My draft opinion holding up FCC v. Fox

My Administrative Law take-home midterm asked that I step into the shoes of a Supreme Court clerk and draft an opinion for FCC v. Fox, the fleeting expletives case. Naturally, because it is for Admin Law, it does not address the First Amendment issues that I think the Court should address. I liked the assignment since it made me think long and hard about the legal issues involved.

I. Draft decision upholding Fox, 489 F.3d 444 (2nd Cir. 2008), with regard to A.P.A. issues.

A. Statutory Interpretation

We find that the FCC impermissibly changed its interpretation of the term ‘indecent’ as used in the governing statute, 18 U.S.C. § 1464, which bars indecent content from broadcast radio and television.

In the order at issue, the FCC changed not only its policy toward indecent content but its interpretation of the term ‘indecent’ provided in the statute, 18 U.S.C. § 1464. As such, the Chevron v. Natural Res. Defense Council, Inc., 467 U.S. 837 (1984) framework governs our review of the Commission’s construction. Congress has delegated to the Commission the authority to â??execute and enforceâ? the Communications Act, 47 U.S.C. § 151, which provides the FCC with power to regulate indecent content on broadcast radio and television. The Commission has the power to deliver administrative sanctions, such as sending cease and desist orders or revoking licenses, 47 U.S.C. § 312, and also to assess criminal forfeiture penalties, 47 U.S.C. §503(b)(1)(D).

Chevron established a familiar two-step procedure for evaluating whether an agency’s interpretation of a statute is lawful. Nat’l Cable and Telecommunications Assoc. v. Brand X Internet Svc., 545 U.S. 967, 986 (2005). As a first step we ask whether the statute’s plain terms â??directly address the precise question at issue.â? Brand X at 986. If the statute is ambiguous on the point, we defer, at step two, to the agency’s interpretation so long as the construction is a â??reasonable policy choice for the agency to make.â? Id.

In the first step of the Chevron analysis, we look at whether the statute directly defines the term ‘indecent’ or if the term, as used, is ambiguous. The statute, 18 U.S.C. § 1464, states in full: “Whoever utters any obscene, indecent, or profane language by means of radio communication shall be fined under this title or imprisoned not more than two years, or both.” It is clear that Congress intended that no indecent language be used in radio communication but we find that indecent is not clearly defined thus leaving this portion of the statute ambiguous.1 The ambiguous nature of the term can be seen in FCC v. Pacifica Foundation, 438 U.S. 726 (1978), in which the plurality opinion and concurrence had two different ideas about what qualified as indecent. Both felt the term meant â??patently offensiveâ? but differed in opinion about what qualified as such. The plurality opinion identified the plain meaning of indecent as â??merely referring to nonconformance with accepted standards of moralityâ? Pacifica at 741 and merely accepted that it was equivalent to patently offensive. The concurrence felt the term was more narrow, finding that the George Carlin monologue could be classified as “indecent” only because “the language employed is vulgar and offensive… [and] was repeated over and over as a sort of verbal shock treatment.” 438 U.S. At 757. (Powell, J., concurring). It is also through the ambiguous nature of the term indecent that the Commission’s rules operate and why it felt it necessary to change its policy as to what qualified.

We next proceed to step two of the Chevron analysis. If the statute is ambiguous on the point, we defer to the agency’s interpretation so long as the construction is a â??reasonable policy choice for the agency to make.â? Chevron’s premise is that it is for agencies, not courts, to fill statutory gaps. Brand X at 972. If Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Brand X at 844. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute. When the legislative delegation to an agency is implicit, a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency. Brand X at 844. This is true, even when the agency is changing rules, policies, and how it interprets a statute. Chevron at 863. Such a change, however, must provide a reasoned analysis to depart from prior precedent.

