April 15, 1999
|In re:||Trinity Broadcasting of Florida, Inc., Miami, Florida, MM Docket No. 93-75|
We respectfully dissent from the Commission's finding that Trinity Broadcasting of Florida, Inc. ("TBF"), is "unqualified" to hold the license to operate television station WHFT. We are not persuaded that the finding of abuse of process that underlies this disqualification is warranted. Specifically, we take issue with two key conclusions in this Order. First, assuming that TBF's parent company, Trinity Broadcasting Network ("TBN") actually exercised de facto control of National Minority TV, Inc. ("NMTV"), we do not think that the legal definition of "minority-controlled" under the multiple ownership exception unambiguously included a de facto element applicable to NMTV. Second, we are not persuaded that the evidentiary record in this proceeding shows that TBN and its principals specifically intended in these full power television applications to deceive the Commission about control of NMTV.
As this Order acknowledges, our precedent clearly requires proof of a "specific intent to deceive" the Commission in order to make a finding of abuse of process.(1) Our precedent teaches that this "is not an easy matter to prove."(2) Today's decision finds an abuse of process on the basis of a record that shows, at most, legal uncertainty on the part of TBN's principals concerning the company's disclosure obligation and NMTV's status as a minority-controlled company. Such uncertainty, however, is quite a different thing from a particularized intent to deceive the Commission about the "true" facts of NMTV's situation and thereby willfully abuse its process.(3)
Today's Order asserts "that Commission rules and precedent have always given fair notice that de facto control is required to take advantage of the special provision concerning minority ownership in the multiple ownership rules."(4) Close examination of the relevant legal sources, however, reveals that this assertion is unsustainable. There was at least some ambiguity on this score in the multiple ownership rules. (5) In similar circumstances, the Commission has given the benefit of the doubt to the licensee. See Fox Television Stations, Inc., 10 FCC Rcd 8452 (1995) (exonerating party of allegations of misrepresentation and lack of candor on grounds of party's reliance upon advice of counsel and unclear state of relevant law). We would follow that precedent here.
Much like the situation in Fox Television, counsel for TBN advised its client that, for purposes of the television applications, NMTV was "minority-controlled" within the meaning of the rule. This position was based on the fact that two-thirds of the members of NMTV's board of directors were minorities. Counsel could well have based this advice on a strict reading of the definition of "minority-controlled" in Section 73.3555(e)(3)(iii). That section provided that: "Minority-controlled means more than 50 percent owned by one or more members of a minority group." One could rationally interpret that definition to adopt an exclusively de jure test for minority-controlled: the existence of "control" would be determined by an objective percentage formula. Indeed, given that nothing in the text of the language mentions any de facto element of the definition, that would be a natural reading of the rule.
Moreover, language in the Multiple Ownership Order adopting the rule supports this reading of section 73.3555(e)(3)(iii). In that Order, the Commission explained that it was "adopting rules today which permit group owners of television and radio stations to utilize a maximum numerical cap of 14 stations provided that at least two of the stations in which they hold cognizable interests are minority controlled."(6) The Commission continued:
A question arises as to the proper definition of a minority owned station for the purposes of our multiple ownership rules. In this regard, we note that the Commission has adopted different standards of minority control depending on the mechanism used to foster its minority policies. In the context of multiple ownership policies, we believe that a greater than 50 percent minority ownership interest is an appropriate and meaningful standard for permitting increases to the rules adopted herein.(7)
This passage represents the Multiple Ownership Order's entire discussion of the definitional issue. Nothing in its language suggests that the Commission intended to apply a de facto control test in addition to the 50 percent test. Notably, the dissenting statement of Commissioner Dennis Patrick asserted -- without provoking any rebuttal -- that "[n]o concern is given as to whether the 51% majority owners will exert any influence on the station's programming or will have any control at all."(8)
Thus, the Multiple Ownership Order and the definition of minority control that it adopted could reasonably be read to indicate that applicants need only demonstrate de jure control, i.e., greater than 50 percent minority ownership.
