Looking for a Way Around a Statute of Limitations?

Video Division forfeiture order shows flexibility, but not necessarily in a good way

One thing you can say about the FCC: If they think they’ve caught a licensee in a violation, they can be persistent in their efforts to impose penalties for that violation. Whether those efforts are entirely consistent with the law is another question entirely.

With respect to any fine it issues, the Commission must consider the relevant statute of limitations. FCC forfeitures are subject to two separate such statutes. First, under Section 503 of the Communications Act, it can levy forfeitures for actions going back to the beginning of the current license term or one year, whichever is earlier. 

Once the Commission has issued its formal “forfeiture order”, a licensee can simply ignore that order. If the Commission wants to collect the fine in the face of such licensee inaction, it must convince the Department of Justice to sue the target licensee in federal district court. But a second, separate, statute (28 U.S.C. § 2462) says that law suits to enforce penalties must be started within five years of “the date the claim first accrued”.  

A recent forfeiture order reflects the Video Division’s awareness of that latter limit and at least one way the Division has devised to try to sidestep it.

The case involves a full-power TV station last renewed in 1998; it filed for renewal in 2005, but that application (as often happens with TV renewals, seemingly so that the FCC can keep an open noose around a station’s neck that they can tighten if they want to) has yet to be granted. In the 2005 renewal application the licensee disclosed that it had failed to prepare its public file EEO report in 2004. In 2013 the station filed a supplemental renewal application, in which it disclosed that it had failed to file eight of its quarterly Children’s Television reports on time during the preceding eight years.

Looking beyond what the licensee reported in its 2013 renewal, the staff checked the FCC’s own records and discovered that, in addition to the admitted late filings, sometime between 1998 and 2005 the licensee had filed 14 other reports late.

In its Notice of Apparent Liability (NAL), the Division recited all those facts and then proposed to lower a $15,000 boom onto the licensee’s head for failure to timely file its kidvid reports “for multiple quarters”.

In response to the NAL, the licensee asked that the forfeiture be reduced because many of the violations occurred more than five years ago, meaning that Section 2462 would appear to prevent the government from trying to collect through the courts. The FCC refused. Instead, it issued a Forfeiture Order in which it added yet another claimed violation (of Section 73.3514, a rule section – not mentioned in the NAL – that requires an applicant to “include all information called for by [the application form]” ). The Forfeiture Order also warned that, in any event, the most recent late-filings (in 2012 and 2013) alone would justify the proposed $15K fine.

The Forfeiture Order is remarkable for a couple of reasons.

First, the Division’s blithe addition of a previously unmentioned violation – the one involving Section 73.3514 – seems to violate Section 503(b)(4) of the Communications Act. Section 503(b)(4) requires the FCC to issue an NAL citing the precise rules supposedly violated before it can impose a forfeiture. The statute does not appear to authorize the Commission to toss into a forfeiture order extra supposed violations that didn’t happen to be mentioned in the initial NAL. So the sudden appearance of Section 73.3514 is unusual, to say the least.

Second, the reference to a supposed violation of Section 73.3514 is plainly an effort to sidestep the five-year statute of limitations. As noted above, Section 73.3514 requires that applicants must provide all the information called for in Commission applications. Recall that the Commission concluded (based on its own review of Commission records) that the licensee had not mentioned in its 2005 renewal application that 14 of its Children’s TV reports between 1998-2005 were filed late.

Having noted the licensee’s argument about the five-year statute of limitations, the Forfeiture Order refers to the 73.3514 “violation” as “an alternative basis for the forfeiture”. Its reasoning: since the licensee failed to report, in its 2005 renewal applications, the 14 late filings that occurred between 1998-2005, that violation is “continuing”, meaning that “a new claim accrued each day that the Licensee failed to report the violation, and therefore the [five-year] statute of limitations does not apply.” That seems a somewhat self-serving interpretation of “continuing violation”, particularly since any failure to report would ordinarily be thought to have occurred back in 2005, when the licensee, um, failed to report.

Third, the staff does not seem to have been especially confident of this fall-back position, because in a footnote in the Forfeiture Order, it opined that the late-reporting violations that occurred in 2012 and 2013 would in any event be sufficient on their own to support the entire $15,000 forfeiture. In other words, even if the older violations are beyond collection, the newer ones – i.e., violations well within the five-year limit – will still enable the Commission to sue for collection.

