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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In re: Applications of ) ) NORTHWEST BROADCASTING, INC. ) File No. BAL-951011EA Assignor ) ) and ) ) WESTERN PACIFIC, Inc. ) Assignee ) ) For Consent to Assignment of Station) KKIC(AM), Boise, Idaho ) ) and ) ) RADIO BROADCASTING, INC. ) File No. BALH-951011EB Assignor ) ) and ) ) CAPITAL WEST, INC. ) Assignee ) ) For Consent to Assignment of Station) KJHY(FM), Emmett, Idaho ) MEMORANDUM OPINION AND ORDER Adopted: February 6, 1997 Released: February 14, 1997 By the Commission: 1. The Commission has before it an Application for Review from Ray Montierth and Sawtooth Energy Reserves, Inc. (collectively "Petitioners") concerning the assignment of license for stations KKIC(AM), Boise, Idaho and KJHY(FM), Emmett, Idaho. Petitioners seek to reverse staff decisions which granted the assignments and procedurally dismissed Petitioners' request for reconsideration. For the reasons discussed below we affirm the staff's decision and deny the Application for Review. BACKGROUND 2. On December 5, 1995 the staff of the Mass Media Bureau granted its consent to the assignment of license for stations KKIC(AM) and KJHY(FM). The two transactions were related in that the two assignors are sister corporations and the two assignees also are sister companies. The assignments were unopposed and were consummated on December 6, 1995. 3. Petitioners, who claim a right to be majority stockholders in both assignor corporations, participated in this proceeding for the first time on January 16, 1996, when they filed a Petition for Reconsideration. According to Petitioners, both assignments were void from the start because Steve Sumner (the assignors' corporate President who signed both applications) acted without corporate authority. That argument stems from Petitioners' claim that, at least nine months previously, a state court awarded a portion of Sumner's controlling stock interests to Petitioners. According to court documents which the parties submitted at our request, the court's award is not yet final. Petitioners are litigating related issues in an ongoing Idaho proceeding. On January 4, 1996 the Idaho court, apparently unaware that the assignments had already been consummated, issued a preliminary injunction enjoining consummation of the KKIC assignment. The court declined to issue a similar injunction for station KJHY because that station's licensee was not a party to the litigation at that time. It also declined to appoint a receiver for either station. 4. The staff dismissed Petitioners' reconsideration request on March 20, 1996. The staff observed that our rules provide for dismissal of reconsideration requests from non-participants who do not show good cause for failure to participate earlier, and rejected Petitioners' argument that they could not have participated earlier because they lacked adequate public notice. See 47 C.F.R.  1.106(b)(1). Thus, the staff did not individually address each of Petitioners' arguments, but observed that many of those arguments were based on private disputes beyond Commission jurisdiction, and that any FCC action would be inappropriate absent a final court determination. Although the staff noted that a preliminary injunction had been issued, it determined that the injunction could not prevent a consummation that had already occurred. The staff emphasized, however, that its earlier approval of the assignments was not intended to prejudice any relief ultimately awarded by the court and that the Commission could take further action, if appropriate, after a final decision of the court. Petitioners now allege staff error and seek our review. The assignors, Northwest Broadcasting, Inc. ("NBI") and Radio Broadcasting, Inc.("RBI") (collectively "Assignors"), filed an Opposition to which Petitioners replied. DISCUSSION A. Procedural Dismissal/Public Notice 5. The issue of whether the Petition for Reconsideration should have been dismissed procedurally or fully addressed turns on the adequacy of public notice. Generally, for broadcast assignment applications, the Commission must publish a public notice, and the applicant must give local notice over the station and in a newspaper. See 47 C.F.R.  73.3564 and 73.3580. Petitioners allege that the Assignors did not make timely newspaper or on-air announcements, thereby preventing Petitioners from participating earlier, and requiring consideration of their arguments now. Petitioners allege that they learned of the proposed sale of KKIC on November 30, 1995 when they saw the previous day's newspaper containing the last of the station's late- published notices. At that time, there was still approximately one week remaining before the Commission would act. Newspaper publication was not required with respect to station KJHY because, as the only FM station licensed to its community, our rules provide that notice by way of on-air announcements is sufficient. See 47 C.F.R.  73.3580(e). Petitioners allegedly did not learn of the proposed KJHY transaction until after the assignment was already approved and consummated. 