TELESTAR, INC. V. FEDERAL COMMUNICATIONS COMMISSION, ET AL.

   No. 89-1770

   In The Supreme Court Of The United States

   October Term, 1990

   On Petition For A Writ Of Certiorari To The United States Court Of
Appeals For The District Of Columbia Circuit

   Brief For The Federal Respondent In Opposition

            TABLE OF CONTENTS
   Question Presented
   Opinions below
   Jurisdiction
   Statement
   Argument
   Conclusion

                            OPINIONS BELOW

   The decision of the court of appeals (Pet. App. 11-13) is
unpublished, but the decision is noted at 886 F.2d 442 (Table).  The
decision of the Federal Communications Commission (Pet. App. 14-66) is
reported at 3 FCC Rcd 2860.

                             JURISDICTION

   The judgment of the court of appeals was entered on September 22,
1989.  A petition for rehearing was denied on November 27, 1989.  Pet.
App. 7.  The petition for a writ of certiorari was filed on February
26, 1990 (corrected copy filed May 16, 1990).  The jurisdiction of
this Court rests on 28 U.S.C. 1254(1).

                          QUESTION PRESENTED

   Whether applications for a common carrier microwave communications
system were properly denied by the Federal Communications Commission
on the basis of the applicant's misrepresentations and lack of candor.

                               STATEMENT

   Under the Communications Act of 1934, 47 U.S.C. 151 et seq., the
responsibilities of the Federal Communications commission include
authorizing the construction and licensing of common carrier microwave
communications systems.  In this case, the Commission denied 15
applications by petitioner to construct such a system.

   1. In January, 1985, petitioner filed 15 applications with the
Federal Communications Commission for a common carrier microwave
communications system to carry communications between Salt Lake City,
Utah and Denver, Colorado.  Shortly thereafter, an existing carrier,
Western Tele-Communications, Inc. (WTCI) submitted a letter to the
Commission alleging that petitioner had constructed most of its
proposed facilities without first obtaining the Commission's
authorization.  Petitioner responded by admitting that it had already
constructed substantial elements of its system.  It asserted, however,
that it had understood the Commission's rules to require Commission
authorization only at the point when radio transmission equipment was
installed.  Petitioner submitted an affidavit from its president,
Walter Stewart, stating that the information in its responsive
pleading was true.  1 C.A. App. 1-38.

   2. On June 21, 1985, the Chief of the FCC's Common Carrier Bureau,
acting under delegated authority, issued a Notice of Apparent
Liability and Order Designating Applications for Hearing (CC No.
85-202) (Designation Order).  1 C.A. App. 141-150.  The order
concluded that there were "substantial and material questions of fact
concerning the circumstances surrounding the construction by
(petitioner) and its subsequent application(s) to the Commission," and
designated issues to be addressed in a hearing.  Id. at 147.  The
order noted that, even if petitioner had correctly read the FCC's
rules as requiring a permit only before the installation of radio
transmission equipment, petitioner's construction had progressed
beyond that point before petitioner filed its applications.  Id. at
145-146.  The order specified that petitioner would have the
responsibility of adducing evidence on the issues and of bearing "the
burden of proof on the conclusory issues," because of its "peculiar
knowledge (of) the facts regarding the alleged misconduct." Id. at 150
& n.19.

   3. On September 20, 1985, before the hearing commenced, petitioner
filed a Motion for Summary Decision.  2 C.A. App. 156-480.  Petitioner
argued that the Designation Order was based on a mistaken premise --
that its explanation for the preconstruction was that it had read but
misunderstood the FCC's rules.  Id. at 168-169.  Attributing this
explanation to its counsel, petitioner's president now stated that he
had not seen a copy of the Commission's rules until shortly before he
signed the applications and that even then he had only reviewed the
technical aspects of the rules.  Id. at 163-164, 188-189.  Concerning
the earlier affidavit by petitioner's president attesting to the
accuracy of petitioner's first explanation, Walter Stewart now
contended that he had signed that affidavit without ever seeing the
underlying documents to whose accuracy he had purportedly attested.  3
C.A. Appp. 481.  Petitioner now explained that its misunderstanding of
the FCC's rules was the result of informal discussions with frequency
coordination companies and equipment suppliers.  2 C.A. App. 162-163,
182-183.

