[00:00:00] Speaker 00:
Case number 21-7039, United States of America, X-Rail Vermont National Telephone Company, and Vermont National Telephone Company, Abelant, versus North Star Wireless LLC, et al.

[00:00:13] Speaker 00:
Mr. Lamkin, Freddie Abelant, Mr. Waxman, Freddie Epolize.

[00:00:20] Speaker 06:
So, good morning, Mr. Lamkin.

[00:00:25] Speaker 07:
Good morning.

[00:00:26] Speaker 07:
I guess I should start again.

[00:00:27] Speaker 07:
Thank you, and may it please the court.

[00:00:29] Speaker 07:
A civil money penalty proceeding is a proceeding to exact money as punishment for violating a law or regulation.

[00:00:37] Speaker 07:
Every time the phrase civil money penalty appears in the US code, it's used in that sense.

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The licensing proceeding after an auction for 97 wasn't such a proceeding.

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It addressed eligibility for licenses and for bidding credits.

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It wasn't to impose punishment for offenses against the United States.

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In fact, it's undisputed that the FCC didn't invoke

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the FCC refused to invoke the procedures required for forfeitures, the one civil money penalty the FCC has statutory authority to impose.

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Defendant's primary argument is that a civil money penalty proceeding, and proceeding is a key term here, encompasses any proceeding where the FCC theoretically could invoke additional procedures and impose a penalty.

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But that converts almost every proceeding into a civil money penalty proceeding

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including cases where the agency never asks for money, never invokes necessary procedures.

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It's a bit like calling a trial proceeding, a sanctions proceeding, because theoretically someone could ask for sanctions.

[00:01:40] Speaker 06:
So I understand you to argue in part, if I'm correct, that in the proceeding that was brought, the commission had it provided the necessary notice and opportunity

[00:01:58] Speaker 06:
could have, in a sense, included that as part of the proceeding the commission did bring.

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It didn't necessarily have to start a new proceeding.

[00:02:12] Speaker 07:
That's correct.

[00:02:13] Speaker 07:
I think the FCC would have to have provided additional materials, either notice an opportunity, or it would have had to provide an opportunity for a hearing before the ALJ.

[00:02:22] Speaker 07:
But the fact that the FCC could have, but didn't initiate proceedings or make this into a proceeding for a civil monetary penalty means that it wasn't a proceeding for a civil monetary penalty.

[00:02:33] Speaker 06:
Well, all I was trying to clarify with my question was whether you see this other proceeding as the exclusive means by which the commission has authority to impose penalties.

[00:02:45] Speaker 07:
Yeah, so ordinarily, the commission would have its enforcement bureau

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begin to get a civil money penalty and because the Enforcement Bureau has the exclusive authority in that context and ordinarily the Enforcement Bureau does not have authority in the context of licensing proceedings.

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I don't think that necessarily precludes the possibility of the Commission deciding during a licensing proceeding that it will convert it by providing the necessary notice and the procedures and then convert it into something where they could seek a forfeiture.

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the one civil money penalty that the FCC has statutory authority to obtain.

[00:03:19] Speaker 07:
But when it doesn't happen, I'm sorry.

[00:03:21] Speaker 07:
No, you go ahead, finish your sentence.

[00:03:23] Speaker 07:
When that doesn't happen, when the FCC doesn't convert the proceeding into one to obtain money as punishment for a violation for offenses against the laws of the state, then it isn't a civil money penalty proceeding.

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The mere hypothetical fact that it could have been one doesn't make it into one.

[00:03:40] Speaker 05:
Does any of this make any difference

[00:03:43] Speaker 05:
You argue that the default payments in this case were not levied in the same proceeding as the commission's eligibility determination.

[00:03:56] Speaker 05:
And if that's right, do we have to even address any of these questions about the commission's authority in those proceedings?

[00:04:04] Speaker 07:
I think only to address the defendant's broader argument.

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The broader argument is that

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if it's conceivable that the commission could have converted the proceeding into one for civil money penalties, it is a civil money penalty proceeding.

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But the default payments- But that's the only question.

[00:04:21] Speaker 05:
If we agree with you that these are different proceedings, then that's the only other question we have to address.

[00:04:27] Speaker 07:
I think, yes, I think that's correct.

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I think if the default payments are a separate proceeding, then the licensing proceeding is not a civil money penalty proceeding, and the court doesn't need to go any further.

[00:04:37] Speaker 07:
But to address the default payments, since you bring it up,

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is I think their argument is that the default payment, their decision to default after the FCC decided eligibility, after it decided the bidding credit issue, somehow retroactively made the licensing proceeding into a civil money penalty proceeding.

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If that were right, if a decision by the defendant to default

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could convert an existing proceeding to a civil money penalty proceeding.

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Anyone who is afraid of a key TAM action would have an easy way to buy immunity.

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Simply default on your cheapest license, and you've converted into a civil money penalty proceeding, and you don't have to face key TAM actions.

[00:05:15] Speaker 07:
But that would violate two statutory provisions.

[00:05:19] Speaker 07:
One is, apart from the fact that the default payments, as you mentioned, are not for the same allegations or transactions of fraud, the fraud alleged in the QTAM complaint, default payments aren't themselves civil money penalties, and they don't make things into civil money penalty proceedings.

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To borrow a phrase from Kukash, they're not punishment imposed and enforced by the state for a crime or offense against its laws.

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And one reason it's clear is they apply to totally innocent bidders, someone who, through no fault of its own,

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defaults, it has a sudden reversal of finances, someone doesn't come through with a loan, no fault of their own, but they're still subject to the default payments.

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And it's very hard to consider something punishment for an offense against the United States and its laws, where it's imposed on people who are wholly innocent, who just for happenstance end up defaulting.

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And the commission's rules clearly do permit default.

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It's a permissible course.

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If you look at joint appendix 959 and 963, the commission explains that it has allowed winning bidders to default selectively.

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And later on on page 960, 964, under the commission's rules, winning bidders that choose to selectively default.

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This is a permissible choice for winning bidders.

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You can pay or you can default and accept those consequences.

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When default involves bad behavior,

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like misrepresentation or bad faith.

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That's when the commission goes to something that would be a penalty.

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And if you look at Joint Appendix 208, paragraph 241, it says, in those cases, the commission may take other actions it deems necessary.

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And it cites some of its penalty provisions.

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But when you have just a default, that's akin to a breach of contract.

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It's a no fault situation.

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And the consequences of that are akin to

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They're simply akin to statutory damages or the like.

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They're not a penalty for an offense against the United States.

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Turning briefly to the same transactions or allegations.

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Default payments here aren't for the same fraud charged with complaint.

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It has to be the same transactions or allegations.

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And here, the default payments were a completely different item.

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Therefore, the defendant's permissible decision not to pay the licenses.

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Anyone can choose to default, whether or not their applications are opposed, whether or not they get bidding credits.

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And the default payment proceedings aren't remotely the same allegations or transactions that are underlying the suit.

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Returning licenses, like purchases and returns, are separate transactions from getting them.

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And returning property is a different transaction than obtaining it in the first instance.

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Turning briefly to materiality.

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Defendants, I think, conflate materiality with causation.

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The defendant ultimately fails to meet one of many eligibility requirements, doesn't make riskiness representations in connection with other important requirements immaterial.

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A doctor or an individual might submit a Medicare claim that falsely represents that he's a doctor, which is an eligibility requirement, that his treatment was medically necessary, also a requirement, and that he actually performed it.

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that the agency denies payment on one of those grounds doesn't convert all the other false statements into something that's immaterial.

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Each remains material because at the time made, each was capable of influencing the agency's decision.

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The fact that there's many doesn't make them all immaterial.

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And here the falsehoods didn't merely allow defendants to exercise bidding credits at the auction.