6. We find that the staff's action on the two assignment applications at issue was preceded by public notice that substantially complied with our rules and, therefore, that the staff was correct to dismiss procedurally a request for reconsideration from a non-participant. Of primary importance among our public notice requirements is the Commission's own issuance of a public notice, a process specified by statute. See WHDH-AM, Inc., 6 FCC Rcd 4329 (1991). 47 U.S.C.  309(b). It is undisputed that the Commission published a timely public notice announcing acceptance of the KKIC and KJHY assignment applications on October 24, 1995. The staff did not act on the applications for at least 30 days, in compliance with statutory requirements which are intended to provide the public an opportunity to file Petitions to Deny. See 47 U.S.C.  309(b). See also 47 C.F.R.  73.3564(c). 7. Our rules also provide for on-air announcements and newspaper publication at the local level to more fully assure that the local community is apprised of the proposed assignment. See47 C.F.R.  73.3580. The requirement of a local public notice is also based on statute, but the statute gives the Commission broad discretion over the methods to be used. See 47 U.S.C.  311(a). Petitioners allege that the Assignors did not give proper announcements on the air or in the newspaper. Petitioners did not raise the on-air allegation previously, and we generally do not consider matters on which the staff had no opportunity to pass. See 47 C.F.R.  1.115(c). We shall, on our own motion, discuss on-air announcements, however, because KJHY would have been required to give local notice solely by that method and we believe that the public interest warrants a discussion under those circumstances. See 47 C.F.R.  1.117. 8. The assignor maintains that it gave proper local public notice for KJHY(FM). We agree. As noted, the assignor did not publish any local newspaper announcements for that station because, as the only FM station licensed to the community of Emmett, Idaho, station KJHY falls within a small category of stations exempt from the publication requirement. See 47 C.F.R.  73.3580(e). Local public notice by on-air announcements would have been sufficient for KJHY. See 47 C.F.R.  73.3580(d)(3). Petitioners make a bare assertion that there may not have been on-air announcements at either station, but they do not support that allegation with any evidence such as affidavits from persons who listened to the stations for significant time during the relevant period. As a result, they failed to make a prima facie case. See Astroline Communications Co. v. FCC, 857 F.2d 1556 (D.C. Cir. 1988). We thus will accept as uncontroverted Assignors' certification in their original applications that they would give local on-air announcements as required. Accordingly, we do not find any deficiency in the notice for KJHY(FM). 9. With respect to station KKIC(AM), Petitioners provide a certification from the local newspaper showing that publication occurred 4 times beginning November 21, 1995 and ending November 29, 1995. As the assignor concedes, these notices were late. When notice is published in a daily newspaper, as here, the rules provide for publication twice a week for two consecutive weeks, to be completed within 30 days of tendering the application. See 47 C.F.R.  73.3580(c). Thus, publication announcing the KKIC filing should have been given in any two consecutive weeks between October 11, 1995 and November 11, 1995. Instead, notice was given in two consecutive weeks between November 21, 1995 and November 29, 1995. Although this publication was late, it is similar to notice that we have found to nevertheless be adequate. SeeWHDH-AM, Inc., 6 FCC Rcd 4329 (1991) (local newspaper publication and on-air announcements, albeit 2 months late, substantially complied with our requirements when the Commission also published a timely statutory notice). Petitioners try to distinguish the WHDHcase, arguing that no one was harmed in WHDH due to extensive media coverage. We do not agree that the two cases are dissimilar. In the present case, as in WHDH, potential objectors had sufficient notice to enable timely participation. Petitioners had timely constructive notice by the Commission publication and on-air announcements, and received actual notice by the late- published local notices. A copy of the assignment application was available locally. Petitioners could have objected, requested an extension, or otherwise preserved their rights prior to Commission action for over one month following on-air announcements and Commission