   4. The Administrative Law Judge (ALJ) denied petitioner's Motion
for Summary Decision (3 C.A. App. 506-507), and, after holding four
days of hearings, decided that petitioner's applications should be
denied because petitioner was "not qualified to be a Commission
licensee." Id. at 700.  He determined that petitioner had engaged in
premature construction (id. at 694);  that petitioner had had
knowledge of the Commission requirements (id. at 694-697);  and that
petitioner had engaged in misrepresentations and a lack of candor in
its dealings with the Commission.  Id. at 697-700.

   5. In January 1987, the Commission's Review Board affirmed the
ALJ's decision.  4 C.A. App. 887-901.  The Board concluded that "the
preponderance of the record evidence corroborates the ALJ's findings
and conclusions for the proposition that (petitioner) has
misrepresented material facts to the Commission and that its
principals have demonstrated an egregious lack of candor with this
agency in this proceeding." Id. at 887.

   6. In December 1987, the Commission issued a decision in which it
agreed with the Review Board and the ALJ on many matters, but remanded
to allow petitioner to submit additional evidence.  Pet. App. 74-109.
The Commission first agreed that the burden of proof and of proceeding
was on petitioner.  The Commission noted that, under 47 U.S.C. 309(e),
"'(t)he burden of proceeding with the introduction of evidence and the
burden of proof shall be upon the applicant, except that with respect
to any issue presented by a petition to deny or a petition to enlarge
the issues, such burdens shall be as determined by the Commission.'"
Pet. App. 82.  The Commission stated that the operative facts with
respect to the issues in this proceeding were "peculiarly within the
knowledge of (petitioner's) principals," and that the "burden is on
(petitioner) to establish by a preponderance of the evidence both that
it is qualified to be a licensee and that the public interest will be
served by the grant of its applications." Id. at 83.  The Commission
also agreed that "on the face of the record (petitioner) does not
appear to have met its burden of proof" (id. at 84) and that "the
record does not establish (petitioner's) qualifications to be a
licensee." Id. at 105.

   The Commission remanded the proceeding to the ALJ to afford
petitioner a further opportunity to meet its burden.  Pet. App.
105-106.  The Commission identified several specific areas where it
felt additional evidence would be helpful.  It noted, for example,
petitioner's earlier claim that its principals were led to believe
that they could lawfully undertake pre-permit construction as a result
of discussions with frequency coordination companies and equipment
suppliers.  The Commission suggested that petitioner on remand should
identify more specifically these alleged sources of its
misunderstanding and present them as witnesses.  Pet. App. 101.  The
Commission further pointed to a significant conflict between
petitioner's principals and its former counsel concerning the date
when these principals spoke with counsel about a possible premature
construction problem.  Id. at 102-105.  Similarly, the Commission
observed that the record contained information which petitioner had
prepared for submission to its potential investors and which evidenced
an understanding on petitioner's part of the FCC's construction permit
requirements;  the Commission noted that petitioner had not adequately
reconciled this information with its subsequent claims that it
misunderstood the requirements of the FCC's rules.  Id. at 96-97.  /1/

   7. On remand, petitioner chose not to supplement the existing
record.  Accordingly, in April 1988, the ALJ dismissed petitioner's
applications for failure to prosecute.  Pet. App. 67-73.