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When the payments came due on March 2nd, the fraudulently obtained credits allowed defendants to pay 10 billion instead of 13 billion.

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a $3 billion shortfall.

[00:09:07] Speaker 07:
That's material and causal.

[00:09:10] Speaker 07:
The false litigations at least allowed the defendants to avoid paying 3 billion when otherwise would have been due.

[00:09:17] Speaker 05:
I know that the court- Is that your answer to the district court's conclusion that these were not material because the commission ended up denying the bidding credits anyway?

[00:09:30] Speaker 07:
Yes, I think that's right.

[00:09:31] Speaker 05:
Do I have the answer to that?

[00:09:32] Speaker 07:
I think that conflates causation with materiality.

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The fact that in the end, the commission ended up denying bidding credits doesn't mean that the misrepresentations weren't material when made, that they didn't have the capacity to influence the outcome when made.

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And I think that's very clear here if you look at the nature of the misrepresentations.

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One of the critical misrepresentations is the omission of the fact that there was an agreement or an understanding that the spectrum licenses would be transferred

[00:10:02] Speaker 07:
at the end of five years from the SNR to DISH.

[00:10:08] Speaker 07:
That is absolutely disqualifying.

[00:10:11] Speaker 07:
On appendix addendum page 20, we cite the regulations reproduced.

[00:10:15] Speaker 07:
It's 1.2110B3 Romanat 4.

[00:10:18] Speaker 07:
And it says that an understanding to transfer even 25% of the spectrum of a single license creates a material relationship that means that the other person's revenue is attributable to you.

[00:10:32] Speaker 07:
Automatically, per se, that's just disqualifying.

[00:10:35] Speaker 07:
That is an enormous, enormous barrier to qualification.

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If it were disclosed, it would be absolutely disqualifying.

[00:10:41] Speaker 07:
Now, the fact that other grounds came up, well, those other grounds were de facto control.

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And de facto control is like a six factor test under the Intermountain Microwave Test.

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And that's a test that's sufficiently unclear in application that the defendants litigated this all the way up to the Court of Appeals, all the way up to you all.

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And while this court called the FCC's decision is reasonable, it made it clear that the test application was sufficiently unclear in advance, that the degree of control that it would tolerate was sufficiently unclear in advance, the FCC couldn't abandon its practice of giving people who ran a foul of the test the ability to cure

[00:11:21] Speaker 07:
after they are found to have.

[00:11:24] Speaker 04:
Mr. Lemkin, what about the district court's reliance on the FCC's stated practice of not looking at the short form?

[00:11:32] Speaker 04:
And that's part of, I think, the district judge's materiality analysis to say that even had this been disclosed, it would not have changed the timing and sequence of the payment.

[00:11:47] Speaker 07:
Yeah, so I think there's there's two answers.

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First, I think the government ordinarily would resist the notion that the fact that it doesn't look at representation certifications makes them immaterial.

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It sort of relies on people's good faith and making payments all the time.

[00:12:00] Speaker 07:
But even setting aside, it certainly was at least, there was enough review here, at the very least, identify things would be facially disqualified.

[00:12:08] Speaker 07:
And it's not just if you look at appendix page 165 or 857, where the FCC says that the short forms will be used to determine eligibility, or that they looked at the forms that SNR Northstar filed, quote, prior to auction and found them qualified.

[00:12:24] Speaker 07:
The Alexander case cited in our brief gives a pretty good example of the type of review that occurs.

[00:12:30] Speaker 07:
In that case, it found that Mr. Alexander was not eligible because of an undisclosed relationship with another bidder called SCI.

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And it found that relationship among other things, because there was information that pointed it out in a biennial ownership report filed by the other party 18 months earlier.

[00:12:49] Speaker 07:
There were two phone calls with Mr. Alexander's counsel, and the commission ultimately denied his eligibility and noted inconsistencies among the original application, the amended application, and Alexander's public statements.

[00:13:04] Speaker 07:
Clearly, it's not no review at all.

[00:13:06] Speaker 07:
There's some review there.

[00:13:07] Speaker 07:
It may not be the substantial and really probing review when you have an actual licensee, but there's some review there.

[00:13:14] Speaker 07:
And if the argument is, look, it's immaterial because they wouldn't have looked and they wouldn't have found enough of it, that's at most a factual issue for trial.

[00:13:23] Speaker 07:
It's not an issue that results in motion.

[00:13:26] Speaker 05:
Mr. Lampkin, I'm a little surprised at your answer to Judge Pilger.

[00:13:29] Speaker 05:
I thought your answer about this issue was,

[00:13:32] Speaker 05:
At the motion to dismiss stage, the only question here is whether they've plausibly alleged that the commission reviews and that your entire argument is about the merits or summary judgment, right?

[00:13:44] Speaker 07:
I think that's probably where I should have started.

[00:13:47] Speaker 07:
Yes, Judge Tatel.

[00:13:48] Speaker 07:
I see I'm well into my rebuttal time.

[00:13:50] Speaker 07:
If the court has further questions, I'm happy to add them.

[00:13:53] Speaker 07:
Now that I've reserved my time for rebuttal.

[00:13:56] Speaker 04:
Fine.

[00:13:56] Speaker 04:
Oh, sorry.

[00:13:58] Speaker 04:
I was just going to say, could you just very briefly address the question whether you plausibly alleged the fraud in the sense that the very factors that show de facto control in some sense seem to undercut the plausibility of the notion that

[00:14:17] Speaker 04:
DISH had an explicit agreement with these very small entities because it had so much involvement and so much control and so much ability to direct their course of business, so much skin in the game that why would it have even needed to have an agreement to transfer this spectrum?

[00:14:39] Speaker 07:
So the standard in the FCC is an agreement or understanding.

[00:14:42] Speaker 07:
So it doesn't have to be an explicit written description.

[00:14:44] Speaker 07:
It just can be an agreement or understanding.

[00:14:47] Speaker 07:
And I think that this is a case that's consistent with both de facto control and an agreement.

[00:14:54] Speaker 07:
And so it's not a case like Twombly where you have an alternative explanation that's inconsistent with what's written in the complaint.

[00:15:00] Speaker 07:
And Twombly, the alternative explanation was independent action versus an agreement to restrain trade.

[00:15:06] Speaker 07:
Here, they're entirely consistent.

[00:15:08] Speaker 07:
And in fact, I think the de facto control makes it more likely that you have an understanding that the spectrum will be transferred.

[00:15:15] Speaker 07:
The controlling entity has the ability, because it's controlling, to make its expectations clear, to obtain acquiescence in the understanding, and there's no reason for it to leave the actual transfer of control of spec and rights, the critical end point here, unclear without a mutual understanding.

[00:15:31] Speaker 04:
Does it even need that?

[00:15:32] Speaker 04:
Why can't it just, when it wants the spectrum, make that happen later?

[00:15:36] Speaker 04:
I mean, just because of the structure of the relationships.

[00:15:39] Speaker 04:
And so why doesn't the question about the plausibility of an actual explicit agreement or understanding go away precisely in light of the degree of control?

[00:15:54] Speaker 04:
And if the degree of control has already been remedied,

[00:15:57] Speaker 04:
then what is the materiality of the separate allegation of an understanding that the spectrum would be bought?

[00:16:04] Speaker 04:
You don't need the understanding if you're in charge from the beginning.

[00:16:10] Speaker 07:
Right.

[00:16:10] Speaker 07:
So the de facto control doesn't necessarily mean that you have absolute and clear assurances that you will always be able to extract those license at the end of five years.

[00:16:18] Speaker 07:
And in fact, the fact that they were required or given the opportunity to cure makes that ability to

[00:16:27] Speaker 07:
demand the agreement or understanding that the spectrum really transferred even more important.

[00:16:32] Speaker 07:
Because they had an opportunity to cure, those elements of control might go away.

