UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


SL COMM

v.

FCC


98-1076a

D.C. Cir. 1999


*	*	*


Tatel, Circuit Judge: The Federal Communications Com- mission
disqualified appellant Dorothy O. Schulze and Debo- rah Brigham
("S&B") from a comparative television licensing  proceeding due to
serious misconduct. Because no other  qualified applicant remained,
S&B proposed to "settle" the  proceeding by substituting in its place
appellant SL Commu- nications ("SL"), an established, reputable
broadcaster willing  to reimburse S&B for the expenses it incurred
pursuing the  license. Relying on its policy of deterring misconduct,
the  Commission rejected the settlement. Because we find the 
disqualification and the rejection of the settlement wholly 


I


In 1985, appellant S&B, a partnership consisting of two  sisters,
applied for a television broadcast license for UHF  channel 52 in
Blanco, Texas, a small town forty miles west of  San Antonio. The
Commission designated S&B and two 


other applicants to participate in comparative hearings before  an
administrative law judge.


Following months of hearings, the ALJ disqualified S&B on  several
grounds. See Opal Chadwell, 1 F.C.C.R. 120 (1986)  ("ALJ Order").
First, he found that S&B improperly failed  to disclose that one of
its principals, Dorothy Schulze, had  previously applied for another
television broadcast license in  San Antonio. Rejecting as "pure
fabrication" Schulze's expla- nation that she never had an interest in
the San Antonio  application, the ALJ found that Schulze lied during
the  Blanco hearings to cover up the omission in S&B's applica- tion.
Id. at 124 pp 45-46. The ALJ also found that Schulze  lied to a
different ALJ--one conducting comparative hearings  regarding a
television broadcast license in Castle Rock, Colo- rado--about her
involvement in yet another application for a  license in Conroe,


Second, the ALJ found that S&B was actually controlled  not by Schulze
and Brigham but rather by their brother,  Richard Ozan, and that Ozan
had convinced his sisters to act  as nominal applicants for the Blanco
license in order to take  advantage of then-applicable affirmative
action programs af- fording preferences to women-owned license
applicants. Ac- cording to the ALJ, Ozan was the real
party-in-interest not  only in S&B's Blanco application, but also in
nine other  applications then pending before the Commission, including
 one in the Conroe proceeding. See id. at 126 p 70.


Third, the ALJ found that in addition to lying about her  interest in
the San Antonio application, Schulze had lied in  her Castle Rock
application about whether she had obtained a  transmitter site in that
area. Although S&B's communica- tions consultant, Ron Baptist, had
originally testified that he  had secured a Castle Rock transmitter
site for Schulze,  Baptist later recanted, admitting that he actually
had nothing  to do with securing a site. Baptist then testified that
he and  S&B's lawyer, Donald Martin, concocted his false story over 
breakfast the morning he first testified. Schulze was at that 
breakfast. The ALJ found not just that Schulze lied about 


the transmitter site, but also that Schulze and Martin had  suborned
Baptist's perjury. See id. at 127 p 93.


After disqualifying S&B on the basis of these findings, the  ALJ
disqualified a second applicant, finding that it had made 
misrepresentations in its pleadings. He awarded the Blanco  license to
the lone remaining applicant. The Commission's  Review Board affirmed.
See Opal Chadwell, 2 F.C.C.R. 5502  (1987) ("Review Board Order").
Agreeing with the ALJ that  Ozan exercised de facto control over S&B's
application, the  Review Board stated that "it was clearly
demonstrated that  [Ozan] was the prime mover, principal and agent
responsible  for every aspect of the prosecution of the application[
]." Id.  at 5509 p 31. It also affirmed the ALJ's finding that Schulze
 lied about the Castle Rock transmitter site. See id. at 5510  p 34.
Because the real party-in-interest and Castle Rock  veracity issues
each independently supported S&B's disquali- fication, the Review
Board declined to review the ALJ's other  findings, including his
finding that Schulze and Martin sub- orned Baptist's perjury. See


Although the Commission denied review of S&B's disquali- fication in
1989, it remanded the case to the ALJ for further  factfinding
regarding the successful applicant's financial qual- ifications. See
Opal Chadwell, 4 F.C.C.R. 1215 (1989). The  ALJ then dismissed that
applicant for failing to participate in  discovery. See Opal Chadwell,
FCC 89M-1568, Docket No.  85-269 (Jun. 2, 1989). At that point, no
applicants remained  in the Blanco proceeding.


Petitioning the Commission for reconsideration, S&B ar- gued that the
ALJ's findings, especially that Ozan exercised  de facto control over
a sham application in Conroe, were  inconsistent with those of the
Conroe ALJ, who had subse- quently found otherwise. Because the Review
Board had  remanded the Conroe proceeding for further consideration in
 light of the Blanco findings, the Commission stayed its order 
denying review of S&B's disqualification, holding S&B's peti- tion for
reconsideration in abeyance pending the Conroe  remand. See Opal
Chadwell, 5 F.C.C.R. 3227 (1990). The  Conroe ALJ then reversed
himself, agreeing with the Blanco 


ALJ that Ozan controlled a sham application in Conroe. See  Montgomery
Cty. Media Network, 6 F.C.C.R. 2963 (1991).


In 1995, while its petition for reconsideration was still in  abeyance,
S&B petitioned the Commission to amend its Blan- co application to
substitute in its place SL, the other appellant  in this case. Under
the proposed "settlement," the Commis- sion would award the Blanco
license to SL, and SL would pay  S&B $227,000--a sum S&B claimed was
less than the ex- penses it incurred pursuing the Blanco license. At
oral  argument, SL's counsel conceded that most of the $227,000 
represented Martin's fees. The Commission denied the peti- tion to
amend, stating that because S&B had not demonstrat- ed that it was
qualified to receive the license, it had nothing  to assign to SL. See
Dorothy O. Schulze and Deborah  Brigham, 12 F.C.C.R. 2602 (1997)
("Commission Order I").  Moreover, the Commission explained, given
S&B's unconscio- nable behavior, allowing S&B to recover its expenses
would  run counter to its policy of deterring misconduct during 
agency proceedings. Id. at 2604-05 p 9 & n.1. The Commis- sion also
denied S&B's petition for reconsideration of its  disqualification;
that petition had been in abeyance for seven  years.


Six months later, Congress enacted the Balanced Budget  Act of 1997.
See Pub. L. No. 105-33, 111 Stat. 251 (1997).  Section 3002(a)(3) of
that Act added section 309(l) to the  Communications Act of 1934. See
111 Stat. at 260 (codified at  47 U.S.C. s 309(l) (Supp. 1998)).
Section 309(l) authorized  the Commission to resolve then-pending
comparative pro- ceedings through competitive auctions. It also
required the  Commission, during the 180-day period following its
enact- ment, to "waive any provisions of its regulations necessary" to
 allow competing applicants to settle conflicts between or  among
their applications. Relying on this new provision,  S&B, this time
joined by SL, once again petitioned the  Commission for
reconsideration, arguing that section 309(l)  required the Commission
to waive its normal rule against  third-party settlements of
comparative proceedings. Denying  the petition, the Commission held
that section 309(l) applies  only to settlements between competing


tween a lone applicant and a third party. See Opal Chadwell,  13
F.C.C.R. 3259 (1998) ("Commission Order II").


S&B appeals the disqualification of its application. Joined  by S&B, SL
appeals the rejection of the proposed settlement.  We review the
Commission's decisions under the familiar  arbitrary and capricious
standard. See 5 U.S.C. s 706(2)(A)  (1994); Serafyn v. FCC, 149 F.3d
1213, 1219 (D.C. Cir. 1998).


II


Represented in this appeal by Martin, S&B spends nearly  half its brief
challenging the ALJ's finding that Martin and  Schulze suborned
Baptist's perjury. We have no authority to  consider that issue,
however, for the Review Board expressly  declined to reach it. See
Review Board Order, 2 F.C.C.R. at  5510 p 34 (concluding that "we need
not reach the more  serious question whether the applicant's conduct
constitutes  'subornation of perjury' " because Schulze "proffer[ed] a
false  version of the events surrounding the securing of the [trans-
mitter] site") (citation omitted).* We turn to S&B's chal- lenges to
the real party-in-interest and lack-of-candor find- ings.


In determining that Ozan was the real party-in-interest  behind S&B's
application, the ALJ credited the testimony of  Thomas Root, Schulze's
former attorney, and Ronald Baptist,  S&B's communications specialist.
Both had described Ozan's  behind-the-scenes role with respect to
S&B's application.  The ALJ rejected as "sheer fabrication"--a "web of
lies," as  he also put it--the contrary testimony of three S&B wit-
nesses, including Schulze. ALJ Order, 1 F.C.C.R. at 124-25  p 55,
125-26 p 69. We disturb credibility findings affirmed by 




__________

n * Perhaps Martin's belief that he needed to defend his own  conduct
led him to place so much emphasis on an issue irrelevant to  his
client's appeal. Cf. Model Rules of Professional Conduct Rule  1.7
cmt. 6 (1983) ("The lawyer's own interests should not be  permitted to
have an adverse effect on representation of a  client.... If the
probity of a lawyer's own conduct in a transaction  is in serious
question, it may be difficult or impossible for the  lawyer to give a
client detached advice.").


the Commission only if "patently unsupportable." Williams  Enterprises
v. NLRB, 956 F.2d 1226, 1232 (D.C. Cir. 1992).


S&B argues that Root's testimony should not have been  credited because
shortly after the Commission first denied  review of S&B's
disqualification Root was convicted on nu- merous state and federal
charges of fraud, racketeering, and  conspiracy. See Petroleum V.
Nasby Corp., 10 F.C.C.R.  6029, 6030 p 6 (1995). Rejecting this
argument, the Commis- sion observed that the Review Board had
determined (after  the Conroe remand) that Root had testified credibly
regard- ing Ozan's role in the Blanco and Conroe proceedings--a 
determination that the Review Board made with full knowl- edge of
Root's subsequent convictions. See Commission  Order I, 12 F.C.C.R. at
2607 pp 13-14. The Commission  ruled that the Review Board had given
adequate reasons for  crediting Root's testimony, pointing out not
only that his  testimony was corroborated by two other witnesses and
by  documentary evidence, but also that he had no apparent  motive to
lie. S&B offers no reason why Root's convictions,  which were weighed
by the Commission, render the ALJ's  credibility determination


S&B next argues that Baptist's testimony should not have  been credited
because he lied about the Castle Rock trans- mitter site. Despite
Baptist's admitted perjury, the ALJ  credited his account of Ozan's
involvement in S&B's Blanco  application. Affirming the ALJ's
credibility determination,  the Review Board stated: "The fact that
Baptist voluntarily  exposed himself to penal sanctions [by recanting]
lends cre- dence to his claim of truthfulness the second time he
testi- fied." Review Board Order, 2 F.C.C.R. at 5510 p 34. Again,  S&B
offers no reason for questioning the ALJ's credibility 


Having considered S&B's remaining arguments and finding  none
persuasive, we affirm the Commission's determination  that Ozan was
the real party-in-interest behind S&B's Blanco  application. Because
the Commission found the real party-in- interest determination
independently sufficient to justify  S&B's disqualification, we need
not consider S&B's challenge 


to the Commission's alternative determination that Schulze  lied about
the Castle Rock transmitter site.


III


This brings us to SL's challenge to the agency's refusal to  approve
the proposed third-party settlement agreement.  Joined by S&B, SL
argues that the Commission's refusal to  approve the settlement
violates the 1997 Budget Act, conflicts  with its own precedent, and
is contrary to the public interest.


Section 3002(a)(3) of the Budget Act, which added section  309(l) to
the Communications Act, authorized the Commission  to resolve
competing applications in then-pending compara- tive licensing
proceedings through competitive auctions. See  Pub. L. No. 105-33, s
3002(a)(3), 111 Stat. at 260. Entitled  "Applicability of competitive
bidding to pending comparative  licensing cases," section 309(l)


With respect to competing applications for initial li- censes or
construction permits for commercial radio or  television stations that
were filed with the Commission  before July 1, 1997, the Commission
shall--


(1) have the authority to conduct a competitive bidding  proceeding ...
to assign such license or permit;


(2) treat the persons filing such applications as the  only persons
eligible to be qualified bidders for pur- poses of such proceeding;


(3) waive any provisions of its regulations necessary to  permit such
persons to enter an agreement to procure  the removal of a conflict
between their applications  during the 180-day period beginning on the
date of  enactment of the Balanced Budget Act of 1997.


47 U.S.C. s 309(l). Subsection (l)(3) required the Commis- sion to
waive any rules that would otherwise have prevented  competing
applicants in then-pending comparative proceed- ings from avoiding an
auction by reaching a settlement.


The Commission interprets section 309(l) as not applying to  the
settlement in this case because SL and S&B are not  "competing
applica[nts]." See Commission Order II, 13 


F.C.C.R. at 3264-65 pp 13-15; see also Implementation of  Section
309(j) of Communications Act, 13 F.C.C.R. 15,920,  15,949 p 78 (1998)
("SL Communications urges that the waiv- er [of the prohibition
against non-party settlements] should  apply to all comparative
proceedings ... even proceedings in  which there is only one remaining
applicant.... However,  ... the special settlement provisions of
Section 309(l)(3) apply  only to competing [i.e. mutually exclusive]
applications.") (in- ternal quotation omitted). SL was not even a
party to the  Blanco proceeding, the Commission observes, and as the
lone  remaining applicant S&B was "competing" with no one. Ac- cording
to the Commission, the unambiguously clear language  of section 309(l)
compelled this conclusion. See Chevron  U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467  U.S. 837, 842-43 (1984) ("If the
intent of Congress is clear,  that is the end of the matter; for the
court, as well as the  agency, must give effect to the unambiguously
expressed  intent of Congress."). We agree.


To begin with, the Commission correctly determined that  S&B was not
"competing" with anybody when it proposed the  settlement. Webster's
defines "competing" as "seek[ing] or  striv[ing] for something ... for
which others are also con- tending." Webster's Third New International
Dictionary  463 (3d ed. 1993) (emphasis added). None of the other 
Blanco applicants was contending for the license; the Com- mission had
disqualified them. SL could not have been  contending for the license
either, for it never became a party  to the proceeding.


In support of its interpretation of the Act, the Commission  also
points out that subsection (l)(3) contemplates settlement  agreements
to "remov[e] ... a conflict between ... applica- tions." Here there
could have been no "conflict" between  applications because S&B was
the only remaining applicant.


Finally, subsection (l)(2) prohibits the Commission from  allowing
parties other than competing applicants to partici- pate in auctions
to resolve pending comparative proceedings.  If section 309(l) covered
S&B's lone application, as SL argues,  and if the Commission chose to
auction off the Blanco license, 


then (l)(2) would entitle S&B to "bid" for that license without  any
competition whatsoever. We have no doubt that Con- gress never
intended such a perverse result.


Next, SL argues that even if section 309(l) does not apply,  the
Commission's rejection of the proposed settlement was  arbitrary and
capricious because it conflicted with agency  precedent. To be sure,
the Commission has recognized that  voluntary settlements of
comparative proceedings are gener- ally in the public interest because
they conserve agency  resources and expedite broadcasting service. See
Rebecca  Radio of Marco, 4 F.C.C.R. 830 (1989), modified by Rebecca 
Radio of Marco, 5 F.C.C.R. 937 (1990). But the Commission  rejected
the proposed settlement in this case on the ground  that allowing S&B
to recoup its expenses after acting so  mendaciously before the agency
would run counter to its  policy of "deterring misconduct." Commission
Order I, 12  F.C.C.R. at 2604-05 p 9 & n.1. According to SL, the Com-
mission has approved third-party settlements even where the  agency
questioned the propriety of the settling applicant's  conduct. It
cites two cases for support: Allegan County  Broadcasters, 83 F.C.C.2d
371 (1980), and Gonzales Broad- casting, 12 F.C.C.R. 12,253 (1997). We
are satisfied that the  Commission has adequately distinguished both


In Allegan, the Commission approved a settlement despite  unresolved
character allegations against one of the withdraw- ing applicants. See
83 F.C.C.2d at 373 p 6. Here, the  Commission refused to follow
Allegan because while in that  case there had been no hearings
regarding the character  allegations, in this case the ALJ actually
found S&B guilty of  serious misconduct. See Commission Order II, 13
F.C.C.R.  at 3264 p 12. It is true, as SL points out, that at the time
the  Commission rejected the settlement in this case the ALJ's 
findings were still subject to judicial review. But surely  there is
nothing irrational about the Commission's determina- tion that its
policy of deterring misconduct controls where  there are actual agency
findings of misconduct--as opposed  to mere allegations (the situation
in Allegan)--whether or not  those findings remain subject to judicial


In Gonzales Broadcasting, a post-Budget Act case, the  Commission
approved a settlement among six competing  applicants through which
the license was awarded to a newly- created corporation jointly owned
in part by all six applicants,  even though the ALJ had found two of
the applicants guilty  of misrepresentation and abuse of process. See
12 F.C.C.R.  at 12,256-57 pp 11-13. As the Commission explained,
newly- enacted section 309(l) controlled the Gonzales settlement 
because, unlike here, it involved six "competing" applicants.  See
Commission Order II, 13 F.C.C.R. at 3265 p 14.


Finally, SL argues that the proposed settlement is in the  public
interest because it would result in prompt initiation of  broadcast
service to an unserved community. But we find  nothing irrational in
the Commission's expert determination  that deterring the kind of
serious misconduct engaged in by  S&B better serves the public
interest than expediting UHF  service to Blanco.


III


The disqualification of S&B and the rejection of the pro- posed
settlement between S&B and SL are affirmed.


So ordered.