Court Invalidates FCC's Attempt to Cancel NextWave Licenses
Ruling
"Deprivation of property by agency fiat, without any procedural or due process safeguards, cannot be countenanced," the Court said in its opinion, which concludes that the FCC's attempted cancellation of NextWave's licenses is "void and without force or effect" because it violates the Bankruptcy Code. "There exists a host of protections, not only for the benefit of (NextWave), but for the benefit of all constituent parties including the FCC, designed to ensure the rational, systematic and equitable reorganization of this estate," the Court's opinion states. "Self-help repossession by ambush is not one of them; it is repugnant to the very essence of the Bankruptcy Code."
"NextWave is pleased by the Bankruptcy Court's decision because it takes us a giant step closer to putting our licenses to full and active use," said Allen Salmasi, chairman and CEO of NextWave. "This decision protects the rights of several thousand NextWave creditors and shareholders, the majority of whom are small businesses and individuals, including numerous private and state pension funds.
"The decision is also a victory for all regulated businesses throughout the nation, large and small, because it protects shareholders and creditors from government agencies who would attempt to circumvent the law. NextWave is confident that time-consuming and unproductive litigation can now cease, and that instead NextWave will be allowed to proceed immediately with confirmation of its plan of reorganization. As the Bankruptcy Court concluded, that is the fairest and fastest way to achieve Congress's goal of placing this spectrum into immediate productive use."
The Bankruptcy Court also concurred with this view, stating that "No more dramatic exemplar of the rehabilitative objectives of the "cure" provisions of the Bankruptcy Code could be imagined than this very case. The protection due the FCC under the Bankruptcy Code exists in (NextWave's) Plan. The FCC will be paid in full, the putative "defaults" cured and nullified. No creditor can ask for better protection, in or out of bankruptcy."
History
In 1996, NextWave participated in an FCC auction for PCS licenses. Congress limited that auction to small entrepreneurial companies to provide more competition and to increase service to the public. NextWave ultimately was awarded 95 licenses and made a down payment of more than $500 million to the government for those licenses. As a result of a precipitous drop in the market value of those licenses and resulting pressure from creditors and others, NextWave and many other licensees were forced to seek bankruptcy protection in order to reorganize their businesses.
NextWave filed late last year a modified plan of reorganization with sufficient financing to emerge from bankruptcy and pay the FCC 100% of the amount owed on the licenses.
On January 12, 2000, the FCC rejected an offer made by NextWave to make a $4.3 billion lump-sum payment to the FCC in full satisfaction of its entire license obligations and announced that NextWave's licenses had been "automatically" revoked a year earlier, in January 1999. The court has now ruled that the FCC violated the law in attempting retroactively to revoke NextWave's licenses. In its ruling, the Court asked, "What public policy is served by an act of the United States Government, which violates basic notions of equity, due process, and the Bankruptcy Code?"