[00:00:00] Speaker 00: Case number 15-1346. [00:00:03] Speaker 00: Free access and broadcast telemedia LLC at L Petitioners versus Federal Communications Commission at L. Mr. White for the petitioners, Mr. Lewis for the respondent. [00:00:50] Speaker 03: Morning. [00:00:51] Speaker 03: Sorry. [00:00:52] Speaker 03: Now take your time. [00:00:58] Speaker 04: If I may reserve two minutes for a bottle. [00:01:02] Speaker 04: Given that the courts already started to delve into the issues of the case, let me just dive in on two specific points that were raised here. [00:01:09] Speaker 02: Yes, your honor. [00:01:12] Speaker 04: Yes, your honor. [00:01:13] Speaker 02: We believe what certain when you have standing or if you have. [00:01:16] Speaker 02: Yes, sir. [00:01:17] Speaker 04: You are. [00:01:18] Speaker 04: We believe that our showings and the declarations attached to the briefs, coupled with the materials and the record of itself for the FCC, demonstrate that our clients have suffered actual injuries that are concrete and particularized. [00:01:32] Speaker 02: The word of God was not a party agreed with, because they were not in the preceding book. [00:01:37] Speaker 04: Yes, sir. [00:01:37] Speaker 04: We concede that within the meaning of current precedent in this circuit, word of God fellowship is not a party agreed with in the meaning of the Hobbs Act. [00:01:44] Speaker 02: How is free access [00:01:47] Speaker 04: How do they have Article III standing? [00:01:50] Speaker 04: They have Article III standing for two reasons. [00:01:53] Speaker 04: They suffer an injury to the value of their current investments, options to purchase stations outright. [00:01:59] Speaker 02: Now, ordinarily shareholders, for example, do not have standing in an action that injures the corporation, thereby presumably is going to injure the value of the shares. [00:02:11] Speaker 02: Why does an auction holder have a greater claim to standing than a shareholder does? [00:02:16] Speaker 04: Well, first of all, just to be clear, these aren't options to buy shares. [00:02:21] Speaker 04: These are options to purchase stations outright from other companies. [00:02:24] Speaker 02: You notice I carefully did not word that it being options to buy shares. [00:02:27] Speaker 04: Yes, sir. [00:02:27] Speaker 04: But there has been some case study confusion. [00:02:30] Speaker 04: These option holders, free access, has superior rights for purposes of litigation, Article III standing, than to normal shareholders for two reasons. [00:02:42] Speaker 04: The current owners are not fiduciaries to these auction holders. [00:02:46] Speaker 04: They're counterparties. [00:02:48] Speaker 04: They've assigned and sold rights. [00:02:49] Speaker 04: I'm not really sure why that matters. [00:02:51] Speaker 04: Well, if you look at franchise tax and the other cases that invoke this doctrine when it has been invoked, they make clear that the shareholder doctrine exception is a prudential doctrine that's based on the normal relationship between the board of directors acting as fiduciaries to shareholders, standing in their shoes, and exercising the rights of the corporation. [00:03:15] Speaker 04: rights exclusively held by the corporation. [00:03:17] Speaker 04: In that respect, the shareholders are not litigating their own rights in those cases. [00:03:21] Speaker 04: They're trying to litigate the rights and interests of the corporation itself. [00:03:25] Speaker 04: Here in this case, free access is litigating in service of its own [00:03:31] Speaker 04: property rights, these contractual interests to purchase. [00:03:36] Speaker 03: But those are just derivative of the rights of the corporation, right? [00:03:40] Speaker 03: I mean, there's no injury to the corporation. [00:03:41] Speaker 03: There's no injury to the option holders. [00:03:44] Speaker 03: I mean, it's derivative. [00:03:45] Speaker 03: And I thought sort of the hallmark of the prudential standing approach is whether it's derivative or not. [00:03:52] Speaker 03: Is that wrong? [00:03:54] Speaker 04: I don't know that I'd say it's derivative. [00:03:56] Speaker 04: It's surely related, obviously. [00:03:59] Speaker 04: Actions that impact an LPTV station will impact the value of options to buy those stations, but I want to make perfectly sure how big a door you're asking us to open. [00:04:09] Speaker 02: I understand these are not stock options, but would not the same kind of logic apply to stock options. [00:04:16] Speaker 02: I would say you've got an option to buy 50% of the state instead of 100%. [00:04:20] Speaker 02: and the 50% is represented by chairs in an LLC or