10. Here, by contrast, we observe no comparable defects. The Board specified financial issues against Malloy based upon its consideration of Free Air's timely filed exceptions to the ALJ's denial of its December 1, 1988 Petition to Enlarge Issues Against Rem Malloy. With respect to the financial issue specified against Free Air, Bernard Dawson's January 11, 1994 Motion to Reopen the Record and Enlarge Issues against Free Air was, as the Board acknowledged, untimely. We note, however, that Free Air's financial proposal was not subject to discovery, that Free Air has not denied the factual premises underlying Dawson's motion (e.g. that Free Air is relying in part on Mrs. Estrada for financing, who in turn is relying on her husband's economic resources), and that we have been cautioned against imposing an unreasonable burden on a party seeking to raise legitimate questions particularly where the party under scrutiny has exclusive control over the pertinent facts. See generally California Public Broadcasting Forum v. FCC, 752 F.2d 670, 679-80 (D.C. Cir. 1985). We do not decide at this time whether these circumstances, which the Board cited, warrant the addition of a financial issue against Free Air. Without regard to the correctness of the Board's action, however, these circumstances persuade us that the untimeliness of the underlying Motion to Reopen is not a compelling and urgent circumstance warranting a waiver of section 1.115(e)'s prohibition against interlocutory appeals. 11. Moreover, to the extent that Free Air and Rem Malloy challenge the factual and/or legal basis for the Board's determination to add the issues, their claims provide no basis for the extraordinary relief requested. Arguments that the Board's action is contrary to precedent may be presented to the Commission in a timely filed application for review of the Board's final decision in this case. In addition, a party may request relief pursuant to summary decision procedures before the ALJ to correct any alleged factual errors underlying the Board's determination to add financial issues against these applicants. 12. Nor are we persuaded that there is an equitable basis for the relief requested. In our view, neither the ongoing revision of the comparative process nor the comparative freeze constitutes compelling and urgent circumstances warranting a waiver of section 1.115(e). As the Joint Opponents note, there is a substantial public interest in ending lengthy adjudicatory proceedings and bringing new service to the public that is furthered by the Board's remand order. 13. Furthermore, the remand order is consistent the Freeze Orders, which contemplated that the Commission, the Review Board, and the ALJs would continue issuing decisions "in cases in which consideration of the applicants' comparative qualifications is unnecessary to resolve the case." Modification, at 2. There is no merit to Movants' claim that the Board's failure to rule on the exceptions concerning the other four applicants contravenes that portion of the Freeze Orders indicating that "proceedings w[ould] not be bifurcated to adjudicate the basic qualifications of some of the applicants, where their disqualification would leave unresolved comparative issues involving other applicants." Id. In accordance with this proscription against bifurcation, the Review Board properly remanded the proceeding without ruling on those pending exceptions. A ruling on those exceptions would constitute a final decision as to those other four applicants that would be ripe for Commission review under 47 C.F.R.  1.115 of the Commission's rules. This would in effect bifurcate the proceeding, contrary to the Freeze Orders. By remanding the proceeding for hearings on the basic qualifications of two of the six applicants, however, the Board has retained jurisdiction over the proceeding, and it will be in a position to consider exceptions relating to all six applicants once the ALJ has considered the questions concerning the basic qualifications of Rem Malloy and Free Air. 14. Given the public interest importance of expediting new service to the public, we believe that it is appropriate to remand a comparative proceeding for further hearings on a basic qualifying issue where there is a possibility that such hearings may obviate the need to make a comparative choice among other applicants. We are confident, moreover, that the Board, mindful of the need to avoid unnecessary hearings, would not have ordered these hearings unless it concluded, based upon a careful evaluation of all pending exceptions, that the disqualification of Rem Malloy and Free Air could obviate the need for further comparative analysis in this proceeding. See Elinor Lewis Stephens, 9 FCC Rcd 5259 (Rev. Bd. 1994), application for review pending, in which the Board refused to entertain an interlocutory appeal of an ALJ's refusal to issue a partial Initial Decision on all non-comparative hearing issues in a three party comparative case, noting that "[t]he Board is not in a position to evaluate whether the basic qualifications issues in this case would be decisional, nor do[es] [it] have any basis for concluding that the ALJ had abused his discretion." Id.  4. In Stephens, the Board distinguished Rem Malloy, where "the exceptions and other factual record that were properly within [its] review function ... indicated that resolution of basic qualification issues 'may make resolution of the proceeding possible without any comparative consideration.'" Id. (emphasis added). Whatever the merits of the Board's decision in Stephens, which we do not prejudge in any way, its distinction of Rem Malloy in that case indicates that it has ordered further hearings in this case based upon more than a cursory review of the pending exceptions. Thus, resolution of the financial issues specified against Rem Malloy and Free Air may, as the Board reasoned, permit resolution of the case without further comparative analysis, inasmuch as the ALJ found three of the other four applicants are disqualified and exceptions filed with the Review Board dispute his finding that the fourth applicant is qualified. 15. We recognize that neither of these applicants can reliably assess its likelihood of prevailing under the comparative issue, pending resolution of the rulemaking proceeding in GC Docket 92-52 which proposes to revise the criteria used to select among competing applicants. It may be true, as Movants suggest, that an applicant's comparative position can affect its willingness to adjudicate its basic qualifications. However, longstanding precedent holds that only basically qualified applicants are entitled to any comparative consideration. Notwithstanding their inability to evaluate their prospects under the revised comparative criteria at this time, there is nothing unfair about requiring Rem Malloy and Free Air to litigate their basic qualifications prior to completion of the proposed revision of the comparative criteria. 