Here, the Commission has an implicit delegation to fill the statutory gap with regard to what is indecent. Through that delegation, the Commission changed how it interprets the term indecent to have a broader meaning than it had used in the past. Previously, the Commission had held that language was indecent if used to depict or describe sexual or excretory activities. In the order at issue, the Commission broadened the meaning of indecent when it determined that all uses of the words â??fuckâ? (the “F-Word”) and â??shitâ? (the “S-Word”) in all contexts depict or describe such activity. Golden Globes Order, 19 F.C.C.R. 4975, 4978. This is the case, with a single, isolated non-literal utterance of the word. For example, Bono’s statement, â??really, really fucking brilliant,â? in reaction to winning a Golden Globe award is considered indecent, although his use of the word did not involve sexual or excretory functions. Golden Globes Order at 4975. As pointed out by the lower court, prior to the Golden Globes decision the FCC had consistently taken the view that isolated, non-literal, fleeting expletives did not run afoul of its indecency regime. Fox Television Stations, Inc. v. FCC, 489 F.3d 444,455 (2nd Cir. 2007).

We find that the Commission provided very limited reasoning as to its new, broader interpretation of the term indecent.2 Rather, it largely relied on its dismissal of previous interpretations of the term indecent as dicta and staff letters. It did provide some reason why it was changing policy with regard to how it would enforce the rule, however it did not discuss its new interpretation of the statute.3 The Commission simply announced that the “core meaning” of certain expletives is always indecent (Golden Globes at 4978), thus expanding the definition of the term indecent, although it had repeatedly held those same terms not indecent in the past.

B. Substantive Decision

Furthermore, we also find that the Commission failed to provide an adequately reasoned analysis for its change in policies and rules with regard to its its interpretation of the statute.

When an agency undertakes “a reversal of policy,” the APAâ??s mandate of reasoned decision making requires it to “adequately explain the reasons” for the change. Brand X at 981. Moreover, “[a]n agencyâ??s failure to come to grips with conflicting precedent constitutes an inexcusable departure from the essential requirement of reasoned decision making.” Ramaprakash v. FAA, 346 F.3d 1121, 1125 (D.C. Cir. 2003) (Roberts, J.).

Here, the Commission failed to provide a rational connection to between the â??first blowâ? theory its policies regarding fleeting expletives or provide adequate reasoning to explain away the conflict between its current policy to consider a fleeting expletive a harmful â??first blowâ? and the prior 30 years when it did not. As pointed out in the court below, there is no identifiable or judicially manageable standard provided by the Commission for the first blow theory underlying its policy change. The Commission held that it had changed the definition of what it considers indecent to include all uses of the F-Word and S-Word to protect viewers (including children) from taking the first blow when an expletive is used. It then provided exemptions for some uses of expletives but not others. For example, it provided exemptions for expletive used during the Early Show and the movie Saving Private Ryan but not for the same expletives used during the Billboard Music Award programs. In which case, the Commission’s justifications relying upon the â??first blowâ? theory were undermined. Viewers to each program still took the â??first blowâ? and were subjected to the offending word(s). In each case, the Commission subjectively determined whether that particular instance was more deserving of an exemption than the others. It is unclear what standards the Commission used for each determination.

The decision by the lower court is affirmed and this matter remanded to the Commission.

1We intentionally do not address any constitutionality in this portion of our opinion. We assume, for sake of argument that this statute and the Commission’s rules with regard to indecent content are are Constitutional.

2 This Court cannot substitute a reasoned basis for the agency action if the agency did not proffer it first. Courts confine evaluations of agency action to reasons articulated by the agency itself. State Farm at 50. See also Chenery (“the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. The reviewing court should not attempt itself to make up for such deficiencies; we may not supply a reasoned basis for the agency’s action that the agency itself has not given.”).

3 The dissent argues that the Commission did not change its interpretation of the statute and merely changed its enforcement policies based on how it had always defined the term indecent. The issue in this case is whether the FCC has adequately explained its decision to broaden the definition of “indecent” when it abandoned a standard limited to “verbal shock treatment” based on sexual or excretory function in favor of a presumption of indecency that must be rebutted with specific mitigating circumstances.

*Update:* The real Supreme Court disagrees with me. Justice Scalia, joined by 4 other justices, said that the FCC adequately followed the Administrative Procedures Act (A.P.A.) and declined to rule on the First Amendment issues. The matter was remanded to the appellate court, which can then reconsider the First Amendment issues.

Want a job?

Then don’t leave a longer than necessary or rambling voice mail. It leaves a bad impression. 🙁

I need to take my own advice. 🙁 🙁

Andrew Ross Sorkin’s Case for Paying the A.I.G. Bonuses

Andrew Ross Sorkin wrote the following in today’s NY Times with regard to why the A.I.G. bonuses should be paid:

via Dealbook – The Case for Paying the A.I.G. Bonuses – NYTimes.com.