sub-chapter S. Are you saying that you would then have a right to bring an action? [00:04:33] Speaker 02: I'm not saying that. [00:04:36] Speaker 04: We're not quibbling with the shareholder standing exception itself. [00:04:40] Speaker 04: All that we're asking is that the court not expand that doctrine to the extent it's already been applied, and it seems that it's been applied only in very limited circumstances. [00:04:48] Speaker 04: We're asking that the court not expand that doctrine to include entities that aren't shareholders, whose interests aren't perfectly aligned with the corporation itself. [00:04:57] Speaker 04: And I want to make that clear. [00:04:59] Speaker 04: Free Access's interests are not aligned perfectly with the interests of the current owners. [00:05:05] Speaker 04: The current owners own a variety of stations, both auction eligible stations, Class A or full service, and LPTV stations. [00:05:15] Speaker 04: The current owners may not find it in their interest to challenge this auction where they stand to make millions of dollars selling their auction eligible spectrum usage rights back to the FCC. [00:05:28] Speaker 04: Free access stands solely to vindicate this provision. [00:05:31] Speaker 04: They have no other contrary interest in this case. [00:05:35] Speaker 04: Unlike the current owners of a portfolio of stations auction eligible. [00:05:39] Speaker 03: When your client bought their property interest, they knew that this sort of thing could happen, right? [00:05:48] Speaker 03: This happens all the time. [00:05:49] Speaker 03: They were buying interest in an entity that was secondary. [00:05:53] Speaker 03: to a whole host of players. [00:05:55] Speaker 04: Well, I would like to get into what secondary means, but to be very clear here, what's happening here has not happened before. [00:06:01] Speaker 04: This incentive auction structure, this double auction with the reorganization in the middle, has never happened before. [00:06:07] Speaker 04: As far as I know, this is the first of its kind. [00:06:09] Speaker 04: This is an experiment by Congress. [00:06:12] Speaker 04: And as we've said in our briefs, our position is the FCC is expanding the meaning of secondary beyond its limited purposes in its prior rulemakings. [00:06:22] Speaker 04: And that's even assuming that the term spectrum usage rights, which Congress used, incorporates every jot and total of an FCC rulemaking, sort of explaining its version of what a spectrum usage right is. [00:06:35] Speaker 01: I think it's important to understand exactly what the distinction is between [00:06:39] Speaker 01: the interests of you as an option holder and the interests of the license holder itself. [00:06:44] Speaker 01: So you were making the point that the owners have different interests because they have other ownership interests too. [00:06:51] Speaker 04: Well, I'm not saying that our spectrum, I'm not saying that there's a difference that goes to spectrum usage rights. [00:06:55] Speaker 04: I'm just saying as to the prudential question. [00:06:57] Speaker 01: Yeah. [00:06:58] Speaker 01: Our interests are now perfectly aligned with the interests of the current owners of the stations. [00:07:01] Speaker 01: And I'm just trying to understand, would that be, does that distinguish shareholders all the time? [00:07:07] Speaker 01: In other words, couldn't you have the same situation where what your option entails is an option to purchase shares? [00:07:16] Speaker 01: option to purchase equity in the company that you still have the situation in which the company, the owners of the company whose shares you could have the option to buy would still have disparate interest because they might be owners of other companies too. [00:07:29] Speaker 04: That's true. [00:07:29] Speaker 04: They might have a diverse portfolio. [00:07:31] Speaker 04: Yeah. [00:07:32] Speaker 01: Again... So how does it distinguish... If that's true, unless I'm missing something, I'm not understanding how that distinguishes [00:07:38] Speaker 01: you from the company in a way that would distinguish your situation from the shareholder's situation? [00:07:43] Speaker 04: Well, prudential standing doctrines, including the shareholder exception, they're prudential stock trends that depend on the facts of given cases. [00:07:52] Speaker 04: So while it may be true that in a given case a diversified investor who has options to buy shares [00:07:57] Speaker 04: may have interests that diverge from the company itself. [00:08:01] Speaker 04: It's not necessarily all the time. [00:08:03] Speaker 04: It's not necessarily every case. [00:08:04] Speaker 04: And we know for a fact, in this case, my client, this non-shareholder, has interests that in fact diverge. [00:08:12] Speaker 04: We know this. [00:08:13] Speaker 04: They diverge from the interests of their counterparties, the companies from which they bought these options. [00:08:19] Speaker 01: But I don't think you could say that the holder of an option to purchase shares is any better off than the owner of the shares. [00:08:28] Speaker 04: I would say that in this case, my client is in a better position to litigate the statutory term at issue in this case, 1452B5. [00:08:36] Speaker 04: His only stake in this case is to maintain the LPTV, we can call it LPTV protection or the non-alteration provision. [00:08:46] Speaker 04: That's the only interest in this case, whereas other, the current owners, they may [00:08:53] Speaker 04: They have all of that. [00:08:55] Speaker 02: They might or might not. [00:08:56] Speaker 02: They might or might not. [00:08:57] Speaker 02: The fact of being a shareholder as opposed to an option holder does not in itself imply a different interest. [00:09:07] Speaker 02: There's no reason to think a shareholder has other interests. [00:09:11] Speaker 02: They may or may not. [00:09:12] Speaker 02: I mean, I doubt seriously if you could demonstrate that all the shareholders involved here do have leverage. [00:09:22] Speaker 01: Because the shareholder standing rule still applies regardless of divergent interests of the shareholders themselves. [00:09:29] Speaker 01: And it just seems that if that's true, it seems hard to stomach a doctrine whereby a person who's one step more removed, which is an option to purchase the shareholders, will then have a better position vis-a-vis standing. [00:09:42] Speaker 04: Well, if I may put it this way, just until you said at the outset of this, it seems a heavy, a heavy oar I'm asking you to row. [00:09:49] Speaker 04: We're asking that the court not rowing over here. [00:09:51] Speaker 04: We're just asking the court to respect the Brightline rule that's been previously enunciated and to not expand it still further to cover non-shareholders because, again, we do believe our interests have diverged. [00:10:04] Speaker 03: If nothing else, if I may say this... But aren't you asking us to do something quite novel? [00:10:11] Speaker 03: You're asking us to give you rights that we have heretofore not given to someone who has a greater property interest than you do. [00:10:18] Speaker 03: That's really quite remarkable. [00:10:20] Speaker 04: If I may, I don't think it's a question of a greater or lesser property interest. [00:10:24] Speaker 04: I think it's a fundamental difference. [00:10:26] Speaker 04: We are counterparties with the corporation. [00:10:28] Speaker 04: We have separate interests. [00:10:29] Speaker 04: They're not our fiduciary. [00:10:30] Speaker 04: They're our counterparty. [00:10:32] Speaker 04: It's not about greater or lesser. [00:10:33] Speaker 04: It's about a difference in the relationship between us and the company that currently owns the stations. [00:10:41] Speaker 04: If I may make just a couple of points on the merits that arose near the end. [00:10:45] Speaker 04: If I understood my friend correctly, he said that the difference that B-5 makes in addition to not increasing the rights of LPTV stations, and I would like to remark on that for just a moment, he said that if that provision wasn't there, then the FCC could have exercised discretion to give LPTV stations the full rights of 1452 B-2. [00:11:07] Speaker 04: In fact, in this proceeding, the FCC claimed that they had discretion to give that protection to LPTV stations. [00:11:14] Speaker 04: It wasn't that they were barred from it. [00:11:15] Speaker 04: It's that they said they were exercising the discretion not to. [00:11:19] Speaker 04: And so I think that example doesn't hold. [00:11:21] Speaker 04: That's not an added protection that B-5 gives LPTV stations that they wouldn't enjoy in its absence. [00:11:29] Speaker 04: And if I may, we've talked about the powers that the FCC may or may not exercise in lieu of B-5. [00:11:36] Speaker 04: But for purposes of this discussion, it's important to focus attention on B1. [00:11:41] Speaker 04: This is what spells out what the FCC can actually do their substantive power in reorganization. [00:11:46] Speaker 04: Not repack a word that the FCC, that Congress did not use, but reorganization. [00:11:51] Speaker 04: I think it's a very different term. [00:11:53] Speaker 04: At B1, capital B, one and two. [00:11:57] Speaker 04: The FCC may make such reassignments of television channels as it considers