16. Finally, our action herein is consistent with Thomas W. Lawthorne, 9 FCC Rcd 4475 (1994). That case involved two applicants, and basic qualifications issues had been specified against one applicant before the freeze on comparative proceedings. As in this case the comparative issue would be moot only in the event of an adverse determination on the specified issue and the applicant would, as a result of our remand order, be required to litigate its qualifications before completion of the ongoing rulemaking proceeding that proposes to revise the criteria used to select among fully qualified applicants that are mutually exclusive. MOTION TO DISQUALIFY COUNSEL 17. Free Air seeks to have Lawrence Bernard, who represents Bernard Dawson, disqualified from further participation in this proceeding because of an alleged conflict of interest stemming from Bernard's purported affiliation in 1990-91 with the law firm of Putbrese & Hunsacker (P&H), which represented Free Air in this proceeding from 1986 to 1988. According to Free Air, Bernard's representation of Dawson violates the D.C. Bar Rules of Professional Conduct and the ABA Code of Professional Responsibility. It notes that the issues specified by the Board (as a result of Dawson's late-filed Petition to Reopen) seek inquiry into Free Air's 1986 certification of its financial qualifications, that P&H represented Free Air at the time of that certification, and that Bernard, by virtue of his previous association with P&H, would have had access to P&H's files indicating the basis of the 1986 certification and the source of its funding. Thus, Free Air claims that Bernard is subject to a serious conflict of interest in that he must zealously advance Dawson's interests and he has a conflicting duty, pursuant to ABA and D.C. Bar Rules, to protect the confidentiality of any information in P&H's files concerning Free Air's application. 18. As Dawson contends, Free Air's allegations -- which are not supported by affidavits or other documentary evidence -- are entirely speculative and without merit. Free Air would have us infer that Dawson's Petition to Reopen was based upon confidential information simply because it raised questions as to the source of the applicant's funding at a time when it was represented by P&H's David Hunsacker. However, statements under penalty of perjury from David Hunsacker and Lawrence Bernard reflect that Bernard was never a member of P&H, that his association with P&H was only an office-sharing arrangement that did not afford Bernard access to confidential files concerning any P&H client (including Free Air), and that Bernard never discussed the merits of this case with David Hunsacker or with any other P&H attorney. Under these circumstances, we find that, although Dawson and Free Air have adverse interests, Bernard's representation of Dawson creates no actual conflict of interest that warrants his removal from this case. 19. In this regard, Dorothy J. Owens, 104 FCC 2d 848 (Rev. Bd. 1986), review denied, 2 FCC Rcd 38 (1987), cited by Free Air, is readily distinguishable. There, an attorney simultaneously represented in one ongoing Commission proceeding an applicant having an 18% non-voting stockholder who was also a 70% limited partner in an opponent of counsel's client in a second proceeding. This created a serious conflict of interest since the interests of the two clients were in sharp conflict, pleadings filed by the attorney as well as oral statements to the ALJ strongly supported the inference that the attorney had been privy to confidential information that could be used against the client's best interest in the second case, and that inference was not rebutted by the attorney's self-serving denials. In contrast, Lawrence Bernard, who represents Bernard Dawson, never served as counsel for Free Air or any of its principals. Nor was he ever a member of the law firm that represented Free Air. Thus, while Free Air and Dawson have sharply opposing interests, Bernard's representation of Dawson involves no impermissible conflict of interest. 20. Free Air also urges, however, that Bernard's former association with P&H creates an appearance of a conflict of interest that jeopardizes the integrity of this proceeding, and that statements denying that Bernard had access to confidential information concerning Free Air and downplaying his connections with P&H must be disregarded as self-serving. In Dorothy J. Owens, which Free Air cites in this regard, an attorney was removed from further participation because pleadings as well as oral representations to the Presiding Judge undermined his claim that he was not privy to privileged information, not merely because that claim was deemed to be self-serving. 21. Nothing comparable belies the credibility of the claims in this case. Dawson's Petition to Reopen does inquire into the basis of Free Air's financial certification during its representation by P&H. However, the petition relies entirely on Attachments consisting of an excerpt from Free Air's 1986 application and of publicly available documents that postdate the time during which Bernard shared office space with P&H. Thus, we find not even a hint of impropriety that would warrant disqualifying Bernard from further participation in this proceeding. See Miller Broadcasting, Inc., 98 FCC 2d 725, 729 (Rev. Bd. 1984), indicating that, once a hint of actual conflict develops, an attorney is expected to remove himself. We conclude therefore that Bernard's continued representation of Dawson will not jeopardize the integrity of this proceeding. ORDERS 22. ACCORDINGLY, IT IS ORDERED, That the Emergency Motion for Extraordinary Relief, filed September 19, 1994 by Rem Malloy Broadcasting; and the Emergency Petition for Extraordinary Relief, filed September 19, 1994, by Free Air Corporation ARE DISMISSED; and that the Joint Motions to Strike Reply, filed on September 29, and on October 7, 1994, by Peebles Broadcasting Company, Interactive Media, and Bernard Dawson (Joint Opponents) ARE DISMISSED as moot. 23. IT IS FURTHER ORDERED that the Motion to Disqualify Counsel, filed September 19, 1994, by Free Air Corporation IS DENIED, and that the Motion to Strike Reply, filed October 5, 1994 by Bernard Dawson IS DENIED. 24. IT IS FURTHER ORDERED That the Motion to Stay, filed September 19, 1994, by Free Air Corporation, and the Motion to Stay Proceeding, filed September 19, 1994, by Rem Malloy Broadcasting ARE DISMISSED as moot. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary