Thacker v. FCC - Opposition

No. 07-803

In the Supreme Court of the United States

DONALD A. THACKER, TRUSTEE, PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

BRIEF FOR THE RESPONDENTS IN OPPOSITION

PAUL D. CLEMENT
Solicitor General
Counsel of Record
JEFFREY S. BUCHOLTZ
Acting Assistant Attorney
General
WILLIAM KANTER
H. THOMAS BYRON III
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

QUESTION PRESENTED

Whether a winning bidder in a Federal Communi cations Commission spectrum auction that defaults on its payment obligations and consents to the cancellation of its licenses has a claim to the proceeds of a subse quent auction allocating new licenses to use the spec trum.

In the Supreme Court of the United States

No. 07-803

DONALD A. THACKER, TRUSTEE, PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

BRIEF FOR THE RESPONDENTS IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-23a) is reported at 503 F.3d 984. The opinion of the district court (Pet. App. 45a-57a) is unreported. The opinion of the bankruptcy court (Pet. App. 24a-44a) is unreported.

JURISDICTION

The judgment of the court of appeals was entered on September 17, 2007. The petition for a writ of certiorari was filed on December 14, 2007. The jurisdiction of this court is invoked under 28 U.S.C. 1254(1).

STATEMENT

1. In the Communications Act of 1934, 47 U.S.C. 151 et seq., Congress sought "to maintain the control of the United States over all the channels of radio transmis sion; and to provide for the use of such channels, but not the ownership thereof, by persons for limited periods of time, under licenses granted by Federal authority." 47 U.S.C. 301. To that end, the statute establishes the Fed eral Communications Commission (FCC or Commission) and vests it with the authority to issue radio licenses upon its determination that doing so will serve the "pub lic interest, convenience, and necessity." 47 U.S.C. 309(a).

Congress has authorized the FCC to award licenses for spectrum dedicated to certain commercial services "through a system of competitive bidding," or auction. 47 U.S.C. 309(j)(1). Congress has also directed the Commission to promote "economic opportunity and com petition * * * by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants, including small businesses." 47 U.S.C. 309(j)(3)(B). The FCC has accordingly desig nated certain blocks of spectrum for auction to small businesses known as "designated entities," and it also has provided bidding credits to such businesses. 47 C.F.R. 1.2110. At the time of the auctions at issue in this case, the FCC allowed designated entities to pay in installments during the term of the license, even though other licensees were required to pay the full bid price at the time of the auction. 47 C.F.R. 1.2110(g); see gener ally In re Implementation of Section 309(j) of the Com munications Act-Competitive Bidding, 9 F.C.C.R. 2348 (1994).

2. In 1996 and 1997, Magnacom Wireless, LLC (Magnacom) was a winning bidder in FCC auctions for wireless telecommunications licenses. Pet. App. 3a, 46a. Magnacom qualified as a designated entity in those auc tions and was therefore awarded the licenses after mak ing only a down payment on its winning bids, with the remainder of its bid payable in quarterly installments over the ten-year term of the licenses. Id. at 3a.

Magnacom soon experienced financial difficulty, and, in October 1998, it petitioned for bankruptcy protection. The FCC sought relief from the automatic stay imposed by 11 U.S.C. 362 so that it could cancel Magnacom's li censes, as provided by FCC regulations, based on Magnacom's failure to make its installment payments. See 47 C.F.R. 1.2110(f)(4) (1998). Without objection by Magnacom, the bankruptcy court entered an order per mitting the FCC to "pursue immediately any and all of its remedies, including its right to cancel the Defaulted Licenses if such licenses have not already canceled as a matter of law." Pet. App. 32a. After cancelling the li censes, the FCC filed a proof of claim in the bankruptcy court as an unsecured creditor for Magnacom's de faulted auction debt of approximately $48 million. Id. at 26a. The bankruptcy court initially allowed the claim. Ibid.

In 2001, several years after the cancellation of Mag nacom's licenses, the FCC completed a new auction to assign licenses covering spectrum that had been unused since earlier licenses (including Magnacom's) were cancelled. Pet. App. 6a; C & F Block Broadband PCS Spectrum Auction Scheduled for Dec. 12, 2000, 15 F.C.C.R. 19,485 (2000). The rules for that auction were different from those in which Magnacom had partici pated; most notably, installment payments were no lon ger allowed. Id. at 19,504. In addition, the licenses awarded in that auction differed significantly from the licenses that had been awarded to Magnacom. For ex ample, each new license was granted for a new 10-year term ending in 2011 (Magnacom's licenses would have expired in 2006 and 2007), and each license was subject to new deadlines for constructing facilities to use the spectrum. Pet. App. 6a. Magnacom did not object to the FCC's rulemaking proceeding, and it did not seek judi cial review of the final revised auction rules.

Because the demand for spectrum had increased, the winning bids for the spectrum licenses in the 2001 auc tion were far higher than those in the earlier auctions. Winning bidders in the 2001 auction bid approximately $238 million more than Magnacom's winning bids in 1996 and 1997 for licenses covering the same spectrum. As required by statute, the proceeds of the auction were paid into the Treasury. Pet. App. 7a, 67a; see 47 U.S.C. 309(j)(8).

After the auction, Magnacom moved for reconsidera tion of the bankruptcy court's order allowing the FCC's claim for the amount that was still owed on the licenses. Magnacom relied on the FCC's policy against double re covery. See Leonard J. Kennedy, Esq., 11 F.C.C.R. 21,572, 21,576 (1996). The FCC explained that the policy was not based on an obligation to mitigate damages but was instead one of "equitable debt forgiveness." Pet. App. 64a-65a. Relying on that FCC policy, the bank ruptcy court disallowed the FCC's claim. Id. at 58a-68a. In the court's view, "the distinction between formal 'miti gation' and 'equitable debtor forgiveness,' if any, [may be] relevant to the issue of whether the estate has any remaining claims before the FCC," but it was not rele vant to the FCC's claim against Magnacom. Id. at 65a. Allowing that claim, the court concluded, would be "con trary to the FCC's position as stated in" Leonard J. Kennedy, Esq. Id. at 67a.

3. Petitioner, trustee of the Magnacom bankruptcy estate, then filed an adversary complaint against the FCC and the United States, seeking payment of more than $238 million-the difference between the amount bid by Magnacom for its licenses and the amount of the winning bids for new licenses awarded at the 2001 auc tion. The bankruptcy court dismissed the complaint. Pet. App. 24a-44a.

The bankruptcy court acknowledged that the FCC had held security interests in Magnacom's licenses, and it explained that if the FCC had exercised its security interests and treated them as collateral, then the Uni form Commercial Code (UCC) might have given Mag nacom a claim to the proceeds of the subsequent auction. Pet. App. 38a. The court emphasized, however, that the FCC had not exercised the commercial remedy of repos session or foreclosure but instead had taken the regula tory step of cancelling Magnacom's licenses. Ibid. "[U]pon cancellation," the court concluded, "the Debtor retained no further interest in the licenses or the pro ceeds," and "[o]nce canceled, * * * the estate's inter est in any later surplus terminated." Id. at 40a-41a. Petitioner appealed to the district court, which affirmed the bankruptcy court's decision. See Pet. App. 45a-57a.

4. The court of appeals affirmed. Pet. App. 1a-23a. The court of appeals began its analysis by noting that, "[u]nder 47 U.S.C. § 301, licenses 'provide for the use' of the spectrum, 'but not the ownership thereof.'" Id. at 8a (quoting 47 U.S.C. 301). Licensees therefore "have a property interest only in the use of the spectrum, not in the underlying spectrum itself." Ibid. For that reason, the court concluded that "once an FCC license is cancelled, a licensee no longer has any right derived from that license and therefore has no entitlement to the proceeds from the auction of a new license." Id. at 9a.

The court of appeals next addressed this Court's de cision in FCC v. NextWave Personal Communications Inc., 537 U.S. 293 (2003), which held that 11 U.S.C. 525(a) prohibits the FCC from cancelling a license solely because of the licensee's failure to pay a debt that would be dischargeable in bankruptcy. Pet. App. 10a-11a. Un der NextWave, the court of appeals explained, "the FCC's decision to cancel Magnacom's licenses for non payment would be subject to challenge." Id. at 11a. The court determined that NextWave was inapplicable, how ever, because petitioner had never objected to the can cellation, under 11 U.S.C. 525(a) or otherwise, either in the bankruptcy court or before the court of appeals. Ibid.