appropriate, or two, it may reallocate such portions of such spectrum as the Commission determines are available for reallocation. [00:12:10] Speaker 04: They can take spectrum that's available for reallocation and they can reallocate it, but they can reassign channels. [00:12:19] Speaker 04: The LPTV stations now operating and licensed by the FCC, their spectrum is not available for reallocation. [00:12:26] Speaker 04: They have licenses from the FCC to continue to operate so long as they are not interfering with other primary users. [00:12:33] Speaker 04: And we believe that's limited. [00:12:34] Speaker 04: It should be limited to primary full service television. [00:12:37] Speaker 04: But at the very least, our spectrum is not available for reallocation. [00:12:42] Speaker 02: What do you say with reference to that question about what you're secondary to, to the [00:12:47] Speaker 02: uh, 2002 proceeding use of the term new wireless service in relation to what you're not to interfere with. [00:12:55] Speaker 04: Well, two points, Your Honor. [00:12:56] Speaker 04: First of all, we don't take for granted that spectrum usage rights, the term employed by Congress and not defined by Congress, necessarily incorporates every single statement from the FCC. [00:13:07] Speaker 02: Yeah, I understand that. [00:13:09] Speaker 02: Second. [00:13:09] Speaker 02: The next question being the, uh, what you're saying there, I take it, is that [00:13:16] Speaker 02: Primary in interference does not mean primary for all purposes. [00:13:21] Speaker 02: That's exactly right, Your Honor. [00:13:23] Speaker 02: That makes the question, though, as to what you are secondary to. [00:13:27] Speaker 02: You asserted in your brief, if I read it correctly, that there's nothing before this proceeding that makes you secondary to anything but full power stations and class A stations. [00:13:39] Speaker 02: I think in this case, these two are running together in my mind by now, but I think in this case, that's the 2002 proceeding in which they do use the term new wireless service in reference to what you can't interfere with. [00:13:54] Speaker 04: Yes, Your Honor, and we recognize that they said that in the 2002 order. [00:13:58] Speaker 04: Let me make two points. [00:13:59] Speaker 04: First of all, the court need not reach this question of the relation, the primary-secondary relationship between LPTV stations and licensed wireless. [00:14:08] Speaker 04: Because before you even reach that issue, the fact remains the FCC is clearing room not just for licensed wireless, but for unlicensed wireless. [00:14:16] Speaker 04: They made that clear throughout the report and order and the second order at issue in this case. [00:14:22] Speaker 04: Not just a subsequent rulemaking, but in this case, they've announced and reiterated that policy. [00:14:27] Speaker 04: We are certainly primary to unlicensed wireless, a point that the FCC itself has made before. [00:14:35] Speaker 04: There's no question about that. [00:14:37] Speaker 04: Now, with respect to, are we primary to licensed wireless? [00:14:41] Speaker 04: We didn't challenge the 2002 rulemaking. [00:14:45] Speaker 04: We weren't around to challenge it. [00:14:46] Speaker 04: We would challenge it because, at least as applied in this rulemaking, because we're not causing interference with licensed wireless. [00:14:57] Speaker 04: We're not. [00:14:58] Speaker 04: The only reason why we could be deemed to be causing interference on licensed wireless is because the FCC is truncating the television band. [00:15:06] Speaker 04: They're carving about 20 channels off the television band and packing us all in to make room for licensed wireless. [00:15:13] Speaker 04: Something that's never been done before in this context where the result is actually to leave far too few seats on the plane or whatever the metaphor, the best metaphor is. [00:15:23] Speaker 02: Metaphors don't work all that well anyway. [00:15:27] Speaker 04: But if I may, in this context, we think this goes far beyond just secondary interference with unlicensed wireless. [00:15:35] Speaker 04: They're carving us out and moving us aside to make room for unlicensed wireless. [00:15:40] Speaker 04: We're not secondary in that respect. [00:15:44] Speaker 03: We have your argument. [00:15:45] Speaker 03: Thank you. [00:15:46] Speaker 03: Thank you very much. [00:15:47] Speaker 03: We're from the Commission now. [00:15:57] Speaker 05: I think as the court recognizes, there is a threshold standing issue, and I think it can be summarized in that the free access petitioners are not even shareholders. [00:16:12] Speaker 05: If they were shareholders, they would be precluded under the shareholders' standing doctrine. [00:16:16] Speaker 05: I think they have less [00:16:17] Speaker 05: of a claim to standing because they are not even shareholders. [00:16:21] Speaker 05: This option is an option, even though they describe it in most general terms, is to buy the entire licensee or some of these stations. [00:16:30] Speaker 05: I mean, those are presumably some of them corporations. [00:16:32] Speaker 05: They're buying shares, whatever. [00:16:33] Speaker 05: They have anticipated that they have a right to buy shares. [00:16:38] Speaker 05: That would seem to put them in an even more indirect position. [00:16:41] Speaker 05: But the main point [00:16:42] Speaker 05: is their injury is entirely derivative of injury to the licensee itself. [00:16:48] Speaker 05: And nothing's preventing the licensees from suing. [00:16:51] Speaker 05: They may have divergent interests, but that can, as I think recognizes, can happen in any number of situations. [00:16:57] Speaker 01: What do you do with the argument that was put forward to the effect that they're differently situated because there's no fiduciary obligation? [00:17:03] Speaker 01: And the reason I ask that is that [00:17:05] Speaker 01: To the extent that the reason shareholders can't bring suit is because their interests, which otherwise would satisfy Article 3, are already taken account of by somebody else, then one could still be left with the argument that, well, then the option holder in shares also has an Article 3 interest, but their interests are not otherwise accounted for by the corporation because there's no fiduciary relationship vis-a-vis. [00:17:32] Speaker 05: Well, I think that, in fact, the issue there is that the shareholder standing doctrine is a subset of a general concern about letting parties assert the rights of third parties. [00:17:47] Speaker 05: And so there is a particularized situation when you're talking about shareholders, and certainly there is a different relationship there. [00:17:54] Speaker 05: I would argue that the relationship causes the shareholder to have more of a stake in the underlying licensee or the underlying corporation. [00:18:11] Speaker 02: protection an option order could not do. [00:18:14] Speaker 05: Well, that's true, but I think that aspect of the law maybe characterizes the recognition of the shareholders' even greater interest in what the corporation does. [00:18:24] Speaker 05: To that extent, these option holders are even more strangers to the corporation. [00:18:30] Speaker 05: But I do think you would be opening up a Pandora's box if you allowed for standing in this kind of case, because [00:18:36] Speaker 05: It would just allow a roadmap of coming up with structuring financial instruments in a way. [00:18:40] Speaker 05: It's no, no, I don't want shares. [00:18:42] Speaker 05: Don't give me shares, because I'm planning to sue. [00:18:45] Speaker 05: I'll give you money for some constructed option. [00:18:51] Speaker 05: And that seems utterly inconsistent with the notion of prudential standing, which is you really want the parties with a real stake [00:19:00] Speaker 05: or that have the most stake in the outcome of a lawsuit to be before you. [00:19:05] Speaker 05: Here, you would be allowing parties which have only the most indirect stake to come before the court. [00:19:12] Speaker 05: So I think that that's a difficulty, a significant difficulty in the outset. [00:19:17] Speaker 05: It means if free access, as we believe, lacks standing, there's no need for the court to reach the merits questions. [00:19:24] Speaker 05: I would say one thing about free access focus on the unlicensed use. [00:19:28] Speaker 05: which is a variant of the argument on V5 that somehow the commission in the repacking is subordinating low-power television stations to unlicensed users. [00:19:38] Speaker 05: There are portions of the ban plan that are available for unlicensed use. [00:19:43] Speaker 05: Those are the so-called guard bans. [00:19:45] Speaker 05: And there are specific provisions in the Spectrum Act that basically take objections to the use of the guard bans off the table. [00:19:52] Speaker 05: That's 1454. [00:19:53] Speaker 05: And so 1454 says nothing in section 1452 prevents the commission from constructing guard bands, and specifically in 1454 says it can be used for unlicensed use. [00:20:08] Speaker 05: So I think that deals with that question. [00:20:10] Speaker 05: There was an additional suggestion with regard to a proposal that's before the commission to reserve some other channels. [00:20:15] Speaker 05: That proposal