TR Daily Judges Urge FCC to Negotiate Debt Compromise With Company
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Wednesday, January 9, 2019

Judges Urge FCC to Negotiate Debt Compromise With Company

Judges on a U.S. Court Appeals for the District of Columbia panel urged the FCC today to negotiate a compromise with a former C-block PCS licensee regarding the company’s debt for defaulting on its installment payments.

An oral argument this morning in “GLH Communications, Inc., v. FCC” (no. 18-1176) involve a company that acquired six C-block licenses from another company in 2001. GLH said it missed its payments on four of the licenses because Leap Wireless International, Inc., the seller of the licenses, defaulted on its obligation to pay GLH to cover the installment payments.

GLH sought a two-year waiver of the installment-payment rules, a request that the FCC rejected by saying that the licenses automatically canceled on Aug. 1, 2003. The FCC reauctioned the four canceled licenses, garnering nearly $9.3 million, compared with the nearly $6.9 million owed by GLH. GLH also filed a petition for debt compromise.

The appeal in the case deals with an FCC order on reconsideration released last year that denied GLH’s petition for reconsideration of the agency’s decision denying the requests of several parties, including GLH, to reverse staff-level decisions denying those parties’ requests for waiver of the installment payment rules (TR Daily, June 8, 2018).

During this morning’s oral argument, judges wondered why the GLH’s case has lingered for so many years and urged the FCC to negotiate a settlement with GLH over the debt.

“This is somebody who paid faithfully … and then the bank bellied up, as it were, through no fault of the petitioner,” said Judge Judith W. Rogers. “Why not just get rid of this?”

FCC Deputy General Counsel David Gossett defended the FCC’s decisions involving GLH, noting that it has long held that business or financial conditions don’t provide an adequate reason to grant a waiver. “The denial of the waiver was entirely consistent with every precedent of the Commission,” he added.

But after being pressed by Judge Rogers, Mr. Gossett said he would welcome GLH filing another petition for debt compromise. However, he said, the attorney general must approve any agreement to compromise debt of more than $100,000.

“You could petition for debt compromise and then you would get the resolution that you’re asking for, which is the determination of whether money is still owed,” Judge Sri Srinivasan told Donald Evans, an attorney for GLH.

Mr. Evans said he can do that, but he criticized the way his client has been treated.

“For the last 15 years, we’ve been under a cloud,” he said. “We’ve got a potential $6 million liability that’s hanging out there that shouldn’t be there.”

“What the Commission is doing is outrageous,” Mr. Evans said. “If Mo’s Quickie Loan Shop up the street here tried to do this, they would be sanctioned by somebody. And here, you’ve got a federal agency taking an outrageous advantage of a debtor in … contrast to the UCC [Uniform Commercial Code].”

He said that while a debt-compromise ruling could address whether GLH owes the FCC any money, there would still be a question about his client’s contention that the Commission owes it about $2 million from the excess funds generated by the reauction of the licenses, excluding lost interest. The offset is due in compliance with the UCC and FCC practice, which was spelled out in a 1996 staff letter, Mr. Evans said.

Judge Cornelia T.L. Pillard noted that the FCC argues that GLH gave away the right to any surplus in a resale of the licenses in a security agreement it signed with the FCC.

Mr. Evans acknowledged the provision cited by the judge, but he said that the FCC is permitted under the UCC to employ any remedies it chooses, and that under the UCC, the Commission is not permitted to waive his client’s right to the offset from the resale of the licenses.

In its brief in the case, the FCC said that “GLH’s reliance on the UCC is inconsistent with the terms of its installment agreements, the 1996 Opinion Letter on which auction participants have long relied, the Ninth Circuit’s decision in Magnacom, 503 F.3d 984, and this Court’s summary affirmance in In re Alpine PCS, Inc., 404 Fed. Appx. 504 (D.C. Cir. 2010). See Section III.A, infra. Nor is it entitled to offset its debts with those auction proceeds. See Section III.B, infra. GLH ignores the difference between 47 C.F.R. §1.2104(g)(2), which applies to defaults before a license award, and 47 C.F.R. §1.2110(g)(4), which applies to licensees who thereafter default on installment payment obligations. The Commission simply seeks to hold GLH to the contractual and regulatory obligations that it voluntarily accepted.” - Paul Kirby, [email protected]

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