The court of appeals rejected petitioner's argument that the subsequent auction of new licenses covering the same spectrum had yielded "proceeds" of the original licenses that remained the property of the bankruptcy estate. That argument, the court explained, rested on the mistaken "premise that Magnacom retained an in terest in the spectrum after the FCC cancelled its li censes." Pet. App. 13a. The court acknowledged that, "if the FCC had sold Magnacom's licenses, the Magna com estate might have rights to proceeds from such a sale," but here there was no such sale-only a cancella tion resulting in extinguishment of the licenses. Pet. App. 11a. Cancellation is the "lawful extinction of a pro perty right in the bankruptcy estate," and "does not give the trustee in bankruptcy rights to other property cre ated by that creditor." Id. at 14a.

Nor was it significant, the court of appeals explained, that the FCC had held a security interest in the licenses. Assuming-but not deciding-that the UCC applied to the security agreement between Magnacom and the FCC, the court observed that petitioner could prevail "only if the FCC's cancellation of the licenses was a lien- enforcement remedy under the UCC." Pet. App. 15a. But the court held that cancellation was not equivalent to lien enforcement: the terms of the security agree ment "do[] not make cancellation a lien-enforcement remedy." Ibid.

ARGUMENT

Petitioner renews his argument (Pet. 17-34) that the holder of an FCC license who defaults on installment- payment obligations and who consents to the cancella tion of that license is entitled to recover the proceeds of a later auction to reassign the spectrum to new license holders. According to petitioner, that claim is supported by the decisions in NextWave Personal Communica tions Inc. v. FCC, 254 F.3d 130 (D.C. Cir. 2001), aff'd, 537 U.S. 293 (2002). The only issue in NextWave, how ever, was whether the FCC could cancel a license based on the licensee's failure to make installment payments when the licensee objected to cancellation in reliance on 11 U.S.C. 525(a). NextWave would lend support to peti tioner's position if he were challenging the cancellation of Magacom's licenses under Section 525(a), but he has not presented such a challenge at any stage of this liti gation. In NextWave, neither the D.C. Circuit nor this Court had any occasion to consider the issues presented here, which arise only after the licenses are cancelled and the spectrum is reauctioned.

The decision below is correct and does not conflict with any decision of this Court or any other court of ap peals. Moreover, since the events giving rise to this case, the FCC's auction procedures have changed signif icantly. Because the FCC no longer permits installment payments, it is unlikely that a future case will arise in which the agency is a creditor of a bankrupt licensee, and therefore the question presented here is of little ongoing significance. Further review is not warranted.

1. Petitioner asserts (Pet. 19-25) that the decision below conflicts with the decision of the D.C. Circuit in NextWave. According to petitioner (Pet. 19), NextWave established that the FCC's cancellation of licenses "is both a regulatory act and simultaneously an action to enforce the FCC's security interest in the licenses." Petitioner misreads the opinion of the D.C. Circuit.

In NextWave, the D.C. Circuit held that the Bank ruptcy Code prohibited the FCC from cancelling Next Wave's spectrum licenses for failure to make installment payments. 254 F.3d at 149. The court based its decision on Section 525, which provides that a government ag ency may not "revoke * * * a license" because the holder of the license "has not paid a debt that is dis chargeable" under the Bankruptcy Code. 11 U.S.C. 525(a); Nextwave, 254 F.3d at 149. The court concluded that Section 525(a) "prevents the Commission * * * from canceling the licenses of winning bidders who fail to make timely installment payments while in Chapter 11." Id. at 155. This Court affirmed, agreeing with the D.C. Circuit's interpretation of Section 525(a). See NextWave, 537 U.S. at 304.

Had petitioner challenged the cancellation of Magna com's licenses in this case under Section 525(a), Next Wave suggests that he might well have been successful. But as the court of appeals explained, petitioner did not object when the FCC asked the bankruptcy court for relief from the automatic stay to allow it to cancel the licenses, and he did not argue that Section 525 prohib ited the cancellation. Pet. App. 11a. Nor does he make such an argument here. Instead, he contends that a business may win an auction for licenses, default on its payment obligations, consent to cancellation, and then reap a windfall when the market subsequently improves and new licenses are issued. Nothing in NextWave sup ports that proposition.