remains a proposal. [00:20:18] Speaker 05: of free access or a party withstanding has the ability to sue the commission if and when the commission were to adopt that proposal. [00:20:26] Speaker 01: So Judge, I just have one minute in which you have a couple minutes left. [00:20:29] Speaker 01: Can I just ask you one question, which is if you had to come up with the best [00:20:34] Speaker 01: practical distillation of how B-5 does work. [00:20:38] Speaker 01: Is that one the one that you had in the prior argument, which is the non-interference point that otherwise the Commission would have authority potentially to displace an LPTV without regard to interference? [00:20:47] Speaker 05: Yes, and I think I would, that's the best example. [00:20:50] Speaker 05: I think just a queuing to the language of B-5 I think gets you to where you want. [00:20:54] Speaker 05: You would need, it prevents the Commission from altering the spectrum usage rights. [00:20:58] Speaker 05: So if you conclude, [00:20:59] Speaker 05: that somehow, either augmenting or undermining, that the prior spectrum usage rights, that would be prevented, and the commission rely on B, an important ingredient. [00:21:09] Speaker 05: So there may be other examples as well, but that's probably the clearest example. [00:21:15] Speaker 05: Because we all agree that LPTV stations have a right to operate as long as they don't cause interference. [00:21:19] Speaker 05: If for some reason, in the course of deriving authority from B, the commission were to say, no, we're just changing the rules on that. [00:21:26] Speaker 05: You're the standby passenger. [00:21:28] Speaker 05: Yes, there is a seat on the plane. [00:21:29] Speaker 05: No, you can't get on and that would be a problem. [00:21:32] Speaker 02: Okay. [00:21:34] Speaker 04: Thank you. [00:21:39] Speaker 04: Your honor. [00:21:41] Speaker 04: If I'm a standby passenger on the plane, they might not let me get on the plane on the first instance, but we're on the plane. [00:21:46] Speaker 04: The plane is in flight. [00:21:47] Speaker 04: We're operating pursuant to licenses. [00:21:49] Speaker 04: They can't ask us to give up our seats mid flight for nothing for the basis of no fault of ours. [00:21:55] Speaker 02: Yeah, that's it. [00:21:56] Speaker 02: Before men never really work. [00:21:59] Speaker 04: Let me just avoid metaphors and make this point clear. [00:22:03] Speaker 04: They're setting LPTV stations outside. [00:22:05] Speaker 04: They're moving them away from their channels. [00:22:07] Speaker 04: They're taking away their spectrum usage rights, not because of interference. [00:22:11] Speaker 04: They've already cleared the spectrum down to channel 29. [00:22:17] Speaker 04: Through no interference, nothing caused by LPTV stations. [00:22:20] Speaker 04: It has nothing to do with anything that we've done. [00:22:23] Speaker 04: And one more point. [00:22:25] Speaker 04: The spectrum usage rights, these are rights that are supposed to protect us in the reorganization process, not in the aftermath of the repack, as they call it. [00:22:35] Speaker 04: These are the rights that protect us in the context of 12b. [00:22:39] Speaker 04: The provision says nothing in this subsection, 12b. [00:22:43] Speaker 04: That's where our rights attach, in that process. [00:22:46] Speaker 04: They're telling us that we can exercise our rights in the aftermath of the repack. [00:22:50] Speaker 04: Once everything's been packed as tightly as possible, then we can exercise whatever practical rights we have left. [00:22:57] Speaker 04: There's no indication, though, in my very last point. [00:23:01] Speaker 04: You said, well, Your Honor, perhaps B-5 was intended to make sure the FCC didn't enlarge our rights. [00:23:08] Speaker 04: The fact is, there's nothing in the record or in the legislative history that indicates that was ever even a possibility. [00:23:13] Speaker 04: Two years before the Spectrum Act, the FCC staff made clear in the broadband plan that they wanted to repack the Spectrum at the expense of LPTV stations. [00:23:23] Speaker 04: Two years later, when Congress wrote this statute, they included this provision, notwithstanding the FCC's proposal. [00:23:29] Speaker 04: And in the aftermath of the act, the FCC continues to persist, one, in calling it repack, not reorganization, their term, not Congress's, their term from the broadband plan and today, without any regard for the substantive protection of B5 in the actual operation and mechanics of the reorganization. [00:23:49] Speaker 04: Thank you. [00:23:50] Speaker 03: Thank you very much. [00:23:50] Speaker 03: The case is submitted.