But if that’s the case, what does that say about the fine calculation process? After all, in its NAL determination that a $15,000 fine was warranted, the Division described a total of 22 late-filing violations. But the footnote in the Forfeiture Order says that 2012-2013 late filings (eight in number, it would appear) warrant precisely the same fine. And let’s not forget that the Forfeiture Order also purports to drag in Section 73.3514 as yet a further violation, the precise cost of which, forfeiture-wise, isn’t indicated. While ‘regulatory flexibility’ is a popular principle often touted by the FCC, flexibility along these lines is troubling.

The Forfeiture Order’s strained effort to dodge the five-year statute of limitations is also troubling. Note that the order does not deny the existence of that limit; to the contrary, the order tries to sidestep it. But what good is a statute of limitations on collection if the FCC can avoid it by the artifice of re-characterizing old time-barred violations as new, not-barred, violations? The Commission’s apparent preference for holding licensees liable indefinitely for potential forfeitures flies in the face of centuries-old pronouncements by such prominent jurists as John Marshall. (FYI – Way back in 1805 Marshall said, “In a country where not even treason can be prosecuted, after a lapse of three years, it could scarcely be supposed, that an individual would remain for ever liable to a pecuniary forfeiture.” Those words have been cited by the current Supreme Court as recently as last year. Marshall’s colleague, Joseph Story, was of a similar mind: “it would be utterly repugnant to the genius of our laws, to allow [civil penalty] prosecutions a perpetuity of existence.”)

As always, though, the problem with fighting FCC forfeitures is that a judicial appeal costs more than the forfeiture. So it’s not surprising that most practical licensees run the cost/benefit numbers and end up caving in and paying the Commission. Eventually, though, we suspect – and certainly hope – that someone will blow the whistle on the Commission’s forfeiture practices.

The Five-Year Enforcement Shot Clock: Has the FCC Finally Begun to Acknowledge It?

Forfeiture cancellations suggest possible path to clearing backlogged complaints (and enforcement holds).

It appears that the Commission may have taken the first steps – baby steps carefully cloaked from public view, perhaps, but steps nonetheless – toward addressing its hopeless backlog of broadcast complaints. In a series of super-low-key actions in recent weeks, the Media Bureau has quietly cancelled a number of previously assessed forfeitures. The actions have been reflected in terse (and we do mean terse – check out this example) letters that provide no explanation for the cancellations. But based on the answers we got to some informal inquiries, we figure that these cancellations could be the harbinger of considerably more dramatic developments on the complaints front.

It appears that the recent forfeiture cancellations have all involved the same general fact pattern. The Bureau issued a notice of apparent liability (NAL) and/or forfeiture order for violations which occurred significantly more than five years ago. The target licensee responded by arguing that, thanks to 28 U.S.C. §2462, the FCC is statutorily prevented from collecting the fines, so they should be cancelled. That argument has been initially rejected by the Bureau in some cases (here’s an example), but the licensees have pressed their argument before the Commission in applications for review. 

And now, we understand that the Bureau has been directed by higher-ups in the agency to cancel the forfeitures in light of that Section 2462 argument. The Bureau’s cancellation letters are, we are told, the result of that direction.

For readers not familiar with Section 2462, check out Steve Lovelady’s post on the topic from a couple three years ago. Essentially, Congress has told the Department of Justice that DoJ can’t initiate any lawsuit to enforce a civil fine, penalty or forfeiture later than five years after the underlying claims accrue. That’s important because Congress (in 47 U.S.C. §504(a)) has also told the FCC that, if the FCC fines a licensee and the licensee declines to pay – which is an option accorded to licensees by Congress – the FCC can collect only by getting DoJ to sue the licensee to collect the fine. Perhaps more importantly for FCC licensees, Section 504(c) of the Communications Act clearly and unequivocally provides that, if a licensee has not paid the fine and no court has ordered that the fine be paid, then the fact that the Commission may have imposed a forfeiture in the first place “shall not be used, in any other proceeding before the Commission, to the prejudice of the person to whom such notice was issued”.

Get the picture?

If the licensee doesn’t pay the fine voluntarily, the only way the FCC can collect is through a lawsuit. But if the claim underlying that lawsuit arose more than five years earlier, the FCC (acting through DoJ) can’t even start such a lawsuit, much less collect through it. And if the lawsuit can’t get started, then, under Section 504(c), whether or not the rules may have been violated makes no difference: the mere fact that an NAL (or, presumably, forfeiture order) was issued cannot be “used . . . to the prejudice” of the supposed violator.

Truth be told, this is a pretty simple concept, made even simpler by the clarity of the two statutes in question. But historically the Commission appears to have ignored it. You can understand why. 

The Commission has tended to take a leisurely approach to forfeitures. The Communications Act, after all, technically permits the Commission to issue fines for licensee misconduct that occurred at any time during a license term as long as the next license term hasn’t already started. (Remember, Section 2462 relates to collecting fines, not imposing them in the first place.) In order to preserve its ability to issue fines, then, the FCC has imposed the dreaded “enforcement hold” on pending renewal applications, meaning that it has simply declined to grant renewal where the possibility of some violation might exist. By doing this, the FCC has been able to (a) avoid the commencement of a new license term and, thus, (b) keep open the option of maybe someday getting around to considering whether a fine may or may not be appropriate.

(Relevant illustrative factoid:  According to CDBS, there are more than 300 TV renewal applications still pending from the 2004-2007 application season. Our guess is that most, if not all, of those have been hung up on “enforcement holds” – but since the Commission doesn’t generally disclose why any renewal has been held up, your guess is as good as ours.)

By invoking such “holds”, the Commission has been able to avoid resolving, or even addressing, vast numbers of complaints and violations (admitted or otherwise) that have piled up for a decade or more. And since many of those complaints involve issues like indecency, the Commission has also been able to avoid the difficult political and legal considerations attendant to such controversial topics.

Think of all those distasteful chores that you put off by relegating them to the basement, or a closet, or the garage, always with the promise that you really will get around to them someday, but also always with the tacit understanding that that “someday” probably won’t be anytime soon, particularly as the basement/closet/garage gets more and more jam-packed with chores. That’s essentially what the “enforcement hold” has let the FCC do with hundreds of thousands, possibly millions, of complaints.

The five-year shot clock imposed by Section 2462 obviously messes that up big time. If that statute of limitations on collection actions really means what it says, then any complaint filed with the Commission more than five years ago, and any forfeiture proceeding initiated more than five years ago, is at a dead end if the case hasn’t already resulted in payment of a forfeiture or the filing of a collection suit. Logically and legally, the only available course for the Commission would appear to be to summarily toss any such complaint or forfeiture proceeding.

Which is just what the Media Bureau has done with the dozen or so forfeitures which it recently cancelled. And that’s why those mysterious, unexplained cancellations could portend an important shift in the FCC’s handling of old complaints.

Bear in mind that the Bureau had already considered, and rejected, the Section 2462 argument in at least some, if not all, of those cases, insisting instead that the FCC could reach back indefinitely to penalize misconduct. But that’s not what 28 U.S.C. §2462 and 47 U.S.C. §504(c) provide. And we understand that at least some folks in the General Counsel’s office may now recognize and accept that limitation – and that the Bureau’s recent forfeiture cancellations are a result of that recognition and acceptance.

That’s the good news: Some fines have been cancelled for reasons which should lead to further cancellations of previously issued fines or previously-initiated-but-still-pending inquiries.

The bad news is that the Commission may still be reluctant to follow up with those other cancellations.

The Commission appears still to be loath to state conclusively that Section 2462 imposes a five-year shot clock on the FCC collection process. We understand from conversations with folks involved in the Bureau’s recent cancellations that Section 2462 was the reason for those cancellations, but you won’t find any reference to that section in any of the cancellation letters. And to avoid even having to refer to the arguments that had been presented concerning Section 2462, when it issued its cancellation letters the Bureau called on the various beneficiaries of those letters to request withdrawal of their respective, still-pending pleadings in which those arguments had been advanced.

What’s up with that? As best we can figure, the Commission believed that, if it had to dispose of those arguments on their merits, it would have to publicly acknowledge that Section 2462 does indeed impose a five-year shot clock. But if the Bureau instead offered to simply cancel the fines without explanation, it could call upon the affected licensees to withdraw their pleadings, thus obviating the need to address their arguments. And those licensees could be expected to comply happily – they are, after all, getting off the hook for the fines they had been assessed, so why should they care whether the FCC formally acknowledges the reason for that?

The Commission’s reticence is not encouraging, but to some degree understandable. Formal acceptance of the five-year shot clock would affect the Commission both retrospectively and prospectively. 

Looking back, the Commission would be required to sort through its various enforcement files, searching for any complaints, inquiries, etc., that involve potential misconduct that occurred more than five years ago and as to which no collection lawsuit has yet been filed. All such complaints, inquiries, etc. would then have to be summarily dismissed, no questions asked. Back the dump trucks up to the Portals and start tossing files out the window. We’re probably talking about hundreds of thousands, maybe millions, of complaints or other potential violations. Problems involving indecency, sponsorship ID, kidvid reports, public files, etc., etc., etc. Kiss them good-bye and color them gone.

That’s a lot of work in and of itself. And if the Commission were to do that, the result would likely be a public relations nightmare. Various self-appointed guardians of the public interest would almost certainly rise up on their hind legs and complain vigorously about the impropriety of allowing scofflaws – including pornographers! – to avoid any penalty for their supposedly vile misdeeds. And some members of Congress might respond to such complaints by asking pointed questions of the Commission: how, after all, did the FCC get itself into this mess? A preference to avoid this scenario is understandable.

And looking forward, the Commission would be acknowledging that it is in fact subject to a five-year shot clock. That would mean that the Commission would have to veer sharply away from its decades-long lackadaisical approach to enforcement. Instead, it would have to commit staff and resources sufficient to process complaints and related matters on a super fast-track. Suffice it to say that the FCC has seldom demonstrated the inclination or ability to do much of anything on a super fast-track, particularly in the enforcement area.

Remember, Section 2462 requires that the collection lawsuit be initiated within five years. So the Commission would have to investigate potential misconduct, issue an NAL, consider the licensee’s response, issue a Forfeiture Order, maybe address any petition for reconsideration, determine that the licensee wasn’t going to pay, and then convince DoJ to free up attorneys to file the suit, all within five years. A preference to avoid this scenario is likewise understandable.

Such preferences may be understandable, but they are also unrealistic and just plain silly. After all, the law says what the law says, and it’s said it for years. If the recent forfeiture cancellations do in fact reflect an acknowledgement by senior agency officials that the constraints of Section 2462 apply, we can see no valid distinction between those proceedings and the myriad other long-pending complaints, investigations, etc., that have been gathering dust at the Commission for more than five years.

It would be nice if the Commission, in the much-vaunted spirit of transparency, were to issue a public notice or some other statement explaining the recent cancellations, acknowledging the impact of Section 2462 on its enforcement activities, and committing to prompt steps consistent with those statutory obligations. It would also be nice if the Commission were simply to start taking such steps, fanfare or no. Whether it will do so obviously remains to be seen. Let’s all keep our fingers crossed.

Enforcement Shot Clocks - Tick Tick Tick . . .

Statutes of limitations apply to FCC enforcement actions

Let’s say you’re a licensee on the wrong end of one (or more) of the several hundred thousand (or more) complaints sitting in piles in the Enforcement Bureau, awaiting some kind of action. You might be frustrated by the glacial pace of the FCC’s processes – after all, many of those complaints have been pending for years. 

But wait – there may be a silver lining to that slow-moving dark cloud hanging over you. 

Federal law – 28 U.S.C. §2462, if you care to look it up – requires that lawsuits to enforce a civil fine, penalty or forfeiture be initiated within five years after the underlying claims accrue. In other words, if the government’s got a claim against you, they’ve got five years to use it or lose it. The good news is that this “statute of limitations” could shield you from financial penalties even if the FCC eventually decides that you violated FCC rules.

Much of the credit for this potential benefit goes to the byzantine procedural maze the FCC must navigate before it can even start to think about suing a broadcast licensee.

The process generally starts when the Commission receives a complaint about an alleged rule violation, or possibly turns up a violation on its own during a field inspection. 

The first step is for the Commission (or one of its Bureaus) to issue a Notice of Apparent Liability (NAL) describing the alleged violation and proposing a penalty amount. The NAL gives the licensee a chance to tell its side of the story. If that story doesn’t convince the Commission to back off (and it almost never does), the next step is a Forfeiture Order recapitulating the facts, addressing any arguments raised in the licensee’s response to the NAL, and ordering payment of the fine within 30 days. 

Just because the FCC “orders” a licensee to pay, the licensee doesn’t have to pony up. Instead, it can sit back and do nothing, and the FCC cannot hold that against the licensee. Rather, the burden is then on the Commission to refer the matter to the Department of Justice (DoJ) to sue the licensee for the amount of the fine. And get this – the trial is what they call “de novo”, which means that the burden is on the government to go back to square one and prove that the licensee really did violate the rules. The licensee, in turn, gets to challenge every element of the FCC’s case. 

Obviously, this multi-step process tends to drag on, with extended delays possible at each step of the way. The final step – i.e., convincing DoJ to sue – is often the ultimate roadblock, since DoJ tends to have better things to do with its scarce litigation resources than to file nickel-and-dime lawsuits for petty violations of obscure regulations.

Working against the FCC all along the way are two statutes of limitations.

The first limits the time within which the FCC may issue an NAL. The Communications Act (47 U.S.C. § 503(b)(6)) specifies that the FCC cannot issue an NAL for conduct which occurred either (a) more than one year prior to the NAL or (b) prior to the commencement of licensee’s current license term, whichever is earlier. The first aspect of that limit – the one-year cap – is straightforward. The second aspect not so much. A licensee’s “current” license term extends until its next renewal application is granted. That means that the FCC can avoid the one-year limit on NALs simply by sitting on the renewal applications of stations against which complaints have been lodged. Stations caught in that posture are said to be subject to an “enforcement hold” on their renewals. This happens routinely, as many TV licensees targeted by, e.g., indecency complaints can attest.

The second limit is the five-year bar imposed by 28 U.S.C. §2462, mentioned above.

Importantly, it appears that that five-year limit counts down irrespective of any procedural devices (for instance, “enforcement holds”) the FCC may deploy to keep the ball in play. That is, while Section 503 may enable the FCC to delay indefinitely the issuance of an NAL, Section 2462 does not appear to be so forgiving. So while the FCC dilly-dallies with its own processing of alleged violations, the clock is still running against the government’s ability to collect even if a violation is ultimately found to have occurred.

All of this should be of interest to any licensee whose renewal application happens to have subjected to an “enforcement hold” arising from a pending complaint (or a violation which the licensee itself reported in its most recent renewal application). Licensees in that situation might want to get out the calendar and start counting the years. Even if the FCC may have tried to keep its options open by not granting the renewal application, the five-year limit in Section 2462 might still pull the rug out from under the Commission.

The first question is: when does that five-year period start for purposes of the statute of limitations? That’s not cut-and-dried. At least one federal court of appeals has assumed that the five-year period begins when the violation occurs – for example, when the allegedly indecent material is broadcast by the target station. An alternate possible starting point would be the date on which the Commission officially learned of the possible violation (by, e.g., receiving a complaint or inspecting the station). 

Unfortunately, the date for calculating the start of the five-year Section 2462 limitation in the context of FCC enforcement actions has not been definitively identified by any court, yet. But while it’s possible that the creative minds at the Commission could conceivably come up with some other alternatives, the two described above are the most obvious. And, indeed, the Enforcement Bureau seemed tacitly to suggest in a couple of high profile indecency forfeiture cases in 2008 (i.e., the “Married by America” and “NYPD Blue” proceedings) that the five-year statute of limitations period begins running on the date of broadcast.

The question has recently been teed up by several licensees who were targeted back in May with five-digit fines for alleged children’s television violations. (We described the NALs in the May, 2010, Memo to Clients.) The licensees have asked that the FCC rescind the NAL’s issued because the supposed violations occurred more than five years ago and were reported to the FCC in the licensees’ respective renewal applications, all of which were filed more than five years ago. The argument is clear: if, because of the passage of time and the operation of Section 2462, the FCC can’t in any event collect any fines even if the violations did occur, then no purpose is served by issuance of an NAL (or Forfeiture Order) at this point. We’ll keep an eye on how that argument fares and report back as developments warrant.