[00:16:38] Speaker 07:
They might have to bargain away.

[00:16:39] Speaker 07:
They might have to change the agreements that they're going to give the commission.

[00:16:42] Speaker 07:
Once you do that, that assurance isn't there anymore.

[00:16:46] Speaker 07:
And so you need the understanding or agreement, at least an understanding

[00:16:50] Speaker 07:
that these are going to be transferred.

[00:16:51] Speaker 07:
Otherwise, you're taking a big risk that once you reduce the control, you're going to have a fight with the entity that you previously controlled.

[00:16:59] Speaker 07:
If there are any further questions, thank you very much.

[00:17:02] Speaker 06:
Thank you.

[00:17:03] Speaker 06:
Thank you.

[00:17:03] Speaker 06:
All right, Council for Appellees.

[00:17:08] Speaker 01:
Thank you, Your Honor.

[00:17:08] Speaker 01:
May I just inquire to make sure that you can both hear me and see me?

[00:17:14] Speaker 06:
I can.

[00:17:16] Speaker 06:
Judge Pillard?

[00:17:17] Speaker 06:
Yes.

[00:17:18] Speaker 05:
I can hear you.

[00:17:21] Speaker 06:
Please proceed.

[00:17:22] Speaker 01:
I'm going to I'm going to try to boom.

[00:17:24] Speaker 01:
May it please the court.

[00:17:26] Speaker 01:
The government action bar aims to prevent key TAM suits where the government is already aware of the relevant allegations and it is able to impose civil money penalties if warranted.

[00:17:40] Speaker 01:
This case is a paradigm as the district court held

[00:17:44] Speaker 01:
Vermont Telephone's Keetam complaint concerned the very same fraud allegations that Vermont Telephone had made to the FCC, which investigated them and rejected them in a separate section of its order.

[00:18:00] Speaker 05:
Okay, Mr. Waxman, even if you're right about that, it still has to be a civil money penalty proceeding, right?

[00:18:07] Speaker 01:
That's right.

[00:18:08] Speaker 05:
Could you just focus on that, please?

[00:18:11] Speaker 01:
Yes, absolutely.

[00:18:13] Speaker 01:
The district court was correct that this was a civil money penalty because the FCC had full authority.

[00:18:19] Speaker 05:
A civil money penalty proceeding.

[00:18:22] Speaker 01:
a civil money penalty, an administrative civil money penalty proceeding.

[00:18:29] Speaker 01:
Because the commission in that proceeding had full authority to impose civil money penalties upon any finding of fraud.

[00:18:40] Speaker 01:
In other words, if it had found that Vermont telephone allegations were correct, it could readily have imposed civil money penalties.

[00:18:49] Speaker 01:
It didn't impose any because it concluded

[00:18:53] Speaker 01:
and I'm quoting from paragraph 132 of the commission's order on JA 857, that quote, Vermont Telephone had made no showing that SNR and North Star attempted to mislead the commission about their respective relationships with Dish.

[00:19:13] Speaker 01:
Now let me go directly to one of the principle points.

[00:19:15] Speaker 04:
Just to interject so that I know the premise of the argument you're making now, Mr. Waxman,

[00:19:20] Speaker 04:
When you refer here to the to the administrative civil money penalty proceeding, you're referring to the possibility that the FCC could convene a hybrid licensing and forfeiture proceeding and impose forfeiture penalties for fraud, right?

[00:19:38] Speaker 01:
Not exactly.

[00:19:39] Speaker 01:
What I'm preferring to as the proceeding is the administrative proceeding that was invoked by the Vermont Telephone's complaint.

[00:19:49] Speaker 01:
That petition alleged

[00:19:53] Speaker 01:
among many other things, that there was not disclosed that SNR and Northstar agreed to transfer there to DISH the licenses they acquired and many, many other things.

[00:20:12] Speaker 01:
That began a proceeding, and that is the relevant proceeding in this case.

[00:20:18] Speaker 01:
Now, in their petition,

[00:20:21] Speaker 01:
invoking this proceeding, and I'm referring the court to joint appendix pages 718 through 721.

[00:20:28] Speaker 01:
They said to the commission, because of this alleged concealment and misrepresentation, you should do two things.

[00:20:42] Speaker 01:
You should impose on a mandatory basis the default

[00:20:48] Speaker 01:
payments, which the commission and this court have repeatedly referred to as penalties, and Vermont Telephone's own complaint in this case refers to as a penalty.

[00:20:59] Speaker 04:
In other words, what they asked the commission to do is... They say two things, default, and the other thing is refer this to the Enforcement Bureau.

[00:21:06] Speaker 01:
So, right.

[00:21:07] Speaker 01:
Now, what they said was you should consider, and this is on seven, I believe 719... Wait, wait, excuse me, Mr. Waxman.

[00:21:15] Speaker 05:
Judge Pillard's question was, the second was, refer to this enforcement proceedings, enforcement bureau for initiation of new proceedings.

[00:21:25] Speaker 05:
I think that's what she was asking.

[00:21:28] Speaker 01:
Actually, let me answer both that question and the question that I perhaps mistakenly had understood Judge Pillard was asking.

[00:21:37] Speaker 01:
As to new proceedings,

[00:21:39] Speaker 01:
The commission, the VTEL asked the commission, there's no, VTEL agrees the Enforcement Bureau has no authority in this because this arises out of a licensing proceeding.

[00:21:51] Speaker 01:
That's why the full commission adjudicated this proceeding.

[00:21:56] Speaker 01:
They said, you should do two things.

[00:21:59] Speaker 01:
Well, here's what you should do.

[00:22:01] Speaker 01:
Because of their fraud that we've now alleged in detail, you should declare them ineligible to receive these.

[00:22:11] Speaker 01:
You should re-auction all of these licenses.

[00:22:15] Speaker 01:
And you should, as a mandatory matter, require them to pay the 15%, what this court called, fine.

[00:22:25] Speaker 01:
and in addition, make up the difference in the auction results up to $3.3 billion.

[00:22:33] Speaker 01:
They asked, they told the commission in that proceeding, in the very document that invoked that proceeding, that this is the penalty that they wanted.

[00:22:44] Speaker 01:
And as I said, the complaint even correctly calls it a penalty.

[00:22:47] Speaker 01:
Now, second of all, ask the forfeiture.

[00:22:49] Speaker 04:
Is there any more to that argument than effectively sort of

[00:22:56] Speaker 04:
a stopple of your opponent and nomenclature.

[00:22:59] Speaker 04:
I mean, what you're saying is that they, VTEL came in and said, look, these people aren't eligible in the licensing proceedings, said you should recognize that they are not very small enterprises.

[00:23:12] Speaker 04:
And then the various things that you identified, which you're right, we have called penalties, fines, are the things that flow from the defaults.

[00:23:20] Speaker 04:
that you have to pay the difference between the re auction price you have to pay interest you have to pay the 15% that's you're not referring to anything other than that in this line of argument.

[00:23:33] Speaker 01:
So I'm referring to, in this line of argument, let me shift quickly to the other, our principle line of argument.

[00:23:40] Speaker 01:
In this line of argument, our argument is that there was a half a billion dollars in what this court called fines, which were the direct result of VTEL's petition, which had the result of denying them the bidding credits.

[00:23:55] Speaker 01:
And in the petition itself that initiated the proceedings,

[00:23:59] Speaker 01:
One of the requests for relief was that they be required to pay a 15% penalty on all of the bids that they won, 15% of the full undiscounted price,

[00:24:13] Speaker 01:
and up to $3.3 billion to make sure that the commission lost no money.

[00:24:20] Speaker 04:
Is that any different from what the regulations provide when a successful bidder decides to give up some of the spectrum at one?