publication, or during the one-week period following actual notice. Petitioners attribute their failure to do so to their local attorney's inexperience with Commission procedures, but an alleged failure on the part of an applicant's counsel is not a basis on which we would ordinarily grant relief. See generally Crystal Broadcast Partners, 11 FCC Rcd 4680 (1996) (attorney's failure to file timely application due to a death in the family unacceptable reason for late-filed Petition). Accordingly, we find that the staff properly dismissed Petitioners' pleadings, which relied solely on the adequacy of public notice to explain their failure to participate during the earlier stages of this case. B. Court Proceedings and Injunction 10. Further, we do not believe that Petitioners' arguments would have yielded a different result, even had they been submitted properly before grant of the assignment applications. SeeBlack Television Workshop, 6 FCC Rcd 381 (1991); recon. denied 6 FCC Rcd 4431 (dispute over corporate authority does not preclude staff action on assignment application). As the staff recognized, most of Petitioners' arguments revolve around questions of state law and private contracts, matters which the Commission historically and consistently has left to local courts of appropriate jurisdiction. See John F. Runner, 36 RR 2d 773 (1976); Transcontinental Television Corp., 21 RR 945 (1961). Absent a final court judgment raising issues within the Commission's jurisdiction, we would not ordinarily act on matters resulting from private contracts. Absent a prior court injunction we would not ordinarily withhold consent to an otherwise acceptable transaction. 11. In the present case, there are partial judgments and it was initially not entirely clear to us whether these were final adjudications or non-final matters in an ongoing court proceeding. Thus, in August 1996, the staff requested that the parties submit information about the status of the court proceeding. We learned that the Idaho litigation is ongoing, and is not likely to reach a final conclusion in the near future. The case has recently been transferred to a new judge, the Petitioners were in the process of retaining new local counsel, the discovery process had not been completed, and no date had yet been set for trial. Before the case was transferred, the previous judge issued partial default judgments in favor of Petitioners on one of the case's 14 counts. Pursuant to those partial judgments, Petitioners have awards against defendants, including Sumner, for 700 of the 1000 authorized shares of Northwest Broadcasting, Inc. and for 400 of the 1000 authorized shares of Radio Broadcasting, Inc. Petitioners's argument that the Commission should rescind approval of the sale of both KKIC(AM) and KJHY(FM) is based on those partial judgments. However, none of the partial judgments is yet considered final, even though the partial judgments were reached through default. In fact, the court record shows that a "Motion to Set Aside Default Judgment" is currently pending. As the court stated in ruling that Petitioners could not have the Sheriff take forcible possession of the stock awarded: There are several partial judgments in this case, but no final judgment resolving all issues among the parties has ever been entered and no Rule 54(b) certificate of finality has been issued. . . . It is fundamental that a writ of execution may not issue on a partial judgment unless it has been certified as final pursuant to Rule 54(b). . . Since none of the judgments has been certified as final and since there still are unresolved issues between the parties, it is hereby ordered that the writ of execution is quashed. Memorandum and Order Quashing Writ of Execution, Sawtooth Energy Reserves, Inc. v. Northwest Broadcasting, Inc., No. 96812, (August 7, 1995, 4th D. Ada, Idaho), at 3. 12. Consistent with the ongoing nature of this case and lack of finality, Petitioners now claim only a "right" to own the stock. They have not filed any application with the Commission seeking our consent to a de jure transfer of control, as would be required if a final judgment had been entered granting Petitioners a majority of stock in either assignor corporation. See 47 C.F.R.  73.3540. Nor is there any evidence currently before us that Petitioners nevertheless assumed any control of station finances, personnel, or programming and we do not, therefore, consider whether a de facto unauthorized transfer of control occurred. Steve Sumner has been the only person to file Commission documents on behalf of either assignor corporations, is the only controlling corporate stockholder of record, and is someone upon whose qualifications the Commission has passed. Although Petitioners argue that the Commission should view the court's partial judgments as having the effect of displacing Steve Sumner from