   8. In May 1988, the Commission affirmed the denial of petitioner's
applications.  Pet. App. 14-66.  The Commission noted that it had
issued the remand order from an "abundance of caution" and "to allow
(petitioner) an opportunity to establish its qualifications." Id. at
19-20.  The Commission further observed that, "(a)lthough we
specifically found that (petitioner) failed to establish its
qualifications to be a licensee on the basis of the present record(,)
(petitioner) refused to present further evidence." Id. at 20-21.  The
Commission thus evaluated the administrative record before it and
concluded, "When consideration is given to the full record in this
proceeding, the preponderance of the evidence establishes that
(petitioner) has both misrepresented material facts and exhibited a
lack of candor in its prosecution of these applications." Id. at
21-22.

   9. On September 22, 1989, the D.C. Circuit affirmed the
Commission's denial of petitioner's applications.  In its unpublished
order, the court stated:

         The Commission's remand order warned (petitioner) that, as
      the record then stood, the FCC had "no basis to reverse the
      conclusion of both the ALJ and the Review Board that
      (petitioner) is unqualified to be a licensee." Despite that
      warning, and the reasonableness of the Commission's assignment
      of the proof burden to the applicant when "the operative facts
      are peculiarly within the knowledge of (that party),"
      (petitioner) chose to stand on the existing record.  Under the
      circumstances here presented, we have no cause to disturb the
      Commission's final order denying (petitioner's) applications.
      /2/

                               ARGUMENT

   Petitioner raises three objections:  (1) the court of appeals'
order was erroneous (Pet. 52-54);  (2) the Commission's proceedings
and decision were unfair (Pet. 56-62);  and (3) the court of appeals'
decision conflicts with other decisions regarding exhaustion of
administrative remedies.  Pet. 62-63.  None of these objections is
well founded, and none warrants review.

   1. Petitioner's challenge to the court of appeals' order is
apparently based upon a fundamental misconception.  Petitioner
contends that the court of appeals "(f)ail(ed) to grant review (i)n
this case" (Pet. 55) and that the alleged "cutoff of judicial review"
(Pet. 54) was impermissible.  This suggestion is incorrect.
Petitioner's principal argument in the court below, i.e., that the
Commission improperly placed upon it the burden of "nonpersuasion,"
was explicitly considered and rejected by the court of appeals.  See
App., infra.  The court explained that it was entirely reasonable for
the Commission to assign the burden of proof to petitioner because
"the operative facts are peculiarly within (its) knowledge." Id. at
2a.  After carefully considering petitioner's arguments, the court
found that it had "no cause to disturb" the Commission's decision,
including its allocation of burdens.  Ibid.  Thus, although petitioner
may disagree with the result reached by the court of appeals, any
assertion that it was denied judicial review is clearly mistaken.

   2. Petitioner also raises scattered objections to the Commission's
administrative process.  It maintains that settlement negotiations
were unfair and abusive.  Pet. 44-47, 59-60.  Contrary to petitioner's
suggestions, the conduct of what turned out to be unsuccessful
settlement negotiations in the presence of the FCC staff did not taint
the administrative process, and the Commission did not punish
petitioner for failing to agree to a negotiated settlement;  the
Commission rendered a decision in this case on the basis of the
evidence in the record.  Similarly, petitioner repeatedly points to
positions taken by the FCC Common Carrier Bureau (Pet. 25, 39-40, 56);
 the recommendations of the FCC Common Carrier Bureau obviously were
not binding on the ALJ, the Review Board, and the Commission, and did
not foreclose their own evaluations of the record.  Finally,
petitioner repeatedly focuses on the FCC's decisions, in entirely
separate proceedings, not to revoke the authorizations of MCI
Telecommunications Corporation (Pet. 1-13, 57-58) and WTCI (Pet.
14-15, 49, 57-58).  /3/ The propriety of these other decisions, of
course, is not properly presented by this case, in which the
Commission rejected petitioner's applications.  To the extent that
petitioner argues that the Commission's decision in this case was
unfair because it treated petitioner more harshly than WTCI and MCI,
it should be pointed out that, in the other proceedings, the
Commission specifically held that there was no evidence that either
WTCI or MCI had engaged in misrepresentation or a lack of candor in
their explanations to the Commission.  See Western
Tele-Communications, Inc., 3 FCC Rcd at 6405-6406;  MCI
Telecommunications Corp., 3 FCC Rcd at 514.  This difference from the
Commission's finding with respect to petitioner's misrepresentation
and lack of candor is clearly sufficient to distinguish those
decisions.

   3. Finally, petitioner's contention (Pet. 62-63) that the court of
appeals' order conflicts with decisions from this Court and the Ninth
Circuit regarding the exhaustion of administrative remedies is without
merit.  The basis of the alleged conflict is not clearly set forth in
the petition, but petitioner apparently believes that the court of
appeals concluded that petitioner had failed to exhaust administrative
remedies.  Pet. 62.  In fact, neither the court of appeals decision
nor the Commission order which it affirms relies upon, or even
mentions, the exhaustion doctrine.  Instead, petitioner's applications
were rejected because, on the state of the hearing record, the
preponderance of the evidence established that petitioner engaged in
misrepresentations and lack of candor in its dealings with the
Commission.  Pet. App. 21-22.  /4/ The significance of petitioner's
failure to submit additional evidence was that, as the Commission had
explicitly warned, it left the administrative record in a state on
which petitioner could not possibly prevail.  Thus the court of
appeals' order clearly presents no conflict with any decision of this
Court or any other court.

                              CONCLUSION

   The petition for a writ of certiorari should be denied.

   Respectfully submitted.

   JOHN G. ROBERTS, JR.

      Acting Solicitor General /5/

   ROBERT L. PETTIT

      General Counsel Federal Communications Commission

   JULY 1990

   /1/ Petitioner's appendix omits Commissioner Dennis's dissent, in
which she concluded that no remand was necessary and that petitioner's
applications should simply be denied.  See 4 C.A. App. 953-954.

   /2/ Petitioner's appendix (at 12) omits an important phrase from
the last sentence in the quoted passage.  We have reprinted the order
in its entirety in an appendix, infra.

   /3/ In the MCI matter, petitioner filed two petitions with the FCC
to revoke MCI's licenses to operate certain common carrier microwave
facilities on the ground that MCI had prematurely constructed some of
its facilities prior to obtaining FCC approval.  The Commission
concluded that MCI had indeed prematurely constructed some of its
facilities and it imposed a monetary forfeiture of $10,000 on MCI.
MCI Telecommunications Corp., 3 FCC Rcd 509, supplemented by 4 FCC Rcd
7299 (1988).  See also 3 FCC Rcd 3155, reconsideration denied, 3 FCC
Rcd 6732 (1988).  In the WTCI matter, similar charges were filed by
petitioner, but the Commission found no evidence to support
petitioner's claim of impermissible premature construction.  Western
Tele-Communications, Inc., 3 FCC Rcd 6405 (1988).  Petitioner appealed
the denial of its petitions to the D.C. Circuit.  In unpublished
judgments, the court dismissed petitioner's appeals for lack of
standing.  TeleSTAR, Inc. v. FCC, 901 F.2d 1131 (D.C. Cir. 1990)
(Table);  TeleSTAR, Inc. v. FCC, 899 F.2d 1268 (D.C. Cir. 1990)
(Table).

   /4/ It is well settled that misrepresentation and lack of candor
justify the Commission's denial of a license.  FCC v. WOKO, Inc., 329
U.S. 223 (1946);  RKO General, Inc. v. FCC, 670 F.2d 215 (D.C. Cir.
1981), cert. denied, 456 U.S. 927 (1982).  The integrity of the
Commission's processes rests on its ability to rely upon the
representations of its licensees.  RKO General, Inc. v. FCC, 670 F.2d
at 231.

   /5/ The Solicitor General is disqualified in this case.

   APPENDIX