In deciding to disqualify NMTV, this Order does not admit of any ambiguity with respect to the applicability of the element of de facto control to TBN's application. Instead, the Order asserts that a note appended to the multiple ownership rule makes clear that NMTV was required to prove actual control in addition to 51% percent minority ownership.(9)
We are unconvinced that the presence of this note in section 73.3555 is sufficient to overcome the language of either the actual rule on "minority-controlled" or the Multiple Ownership Order regarding the existence of a de facto control test.
First, it is not clear that Note 1 applies to the definition of "minority-controlled" at all. Note 1 is appended to all of section 73.3555, not subsection 73.3555(e)(3)(iii) in particular. One thus could reasonably assume that the administrative gloss in Note 1 applies to those instances in section 73.3555 in which "control" is not otherwise defined, such as the TV duopoly rule.(10) It is, in fact, awkward to layer Note 1's explanation of "control" on top of the separate definition of "minority-controlled" in subsection 73.3555(e)(3)(iii); indeed, the definitional part of that regulation never uses the term "control." Moreover, the statements in subsection 73.355(e)(3)(iii) and the Multiple Ownership Order regarding the definition of minority control might colorably be thought to outweigh this addendum on the scale of legal authority.(11)
Even if Note 1 governed the meaning of "minority-controlled," the text of the note can not bear the weight with which the majority saddles it. Note 1 states that "the word 'control' as used herein is not limited to majority stock ownership, but includes actual working control." (emphasis added). This language does not necessarily reflect an intent to "prevent licensees from circumventing the limitations imposed by the multiple ownership rules by exercising actual control over stations over which they did not have legal control."(12) Rather, it could well be understood to manifest an attempt to explain that "control" can mean majority stock ownership, but that it can also mean actual working control, as determined on a case-by-case basis. That is, the Note could plausibly be interpreted to mean that if an entity fails the 51% ownership test, but can nevertheless show that minorities exercise actual working control over the entity, that entity would still qualify as minority-controlled. A 51% equity interest was thus a proxy for control, but control could also be demonstrated on a fact-specific, case-by-case basis where that test was not met. That is not the same thing, however, as requiring the application of a fact-specific, de facto control analysis in all cases.(13)
Next, the Commission argues that agency precedent "has always required minorities to exercise de facto control over 'minority-controlled' stations" and suggests that the Commission meant to follow this precedent in the Multiple Ownership Order by "mak[ing] specific reference" to the 1982 Policy Statement on Minority Ownership in Broadcasting.(14) Neither claim is borne out by the relevant documents.
We take the last point -- that the Commission intended to adhere to the "traditional" definition of minority controlled when it adopted the ownership preference -- first. The 1982 Policy Statement, upon which today's decision relies as proof of such adherence, was merely cited in a footnote. The footnote followed this sentence: "We note that the Commission has adopted different standards of minority control depending on the mechanism used to foster its minority policies."(15) The Commission reads too much into the fact of this citation. To be sure, the Multiple Ownership Order specifically referred to the Policy Statement, but only as an example of the varying definitions of minority-controlled in FCC administrative law. There is no indication that this citation was meant to incorporate the Statement's definition of minority-controlled into the ownership exemption rules. That citation thus provides no substantive pass-through to either the Policy Statement or the 1978 Policy Statement quoted therein. In fact, immediately after citing the 1982 Policy Statement, the Multiple Ownership Order went on to adopt an apparently independent standard based on the different "mechanism" at issue: "In the context of the multiple ownership policies, we believe that a greater than 50 percent minority ownership interest is an appropriate and meaningful standard."(16) The citation to the 1982 Statement serves to establish a contrast to the rule that the Commission actually adopted in the Multiple Ownership item, not a corollary. The "meaningful standard" that the Multiple Ownership Commission adopted was, in its own words, a "greater than 50 percent minority ownership interest" standard, not the standard of the 1982 Policy Statement.(17)
In any event, close examination of the 1982 Policy Statement on Minority Ownership in Broadcasting,(18) which this Order cites as evidence that "Commission precedent has always required minorities to exercise de facto control over 'minority-controlled' stations,"(19) leads one to doubt, not to embrace, that proposition. Minority Ownership in Broadcasting presented the Commission's policy statement on minority tax certificates. In paragraph 7 of that statement, the Commission indicated that entities would be deemed qualified for tax certificates "where the minority ownership interest in the entity exceeded fifty percent or was controlling."(20) The paragraph does not state that minority interests must uniformly demonstrate actual control -- over and above satisfaction of the ownership percentage test -- in order to receive a preference. To read it that way is to ignore the clear disjunctive nature of the sentence.
Nor does paragraph 16 make such a statement. Although that paragraph indicates that control is a factor in issuing tax certificates, it does not clearly require parties affirmatively to show de facto control in all circumstances in order to claim a minority benefit.(21) Notably, the sentence in question refers to "minority ownership of and control in the entity below 51 percent."(22) Reading "control" independently of "minority ownership" -- as the Order does by emphasizing the word "and"(23) -- makes no grammatical sense; it produces the odd phrase "control in the entity below 51 percent." The less strained reading of this language is that "control in the entity" refers back to the proxy of a 51% ownership interest. In other words, minority ownership of 51%, which in turn establishes control, should not be diminished by the transaction.
Finally, William M. Barnard(24) does not bolsterthe Order'scontention that de facto control has always been a general requirement for a finding of "minority-controlled." That case involved the granting of a tax certificate notwithstanding the fact that the minority ownership interest in the beneficiary entity was less than 51% -- specifically, 45.5%. It thus does not support the proposition that actual control is a general requirement for a finding of "minority-controlled." To the contrary, it indicates that, where the ownership interest is less than 51%, the Commission under its "traditional" approach will apply a de facto test in order to save the entity from automatic disqualification for minority-controlled status. More specifically, this case is about "the unique nature of limited partnerships," for that was the factor that caused the Commission to find "sufficient minority involvement" to warrant "issuance of a tax certificate" even though the percentage test was not met.(25) Even if the case applied to section 73.3555(e)(3)(iii),(26) that still would not mean that a de facto control test governed TBN's application, in which there was no question of failure to meet the percentage test.
In short, we find unpersuasive the evidence marshaled in the Order to show that Commission rules, notes, or precedent clearly required NMTV to make an affirmative de facto showing in its application. A reasonable attorney, as well as a reasonable layperson, might have read the regulation without being on clear notice that the minority control test included any such element in the context of the multiple ownership exemption. It certainly did not make clear that a de facto control showing was necessary when the percentage test was satisfied. In light of the foregoing, we cannot find that TBN's failure to make an initial and affirmative showing of de facto control constituted an abuse of process.
The evidence cited in the Order to show that the principals of TBN may have been "aware that" NMTV's compliance with section 73.3555(e)(3)(iii) was "doubtful"(27) is insufficient to show that they possessed the requisite intent to deceive. At best, such evidence shows some amount of reservation about NMTV's technical status. But that is often the case in the legal arena, especially where, as here, an agency adopts different tests for different purposes. Notably, the only direct testimony in this record on the question of intent is that the principals believed that, notwithstanding TBN's interaction with NMTV, the nature of that relationship would not raise legal problems relating to de facto control so long as other practices to promote NMTV's independence were followed.(28)
In rejecting this direct testimony as to intent, today's decision states that the opinion of TBN counsel that NMTV qualified as minority-controlled "does not reflect a reasonable interpretation of Commission policy."(29) Given our analysis in Part I of the regulations in effect when the application was filed, we cannot say that this belief was unreasonable or clearly erroneous under the circumstances.
Moreover, the reasonableness of a party's belief is not the issue here. For abuse of process determinations, the relevant question is whether the party possessed a specific intent to deceive. Even if the definition of "minority-controlled" under the multiple ownership rules was unambiguous at the time of NMTV's filing (which, as explained above, it was not), that does not establish that TBN specifically intended to deceive the Commission about matters relating to control of NMTV. The clarity of the law is not probative of the filers' intent. From the proposition that the Commission provided clear notice of a de facto control test, one might deduce, as an objective matter, that TBN should have known of the de facto control requirement. But that proposition tells us nothing about the subjective state of mind of TBN's principals (the essence of an intent standard) or what they actually knew. What a reasonable person should have known is not necessarily what a particular person knew. And abuse of process is not an objective question but a subjective one.
The Order's conclusions about intent, however, are based on speculation about what the majority feels the principals must have known, not on proof of what the principals did know. As discussed above, the Order's rejection of TBN counsel's direct testimony is based only on the "reasonableness" of that view, not on any evidence that he actually knew that NMTV did not meet the relevant tests and consciously endeavored to hide that from the Commission. Similarly, the Order asserts that TBN principal "Crouch. . . could not have been unaware that he dominated NMTV, that NMTV was not truly independent of TBN, and that there was no basis to claim otherwise."(30) Yet the Order points to no proof that he was aware of those things, or that he intentionally withheld those facts in order to perpetrate a fraud on the Commission. Whether the Commission finds the principals' belief that they had complied with the relevant rules to be with or "without foundation,"(31) the point is what the parties actually and specifically intended. On this score, the item adduces scant evidence.
In search of evidence on the intent question, the Order relies on a provision in one of TBN's purchase contracts that conditioned the contract on NMTV's compliance with the minority control rule.(32) It is commonplace, however, for commercial contracts to be conditioned on regulatory compliance or approval; such conditions are no admission of a subjective belief that the matters in question indeed fail to satisfy the relevant regulatory requirements.(33) Again, what this provision reflects is, at most, some lack of certitude about NMTV's status as a "minority-controlled" company within the meaning of the regulation. And again, this is not at all surprising given the case-by-case, fact-specific, multi-factored nature of the legal determination of de facto control -- if the parties even knew that was the test. Whatever its probative force, this contractual language is certainly not enough, in our view, to overcome the direct record testimony on intent given by the principals.
Finally, the Order suggests that the novelty of the question presented (the meaning of section 73.3555(e)(3)(iii) as applied to a nonprofit public charity) at the time of TBN's filing increased its burden of initial disclosure. This sword of an argument is double-edged, however. It could just as readily cut in favor of TBN on the intent question.(34) The fact that "the Commission had never before applied the provision to an arrangement"(35) such as NMTV's means that there was no precedent to guide the applicants in their filing. Notice therefore was less, not more, clear than the Commission argues it was. In light of the novelty of the issue, any failure by TBN to disclose certain information might seem less the product of an intent to deceive than of lack of guidance on the meaning of "minority-controlled" under the ownership exemption.
In short, the evidence adduced by the Commission does not persuade us that TBN possessed a specific intent to deceive the Commission with respect to control of NMTV, and we are aware of no other record evidence that demonstrates such intent. While intent to deceive certainly can be proven by circumstantial as opposed to direct evidence, the amount of circumstantial evidence of intent to deceive here is not particularly substantial. The only direct evidence on this issue is that the parties did not mean to deceive the Commission. On such a record, a finding of abuse of process is unwarranted.
To conclude, we think this Order errs in asserting that TBN was on clear notice of the applicability of a de facto control showing to its applications. We further believe that the record evidence in this proceeding is not sufficient to prove a specific intent to deceive the Commission. In these circumstances, we find that imposition of the "death penalty" of disqualification is both unfair and unwarranted.
2. WWOR-TV, Inc., 7 FCC Rcd 636, 638 (1992) (internal quotation omitted).
3. We emphasize that the finding of abuse of process is based on the assumption that TBF was affirmatively required to disclose the details of the relationship between NMTV and TBN in its initial application. There is no indication on this record that the parties failed to provide relevant information once the staff requested it; indeed, the record shows that TBN subsequently disclosed the additional facts regarding "control" upon which the Commission today relies. See Order atparas. 94-95. In this regard, the Order imposes an unduly high burden of initial disclosure upon applicants. See id. atpara. 95 (rejecting subsequent disclosure as curative because TBN did not "[take] the initiative" to do so and because disclosure occurred as a response to questions asked by Commission staff). By making the validity of subsequent disclosures turn on the reason why disclosure was made, the Order distorts what ought to be the real issue, i.e., whether disclosure was made.
