Top Banner

of 34

Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Cause

May 30, 2018

Download

Documents

Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    1/34

    IN THEUNITED STATES COURT OF APPEALS

    FOR THE NINTH CIRCUITCase No. 10-71808

    SKYBRIDGE SPECTRUM FOUNDATION, a Delaware NonprofitCorporation, INTELLIGENT TRANSPORTATION & MONITORINGWIRELESS LLC, a Delaware Limited Liability Company, V2G LLC, a

    Delaware Limited Liability Company, and WARREN HAVENS, anindividual.

    Petitioners,v.

    UNITED STATES OF AMERICA, and the FEDERALCOMMUNICATIONS COMMISSION

    Respondents.

    RESPONSE TO JUNE 14, 2010 ORDER TO SHOW CAUSE

    NOSSAMAN LLPPATRICK J. RICHARD (SBN 131046)(Counsel of Record)[email protected] D. DAMARI

    50 California Street, 34th FloorSan Francisco, California 94111-4707Telephone: (415) 398-3600Facsimile: (415) 398-2438

    Attorneys for Petitioners

    Case: 10-71808 07/06/2010 Page: 1 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    2/34

    i

    Table of Contents

    Page

    I. INTRODUCTION........................................................................... 1

    II. RELEVANT FACTS....................................................................... 1

    III PROCEDURAL HISTORY ............................................................ 7

    IV. ARGUMENT .................................................................................. 7

    A. The Rule Change Is Appealable Under47 U.S.C. 402(a).................................................................. 7

    1. The Rule Change Is A Legislative Rule ..................... 8

    2. The Rule Change Is Binding..................................... 17

    3. The Rule Change Is Final ......................................... 19

    4. Ample Precedent Supports This CourtsAuthority To Invalidate an Ultra Vires RuleChange ...................................................................... 24

    B. The Exhaustion Requirements of 47 U.S.C. 155(c)(7)are not Applicable to this Case ........................................... 27

    Case: 10-71808 07/06/2010 Page: 2 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    3/34

    1

    I. INTRODUCTION

    This case arises out of an attempt by the Federal Communications

    Commission (the FCC), through its Wireless Telecommunications Bureau (the

    Bureau), to modify FCC regulations which limit permissible amendments to

    wireless license applications (the Rule Change). This Rule Change is ultra

    vires , occurring without APA-mandated notice and comment. As described more

    fully below, the FCC and the Bureau have promulgated and implemented an

    amendment policy directly contradicting the unambiguous language of 47 CFR

    1.2105(b), the regulation governing amendments to final auction applications. As

    demonstrated infra , this policy ( i.e. , the Rule Change) is a binding final legislative

    rule and is therefore appealable.

    II. RELEVANT FACTS

    Petitioners are private nonprofit and for-profit businesses based in Berkeley,

    California. They provide wireless communications services for government

    entities, critical infrastructure companies and others. To this end, they obtain and

    use licenses procured from the FCC. When the FCC receives license applications

    for commercial purposes that are mutually exclusive, such as applications for the

    same frequency in the same area, (and for other reasons), the Federal

    Communications Act (FCA) requires it to choose among these applications by

    Case: 10-71808 07/06/2010 Page: 3 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    4/34

    2

    using a competitive bidding process. See 47 U.S.C. 309(j)(1). 1 Under this

    bidding system, so-called Designated Entities receive preference pursuant to

    FCC regulations. See 47 CFR 1.2110(a). 2 Specifically, Designated Entities

    obtain bidding credits at FCC-administered auctions based upon their revenue size

    (determined by average annual attributable gross revenues, as defined). These

    bidding credits permit Designated Entities to in effect "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 the auction). 3 Thus, the value of a

    bidding credit stems from the competitive business advantage it confers it is only

    secondarily a payment discount upon a successful bid.

    The purpose of the Designated Entity bidding credit is to further the FCA-

    mandated Congressional policy of promoting the development of small and

    minority-owned wireless businesses, including by bidding preferences. See 47

    1 If . . . mutually exclusive applications are accepted for any initial license orconstruction permit, then . . . the Commission shall grant the license or permitto a qualified applicant through a system of competitive bidding that meets therequirements of this subsection.

    2This regulation states: Designated entities are small businesses, businessesowned by members of minority groups and/or women, and rural telephonecompanies.

    3 Thus, a Designated Entity entitled to a 35% bidding credit which offers a bid of $650 for a particular license at auction is deemed to have bid $1,000 at theauction.

    Case: 10-71808 07/06/2010 Page: 4 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    5/34

    3

    U.S.C. 309(j)(3)(B), 309(j)(4)(C) and (D). 4 Petitioners are small businesses

    which qualify for the highest (35%) Designated Entity bidding credit.

    The auction process under 47 U.S.C. 309(j)(1) involves three steps: (1) the

    FCCs identification of qualified bidders among license applicants on the basis

    of certified statements in so-called short-form applications (otherwise known as

    Form 175s); (2) the participation of qualified bidders in the auction for the

    spectrum licenses being sold; and (3) post-auction award of licenses to high

    bidders upon the acceptance of the high bidders long form application.

    Several safeguards are built into the auction system to protect its integrity.

    First, each applicant which claims on its short-form application Designated Entity

    status (to obtain a bidding credit) pursuant to 1.2110 must declare, under penalty

    of perjury, that it in fact qualifies as a Designated Entity. See 47 CFR

    1.2105(a)(2)(iv) (The short-form application must contain the followinginformation . . . If the applicant applies as a designated entity pursuant to 1.2110,

    4 These statutes direct the FCC to design and execute auctions promotingeconomic opportunity and competition . . . by disseminating licenses among awide variety of applicants, including small businesses. To this end, the FCCis directed to ensure that small businesses, rural telephone companies, andbusinesses owned by members of minority groups and women . . .are given the

    opportunity to participate in the provision of spectrum based services and, forsuch purposes, consider the use ofbidding preferences. As described morefully below, the Rule Change ensures precisely the opposite. It deprivessmall businesses of the benefits of bidding preferences, since (as discussedinfra ) it permits larger companies to take advantage of the bidding preferencesystem, eliminating the advantage to small businesses the preference systemwas designed to promote.

    Case: 10-71808 07/06/2010 Page: 5 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    6/34

    4

    a statement to that effect and a declaration, under penalty of perjury, that the

    applicant is qualified as a designated entity under 1.2110.)

    Second, 47 CFR 1.2105(b) bars Major amendments [to short form

    applications that] includechanges in an applicants 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 a 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).

    However, over the course of the past four years, the FCC, through the

    Bureau, has undermined these safeguards and Congressional intent, by instituting a

    de facto legislative rule change ( i.e. , the Rule Change), the terms of which directly

    contradict the plain language of 1.2105(b). The Rule Change has beenimplemented in at least 9 separate public auctions since 2006, most recently in

    connection with the FCCs Auction of Lower and Upper Paging Bands Licenses,

    AU Docket No. 09-205 (Auction 87), which includes 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 changeaffecting their eligibility for a bidding credit. Biddersshould clearly state the nature of the change in anamendment to their short-form application and in thesummary letter referenced above. In cases of diminished

    Case: 10-71808 07/06/2010 Page: 6 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    7/34

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    8/34

    6

    significantly, under the Rule Change, unscrupulous applicants 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 down-

    grade 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 FCCs

    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 FCC

    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 smallbusinesses are allowed to bid with falsely obtained bidding credits a preference

    that Congress intended to confer only upon small businesses and other limited

    classes of preferred categories.

    Petitioners, who are bona fide small companies with deserved bidding

    credits in Auction 87 (and who have participated in past auctions, and intend to

    participate in future auctions) have been and continue to be harmed by this Rule

    Change. Therefore, by virtue of the instant appeal, they seek an Order of this

    Case: 10-71808 07/06/2010 Page: 8 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    9/34

    7

    Court invalidating the Rule Change, thus compelling the FCC to comply with

    1.2105(b) as written.

    III. PROCEDURAL HISTORY

    On June 8, 2010, Petitioners filed this appeal challenging the Rule Change.

    Concurrently, Petitioners filed an Emergency Motion for Stay of Agency Action

    or, in the Alternative, Petition for Writ of Mandamus (the Emergency Motion.)

    in which Petitioners sought an emergency stay of Auction 87, which was

    scheduled to commence on June 15, 2010.

    On June 11, 2010 the FCC filed an Opposition to the Emergency Motion, to

    which Petitioners filed a Reply on June 14, 2010. On June 14, 2010, this Court

    denied the Emergency Motion and issued an Order directing Petitioners to show

    cause why this appeal should not be dismissed for lack of subject matter

    jurisdiction. In its Order, the Court identified two jurisdictional issues:(i) appealability under 47 U.S.C. 402(a); and (ii) exhaustion of remedies under 47

    U.S.C. 155(c)(7). Each of these issues is addressed in turn.

    IV. ARGUMENT

    A. The Rule Change Is Appealable Under 47 U.S.C. 402(a)

    47 U.S.C. 402(a) provides for appellate jurisdiction over Any proceeding

    to enjoin, set aside, annul or suspend any order of the Commission under this

    Chapter. However, not all actions by the Commission are appealable under

    Case: 10-71808 07/06/2010 Page: 9 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    10/34

    8

    402(a). For example, jurisdiction under 402(a) is premised upon a final FCC

    determination. See 28 U.S.C. 2342 (otherwise known as the Hobbs Act). 5

    Petitioners maintain that three factors militate decisively in favor of the

    appealability of the Rule Change 6 under 402(a): (i) the Rule Change is a de facto

    legislative rule; (ii) the Rule Change is final; and (iii) the Rule Change is binding.

    Each of these factors is discussed below.

    1. The Rule Change Is A Legislative Rule

    The appealability of the Rule Change can only be discerned in view of its

    nature, purpose and effect; i.e. , whether it is an interpretive rule or a legislative

    rule. The status of the Rule Change as a legislative rule is important because

    legislative rules are more likely to be deemed final appealable orders. S ee

    Mckee , Judicial Review Of Agency Guidance Documents: Rethinking The Finality

    5 This statute states: The court of appealshas exclusive jurisdiction to enjoin,set aside, suspendor to determine the validity ofall final orders of theFederal Communications Commission made reviewable by section 402(a) of title 47.

    6 The FCCs most recent promulgation of the Rule Change was in Auction 87(discussed above). The most recent known application of the Rule Change alsooccurred during the course of this auction, when the Wireless Bureau allowedtwo applicant companies to down-grade their bidding credit eligibility status.

    This action was referenced in the Emergency Motion as the Two-BidderDetermination. Nonetheless, it should be noted that the Two-BidderDetermination is not the decision giving rise to this appeal. Rather, it is merelyone recent application of the Rule Change which has been applied for yearssince 2005. Thus, to be clear, this case is not an appeal from a licensingdetermination under 47 U.S.C. 402(b), but is instead an appeal of a finalagency action under 47 U.S.C. 402(a).

    Case: 10-71808 07/06/2010 Page: 10 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    11/34

    9

    Doctrine, 60 Admin. L. Rev. 371, 389-90 (The legislative/nonlegislative

    distinction is also critical . . . where the challenger seeks relief based on a specific

    statutory judicial review provision authorizing review only of regulations or

    final regulations.). This is because legislative rules, in contrast to non-binding

    interpretive rules, create rights, impose obligations, or effect a change in existing

    law pursuant to authority delegated by Congress. Hemp Indus. Assoc. v. DEA ,

    333 F.3d 1082, 1087 (9th Cir. 2003).

    A finding that a rule is a legislative rule is also important because An

    agency can issue a legislative rule only by using the notice and comment

    procedure described in the APA, [whereas] an agency need not follow the notice

    and comment procedure to issue an interpretive rule. Id .7

    There are three circumstances under which a rule has the force of law

    sufficient to render it a legislative rule: (i) when, in the absence of the rule, therewould not be an adequate legislative basis for enforcement action; (ii) when the

    agency has explicitly invoked its general legislative authority; or (iii) when the

    rule effectively amends a prior legislative rule. Id . The third category is

    particularly pertinent to this case. Under the rubric established by this category,

    7 In making this determination, the Court need not accept the agencyscharacterization of a rule at face value. Id ; see also , Croplife America v. EPA ,329 F.3d 876, 883 (D.C. Cir. 2003) (The agencys characterization of its ownaction is not controlling if it self-servingly disclaims any intention to create arule with the force of law, but the record indicates otherwise.)

    Case: 10-71808 07/06/2010 Page: 11 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    12/34

    10

    a rule may be considered legislative even where the agency does not hold out the

    rule as such, if it is inconsistent with a prior rule having the force of law. Id . As

    noted by the DC Circuit, such ultra vires rule changes are particularly insidious:

    Congress passes a broadly worded statute. The agencyfollows with regulations . . . Then as years pass, theagency issues circulars or guidance or memoranda . . .often expanding the commands in the regulations . ..Law is made, without notice and comment, withoutpublic participation, and without publication in theFederal Register or the Code of Federal Regulations. . ..An agency operating in this way gains a largeadvantage. It can issue or amend its real rules, i.e. , itsinterpretative rules and policy statements, quickly andinexpensively without following any statutorilyprescribed procedures. . . . The agency may also think there is another advantage--immunizing its lawmakingfrom judicial review.

    See Appalachian Power Co. v. EPA, 208 F.3d 1015, 1020 (D.C. Cir. 2000).

    As described below, the Rule Change effectively amends a prior legislative

    rule. It is therefore a legislative rule, which is invalid because it has been issued

    without notice and comment. See Barahona-Gomez v. Reno , 167 F.3d 1228, 1235

    (9 th Cir. 1999); Yesler Terrace Community Council v. Cisneros , 37 F.3d 442, 449

    (9 th Cir. 1994); Southern California Aerial Advertisers Assoc. v. Federal Aviation

    Admin. , 881 F.2d 672 (9 th Cir. 1989).

    As noted above, the prior legislative rule at issue is 47 CFR 1.2105, which

    states, in relevant part:

    (a)(2)(iv) If the applicant applies as a designated entity[the applicant must provide], a statement to that effect

    Case: 10-71808 07/06/2010 Page: 12 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    13/34

    11

    and a declaration, under penalty of perjury, that theapplicant is qualified as a designated entity.(b)(2)The Commission will provide bidders a limitedopportunity to cure defects specified herein (except forfailure to sign the application and to make

    certifications).During the resubmission period forcuring defects, a short-form application may be amendedor modified to cure defects identified by the Commissionor to make minor amendments or modifications. Afterthe resubmission period has ended, a short-formapplication may be amended or modified to make minorchanges or correct minor errors in the application. Majoramendments cannot be made to a short-form applicationafter the initial filing deadline. Major amendmentsinclude changes in ownership of the applicant that wouldconstitute an assignment or transfer of control, changesin an applicants size which would affect eligibility fordesignated entity provisions.Minor amendmentsinclude, but are not limited to, the correction of typographical errors and other minor defects notidentified as major. An application will be considered tobe newly filed if it is amended by a major amendmentand may not be resubmitted after applicable filingdeadlines.

    Thus, 1.2105(b)(2) unambiguously provides that major amendments to

    final Form 175s are strictly prohibited. Major amendments include any

    amendment relating to an applicants size which would affect eligibility for

    Designated Entity status under FCC rules (made after the Form 175 deadline). 8

    8 Similarly, under 47 CFR 1.65(a): Each applicant is responsible for thecontinuing accuracy and completeness of information furnished in a pendingapplication or in Commission proceedings involving a pending application. . .Whenever there has been a substantial change as to any other matter which maybe of decisional significance in a Commission proceeding involving thepending application, the applicant shall as promptly as possible and in anyevent within 30 days, unless good cause is shown, submit a statement

    Case: 10-71808 07/06/2010 Page: 13 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    14/34

    12

    The regulation further provides that in no event is a failure to supply an accurate

    certification curable by amendment or otherwise. Id. (The Commission will

    provide bidders a limited opportunity to cure defects specified herein (except for

    failure to sign the application and to make certifications).) Furthermore, a major

    ownership amendment to an application for which the filing window has closed

    would normally make that application untimely and therefore unacceptable for

    filing. In Re Biennial Regulatory Review , 13 FCC Rcd 9672, *40-41 (1998).

    By its terms, 1.2105(b)(2) applies to any amendments relating to

    Designated Entity size. It encompasses amendments in which an applicant avers

    that it is a smaller Designated Entity size than originally claimed. It also

    encompasses amendments in which an applicant avers that it is larger than

    originally claimed. In the course of enacting 1.2105(b)(2), the FCC considered

    a proposal that would have permitted applicants after the short-form deadline todown-grade a claim for a bidding credit via an amendment:

    [C]ommenters opinions differ on what types of amendments the Commission should categorize as majoror minor. For example, AT&T and ISTA argue thatmajor amendments should include all changes inownership that constitute a change in control, as well asall changes in size that would affect an applicantseligibility for designated entity provisions. In contrast,Metrocall contends that all changes in ownership

    continued from previous pagefurnishing such additional or corrected information as may be appropriate.(emphasis added).

    Case: 10-71808 07/06/2010 Page: 14 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    15/34

    13

    incidental to mergers and acquisitions, non-substantialpro forma changes, and involuntary changes inownership should be categorized as minor. Metrocallalso states that an applicant should not be permitted toupgrade its designated entity status after the short form

    filing deadline ( i.e. , go from a small to very smallbusiness), but should be permitted to lose its designatedentity status as a result of a minor change in control ( i.e. ,exceed the threshold for eligibility as a small business).

    63 FR 2315, 2322 (January 15, 1998), emphasis added.

    The FCC squarely rejected this proposal:

    [W]e believe that a definition of major and minor

    amendments similar to that provided in our PCS rules isappropriate. After the short-form filing deadline,applicants will be permitted to make minor amendmentsto their short-form applications both prior to and duringthe auction. However, applicants will not be permittedto make major amendments or modifications to theirapplications after the short-form filingdeadline.Consistent with the weight of the commentsaddressing the issue major amendments will also includeany change in an applicants size which would affect anapplicants eligibility for designated entityprovisions.In contrast, minor amendments will include. . . the correction of typographical errors and otherminor defects, and any amendment not identified asmajor.

    Id .

    Nevertheless, the FCC and Bureau, over the past four years, have

    systematically implemented the Rule Change, which directly contradicts (and thus

    effectively amends) 1.2105(b)(2), and makes a mockery of the sworn

    certification required under 1.2105(a)(2)(iv). As noted supra , this Rule Change

    Case: 10-71808 07/06/2010 Page: 15 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    16/34

    14

    permits license applicants to: (i) falsely certify their eligibility for Designated

    Entity bidding credits; (ii) obtain bidding credits via these false certifications, and

    use them to outbid competitors; and (iii) subsequently amend their short-form

    applications to effectuate a post hoc cure of the false certification, subject to the

    FCCs adjustment of the purchase price. In short, the FCC has adopted a practice

    identical to the proposal considered and rejected by the Commission in

    formulating 1.2105(b)(2). The Rule Change turns the small business bidding

    credit system envisioned by Congress into a program which fosters false credits

    claimed by large applicants. Thus, by re-engineering 1.2105(b) in the Rule

    Change, the FCC has attempted to implement a de facto revised regulation without

    the notice and comment procedures mandated by the Administrative Procedure

    Act.

    The provenance of the Rule Change is no mystery. It can be directly tracedto an earlier auction involving certain of Petitioners (FCC Auction No. 61), in

    which licenses were awarded to a company known as Maritime Communications

    and Land Mobile, LLC (MCLM). MCLM, via its sworn short-form application

    submitted in this auction, sought and obtained a 35% bidding credit from the FCC

    as a small business Designated Entity. After Petitioners revealed that this

    representation by MCLM was false (because MCLM had failed to properly

    attribute the gross revenues of its principals spouse in claiming the bidding

    Case: 10-71808 07/06/2010 Page: 16 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    17/34

    15

    credit), Petitioners sought to have the subject licenses denied to MCLM. 9

    Thereafter, the FCC directed MCLM to amend its auction application and pay a

    sum essentially equivalent to its falsely claimed 35% bidding credit, at which point

    the FCC granted MCLM the licenses won with the undeserved bidding credits.

    Nearly five years later, this case is still on administrative appeal before the FCC,

    and the FCC has neither applied 1.2105(b)(2) to MCLM, nor addressed the

    perjury of MCLMs principals. In these appeals, the FCC has steadfastly

    maintained (despite the plain language of 1.2105(b)(2)) that MCLM was

    permitted to amend its bidding credit eligibility status on the grounds that this

    endeavor was purportedly a minor application amendment. See e.g., In re:

    Maritime Communications/Land Mobile, LLC , 2I FCC Rcd I 3135 (November 27,

    2006). 10

    9 MCLMs principals are currently being investigated for misrepresentationsmade during this auction. (http://www.scribd.com/doc/28336861/FCC-Enforcement-Bureau-Letter-of-Investigation-dated-2-26-2010-to-Sandra-DePriest-of-MCLM)

    10 MCLMs principal (Sandra DePriest) and her spouse are well known at theFCC. The FCC Chairman at the time of Auction 61 was an appointee under theBush administration who also appointed Mrs. DePriests spouse, Donald

    DePriest, to the board of the Tennessee Valley Authority. (See:http://epw.senate.gov/public/index.cfm?FuseAction=Hearings.Testimony&Hearing_ID=da47ed15-802a-23ad-4341-1ee2229081f8&Witness_ID=4f0478e9-0482-416a-baec-b11aa87e2efa ) Mrs. DePriest was also a former staff attorneyat the FCC. Both Mr. and Mrs. DePriest contributed and raised substantialfunds for the Republican Party, and Mrs. DePriest was a party delegate.http://www.cbsnews.com/stories/2004/08/31/politics/main639607.shtml.

    Case: 10-71808 07/06/2010 Page: 17 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    18/34

    16

    The Rule Change was apparently devised by the FCC in an attempt to place

    a post hoc imprimatur on the FCCs actions in the Auction 61 matter. Thus, in the

    Public Notices associated with subsequent auctions, the Bureau began to include

    language (identical to the language contained in Paragraph 43 of DA 10-863)

    permitting short-form applicants to downgrade their bidding credit eligibility

    status:

    43.Bidders must immediately report any changeaffecting their eligibility for a bidding credit. Biddersshould clearly state the nature of the change in anamendment to their short-form application and in thesummary letter referenced above. In cases of diminishedbidding credit eligibility, the Commission will makeappropriate adjustments in the bidding credit prior to thecomputation of any down and final payment amountsdue [after end of the auction]. 11

    See also In re Auction of FM Broadcast Construction Permits; 77 Bidders

    Qualified to Participate In Auction 79 , 24 FCC Rcd 10782, 10790 (August 19,2009); In re Auction of LPTV and TV Translator Digital Companion Channels , 23

    FCC Rcd 15274, 15283 (October 24, 2008); In re: 16 Bidders Qualified To

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

    11

    This language underscores how the Rule Change is a violation of 1.2105. Bythe time the final payment amount is due, any reimbursement of the biddingcredit becomes meaningless, particularly where the subject bidder has alreadybeen deemed the high bidder at auction, and has had the opportunity to fullyutilize the bidding credits. In all cases, improperly used bidding credits affectthe auction process, either by permitting the entity falsely-claiming the credit tooutbid others, or by driving up the bids at auction.

    Case: 10-71808 07/06/2010 Page: 18 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    19/34

    17

    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) ; In re Five Bidders Qualified to Participate in Auction No. 72,

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

    Spectrum Licenses; 23 Bidders Qualified to Participate in Auction No. 71 , 22 FCC

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

    Qualified to Participate in Auction No. 6922 , FCC Rcd 605 *14 (January 23,

    2007); Auction Of Advanced Wireless Services Licenses; 168 Bidders Qualified to

    Participate in Auction No. 66 , 21 FCC Rcd 8585 n. 15 (July 28, 2006). 12 The FCC

    apparently recognized that if it endeavored to change 1.2105 via the proper notice

    and comment procedures, it would be tacitly admitting that the regulation was not

    applied properly in Public Auction 61. Instead, the agency has tried to effectuate a

    surreptitious de facto revision to the CFR which plainly violates the APA. Foreach of the above reasons, the Rule Change is a legislative rule.

    2. The Rule Change Is Binding

    The appealability of the Rule Change also stems from the fact that it is

    binding. In this regard, courts have recognized that de facto legislative rules can

    12 Each of the foregoing auctions has been completed, except for Auction 87.Bidding in Auction 87 commenced on June 15, 2010. While bidding continues,provisionally winning bids on licenses involving over 80% of eligiblebidding have already been made through 62 bidding rounds (as of July 2,2010), and the auction is substantially completed.

    Case: 10-71808 07/06/2010 Page: 19 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    20/34

    18

    be binding (and therefore appealable) in the same manner as rules properly

    promulgated under APA notice and comment procedures:

    EPA tells us that its Periodic Monitoring Guidance is not

    subject to judicial review because it is not final, and it isnot final because it is not "binding." . . .But we have . . .recognized that an agency's other pronouncements can,as a practical matter, have a binding effect . . .If anagency acts as if a document issued at headquarters iscontrolling in the field, if it treats the document in thesame manner as it treats a legislative rule . . . then theagency's document is for all practical purposes"binding."

    Appalachian Power Co. v. EPA, 208 F.3d 1015, 1020-21 (D.C. Cir. 2000).

    Under this standard, the Rule Change is clearly binding and therefore

    appealable. Firstly, the FCC treats the Rule Change and its associated adjustment

    policy as if it were controlling and binding. Among other things, the Rule Change

    is expressed in mandatory language ( i.e. , Bidders must immediately report any

    change affecting their eligibility for a bidding credit . . .In cases of diminished

    bidding credit eligibility, the Commission will make appropriate adjustments in

    the bidding credit prior to the computation of any down and final payments due

    [after the end of the auction]) (emphasis added). 13 Such mandatory language

    13 See Exhibit 1, at pg. 9 (emphasis added); In re Auction of FM BroadcastConstruction Permits; 77 Bidders Qualified to Participate In Auction 79, 24FCC Rcd 10782, 10790 (August 19, 2009); In re Auction of LPTV and TVTranslator Digital Companion Channels, 23 FCC Rcd 15274, 15283 (October24, 2008); In re: 16 Bidders Qualified To Participate In Auction 86, 2009 FCCLEXIS 5271 at *25 (Oct. 8, 2009); In re Auction of Aws-1 & Broadband PCSLicenses , 23 FCC Rcd 11850, 11858 (August 4, 2008); Auction of 700 MHz

    Case: 10-71808 07/06/2010 Page: 20 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    21/34

    19

    demonstrates the existence of a binding appealable rule. Community Nutrition

    Institute v. Rogers , 818 F.2d 943, 946-47 (D.C. Cir. 1987) (Appellate court

    concludes that the use of the word will by the FDA indicated that an action

    level statement was a binding norm, noting that this type of mandatory,

    definitive language is a powerful, even potentially dispositive, factor indicating

    that action levels are substantive rules.).

    3. The Rule Change Is Final

    As noted above, jurisdiction under 402(a) is premised upon a final FCC

    determination. See 28 U.S.C. 2342. 14 A de facto legislative rule is final where:

    (i) the rule marks the consummation of the agencys decision-making process ( i.e. ,

    it is not tentative or interlocutory) and (ii) the action is one by which rights and

    obligations have been determined, or from which legal consequences will flow.

    continued from previous pageBand Licenses - Auction 73, 23 FCC Rcd 276, 281 (January 14, 2008) ; In reFive Bidders Qualified to Participate in Auction No. 72, 2007 FCC LEXIS4124 at *17 (June 5, 2007); Auction Of Broadband PCS Spectrum Licenses; 23Bidders Qualified to Participate in Auction No. 71, 22 FCC Rcd 8347 *17(May 2, 2007); Auction Of 1.4 Ghz Band Licenses; Nine Bidders Qualified toParticipate in Auction No. 6922, FCC Rcd 605 *14 (January 23, 2007);Auction Of Advanced Wireless Services Licenses; 168 Bidders Qualified toParticipate in Auction No. 66, 21 FCC Rcd 8585 n. 15 (July 28, 2006).

    14 A final agency action under the APA is analytically equivalent to a finalorder under the Hobbs Act. See U.S. West Communications, Inc. v. Hamilton ,224 F.3d 1049, 1055 (9 th Cir. 2000); see also , State of Oregon v. Ashcroft , 368F.3d 1118, 1146 (9 th Cir. 2004) (J. Wallace dissent). Accordingly, in thediscussion which follows, Petitioners rely, in part, upon precedent construingfinality under the APA.

    Case: 10-71808 07/06/2010 Page: 21 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    22/34

    20

    Appalachian Power Co. at 1022. However, the definition of finality is not rigid.

    Indeed, the need for flexibility with regard to finality is particularly important

    where, as here, the agency action at issue is an ultra vires legislative rule change.

    In such instances, the effective date of an agencys action for purposes of finality

    is not easily-ascertainable precisely because the determination is unauthorized and

    procedurally improper.

    Furthermore, the mere fact that a policy is subject to change does not

    prevent it from being binding and final. Appalachian Power Co. at 1022; See also ,

    General Electric Co. v. EPA , 290 F.3d 377, 380 (D.C. Cir. 2002) (If the

    possibility . . . of future revision in fact could make agency action non-final . . .

    then it would be hard to imagine when any agency rule. . . would ever be final as a

    matter of law.); Intl Union United Automobile, Aerospace & Agricultural

    Implement Workers Of America v. Brock , 783 F.2d 237, 248-49 (D.C. Cir. 1986)(the relevant considerations in determining finality are whether the process of

    administrative decisionmaking has reached a stage where judicial review will not

    disrupt the orderly process of adjudication and whether rights or obligations have

    been determined or legal consequences will flow from the agency action.).

    Applying this standard, the Rule Change is clearly final. Firstly, the Rule

    Change marks the consummation of the Bureaus decision-making process. It is

    neither tentative nor interlocutory; to the contrary, it is expressed in mandatory

    language ( i.e. , In cases of diminished bidding credit eligibility, the Commission

    Case: 10-71808 07/06/2010 Page: 22 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    23/34

    21

    will make appropriate adjustments in the bidding credit prior to the computation of

    any down and final payments due) (emphasis added). Moreover, the Rule

    Change has defined and affected rights and obligations of auction participants for

    years. As discussed, it has been promulgated in the Public Notices establishing

    auction procedures in at least 9 separate wireless auctions since 2006. In at least

    one instance known to Petitioners (Auction No. 61), the Rule Change has

    permitted a party to wrongfully obtain and retain licenses which were falsely

    procured. Absent court intervention, the Rule Change will continue to be used in

    the pending Auction 87 and in future auctions. In short, the most recent

    implementation of the Rule Change in DA 10-863 does not merely embody an

    isolated aberrant decision by the FCC. Rather, it is only the latest in a series of

    auction pronouncements in which the Bureau has repeatedly and expressly

    permitted parties to falsely obtain bidding credits and then disclaim them later,even after auction bidding has ended and the disclaimer is essentially moot.

    Finally, the Rule Change both determines rights and gives rise to legal

    consequences. It provides a free pass (undeserved right) to license applicants

    who either: (i) falsely-certified their bidding credit eligibility status at the outset,

    or (ii) changed their gross revenue size ( e.g. , via merger) after a truthful

    certification, rendering them subsequently ineligible for a bidding credit, by

    allowing them to amend short-form applications to down-grade bidding credit

    eligibility status with impunity. This is a right they would otherwise not have

    Case: 10-71808 07/06/2010 Page: 23 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    24/34

    22

    under 47 CFR 1.2105(b). The Rule Change also eliminates the legal

    consequences of short-form application perjury. 15 It creates in each auction the

    real potential that: (i) an entity might win an auction by falsely certifying its

    bidding credit eligibility status, only to retain its ill-gotten gains under the

    Bureaus adjustment policy (as demonstrated in Auction 61); (ii) bidders using

    undeserved bidding credits will artificially inflate the bids of competing bidders

    (even if they are not ultimately high bidders). As a result, the Rule Change

    undermines the integrity of the auction process as a whole, the FCC as a

    trustworthy licensing entity, and the Congressional mandates of 47 U.S.C.

    309(j)(3). It prejudices the small-business applicants (such as Petitioners) who

    are legitimately entitled to bidding credits as Congress intended, as well as all

    other applicants who have complied with auction rules.

    The FCC will undoubtedly argue that this appeal does not stem from a finalagency action, and that this Court therefore lacks jurisdiction. For the reasons

    discussed above, any such argument should be summarily rejected in light of, inter

    alia , the well-established precedent holding that an ultra vires legislative rule

    change is a final appealable agency action. Indeed, any argument by the FCC that

    the instant appeal is not ripe would inevitably beg the question: If the Rule

    15 A false statement in an FCC license application is not only a violation of 47C.F.R. 1.2105(a)(2)(iv), but is also a criminal violation of 18 U.S.C. 1001 (asthe short-form application itself notes).

    Case: 10-71808 07/06/2010 Page: 24 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    25/34

    23

    Change is not final now (after it has already been promulgated and implemented in

    9 separate auctions ), when will it become appealable? What further action is

    required to ripen these appeals? And if, as the Petitioners suspect, the FCCs

    ultimate position will be that the Rule Change is not final under any

    circumstances, what remedy does a private party have when a government agency

    institutes a legislative rule change without notice and comment? Petitioners submit

    that the answer, at least within the factual context of this case, is self-evident the

    instant appeal should be allowed to go forward in order to forestall any further

    corruption of 1.2105(b). Any other determination would unjustly and counter-

    intuitively result in a situation where the worst types of agency action ( ultra vires

    actions which contravene duly enacted regulations) escape judicial scrutiny. 16

    16 During the course of the administrative proceedings in Auction 61, the FCC has

    had ample time to eliminate the Rule Change that originated at the start of thatproceeding, or at a minimum explain the rationale and authority underlying it,but has failed to do either. In particular, certain Petitioners filed Petitions forReconsideration in which they have sought an FCC determination that the RuleChange was unlawfully utilized in Auction 61 to grant licenses to MCLM(there is no authority supporting an ad hoc rule-change in the course of alicensing proceeding, yet this is precisely what the Bureau did). Under 47C.F.R. 1.106(j), the FCC was required to rule on this Petition within 90 days.Nevertheless, Petitioners most recent Petition has now been pending before theFCC for several years without an FCC ruling (or a hearing under 47 U.S.C.309(d) to which Petitioners are entitled). Had the FCC adjudicated thisPetition in a timely fashion, the validity of the Rule Change (at least within thecontext of Auction 61), if maintained by the FCC when deciding on thePetition, would have become independently appealable under 47 U.S.C.402(b). But the FCCs inaction has delayed the ripening of the licensedeterminations in Auction 61. In short, it would be disingenuous for the FCCto contest the instant appeal on the grounds of ripeness/finality, given that they

    Case: 10-71808 07/06/2010 Page: 25 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    26/34

    24

    4. Ample Precedent Supports This Courts Authority To

    Invalidate an Ultra Vires Rule Change

    Courts have invalidated ultra vires legislative rule changes in a variety of

    contexts. For example, in Hemp Indus. Assoc. , hemp product manufacturers

    challenged a rule banning all naturally-occurring tetrahydrocannabinol (THC),

    including that found in hemp seed and oil. The manufacturers maintained that the

    DEA had promulgated the rule (characterized by the DEA as an interpretive

    rule) in an improper effort to change an existing regulation which permitted the

    sale of products containing trace amounts of naturally-occurring THC. This Court

    agreed and invalidated the rule:

    The DEA cites nothing in the legislative history of theact to show that the 1970 Congress consciously intendedto cover naturally-occurring THC under THC as well asunder marijuana . . . Were there no regulation or

    legislative history on the subject, the DEA's position onthe coverage of naturally-occurring THC could becharacterized as an interpretation of the CSA, which listsTHC generally without qualification in Schedule I. . .However, in this case, the agency is not operating in aregulatory vacuum. A DEA regulation interpreting thecoverage of THC exists. Thus, the DEA purports to beinterpreting its THC regulation as well as the CSA. To"interpret" the regulation, the DEA's rule must be

    continued from previous pagehave simultaneously declined the opportunity to pass upon the Rule Changewithin the context of Auction 61. Conversely, since the FCC has nevercharacterized the Rule Change as dependent upon the disposition of thePetitions for Reconsideration in Auction 61, the FCC cannot now claim that theappealability of the Rule Change is contingent upon a ruling on those Petitions.

    Case: 10-71808 07/06/2010 Page: 26 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    27/34

    25

    consistent with the regulation . We are back to ouroriginal question: whether the DEA's rule is inconsistentwith the current DEA regulation, which has the force of law and cannot be amended except by another legislativerule. . . .In light of the regulatory history recounted

    above and the plain language of the DEA regulation, itseems obvious that the DEA's rule covering natural THCis inconsistent with the current regulation . . . An agencyis not allowed to change a legislative rule retroactively

    through the process of disingenuous interpretation of the rule to mean something other than its original meaning . . . .Yet here the DEA similarly attempts toevade the time-consuming procedures of the APA byinterpreting an existing regulation to cover naturally-occurring THC, which was consciously omitted from thescope of the current regulation. Consequently, the DEA'sputative interpretive rule is invalid.

    Id ., at 1089-91 (emphasis added).

    See also Appalachian Power Co., at 1023 (EPA Periodic Monitoring

    Guidance for Title V Operating Permits Programs, relating to monitoring of

    emission standards was binding and final; EPAs characterization of the policy as

    a non-final guidance document deemed a charade, intended to keep the

    proceduralizing courts at bay.); General Electric Co. v. EPA , 290 F.3d 377, 385

    (D.C. Cir. 2002) (Court vacates EPAs PCB Risk Assessment Review Guidance

    Document, on the grounds that it was a legislative rule promulgated without

    appropriate notice and comment); Croplife America (Appellate court vacates EPA

    press release banning agency consideration of human studies in evaluating

    pesticide safety); Syncor Intl Corp. v. Shalala , 127 F.3d 90, 95-96 (D.C. Cir.

    1997) (FDA's 1995 publication is not an interpretative rule. It does not purport to

    Case: 10-71808 07/06/2010 Page: 27 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    28/34

    26

    construe any language in a relevant statute or regulation . . .Instead, FDA's rule

    uses wording consistent only with the invocation of its general rulemaking

    authority to extend its regulatory reach . . . This is not a change in interpretation . .

    . but rather, is fundamentally new regulation. The reasons FDA has advanced for

    its rule . . . are exactly the sorts of changes in fact and circumstance which notice

    and comment rulemaking is meant to inform.); Community Nutrition Institute v.

    Rogers , 818 F.2d 943, 948-49 (D.C. Cir. 1987) (FDA action level statements

    were legislative rules issued without the requisite notice and comment).

    In this case, as in Hemp Indus. Assoc. , the FCC and Bureau have

    implemented a short-form application amendment policy via the Rule Change

    which violates the plain language of the relevant regulation (1.2105(b)) that

    implements the intent of Congress. Moreover, in this case, as in Hemp Indus.

    Assoc., the rulemaking history of the relevant regulation reflects a consciousrejection by the agency of the very same rule interpretation that it now propounds

    (i.e. , the interpretation that parties can amend their short-form applications to

    down-grade their bidding credit eligibility status). Thus, in this case, as in Hemp

    Indus. Assoc. , the FCC has attempted to change a legislative rule retroactively

    through the process of disingenuous interpretation of the rule to mean something

    other than its original meaning. For each of the foregoing reasons, this Court has

    jurisdiction under 47 USC 402(a).

    Case: 10-71808 07/06/2010 Page: 28 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    29/34

    27

    B. The Exhaustion Requirements of 47 U.S.C. 155(c)(7) are not

    Applicable to this Case

    Furthermore, this appeal is not barred for failure to exhaust administrative

    remedies pursuant to 47 U.S.C. 155(c), which states, in relevant part:

    (1) [T]he Commission may, by published rule or byorder, delegate any of its functions . . . to . . . anemployee board, or an individual employee, includingfunctions with respect to hearing, determining, ordering,certifying, reporting, or otherwise acting as to any work,business, or matter . . .Any such rule or order may beadopted, amended, or rescinded only by a vote of amajority of the members of the Commission thenholding office. . . (4) Any person aggrieved by any suchorder, decision, report or action may file an applicationfor review by the Commission . . . (7) The filing of anapplication for review under this subsection shall be acondition 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 delegated under 155(c)(1).

    Conversely, it follows, ipso facto , that if a particular function has not been

    delegated, the administrative exhaustion requirement of 155(c)(7) is inapplicable

    at the outset.

    Section 155(c)(1) does not delegate rule-making to the Bureau. In fact, 47

    CFR 0.331(d) clearly indicates that the Bureau does not have this authority:

    Case: 10-71808 07/06/2010 Page: 29 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    30/34

    28

    Authority concerning rulemaking proceedings. TheChief, Wireless Telecommunications Bureau shall not

    have the authority to act upon notices of proposedrulemaking and inquiry, final orders in rulemakingproceedings and inquiry proceedings, and reports arising

    from any of the foregoing except such orders involvingministerial conforming amendments to rule parts, ororders conforming any of the applicable rules to formallyadopted international conventions or agreements . . .

    (emphasis added).

    To the contrary, under the FCCs own regulations, rule-making authority is

    vested in the FCC as a whole. 17 Since the Bureau does not have any rule-making

    authority, it follows, a fortiori , that it does not have the authority to promulgate a

    de facto rule ( i.e. , the Rule Change) which expressly conflicts with a properly

    promulgated regulation ( i.e. , 1.2105(b)). As such, the Rule Change was not an

    17 See 47 CFR 1.407 (If the Commission determines that the petition disclosessufficient reasons in support of the action requested to justify the institution of a rulemaking proceeding, and notice and public procedure thereon are requiredor deemed desirable by the Commission , an appropriate notice of proposed rulemaking will be issued . . .) (emphasis added); 47 CFR 1.411 (Rulemakingproceedings are commenced by the Commission , either on it own motion or on

    the basis of a petition for rulemaking.) (emphasis added); 47 CFR 1.412 (Asummary of the full decision adopted by the Commission constitutes a Noticeof Proposed Rulemaking for purposes of FEDERAL REGISTERpublication.) (emphasis added); 47 CFR 1.425 (The Commission willconsider all relevant comments and material of record before taking final actionin a rulemaking proceeding and will issue a decision incorporating its findingand a brief statement of the reasons therefor.) (emphasis added).

    Case: 10-71808 07/06/2010 Page: 30 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    31/34

    29

    action made or taken pursuant to a delegation under paragraph (1) of this

    subsection. Accordingly, 47 U.S.C. 155(c)(7) does not bar the instant appeal. 18

    18 Alternatively, assuming arguendo that the Wireless Bureau is deemed to haveacted within its delegated authority in the course of implementing the RuleChange, the exhaustion requirements of 155(c)(7) would nonetheless beinapplicable, in light of 47 U.S.C. 405(a). This statute states that After an . .. action has been . . . taken in any proceeding by the Commission, or by anydesignated authority within the Commission pursuant to a delegation undersection 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 suchreview (1) was not a party to the proceedings resulting in such . . . action, or(2) relies on questions of fact or law upon which the Commission, ordesignated authority within the Commission, has been afforded no opportunityto pass. (emphasis added). In this case, both elements are met. While theRule Change action did not formally arise out of a specific proceeding per se ,Petitioners were parties both to the Public Auction that engendered the RuleChange (Auction 61) and the Public Auction in which the Rule Change was

    most recently implemented (Auction 87). Moreover, the Wireless Bureau andthe Commission have had the opportunity to pass upon ( i.e. , eliminate) theRule Change prior to this appeal (including during the course of theadministrative proceedings in Auctions 61 and 87), but have failed and refusedto do so. Conversely, in its proper implementation of the actual rule (1.2105),the Commission did pass upon (it considered and rejected) the positionsubsequently adopted by the Bureau via the Rule Change.

    Case: 10-71808 07/06/2010 Page: 31 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    32/34

    30

    Respectfully submitted,

    Dated: July 6, 2010 /S/

    NOSSAMAN LLPPATRICK J. RICHARD (SBN 131046)(Counsel of Record)[email protected] D. DAMARI

    50 California Street, 34th FloorSan Francisco, California 94111-4707Telephone: (415) 398-3600Facsimile: (415) 398-2438

    Attorneys for Petitioners

    Case: 10-71808 07/06/2010 Page: 32 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    33/34

    1

    CERTIFICATE OF SERVICE

    I hereby certify that on July 6, 2010 a copy of the foregoing document has

    been served on the following:

    Via U.S. Mail and Electronic Filing

    Austin Schlick, General CounselDaniel M. Armstrong, Associate General CounselOffice of General CounselFederal Communications Commission445 12 th Street S.W.Washington, DC 20554

    Via U.S. Mail

    United States Department of JusticeCivil Division, Appellate Staff 950 Pennsylvania Avenue NWWashington, DC 20530

    Marlene Dortch, Secretary Office of the SecretaryFederal Communications Commission9300 East Hampton DriveCapital Heights, Md. 20743

    Lester L. BoihemTwo Way Communications, Inc.1704 Justin RoadMetairie, LA 70001

    Frank W RuthTwo Way Communications, Inc.2819 East Simcoe StreetLafayette, LA 70501

    Case: 10-71808 07/06/2010 Page: 33 of 34 ID: 7394395 DktEntry: 18

  • 8/9/2019 Skybridge Spectrum Foundation v. FCC. 9th Circuit (FCC Violation of Its Auction Rules)-Response to Order Show Ca

    34/34

    James D. SilkeSilke Communications, Inc.680 Tyler StreetEugene, Oregon 97402

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

    /S/ Maura Bonal

    Case: 10-71808 07/06/2010 Page: 34 of 34 ID: 7394395 DktEntry: 18