[00:24:34] Speaker 04:
As I hear it, and maybe I'm not hearing it,

[00:24:36] Speaker 04:
What you're describing is what happens, what's available for the commission to impose.

[00:24:43] Speaker 04:
And I mean, I don't mean to stop on this.

[00:24:46] Speaker 04:
I invite you to move on to your next point, but I just want to make sure that that's.

[00:24:51] Speaker 01:
I do want to move on to my next point, but I will simply cite the court to 47 CFR 1.2106.

[00:24:58] Speaker 01:
No, I'm sorry.

[00:25:06] Speaker 01:
1.2109C, which says that a winning bidder who's found unqualified or is disqualified for any reason after having made the required down payment will be deemed to have defaulted

[00:25:24] Speaker 01:
And the penalties, and it refers to the actual default penalties, will be imposed.

[00:25:31] Speaker 01:
And that's the relief that they asked for here.

[00:25:33] Speaker 01:
It had nothing to do with choice at all.

[00:25:36] Speaker 01:
My principal point here on why this is a civil money penalty is that they made detailed allegations of willful concealment and fraudulent misrepresentation.

[00:25:50] Speaker 01:
They suggested in their petition

[00:25:53] Speaker 01:
And this is at page 719, note 86.

[00:25:58] Speaker 01:
It gave the example of VTEL itself having suffered a forfeiture penalty in, by the way, a proceeding that was part and parcel of the proceeding that investigated and determined that they had failed to disclose one of their owners.

[00:26:19] Speaker 01:
The point here is that the argument that

[00:26:24] Speaker 01:
that somehow it would have been a different proceeding if the commission had decided that forfeiture penalties were appropriate is completely without any foundation whatsoever.

[00:26:39] Speaker 01:
It didn't even happen in the case involving VTEL.

[00:26:43] Speaker 01:
But if the court wants an almost perfect analogy to this case, I recommend to the court the FCC's decision in in Ray

[00:26:53] Speaker 01:
Mercury PCS 2, which is reported at 12 FCC record 1790.

[00:27:01] Speaker 01:
That was a case in which the commission was

[00:27:07] Speaker 01:
evaluating a complaint made by a competitor of the winning bidder that the winning bidder should not be entitled to the license because it was covertly signaling its intentions to other bidders by including some ostensibly random numbers in its bid numbers.

[00:27:31] Speaker 01:
The commission investigated that

[00:27:34] Speaker 01:
It found that there was reason to believe that that, in fact, had occurred.

[00:27:41] Speaker 01:
It issued a notice of apparent liability for forfeiture in that proceeding.

[00:27:47] Speaker 01:
After considering the briefs and arguments back and forth, it imposed a forfeiture penalty.

[00:27:54] Speaker 01:
And then, on a petition for reconsideration, decided to revoke it.

[00:27:59] Speaker 01:
But the point is, it was done by the commission

[00:28:04] Speaker 01:
in the same proceeding, because unlike here, it found that the allegation of misconduct was well-founded.

[00:28:13] Speaker 01:
And the notion that somehow, if the commission had determined that anything that VTEL was alleging in its petition, in fact, was true, that the commission could not have and would not have proceeded straightforwardly to

[00:28:31] Speaker 01:
issue a notice that it was going to consider forfeiture is utterly unsupported by the statute, the regulations, and a whole host of case laws showing that exactly the opposite occurs.

[00:28:46] Speaker 06:
So let me ask you.

[00:28:47] Speaker 01:
That's really why the government action bar precludes it here, because there is simply no argument.

[00:28:54] Speaker 01:
There can't be an argument that if the commission had credited

[00:28:59] Speaker 01:
what VTEL was saying in its petition, it could have imposed a money forfeiture.

[00:29:06] Speaker 01:
I mean, I also want to make the point that my friend is absolutely correct that only forfeitures under Section 503 of the Communications Act are the only civil money penalties.

[00:29:19] Speaker 01:
It is a commonplace for the commission and a private party that's been accused of violating a rule or regulation or whatever

[00:29:29] Speaker 01:
to enter consent decrees or settlement agreements that impose quote penalties for the misconduct.

[00:29:36] Speaker 01:
The notion that the only kind of civil money penalty that the commission can impose upon an allegation of fraud, concealment, misrepresentation is a forfeiture is wrong.

[00:29:49] Speaker 01:
But in any event, even my friend on the other side agrees that the full commission could readily

[00:29:56] Speaker 01:
have issued a notice of apparent liability which would have given VTEL an opportunity, which would have given DISH and Northstar and SNR an opportunity to be heard on why they shouldn't, a forfeiture penalty shouldn't have been imposed.

[00:30:12] Speaker 01:
And the only reason that it did it, that it didn't do so is because it found one, and I'm quoting from

[00:30:21] Speaker 01:
paragraph 132 of its order on page 857 of the appendix.

[00:30:26] Speaker 06:
Yeah, I think we're all familiar with that finding.

[00:30:28] Speaker 06:
Let me just ask you though, that was the point of my first question to counsel for Appellee and for Appellant, sorry.

[00:30:38] Speaker 06:
And he acknowledged, as I understood his answer, that in the proceeding that was brought,

[00:30:49] Speaker 06:
the commission could have, I think he used the word converted, but my question was, if the commission had given proper notice and the opportunity, then would it not have had the authority to enter a penalty without technically invoking a separate proceeding

[00:31:18] Speaker 01:
And the answer is, absolutely.

[00:31:21] Speaker 01:
Absolutely.

[00:31:22] Speaker 01:
It is done.

[00:31:23] Speaker 01:
I've cited one example.

[00:31:24] Speaker 01:
OK.

[00:31:25] Speaker 06:
And so the question here is, was sufficient notice and opportunity provided?

[00:31:33] Speaker 01:
And the answer is no, because the commission found in paragraphs, I think, 129 through 135 of its order,

[00:31:45] Speaker 01:
that it did not credit any of the allegations of concealment, misrepresentation, or fraud that had been made.

[00:31:55] Speaker 06:
But Mr. Waxman.

[00:31:56] Speaker 06:
So your argument then is that the commission first had to make the finding

[00:32:03] Speaker 06:
that it did not make, and then at that point, give the notice an opportunity?

[00:32:10] Speaker 01:
Yes, exactly.

[00:32:12] Speaker 01:
All right.

[00:32:12] Speaker 01:
That's exactly what Section 503 of the statute and the implementing regulations provide.

[00:32:19] Speaker 01:
If the commission had adjudicating the complaint, or the petition in this case, found that there had been some misconduct, it could not impose forfeiture

[00:32:32] Speaker 01:
Without giving notice of a parent liability that's that's that's in fact exactly what happened in the mercury PCS case it's exactly what happened in the case involving Vermont telephone itself and the fact that the salient point here if we're talking about you know whether the.

[00:32:53] Speaker 01:
whether the default payments were or weren't penalties, is that there are a boatload of cases, and we cite them, I think it's on page, yes, 30 of our brief, the New Jersey Coalition case, the Gatley case, the Hill and Cox Corporation case, in which what happened was there was an administrative proceeding, the FCC in those proceedings,

[00:33:21] Speaker 01:
I'm not sure they were all FCC actually the agency in those proceedings imposed only what the court found was a compensatory order.

[00:33:33] Speaker 01:
And in each case, the court said these were these were government action bar cases.

[00:33:38] Speaker 01:
In each case, the court said the government action bar applies not because what was imposed was a, quote, penalty, but because if the agency had found more, it certainly could have imposed penalties.

[00:33:53] Speaker 01:
And this case is not all enforcement.

[00:33:54] Speaker 04:
And that gets to my question, Mr. Waxman.

[00:33:57] Speaker 04:
I appreciate that's one way to understand what happened.

[00:34:03] Speaker 04:
Another way to understand what happened is that the FCC chose not to look at what it was doing in the licensing proceeding as also substantively addressing the fraud claims.