4. Order at para.86.
5. Indeed, the Mass Media Bureau Trial Staff initially came to the same conclusion. See Mass Media Bureau Proposed Findings of Fact & Conclusions of Law, at159.
6. Amendment to Section 73.3555 of the Commission's Rules Relating to Multiple Ownership of AM, FM, and Television Broadcast Stations,100 FCC 2d 74, 94 (1985) (herein after"Multiple Ownership Order").
7. 100 FCC 2d at 95 (footnotes omitted) (emphasis added).
8. Id. at104. While Commissioner Patrick's interpretation of the Order is of course not binding in any legal sense, it is nonetheless probative of the meaning of the Order. At a minimum, it shows that reasonable people such as the Commissioner could have read the Order and related rule as adopting a straight percentage test for companies that met the 51% level.
9. Order atpara. 86.
10. See 47 C.F.R. section 73.3555(e)(1).
11. Cf.Laurens Walker, Writings on the Margin of American Law: Committee Notes, Comments, and Commentary, 29 Ga. L. Rev. 993, 994 (1995) (arguing that "courts should assign little, if any, weight to these examples of gloss").
12. Order at para. 86.
13. The Order's reliance onSouthwest Texas Public Broadcasting Council, 85 FCC 2d 713 (1981), see Order atpara. 86, is also misplaced. That decision sets forth a definition of "control" that is limited by its terms to the "determin[ation] whether an unauthorized transfer of control has occurred" under section 310(d) of the Communications Act. 85 FCC 2d at 715. As the quoted sentence states in full, "[s]ection 310(d) contemplates every form of control, actual or legal, direct or indirect, negative or affirmative, over basic operating policies." Id. (emphasis added). That statutory provision is not at issue here. Moreover, it stands to reason that in the context of unauthorized transfers the test for control might be exclusively de facto. Unauthorized transfers of control are rarely effected by overt, recorded acts like the transfer of stock; they are, by definition, sub rosa, a fact that practically requires the Commission to look beyond legal ownership.
14. Order at para. 87.
15. 100 FCC Rcd at para. 46.
17. Cf. Order atpara. 87 n. 17(asserting that "the Commission clearly intended to establish a 'meaningful standard' of control to ensure that minorities had actual control over the stations benefiting from its minority ownership policies").
18. 92 FCC 2d 849 (1982).
19. Order at para87.
20. 92 FCC 2d at 853 (emphasis added).
21. For this reason, it is not surprising that the Multiple Ownership Order cited paragraph 16 only for the proposition that the Commission "has adopted different standards of minority control depending on the mechanism used to foster its minority policies, "as discussed above.
22. Id.at 857.
23. Order atpara.90.
24. 44 RR 2d 525 (1978) (cited inOrder at para. 89).
25. 92 FCC 2d at para.8.
26. Barnard involved the interpretation and application of the 1978 Policy Statement on minority ownership. As explained above, the Multiple Ownership Order never incorporated the definitional rule of the 1982 Policy Statement, much less that of the 1978 Policy Statement discussed in the 1982 Statement. The relevance of this case to the meaning of section 73.3555(e)(3)(iii) is thus difficult to see.
27. Order at para.. 91; see also id. atpara.94 (faulting application for "not acknowledg[ing] that there is even a question of whether NMTV should be deemed minority controlled") (emphasis added); id. at para. 83 (concluding that the "claim of minority control was at best doubtful").
28. Transcript at 3206, 3226, 3228, 3399-401, 3604.
29. Order at para. 92.
32. Id. at para. 93 & n. 21.
33. Id. at para. 92.
34. The argument also contradicts the majority's earlier contention that the "traditional" definition of minority-controlled applied in the multiple ownership context. If that were true, then precedent on the meaning of section 73.3555 as applied to this case indeed would have existed.
35. Id. at para. 93.