“Eligible entity” policies suspended in light of Third Circuit decision

From our Unintended Consequences File:  The recent Third Circuit decision on multiple ownership rules – which took the Commission to task for failing to do more to promote minority and female broadcast ownership – has led to the abrupt termination of a Commission policy intended to (wait for it) promote minority and female broadcast ownership. While there remains at least a chance that that termination may be forestalled, a recent public notice from the Commission has set the termination process in motion. 

Under the policy at issue, the Commission extended unbuilt broadcast construction permits by 18 months when they were assigned to “eligible entities”. An “eligible entity” was generally defined as an entity that qualified as a small business under the standards of the Small Business Administration for industry groupings based on revenue. The policy was first announced in the Commission’s Diversity Order released in 2008, as part of a wide-ranging agency effort to promote “diversity”.

As we reported earlier this month, the Third Circuit found that the FCC had not shown how its revenue-based definition of eligible entity would advance its goal of promoting minority and female ownership of broadcast stations. Accordingly, the Court tossed the policy, preventing the Commission from continuing to utilize it at all.

In response, the Commission has issued a public notice alerting potentially affected permit holders and prospective permit assignees of the effect of the Court’s decision.

To understand the way the shut-down will work, you have to understand the concepts of (a) “finality” of FCC actions and (b) issuance of the “mandate” relative to the court’s action.

A grant of an “eligible entity” assignment application – along with the corresponding extension of the underlying permit – becomes final 40 days after public notice of the grant (barring any petition for reconsideration, application for review, or other intervention by the Commission on its own motion).

The court’s decision becomes effective when the court issues its “mandate” to the Commission, telling the Commission that the agency’s got to comply with the court’s decision. Under the Federal Rules of Appellate Procedure (Rule 41, if you’re checking), an appellate mandate is supposed to issue seven days after the deadline for seeking rehearing has passed or, if rehearing is sought, then seven days after rehearing is denied. The deadline for seeking rehearing is 45 days after the court’s opinion is issued. Note, however, that parties can also ask the court to hold off on issuing its mandate. The Third Circuit decision was issued on July 7 – which means that the deadline for seeking rehearing would ordinarily be August 21 and, if rehearing isn’t sought and the issuance of the mandate isn’t delayed, we can expect to see the mandate pop out on August 29 (August 28, technically the seventh day after August 21, being a Sunday).

Applying those concepts to the problem at hand, the Commission has come up with the following.

CP-extending “eligible entity” application grants that become final prior to the issuance of the Third Circuit’s mandate are safe – they will not be affected by the Third Circuit’s decision. This means that any such application whose grant showed up on a public notice issued at least 41 days prior to August 29 should be OK. (We do the math so you don’t have to: 41 days prior to August 29 is July 19.)

But any such grant that has not become final as of the issuance of the mandate has big problems.  In such cases, the expiration date of the construction permit at issue will automatically revert back to its original, non-extended date. If that non-extended date has already passed and the permit has, thus, expired, the staff will rescind the grant of the assignment application and dismiss the application (since, technically, there’s nothing left to assign). If the non-extended date has not yet passed, the grant of the assignment will remain in effect – but the assignee will be subject to the permit’s original construction deadline, and the likelihood of getting that deadline extended is negligible.

For any CP-extending “eligible entity” assignment application that hasn’t yet been acted on, the news is equally grim. Any such application involving a permit that has already expired will be summarily dismissed. If the permit hasn’t expired, the Commission will process the assignment, but the buyer will be getting the permit as is, without any extended construction deadline. Again, the likelihood of any such extension is negligible.

Is there any ray of hope here? If the Third Circuit’s mandate is delayed, presumably the Commission’s ax won’t start to fall right away, which could afford some valuable time in some instances. What are the prospects for such a delay? Who knows? The Third Circuit’s decision was expansive and, at least to some, controversial. It’s possible that some private parties, or maybe even the Commission, might be inclined to seek rehearing. That could delay the issuance of the mandate by several months, possibly affording relief to some. So, too, could an effort to bring the case to the Supreme Court (although that alone would not necessarily stay issuance of the mandate – a request to hold off on that issuance might need to be filed).

The Commission’s public notice does not address that delay possibility, presumably because the one thing we know for sure at this point is that, absent rehearing efforts, the rules provide for issuance of the mandate on August 29. And while the possibility of delay may exist in theory, it’s a very thin reed on which to rest any hopes.

So a policy designed to increase diversity in broadcast ownership is being deep-sixed by a court decision which complained of the lack of diversity in broadcast ownership. And so it goes.