[00:34:18] Speaker 04:
And we see that, and Mr. Lamkin points this out, that on the record before us,

[00:34:26] Speaker 04:
we don't see substantial material question effect as to whether there was a lack of truthfulness that I'm reading from JA 857 paragraph 132.

[00:34:35] Speaker 04:
And so one way of understanding what they're doing is saying, you know, enforcement bureau can do what it wants.

[00:34:40] Speaker 04:
What we're doing today is the thing, is the minimum of what we have to do, which is decide the licensing question.

[00:34:48] Speaker 04:
And I guess what I'm asking you is, is there any suggestion

[00:34:53] Speaker 04:
that the FCC investigated the claim of an undisclosed agreement to sell or rules that somehow there just couldn't be such a thing that would, for example, stop the Enforcement Bureau if it did decide to take this up.

[00:35:13] Speaker 04:
Has that issue actually ever been

[00:35:17] Speaker 04:
administratively adjudicated within the FCC?

[00:35:21] Speaker 04:
And if not, is that not part of your, how does that fit into your position?

[00:35:28] Speaker 01:
Well, our position, I'm really glad you asked that question.

[00:35:32] Speaker 01:
Our position is, as long as the allegations were made, and the commission could have imposed civil money penalties, the fact that it didn't, whether it did or didn't investigate, is irrelevant.

[00:35:44] Speaker 01:
It falls within the... That can't be.

[00:35:46] Speaker 01:
But that is...

[00:35:48] Speaker 04:
Well, in that case, let me just- I'm just saying, like, the fact that somebody makes an argument to me to reach an alternative ground, and I think, no, I'm going to reach only the ground that I think is adequate to support the judgment, and, you know, let a different case that requires decision on that come before us,

[00:36:05] Speaker 04:
Why isn't that the better explanation?

[00:36:08] Speaker 01:
Judge Pillard, I would love to have this debate with you, but let me just go to the facts of this case.

[00:36:15] Speaker 01:
There is an entire section of the commission's order and it's on its paragraphs 129 through 135 of the commission's order, which is on pages 856 through 858 of the joint appendix in which the commission says,

[00:36:34] Speaker 01:
VTEL also makes allegations that there was concealment and misrepresentation.

[00:36:41] Speaker 01:
And we find, one, that Northstar and SNR made no material representations and hadn't, quote, attempted to mislead the commission about their respective relationships with Dish.

[00:36:57] Speaker 01:
As to the allegation of lack of candor, quote, we disagree.

[00:37:03] Speaker 01:
VTEL fails to identify any material factual information that applicants failed to disclose.

[00:37:11] Speaker 01:
And that contrary to the allegation, quote, that SNR and Northstar made material representations to the commission, the commission found that their

[00:37:23] Speaker 01:
quote, disclosure of their agreements and of the existence of their bidding arrangements was sufficient to comply with the disclosure obligations of the commission's rules.

[00:37:35] Speaker 05:
And I believe it's- What's your response to the government statement of interest?

[00:37:42] Speaker 05:
That is, which states that the commission did not.

[00:37:48] Speaker 01:
Yeah, so I think

[00:37:50] Speaker 01:
With respect, Judge Tatel, I think you and my friend on the other side is misreading what the government's statement of interest said.

[00:38:00] Speaker 01:
What it said is... Really?

[00:38:02] Speaker 01:
Yes.

[00:38:03] Speaker 01:
What it said is...

[00:38:05] Speaker 01:
We don't, it told Judge Collier-Cattelli, we don't think you should stay this Keetam case because of the pendency of the case that was subjudice before this court at the time on the de facto control issue, because in that proceeding, in the de facto control proceeding,

[00:38:25] Speaker 01:
there are no allegations of misconduct or otherwise.

[00:38:29] Speaker 01:
It relates to the finding that there was, and this court's opinion explains this in detail, it relates only to the commission's finding that based on all of the disclosed agreements, there was de facto control.

[00:38:47] Speaker 01:
And therefore, there is no need to stay proceedings on a key TAM action that is alleging that there were

[00:38:55] Speaker 01:
agreements that weren't disclosed.

[00:38:58] Speaker 01:
And that's obviously perfectly logical.

[00:39:00] Speaker 01:
I mean, the point of, it seems to me the government's position, what's really salient about the government's position with respect to this litigation is the fact that the government declined to participate in VTEL's key TAM suit

[00:39:16] Speaker 01:
And although it has been, I can tell you, exquisitely aware of what has been going on both in these proceedings and in the de facto control proceedings, because it involves a determination about a whole lot of spectrum, it has declined to participate as an amicus or to intervene or otherwise participate in this dispute at all.

[00:39:40] Speaker 04:
What the commission said and what your friend on the other side relies on is I think it's summed up in, is it footnote 69, that the commission said we assume for purposes of our analysis of the eligibility that the applicants provided us with

[00:40:04] Speaker 04:
and that we therefore have been able to review copies and or summaries of all oral and written arrangements between themselves and Dish that would bear on their eligibility.

[00:40:13] Speaker 04:
So to the extent they're making a decision about fraud or not, candor or not, they're looking at the documents before them and they're leaving on the table.

[00:40:23] Speaker 04:
the question whether any further investigation by an independent entity like Vermont Telecom would change that view.

[00:40:33] Speaker 04:
Just not addressed one way or the other, which makes sense in terms of agency resources, frankly.

[00:40:40] Speaker 04:
Mr. Lampkin may have very much an uphill battle when or if he gets to coming up with evidence of the fraud that he claims.

[00:40:50] Speaker 04:
And maybe the government said, that's just not our task right now.

[00:40:53] Speaker 01:
So, I want to be very clear about this, because I understand how you might have come to that conclusion.

[00:41:00] Speaker 01:
But it is the, I think you need to understand if you look at the commission's order, the commission's order first deals with the question of.

[00:41:09] Speaker 01:
Is there de facto control based on the disclosure of the management agreement, the put agreement, the joint bidding arrangements, and all those other things?

[00:41:19] Speaker 01:
We have all those things.

[00:41:21] Speaker 01:
Is there joint control?

[00:41:23] Speaker 01:
And for purposes of that analysis, we are relying on, we are assuming

[00:41:29] Speaker 01:
That the facts that the relationship is what was disclosed in those documents and that is enough to convince us that there was de facto control.

[00:41:39] Speaker 01:
It then goes on starting in paragraph 129, which is 45 pages later in its decision with a heading that says.

[00:41:49] Speaker 01:
that begins saying VTEL also argues that there was concealment, misrepresentation, et cetera.

[00:41:56] Speaker 01:
And we are dealing with these on the merits right here in the paragraphs that I previously quoted to you.

[00:42:02] Speaker 01:
And they even include a footnote, and I can't remember the foot, I think it's 848, in which they say we requested further information, in the course of our investigation, we requested further information, further documentation, et cetera, et cetera,

[00:42:18] Speaker 01:
from Northstar and SNR.

[00:42:20] Speaker 01:
I mean, they absolutely adjudicated these claims of fraud and, in fact, investigated by multiple requests to the bidding entities to make sure that they had all the relevant documents, they had a bunch of questions that the successful bidders responded to, and they then ruled on the merits that

[00:42:48] Speaker 01:
VTEL had made, hold on one second, VTEL had failed to identify any factual information that applicants failed to disclose.

[00:43:02] Speaker 01:
And so the section that my friend loves to refer to is the section that says, okay, we're just gonna look at the information and documents we were provided and make a determination over whether VTEL's allegation

[00:43:15] Speaker 01:
that those themselves demonstrated de facto control is correct or not.

[00:43:21] Speaker 01:
Yes, we agree.

[00:43:22] Speaker 01:
Now let's move on to their allegations of fraud.

[00:43:26] Speaker 01:
We disagree, and we investigate it.

[00:43:30] Speaker 01:
And I don't think that there can be any reasonable basis for dispute.

[00:43:38] Speaker 01:
The commission's order is very, very clear.

[00:43:41] Speaker 01:
It has its own heading.

[00:43:43] Speaker 01:
for the allegations of misrepresentation and concealment.

[00:43:47] Speaker 01:
And over the course of seven paragraphs, it refutes those allegations.

[00:43:54] Speaker 04:
It'd be great if you would briefly address with Judge Rogers indulgence the materiality question.

[00:44:03] Speaker 04:
If materiality, I understand that at least part of your position is that there's no materiality because the commission took action and did what it considered to be a full remedy for any and all disclosure failures that it perceived.

[00:44:22] Speaker 04:
And as you've just argued, it perceived those to be all the material disclosure failures.

[00:44:27] Speaker 04:
And so everything's been remedied.

[00:44:30] Speaker 04:
which, I mean, in a way, it sounds almost more in mootness than in materiality, because under the Supreme Court's precedent, our precedent, we look at materiality ex ante, and we look at whether something is capable of or has a natural tendency to influence.

[00:44:50] Speaker 04:
And so I wonder if the de facto control determination had gone the other way.

[00:44:54] Speaker 04:
Shouldn't we assume that

[00:44:58] Speaker 04:
had SNR Northstar disclosed a plan to transfer Spectrum to Dish, that that would under, is it Endocino, be material?

[00:45:12] Speaker 01:
So I think the answer is, as the Supreme Court and your court has stated.

[00:45:17] Speaker 04:
Escobar, I'm sorry.

[00:45:17] Speaker 04:
Escobar.

[00:45:19] Speaker 01:
Yes, you know, the Supreme Court in Escobar and this court's decisions, you know, have made clear that when you're evaluating materiality, of course, it's whether the statement or failure to make a statement could have was capable of influencing the agency's decision.

[00:45:37] Speaker 01:
And it is 100 percent clear that where the agent where where the

[00:45:43] Speaker 01:
Whereas here, the agency has said, based on the documents that were disclosed to us, we determined that you are not entitled to designated entity status.

[00:45:53] Speaker 01:
The fact that there may, allegedly, have been some other agreement

[00:45:58] Speaker 01:
that would also have convinced the commission to deny designated entity status is the textbook case of immateriality.

[00:46:08] Speaker 05:
If you have a statute that says- Is that right?

[00:46:11] Speaker 05:
Go ahead, Judge Tatel.

[00:46:12] Speaker 05:
When I was discussed, the question is whether the commission would have acted at the short form stage.

[00:46:20] Speaker 05:
That's their argument.

[00:46:22] Speaker 01:
Well, that's their argument now, but let's, uh, well, so there are two aspects of the material.

[00:46:29] Speaker 05:
And this is, this is a motion dismissed.

[00:46:31] Speaker 05:
They allege, they allege in the complaint that that's the case.

[00:46:38] Speaker 05:
Had the commission known about this at the short form stage, it might've disqualified them then.

[00:46:43] Speaker 01:
No, no, I think.

[00:46:45] Speaker 01:
Let me first disagree slightly with your predicate and then accept your predicate.

[00:46:52] Speaker 01:
If you look at their amended complaint at pages 68 through 70, they go to pains.

[00:47:00] Speaker 01:
I believe it's paragraph 128, but I could be wrong.

[00:47:04] Speaker 01:
They go to pains to say what we are alleging

[00:47:09] Speaker 01:
is that if there was a false certification, and if the certification hadn't occurred, they would not have been allowed to bid or get the bidding credits.

[00:47:21] Speaker 01:
That's absolutely true.

[00:47:23] Speaker 01:
They do not allege.

[00:47:25] Speaker 01:
that if the supposed secret agreement had been included in the short form, that the FCC would have denied it.

[00:47:34] Speaker 01:
And in fact, they have pleaded themselves in their complaint.

[00:47:39] Speaker 05:
What about paragraph 61?

[00:47:41] Speaker 05:
An applicant who fails to certify in its short form application that it has disclosed all agreements will not be permitted to participate.

[00:47:55] Speaker 01:
That's right.

[00:47:56] Speaker 01:
That's absolutely right.

[00:47:57] Speaker 01:
Their claim was that we had a false certification and if we hadn't certified, we wouldn't have been able to participate.

[00:48:06] Speaker 01:
It was not that if we had certified as we did and also included in addition to all the other agreements we described and attached,

[00:48:15] Speaker 01:
the, you know, the so-called secret agreement that that in and of itself would have not allowed us to do that.

[00:48:23] Speaker 01:
And let me just point, let me just, I'm sorry, let me just make, I'm sorry for talking on, but there are two references I really would like the court to look at in evaluating this claim that the commission somehow, I don't know, temporarily lost a deposit of three point something billion dollars.

[00:48:42] Speaker 01:
The number one,

[00:48:44] Speaker 01:
In the amended complaint itself, at paragraph 113, the complaint says, quote, the FCC does not independently examine the existence of de facto control prior to a spectrum audience.

[00:49:03] Speaker 01:
That's at page 92 of the Joint Appendix.

[00:49:06] Speaker 01:
Second of all, in the commission's order, and this is at page

[00:49:14] Speaker 01:
860, the commission said that although it had now determined that SNR and Northstar owed more than they originally deposited, or their original final payment, which functions as a deposit, quote, there had been no failure to pay the full amounts of the bids, nor had the commission permitted either applicant, quote,

[00:49:41] Speaker 01:
to take advantage of bidding credits to which it was not entitled.

[00:49:46] Speaker 03:
You're on page 860 there, Mr. Waxman?

[00:49:48] Speaker 01:
860, yes.

[00:49:49] Speaker 03:
Paragraph.

[00:49:54] Speaker 01:
Whoops, I didn't write down the paragraph, but let me just go to 860.

[00:49:59] Speaker 01:
I also want to refer the court to 651.

[00:50:01] Speaker 01:
860, paragraphs 129 and 132.

[00:50:11] Speaker 04:
All right, that's on page 856 and 57.

[00:50:18] Speaker 01:
Thank you.

[00:50:19] Speaker 01:
Yes, I'm sorry.

[00:50:20] Speaker 01:
Well, wait a minute.

[00:50:22] Speaker 01:
Maybe there is something on 860.

[00:50:27] Speaker 01:
I may have been wrong.

[00:50:28] Speaker 01:
If you look at page 651 of the joint appendix,

[00:50:36] Speaker 01:
On the very first page of its notice of this auction, it says, and I'm quoting from footnote three, a determination that a short form application is complete

[00:50:51] Speaker 01:
and complies with the commission's competitive bidding rules and policies is not determinative of an applicant's qualifications to hold a license or entitlement to a bidding credit.

[00:51:03] Speaker 01:
Now, let me make one further point in response to Judge Tatel's question and my friend's suggestion.

[00:51:08] Speaker 01:
The False Claims Act is not an all-purpose anti-fraud statute.

[00:51:12] Speaker 01:
It aims to protect the government

[00:51:16] Speaker 01:
against financial losses, either by paying out money that wasn't warranted or not getting money that it should have received.

[00:51:27] Speaker 01:
There is no allegation in this complaint.

[00:51:29] Speaker 01:
There is no support anywhere.

[00:51:31] Speaker 01:
And the commission itself has refuted the notion that because only $10 billion rather than $13 billion was deposited pending an adjudication of eligibility,

[00:51:46] Speaker 01:
That the government lost any money and that's the only thing that the false claims act is concerned about.

[00:51:54] Speaker 01:
The government it's I mean if the argument that somehow the government lost money and therefore there can be a recovery under the false claims act.

[00:52:03] Speaker 01:
would apply in every instance in which even absent any alleged fraud or misrepresentation or concealment, the commission determined, you know, we've looked at all, we've now evaluated all these documents and we decided you're not eligible for a designated entity status.

[00:52:20] Speaker 01:
Does that mean that the fact that consistent with the rules you applied for and were allowed to bid

[00:52:27] Speaker 01:
and made a deposit on your request for designated entity status that the government was deprived of money because it ultimately determined that you weren't?

[00:52:37] Speaker 04:
I mean, it's just, there's- Mr. Waxman, nobody's claiming that you don't need to establish fraud.

[00:52:46] Speaker 01:
Well, my only point here is that they have not alleged in their complaint, they haven't argued in their brief,

[00:52:55] Speaker 01:
And there is no basis in the statute or the regulations for the contention that the government lost money in this case by virtue of the fact that only $10 billion was deposited and the commission later determined that

[00:53:13] Speaker 01:
the entities were not entitled to designated entity status and therefore had to pay $13.3 billion in order to get all the licenses.

[00:53:24] Speaker 01:
There's no argument here and there's no basis for an argument that that caused the government to lose money.

[00:53:33] Speaker 01:
If I can just, I know that I'm slightly over my time, but I know Judge Pillard, you had a question about plausibility and my friend had a response, you know, based on Twombly.

[00:53:46] Speaker 01:
Let me just say that as I understand it, his argument, I mean, Twombly absolutely establishes the proposition that

[00:53:57] Speaker 01:
Dismissal is required if the facts alleged in the complaint are subject to a, quote, obvious alternative explanation.

[00:54:05] Speaker 01:
And in this case, the defendant's conduct was entirely consistent with and explained by the agreements they disclosed.

[00:54:16] Speaker 01:
My friend's argument on the other side is, well, there wasn't a disclosure that there actually was an agreement or understanding

[00:54:26] Speaker 01:
that even though these two entities had put guarantees with a negotiated rate of return, there was no allegation that they actually agreed that this was going to happen.

[00:54:42] Speaker 01:
This court, well, the commission, number one, and then this court in its opinion made clear

[00:54:49] Speaker 01:
that there was absolutely no way that Northstar and SNR could avoid financial loss except by putting these options at the end of five years to dish at the agreed rate of return.

[00:55:06] Speaker 01:
That was a conclusion of this court, and we're not disputing it.

[00:55:12] Speaker 01:
It is correct.

[00:55:17] Speaker 01:
The facts that they are alleging here, they keep saying, well, they have some undisclosed expert who finds that there must have been some other agreement.

[00:55:26] Speaker 01:
That is not a statement of pleading a fact.

[00:55:29] Speaker 01:
That's a conclusion.

[00:55:30] Speaker 01:
And if you look at every single fact that they allege in this complaint or every single fact that the commission knew about, it's simply not plausible that there must have been some other agreement.

[00:55:45] Speaker 01:
Every agreement

[00:55:47] Speaker 01:
was disclosed.

[00:55:49] Speaker 01:
I mean, in their very petition to the commission, they argued, and this is on pages 706 to 708 and 714, that SNR and Northstar agreed to transfer to DISH the licenses they acquired

[00:56:12] Speaker 01:
without disclosing that agreement in their applications.

[00:56:14] Speaker 01:
And when the commission reviewed that claim, it said, and this court also said, obviously, there was an understanding that they were going to put these licenses to DISH within the 30-day period following the five-year

[00:56:33] Speaker 01:
regulatory exclusion because otherwise there was no possibility that Northstar and SNR could make money.

[00:56:44] Speaker 03:
Why does that support your position?

[00:56:48] Speaker 03:
And not your opponent's position?

[00:56:51] Speaker 01:
So the argument is, the plausibility argument boils down to is there

[00:57:03] Speaker 01:
is the conduct that actually occurred explained by the agreements that were disclosed?

[00:57:12] Speaker 01:
And what the commission found and what this court found in this respect in particular is yes, including specifically an agreement or an understanding to transfer these licenses.

[00:57:28] Speaker 01:
There was a put right

[00:57:31] Speaker 01:
Which this court explained talked about and so did the commission and made the point after explaining why Northstar and SNR won't be able to do this and they won't have the money to do that and they can't do this and they can't do that.

[00:57:45] Speaker 01:
The only way they can make money in this case is by.

[00:57:50] Speaker 01:
Transferring the licenses, period.

[00:57:53] Speaker 04:
And so are you saying that disclosure of a plan to transfer?

[00:57:58] Speaker 04:
I'm a little bit confused because this sounds different from how you've argued this in your brief.

[00:58:03] Speaker 04:
Are you saying there was disclosure of an agreement to transfer?

[00:58:10] Speaker 01:
No, what I'm saying is, and this is on page 396 of the Joint Appendix, there is a, this is the short form disclosures, this is the one for SNR, but there's an equivalent one for North Star, that these entities have a put right at the end of five years to put all these licenses to dish at a negotiated agreed rate of annual rate of return.

[00:58:39] Speaker 01:
and what the commission found and what this court stated was that when you take the economics of this arrangement between Dish and Northstar and SNR, it was

[00:59:05] Speaker 01:
blindingly clear.

[00:59:06] Speaker 01:
I mean, I'm not quoting Judge Pillard your language.

[00:59:11] Speaker 01:
I'm instead searching for it.

[00:59:12] Speaker 01:
But you have a discussion in the opinion for the court that basically says there was the only way that Northstar and SNR could ever not lose money

[00:59:24] Speaker 01:
forget, make money, is by, in fact, exercising their put options.

[00:59:31] Speaker 01:
And therefore, there was an understanding that, in fact, at the end of five years, this was going to go to dish, which is exactly what the VTEL's petition to the FCC alleged.

[00:59:48] Speaker 01:
And so there is an obvious, just as in Twombly,

[00:59:54] Speaker 01:
all of the facts, all of the transactions alleged are fully explicable by the facts and agreements that were disclosed.

[01:00:05] Speaker 01:
And therefore, under Twombly and Iqbal, plausibility is not cited because there is a quote, obvious alternative explanation.

[01:00:16] Speaker 06:
All right.

[01:00:17] Speaker 06:
Why don't we hear counsel?

[01:00:18] Speaker 06:
Thank you, counsel.

[01:00:20] Speaker 01:
Thank you, Your Honor.

[01:00:22] Speaker 06:
For appellant.

[01:00:25] Speaker 07:
Thank you, Your Honor.

[01:00:26] Speaker 07:
I would like to make just three, I think four basic points.

[01:00:30] Speaker 07:
First, I think the key term here is civil money penalty proceeding, which is a I think that defendants view that it's just fatally overbroad.

[01:00:40] Speaker 07:
It covers any proceeding where the FCC hasn't invoked the procedures necessary to impose a civil money penalty.

[01:00:46] Speaker 07:
but it theoretically could.

[01:00:48] Speaker 07:
But the key fact is the FCC didn't invoke those procedures here and there was no ability to impose a civil money penalty here.

[01:00:54] Speaker 07:
So it's very hard to see how a licensing proceeding looking at eligibility is in fact a civil money penalty proceeding.

[01:01:05] Speaker 07:
The consistent term of our civil money penalty is punishment for violation of the laws.

[01:01:10] Speaker 07:
And that's just not what the commission was deciding.

[01:01:13] Speaker 07:
Second, in terms of what the commission actually had before it,

[01:01:16] Speaker 07:
I don't believe that the commission had before it one of the key allegations here, as the DOJ statement of interest emphasizes, non-disclosure of an agreement to transfer spectrum, which would have been facially disqualified.

[01:01:28] Speaker 07:
And one of the key facts is any licensing proceeding, you do not have discovery.

[01:01:33] Speaker 07:
The commission does not have subpoena power.

[01:01:35] Speaker 07:
So the commission really had to assume that it had all the documents, all the agreements before it, which is why the justice department

[01:01:44] Speaker 07:
on page 59 of the appendix says the FCC is thus operating under the assumption that defendants have made full and truthful disclosures.

[01:01:53] Speaker 07:
And then it goes on to say, for that reason, the government has a very strong interest in the discovery in this case, because if it uncovers the failure to disclose, that is important to the United States.

[01:02:05] Speaker 07:
That's exactly why there is, this is precisely the kind of case for which the key TAM statute is designed.

[01:02:13] Speaker 07:
It's one where the government did not invest its resources, but it could use the help of a private plaintiff to do it.

[01:02:18] Speaker 07:
The FCC hasn't redressed the fraud alleged in the complaint, including the undisclosed transfer agreement to transfer spectrum.

[01:02:25] Speaker 07:
The fact that there was a $3.3 billion in involuntary loan, which is actually alleged on paragraph 135 of the complaint,

[01:02:34] Speaker 07:
and then on page 138 of the joint appendix.

[01:02:39] Speaker 04:
But isn't the mechanism for recovering from that forced loan the default mechanism which has been

[01:02:47] Speaker 04:
done and has addressed the loss of the government, including interest, including the 15%.

[01:02:52] Speaker 04:
I think you call it a restocking fee.

[01:02:56] Speaker 04:
So if you were, by hypothesis, to proceed and to prevail in this case, what would be, I mean, I'm not asking you to take a legal binding position, but just roughly, what would the measure of damages be given that, as Mr. Waxman has argued under the materiality ban, or given that

[01:03:17] Speaker 04:
The any harm caused by the alleged fraud has been fully remedied.

[01:03:23] Speaker 07:
So while the statute itself doesn't require from harm for it to be actionable damages isn't an element.

[01:03:31] Speaker 07:
Right.

[01:03:33] Speaker 07:
Provisions for default cover the fact that there for seven months, the very least, there was a $3.3 billion shortfall.

[01:03:41] Speaker 07:
It doesn't address the fact that swaths of spectrum now seven years out are still completely undeveloped.

[01:03:47] Speaker 07:
It doesn't address the corruption of the auction system.

[01:03:50] Speaker 07:
What's caused when you have false certifications and it allows a very large entity to crowd out people who are actually eligible to bid.

[01:03:57] Speaker 04:
But the only, I mean, I saw in your complaint that you seek damages, but also there are the statutory, whatever it is, you know, 10,000 or, but beyond that, there's not a bigger stake here.

[01:04:11] Speaker 04:
I sort of assume there was.

[01:04:13] Speaker 07:
Yeah, there is.

[01:04:14] Speaker 07:
So under Supreme Court precedent, our understanding is

[01:04:17] Speaker 07:
I think the case is Oberson or something like that.

[01:04:19] Speaker 07:
But it says, in effect, that you do the troubling on the harm first.

[01:04:23] Speaker 07:
And if the government ultimately prevails and gets compensation, you actually deduct what the government got later on.

[01:04:29] Speaker 07:
And the government still has not gotten its default payments, because the default payments, you don't know the amount.

[01:04:34] Speaker 04:
Right, they depend on reaction, and we don't have the reaction.

[01:04:37] Speaker 04:
I didn't mean to derail your, I would like you to address the last argument that Mr. Waxman made, which I may be wrong.

[01:04:45] Speaker 04:
but which I took to be effectively saying that an agreement, a put option, you know, amounted to effectively a disclosure of an agreement to sell.

[01:04:59] Speaker 04:
But please proceed through the four points you wanted to make.

[01:05:02] Speaker 04:
I'm sure my colleagues and I are interested to hear them.

[01:05:05] Speaker 07:
Oh, well, okay.

[01:05:06] Speaker 07:
Well, very briefly, look, in terms of paragraph 113, the complaint, whether the FCC examines for de facto control, the complaint says that.

[01:05:14] Speaker 07:
But that's because the FCC is relying on the representations and certifications that are filed.

[01:05:21] Speaker 07:
And so it doesn't do an in-depth analysis, but certainly if there's something on the face like saying we're going to sell the spectrum at the end of five years, we've agreed to that, that would be disqualified.

[01:05:33] Speaker 07:
And I think there's actually certifications

[01:05:35] Speaker 07:
and I apologize for not having it at my hand, but certification is that there is not actually an agreement to transfer control.

[01:05:41] Speaker 07:
There is perhaps an option, what they represent in their short forms is there is perhaps the option to put, but the compulsion to sell, that there's an understanding or agreement that you must sell, that is not disclosed.

[01:05:55] Speaker 07:
And that is what would have been absolutely and clearly disqualifying under the provisions in addendum page 20.

[01:06:01] Speaker 07:
If you have an agreement or even understanding to sell,

[01:06:05] Speaker 07:
you are going to do it, not that you have an option.

[01:06:08] Speaker 07:
That is disqualifying.

[01:06:09] Speaker 07:
You take all of the assets for that other party and you count them as belonging to the designated entity and it would be disqualifying here.

[01:06:17] Speaker 05:
And what's your response?

[01:06:19] Speaker 05:
What's your response to Mr. Wax would point that that agreement to sell is perfectly plausible.

[01:06:26] Speaker 05:
It makes sense.

[01:06:27] Speaker 05:
It's the only way they could have made money.

[01:06:29] Speaker 07:
So that is

[01:06:30] Speaker 07:
Yes, I think it's the fact that there are all sorts of provisions in there that give them an incentive to sell is not inconsistent with and doesn't make it implausible that there was also an understanding that they would sell.

[01:06:43] Speaker 07:
Those two things are completely consistent.

[01:06:46] Speaker 07:
If you had two explanations, one of which excluded the other, that there was no agreement to sell because you have an option to sell under the put agreement, that might be a problem.

[01:06:57] Speaker 07:
But under Twombly, what you had there was you had

[01:07:00] Speaker 07:
two possible explanations, that it was independent conduct or that it was conduct that was concerted and therefore a violation of the antitrust laws.

[01:07:08] Speaker 07:
They are mutually exclusive.

[01:07:10] Speaker 07:
And the fact that one seemed very likely rendered the other implausible.

[01:07:14] Speaker 07:
The fact that you have de facto control here does not make the possibility and the plausibility of an agreement to transfer spectrum any less because the de facto control could very easily have gone away.

[01:07:27] Speaker 07:
And the de facto control wasn't necessarily so complete, so complete that you would not have to resort to an agreement to enforcing the agreement or to at least having an understanding that would be a sale at the end.

[01:07:41] Speaker 07:
In the end, look, plausibility would be a very fact-intensive analysis based on the complaint.

[01:07:48] Speaker 07:
And the district court didn't address the issue of plausibility.

[01:07:51] Speaker 07:
The district court dismissed on grounds that I think are on its face legally incorrect.

[01:07:57] Speaker 07:
I would urge the court to reverse on those grounds.

[01:08:00] Speaker 07:
If there's a plausibility issue, we can fight that out and proper briefing in the district court.

[01:08:03] Speaker 07:
But I don't think there is.

[01:08:05] Speaker 07:
I think it's very clear that it's entirely plausible that in addition to everything else that was there, there was an agreement or understanding that they were going to sell that spectrum, transfer it to DISH at the conclusion of five years.

[01:08:18] Speaker 07:
And indeed, that is now in process for at least one of the two entities.

[01:08:23] Speaker 07:
If there are no further questions, I thank the court and would

[01:08:27] Speaker 07:
seed any negative time I have left.

[01:08:30] Speaker 07:
Thank you.

[01:08:31] Speaker 06:
Any further questions by my colleagues?

[01:08:35] Speaker 06:
Thank you.

[01:08:35] Speaker 06:
Council will take the case under advisement.