â??This isnâ??t just a matter of dollars and cents,â? he said. â??Itâ??s about our fundamental values.â?

On that last issue, lawyers, Wall Street types and compensation consultants agree with the president. But from their point of view, the â??fundamental valueâ? in question here is the sanctity of contracts.

That may strike many people as a bit of convenient legalese, but maybe there is something to it. If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right.

As much as we might want to void those A.I.G. pay contracts, Pearl Meyer, a compensation consultant at Steven Hall & Partners, says it would put American business on a worse slippery slope than it already is. Business agreements of other companies that have taken taxpayer money might fall into question. Even companies that have not turned to Washington might seize the opportunity to break inconvenient contracts.

If government officials were to break the contracts, they would be â??breaking a bond,â? Ms. Meyer says. â??They are raising a whole new question about the trust and commitment organizations have to their employees.â? The auto industry unions are facing a similar issue â?? but the big difference is that there is a negotiation; no one is unilaterally tearing up contracts.”

One word comes to mind: FRAUD.

A.I.G. committed fraud in the worst way and the bonuses are based on fraud. Accounting fraud, insurance fraud, whatever you name it, fraud took down A.I.G. As an insurance company, A.I.G. is obligated to retain a certain level of capital reserves from which to pay its obligations. Instead, it appears A.I.G. kept little to no capital reserves for insurance contracts it wrote for securities. The money it received from those insurance contracts was looted by its executives through excessive compensation and bonuses. As a result, A.I.G. lacked necessary funds to pay the beneficiaries of those insurance contracts when the insurance notes came due.

A basic tenet of contract law says that contracts based on fraud are not enforceable. Those bonus contracts should be presumed unenforceable until it is clear the recipients were not party to the fraud and actually earned the bonuses received.

I would like to see a real investigation led by William K. Black to determine what exactly went on at A.I.G. and when the executives and other employees knew or should have known they were committing fraud. I find it shocking the Feds have not already begun a thorough investigation into A.I.G. and other financial institutions to get to the bottom of the economic fiasco they caused. Until an investigation is completed, we should all presume fraud is involved.

Then again, I’m surprised A.I.G. wasn’t immediately placed into receivership, executive ranks fired, its counter-party contracts renegotiated through the receiver, and its assets sold off to the highest bidder to pay its obligations.

AP, Please Improve Your Reporting

With the demise of newspapers all around us, you’d think the AP could put out better articles. Case in point is an article circulated by the AP today with a headline that screams more Americans have no religion that in years past.

First off, the headline is misleading at best. A 0.8 percent increase really isn’t the main gist of the article nor is it the most relevant factoid in the article.

More Americans say they have no religion (AP via Y! News).

“Fifteen percent of respondents said they had no religion, an increase from 14.2 percent in 2001 and 8.2 percent in 1990, according to the American Religious Identification Survey.”

Second, the article is poorly structured and misses key details that I expect an article like this to include. For example, what does it mean to not have a religion? Does it mean that person is an athiest and does not believe in a higher power? Does it mean a person is agnostic and chooses to not have a religion but believes in a higher power?

The article lacks a summary at the beginning to say in a nutshell what it is about or to provide a roadmap, is disjointed and provides related details in separate areas of the article, and lacks clear thought. I admit that I’m guilty of these violations at various times but I’m not a professional journalist paid to dispense the news.

Building on my first example, above, why is it that the 15 percent statement is separate from and not tied to the statement more than 8 paragraphs down about 12 percent of Americans believing in a higher power but not a personal God? It seems those stats go together but are not tied together or contrasted. So, is the 12 percent group a subset of the other? Are they separate groups? If a subset, what does that say about the remaining 3 percent? Other questions left unanswered include whether the study includes the same respondents from the earlier versions of the study, what answers respondents gave to why they changed religions, and what was done to accommodate people who did not speak English or Spanish in the sample population (is there underrepresentation in Buddhism, Hinduism, and Islams as a result?).

Please, don’t make me find and read the study to better understand for myself.

The Most Difficult Assignment

I always found self-assessments to be the most difficult work assignments possible. Cover letters for job applications run a close second. I’m currently working on a cover letter.