Previously, the bankruptcy court had found that NextWave purchased the licenses for less than reasonably equivalent value. Based on that finding, the bankruptcy court authorized NextWave to avoid approximately three-quarters of its payment obligation to the FCC, but permitted it to retain the licenses while it reorganized in chapter 11. The bankruptcy court had concluded that the FCC's requirement of full payment as a condition for license retention lacked regulatory purpose and, therefore, was not excepted from the Bankruptcy Code's automatic stay of actions against the debtor and its property.
On appeal by the FCC, the Second Circuit rejected the bankruptcy court's determinations. Moreover, the Second Circuit ruled that it was beyond the bankruptcy court's jurisdiction to interfere with the FCC's system for allocating radio spectrum licenses because the FCC's licensing decisions are subject to the exclusive jurisdiction of the federal courts of appeals.
After the case returned to the bankruptcy court on remand from the Second Circuit, the bankruptcy court (i) determined that the FCC's requirement of timely payment as a licensing condition is without regulatory purpose, and (ii) prohibited the FCC from re-auctioning the licenses formerly held by NextWave. In response to these actions by the bankruptcy court, the FCC filed its petition for a writ of mandamus.
The Second Circuit concluded that the bankruptcy court's ruling violated its prior mandate, and that the FCC's licensing decisions are outside the bankruptcy court's limited jurisdiction. The Second Circuit denied the bankruptcy court's assertion of jurisdiction pursuant to the Bankruptcy Code's automatic stay provision. Rejecting the bankruptcy court's rationale that the FCC's action was an "attempt to enforce its pecuniary interests," the Second Circuit stated that "whenever an FCC decision implicates its exclusive power to dictate the terms and conditions of licensure, the decision is regulatory. And if the decision is regulatory, it may not be altered or impeded by any court lacking jurisdiction to review it." In other words, the Second Circuit concluded that the FCC is a governmental unit seeking to enforce its regulatory power pursuant to the exception to the automatic stay set forth in Bankruptcy Code section 362(b)(4).
In granting the writ of mandamus, the Second Circuit observed,Our extraordinary mandamus power has two purposes: to achieve compliance with the terms and spirit of our mandates, and to constrain inferior courts to proper exercises of their jurisdiction. In this case, the two uses of mandamus overlap and reinforce one another.
The Second Circuit stated that judicial review of all cases involving the exercise of the FCC's radio licensing power is limited to the United States Court of Appeals for the D.C. Circuit. The Second Circuit observed that "NextWave remains free to pursue its challenge to the FCC's regulatory acts," and it noted that, as a protective measure, NextWave already has filed notices of appeal in the D.C. Circuit.
In re Federal Communications Commission, No. 99-5063, 2000 U.S. App. LEXIS 11615 (2d Cir. May, 25, 2000.) See the February 2000 issue of Bankruptcy Bulletin at 8 for a brief discussion of the Second Circuit's prior decision in NextWave. See the July 1999 issue of Bankruptcy Bulletin at 1 for a more detailed discussion of the bankruptcy court's fraudulent conveyance decision in this case.