his corporate roles at NBI by early 1995, we have already noted that these judgments are not final and note as well that Petitioners have stated in court filings as recently as May 1996 that "Defendant Sumner is a principal officer, director, and controlling shareholder of NBI." With respect to the other assignor corporation, RBI, it is clear that the partial judgments affect only a minority (at most 40%) of the stock. In a summary to the new judge of matters that still must be decided at trial, Petitioners include the issue of "Who owns the contested shares?" and court documents show that at least four others claim rights to unspecified amounts of stock. It would be premature for us to issue any ruling on based on partial judgments that are not final as to Sumner and that leave unresolved stock claims of other parties. 13. The assignee, whom we have found qualified, is operating the stations and providing service to the public during the pendency of the court dispute. The court declined to appoint a receiver for the corporations. Absent any further action by the court, we find that the public interest is served by continuing to allow the current arrangement, under which the public is receiving broadcast service. We take note that Petitioners, based on their inability to locate John Tanner (the sole individual stockholder of both assignee corporations) at the address he provided in the assignment application, argue that the assignee corporations are shams, that Mr. Tanner may not exist, and that the assignees provided fraudulent information to the Commission. The record does not contain sufficient evidence to support that claim, however. At most, the record suggests that the address given by Mr. Tanner in his application may no longer be valid as of a date after approval of the assignment application. Mr. Tanner provides a notarized document attesting to his existence and we find no evidence in the record to support the allegation of sham. The court will be considering related matters. Although we may consider at the time of a final court ruling any related decision of the court, based on the information currently before us we would simply remind the assignees of our requirement that licensees update our records if their mailing address is no longer accurate. See 47 C.F.R.  1.5. 14. We also recognize that the Idaho court issued a preliminary injunction to prevent the assignor from consummating the KKIC transaction (which had already been consummated). The purpose of a preliminary injunction is generally to restrain a defendant's future actions, thereby maintaining the status quo pending the outcome of litigation. By the time of the court's injunction, however, there was a new status quo. We cannot tell what the court would have done had it known that the transaction had already been consummated. In the absence of an affirmative court order returning the parties to their prior positions, using means that would not conflict with the Commission's exclusive jurisdiction over broadcast licensing, Commission action would be inappropriate. It is significant to note that Petitioners list as an unresolved matter in the court case "Should the Court order the transactions between NBI and WPI and between RBI and CWI rescinded?" Plaintiff's Case Synopsis at 19. It would be presumptuous for the Commission to act before the court had an opportunity to finally decide this question, especially when the Petitioners themselves do not believe that the question has been settled by the court. Accordingly, we cannot give any effect to the injunction and, consistent with our longstanding policy, will await the court's final ruling on the merits. See Radio Station WOW v. Johnson, 326 U.S. 120, 132 (1945). As the staff correctly observed, the Commission's approval of an assignment application merely authorizes the parties to proceed with the transaction and is not intended to prejudice any relief to which the parties may ultimately be entitled or to foreclose the Commission from taking any appropriate action in light of any such court decision. See generally, Chief Washakie TV, 46 R.R. 2d 1594, 1598, n.7 (1980) (grant of assignment subject to outcome of pending litigation). To further document this intent we shall place an affirmative condition on the assignment grant. ORDERING CLAUSES 15. Accordingly, IT IS ORDERED that the Application for Review filed on January 16, 1996 by Sawtooth Energy Reserves, Inc. and Ray Montierth IS DENIED. The December 5, 1995 grant of the assignments of license for stations KKIC(AM) and KJHY(FM) IS AFFIRMED WITH THE CONDITION that our action is without prejudice to whatever further action, if any, may be appropriate upon a final ruling in Sawtooth Energy Reserves, Inc. v. Northwest Broadcasting, Inc. et al., Case No. 96812 (4th D. Ada, Idaho). FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary