FEDERAL COMMUNICATIONS COMMISSION FCC 981-27 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In re Applications of COASTAL BROADCASTING PARTNERS A CALIFORNIA LIMITED PARTNERSHIP CATALINA 54 BROADCASTING, LTD. A CALIFORNIA LIMITED PARTNERSHIP AVALON, CATALINA BROADCASTERS, INC. ES POSffiLE MINORITY MEDIA TELECOMMUNICATIONS, INC. GOLDEN SHORES BROADCASTING, INC. PATRICK D. SISNEROS d/b/a CATALINA BROADCASTERS ISLAND BROADCASTING LIMITED PARTNERSHIP, A CALIFORNIA LIMITED PARTNERSHIP AVALON BROADCASTING, A CALIFORNIA LIMITED PARTNERSHIP For Construction Permit for a New Television Station on Channel 54 Avalon, California 80925 MM Docket No. 86-173 File No. BPCT-851206KE File No. BPCT-860207KJ File No. BPCT-860210KE File No. BPCT-860210KH File No. BPCT-860210KJ File No. BPCT-860210KK File No. BPCT-860210KM File No. BPCT-860210KN ORDER Adopted: June 1, 1998 Released: June 2, 1998 By the Assistant General Counsel, Administrative Law Division: 1. This Order grants in part the Joint Request for Approval of Settlement Agreements 11495 ___________FEDERAL COMMUNICATIONS COMMISSION FCC 981-27 filed on January 30, 1998 by the above captioned applicants, approves four attached settlement agreements, as well as ancillary amendments, and dismisses the applications of Es Posible Minority Media Telecommunications, Inc. (Es Posible), Coastal Broadcasting Partners (Coastal), Avalon Broadcasting (Avalon), and Golden Shores, Inc. (Golden Shores);1 concludes that the attached settlement agreements involving Patrick Sisneros d/b/a Catalina Broadcasters (Sisneros), Avalon Catalina Broadcasters, Inc. (ACB), and Catalina 54 Broadcasting, Ltd. (Catalina 54) do not warrant Commission action because the denial of their applications is final;2 grants the application of Island Broadcasting Limited Partnership (Island), as amended to substitute Pappas Telecasting of Southern California, L.L.C. for Island; and terminates this proceeding. The Order also dismisses as moot an earlier settlement agreement, dated December 14, 1995, among Island, Es Posible, and Coastal, and all related pleadings.3 The Mass Media Bureau has filed comments supporting grant of the Joint Request and of the related petition for leave to amend Island's application to substitute Pappas for Island. 2. By its Memorandum Opinion and Order, 7 FCC Red 1432 (1992), recon. denied, 1 FCC Red 6594 (1992), the Commission determined that Es Posible was the comparatively superior applicant based on its integration proposal. Five applicants sought judicial review of the Commission's action granting Es Posible's application, but ACB dismissed its court appeal 1 Island reached separate agreements with Avalon in June 1997, with Es Posible in December 1997 and with Coastal in October 1997, which were amended on January 15, 1998 to reflect, inter alia, the substitution of non-party Pappas Telecasting of Southern California, L.L.C. for Island, to make other changes consistent with Pappas' role, and to provide for the form of the Escrow Agreement. Island also reached a settlement with Golden Shores in June 1997. All four agreements were contingent on Island reaching agreements with the other pending applicants. 2 In June 1997 Island entered into settlement agreements with Sisneros and with ACB providing for payments of legitimate and prudent expenses of up to $60,000 to Sisneros and up to $250,000 to ACB, the dismissal of their applications, and the grant of Island's application. On January 13, 1998 Island reached a settlement agreement with Catalina 54 providing for a payment of $500,000. By amendments dated January 15, 1998, the three agreements were amended to reflect, inter alia, the substitution of non-party Pappas for Island, to make other changes consistent with Pappas' role, and to provide for the form of the Escrow Agreement. 3 Filed during a 90-day settlement window that ended December 15, 1995, the Joint Request for Approval of Settlement Agreement provided for the dismissal of the applications of Es Posible and Coastal and for the grant of Island's application. The December 14, 1995 Joint Request was opposed by Avalon, Sisneros, ACB, Catalina 54, and Golden Shores. Each argued, inter alia, that, due to the pendency of its respective application, the Commission could not grant Island's application. 11496 ___________FEDERAL COMMUNICATIONS COMMISSION FCC 981-27 on June 4, 1993.4 Consolidated appeals filed by Avalon, Island, Coastal and Golden Shores were still pending before the United States Court of Appeals for the District of Columbia Circuit on December 17, 1993, when the court issued its decision in Bechtel v. FCC, 10 F.3d 875 (D.C. Cir. 1993), holding that continued reliance on the integration criterion to decide among competing applications was arbitrary and capricious and therefore unlawful. Following the Bechtel decision, the court vacated the Commission's decision and remanded this comparative proceeding to the Commission for reconsideration in light of that court decision.5 Thereafter, the Commission froze all ongoing comparative proceedings pending resolution of the questions raised by the Bechtel decision.6 3. The Joint Request for Approval of Settlement Agreements contemplates the grant of Island's application, as amended to substitute Pappas Telecasting for Island, and the dismissal of the mutually exclusive applications. In exchange for Island's agreement to amend its application, Pappas will pay Island $4,700,000 initially. Under certain circumstances, Island will receive an additional payment of up to $2,000,000 plus interest if Pappas receives a digital channel within three years or if it sells the construction permit or license for a profit during that period. In addition, Pappas has agreed to assume Island's obligations to reimburse the dismissing applicants under the attached settlement agreements. For this purpose, Pappas has agreed to place funds in escrow, or provide irrevocable letters of credit reasonably acceptable to the dismissing applicants, and to pay each dismissing applicant the amount promised as consideration for its agreement to dismiss its pending application upon approval by the Commission of the Joint Request and grant of Pappas' application. 4. Seven separate settlement agreements are attached to the Joint Request. In addition to the four agreements involving Island and applicants Es Posible, Coastal, Golden Shores and Avalon, the Joint Request seeks approval of the agreements between Island and former applicants ACB, Sisneros, and Catalina 54. The Commission's denial of these three applications was already final by March 1, 1994 when the Court of Appeals vacated the Commission's decision granting Es Posible and remanded the proceeding for reconsideration in light of Bechtel. Indeed, long before that time, they had ceased to pursue their claims and thus had forfeited any right to further consideration in this proceeding. In this regard, ACB voluntarily dismissed its court 4 Avalon Catalina Broadcasters v. FCC, Case No. 92-1589 (D.C. Cir. filed Jul. 12, 1993). Court appeals were also filed by Avalon (Case No. 92-1116), Island (Case No. 92- 1117), Coastal (Case No. 92-1118) and Golden Shores (Case No. 92-1574). 5 Avalon Broadcasting v. FCC, Case Nos. 92-1116, 92-1117, 92-1118 and 92-1574 (D.C. Cir. filed Mar. 1, 1994). 6 Public Notice, FCC Freezes Comparative Hearings, 9 FCC Red 1055 (1994), modified, 9 FCC Red 6689 (1994), farther modified, 10 FCC Red 12182 (1995). 11497 ___________FEDERAL COMMUNICATIONS COMMISSION FCC 981-27 appeal on June 4, 1993,7 and neither Sisneros nor Catalina 54 sought judicial review. Since the applications filed by ACB, Sisneros and Catalina 54 are no longer pending before the Commission, Commission approval of these separate reimbursement agreements is not warranted under Section 31 l(c) of the Communications Act or Section 73.3525 of the Rules, which govern settlement agreements involving mutually exclusive broadcast applications.8 See 47 U.S.C. § 311(c); 47 C.F.R. § 73.73525(b) (stating that an application is deemed to be pending before the Commission for purposes of this subsection from the time such application is filed with the Commission until an order of the Commission granting it or denying it is no longer subject to rehearing by the Commission or review by any court). Thus, the separate reimbursement agreements between Island and each of the three former applicants are neither approved nor disapproved.9 And since the denial of Catalina 54's application became final before the Commission instituted the comparative freeze following Bechtel, there is no basis for vacating any findings of fact or conclusions of law relating to Catalina 54. In Crystal Communications, Inc. , 12 FCC Red 2149, 2152 (1997), the Commission concluded that it was appropriate to depart from its usual practice of refusing to vacate findings in connection with a settlement agreement if, as a result of the comparative freeze, an applicant's right to secure final review of the merits of its application was indefinitely delayed. That rationale, however, does not apply to an applicant that forfeited its right to seek judicial review long before the Bechtel decision and the resulting comparative freeze. 5. The Joint Request and the attached settlement agreements involving Island and the four pending applicants will be granted. The settlement agreements provide for payments of up to $2,720,000 to Es Posible, of up to $1,000,000 to Coastal, of up to $200,000 to Avalon Broadcasting, and of $150,000 to Golden Shores. Section 3002(a) of the Balanced Budget Act of 1997, Pub. L. No. 105-33, 111 Stat. 251 (1997), codified as 47 U.S.C. § 309(1)(3), requires that the Commission must waive any provisions of its regulations necessary to permit settlement agreements executed within 180 days of enactment of the statute among persons who filed 7 Avalon Catalina Broadcasters v. FCC, No. 92-1589 (D.C. Cir. filed Jul. 12, 1993). 8 See Aeronautical Radio, Inc. v. FCC, 983 F.2d 275, 282 (D.C. Cir. 1993) (affirming the Commission's refusal to reinstate application that had voluntarily dismissed its application before court decision vacating the Commission's consortium rules); McElroy Electronics Corporation, 10 FCC Red 6762, 6766-67 1 12 (1995), remanded on other grounds, 86 F.3d 248 (D.C. Cir. 1996) (refusing to reinstate cellular applications of applicants who did not preserve their rights by seeking judicial review despite subsequent court decision reversing the dismissal of similarly situated applications). 9 Given that the Joint Request for Approval of Settlement Agreements filed January 30, 1998 supersedes the proposed settlement agreement that had been filed in this proceeding on December 14, 1995, the oppositions to the latter request that were filed by these former applicants are moot and of no relevance here. 11498 ___________FEDERAL COMMUNICATIONS COMMISSION FCC 981-27 competing applications for new commercial radio or television stations before July 1, 1997. Each of the attached settlement agreements was executed before the expiration on February 1, 1998 of the 180-day period specified in Section 309(1)(3). 10 In accordance with that mandate, the restrictions on payments to dismissing applicants set forth in Section 73.3525(a) of the Commission's Rules, 47 C.F.R. § 73.3525(a), will be waived to permit payments to the pending applicants without regard to the legitimate and prudent expenses of any of the dismissing applicants. Gonzales Broadcasting Inc., 12 FCC Red 12253, 12255-56 1 10 (1997). 6. Moreover, in the Notice of Proposed RulemaMng in Implementation of Section 309(j) of the Communications Act, 12 FCC Red 22363, 22375 1 26 (1997), the Commission indicated that, consistent with the congressional policies underlying Section 309(1)(3), it would be inclined to waive its policy against settlement agreements that involve the grant of a construction permit to a non-party in order to facilitate resolution of frozen hearing cases. Under the circumstances of this case, it is in the public interest to waive that policy and thus good cause supports Island's petition for leave to amend its application to substitute Pappas. The Bureau has reviewed the settlement agreement and the amendments to Island's application, and has determined that, subject to notification to the Commission that the publication requirements of Section 73.3580 have been competed, Pappas is fully qualified to receive the construction permit for Avalon. Pappas notified the Commission by filings of April 6, and 13, 1998 that it completed the publication, required by 47 C.F.R. § 73.3580, of its substitution for Island on February 19, February 26, and March 5, 1998. No opposition to the parties' proposal has been received. 7. In addition, the Joint Request complies in all respects with the requirements of Section 311(c) of the Communications Act, and, except for the restrictions on payments to dismissing applicants, it complies fully with the provisions of Section 73.3525(a). Attached to the Joint Request are declarations under penalty of perjury from Island and each of the pending applicants - Es Posible, Avalon, Coastal and Golden Shores. Each declaration states that the application was not filed for the purposes of reaching or carrying out a settlement agreement and that the applicant will not receive any other consideration for dismissing its application. The statements further reflect that approval of the settlement agreement will serve the public interest by expediting service to the public and by conserving the resources of the parties and of the Commission. 8. ACCORDINGLY, IT IS ORDERED That, pursuant to the authority delegated under 47 C.F.R. § 0.251(c), the Joint Petition for Approval of Settlement Agreements, filed January 30, 1998, by Island Broadcasting Limited Partnership, Es Posible Minority Media 10 In some instances the settlement agreements do not reflect the actual date of execution. It is clear, however, that each agreement was executed before February 1, 1998, inasmuch as each agreement contains properly executed signature pages and all of the agreements are attached to the January 30, 1998 Joint Request. 11499 ___________FEDERAL COMMUNICATIONS COMMISSION FCC 981-27 Telecommunications, Inc., Golden Shores Broadcasting, Inc., Avalon Broadcasting; Catalina 54 Broadcasting, Ltd., Coastal Broadcasting Partners, Patrick D. Sisneros d/b/a Catalina Broadcasters, and Avalon, Catalina Broadcasters, Inc. IS GRANTED to the extent reflected herein; that the attached settlement agreements providing for the dismissal of the applications filed by Es Posible Minority Media Telecommunications, Inc., Golden Shores Broadcasting, Inc., Coastal Broadcasting Partners, and Avalon Broadcasting ARE APPROVED; and that the Joint Request for Approval of Settlement Agreement filed December 14, 1995 by Island Broadcasting Limited Partnership, Es Posible Minority Media Telecommunications, Inc. and Coastal Broadcasting Partners, and all related pleadings, ARE DISMISSED as moot. 9. IT IS FURTHER ORDERED That the petition for leave to amend filed February 12, 1998, by Island Broadcasting Limited Partnership IS GRANTED, the attached amendment IS ACCEPTED, Pappas Telecasting of Southern California, L.L.C. IS SUBSTITUTED for Island Broadcasting Limited Partnership; that the amendment submitted March 27, 1998 and resubmitted April 13, 1998 by Pappas Telecasting IS ACCEPTED;11 that the application of Island Broadcasting as amended to substitute Pappas Telecasting of Southern California, L.L.C. (File No. BPCT-860210KM) IS GRANTED; that the applications of Es Posible Minority Media Telecommunications (File No. BPCT-860210KH), Golden Shores Broadcasting, Inc. (File No. BPCT-860210KJ), Avalon Broadcasting (File No. BPCT-860210KN), and Coastal Broadcasting Partners (File No. BPCT-851206KE) ARE DISMISSED; and that this adjudicatory proceeding (MM Docket No. 86-173) IS TERMINATED. FEDERAL COMMUNICATIONS COMMISSION John I. Riffer Assistant General Counsel Administrative Law Division Office of General Counsel 11 Good cause exists for accepting the amendment that submits a corrected Exhibit 2 showing that the Pappas Children's Trust and Ms. Rosemary Danon are not members of Pappas and adjusts the percentage interests of the other members of Pappas accordingly. 1 1 500 *U.S. GOVERNMENT PRINTING OFFICE: 1998-432-420x80036