In support of his argument, petitioner isolates an inapposite discussion from the D.C. Circuit's decision. The court in NextWave determined that Section 525 of the Bankruptcy Code need not be read to include an ex ception for regulatory actions, an exception explicitly provided in the automatic-stay provision, 11 U.S.C. 362(b)(4). Nextwave, 254 F.3d at 150. In reaching that conclusion, the court emphasized that the text of Section 525, unlike that of Section 362, makes no reference to a "regulatory" exception. See ibid. ("Nothing in section 525 or 362 states that section 525 is subject to subsection 362(b)(4)'s regulatory power exception, or that the ex ception should be read to limit section 525's clear reach."). The court also pointed out that Sections 362 and 525 prohibit different conduct, so the absence of a regulatory exception in Section 525 would not create any inconsistency in the Bankruptcy Code. Id. at 150-151.

Although those holdings were sufficient to dispose of the FCC's Section 362 argument, the NextWave panel went on to identify another reason that the argument could not succeed: "[S]ubsection 362(b)(4) does not ap ply to the stay of acts to 'create, perfect, or enforce' liens against property of the estate." 254 F.3d at 151 (quoting 11 U.S.C. 362(a)(4) and (5)). Because the auto matic stay applies-notwithstanding the regulatory ex ception-to "self-help remedies against collateral such as repossession," and because counsel for the FCC in the NextWave bankruptcy proceeding had "acknowl edged that canceling the licenses and seeking to collect on the debt was 'tantamount . . . to foreclosing on col lateral,'" the court concluded that the automatic stay would equally have applied to bar the cancellation of NextWave's licenses. Ibid.

Petitioner seizes (Pet. 21) upon the "tantamount . . . to foreclosing on collateral" language, NextWave, 254 F.3d at 151, which he deems "an express ruling that reg ulatory cancellation under these circumstances is also an action to enforce the FCC's security interest against the licenses as collateral." But the court in NextWave had no occasion to issue a "ruling" on the question pre sented here: whether the regulatory act of license can cellation should be treated as equivalent to the commer cial remedy of lien enforcement where the debtor has consented to the cancellation and agreed that the Bank ruptcy Code poses no barrier to that regulatory step. Instead, the court simply rejected the FCC's argument about the relationship between Sections 525 and 362(b)(4), based on the FCC's concession that, for pur poses of those provisions, cancellation was tantamount to foreclosure. Nothing in the opinion suggests that the court had concluded that license cancellation is neces sarily equivalent to lien foreclosure in all circumstances. Not only was that question not presented in the case, but the court did not consider any of the factors that the court below extensively and carefully analyzed in an swering the question here. For example, the NextWave opinion did not address the inconsistency between the position urged by petitioner and the express statutory limitations on a licensee's interest under 47 U.S.C. 301, see Pet. App. 8a-9a, nor did it take account of the FCC's analysis of the effect of cancellation in Leonard J. Ken nedy, Esq., 11 F.C.C.R. at 21,572; see Pet. App. 9a-10a n.7, 17a, 20a-21a.

For that reason, the court below was correct to con clude that the "brief discussion" in NextWave was not a "reasoned conclusion that cancellation of an FCC license is a lien-enforcement action." Pet. App. 16a. Because the D.C. Circuit did not articulate any reasons to sup port the view that petitioner attributes to it, there is no basis for assuming that it intended to establish a posi tion that conflicts with the authorities considered by the court of appeals here. Although petitioner asserts (Pet. 22) that the court below "openly acknowledged that it was rejecting the D.C. Circuit's ruling because it dis agreed with it," just the opposite is true. The court of appeals did not reject any ruling of the D.C. Circuit, but simply determined-correctly-that the D.C. Circuit had not addressed the question presented here.1

2. Petitioner similarly errs in contending (Pet. 25- 30) that the decision below conflicts with this Court's decision in NextWave. As the court of appeals recog nized, this Court in NextWave "did not address the question whether license cancellation constituted lien enforcement." Pet. App. 17a. Indeed, NextWave specif ically described the FCC's cancellation of licenses as "elimination of the licenses through the regulatory step of 'revoking' them." 537 U.S. at 307-308. And the Court distinguished that step from "the enforcement of [a se curity] interest in the bankruptcy process" by enforcing a lien on the licenses. Ibid.

Petitioner seeks (Pet. 25) to characterize this Court's opinion as having categorically "rejected the dichotomy that the FCC has attempted to drive between its regula tory and creditor roles." The Court did no such thing, as that broad issue was not before it. Petitioner notes (Pet. 26) that the Court in NextWave held that the terms "debt" and "claim" under the Bankruptcy Code have "the broadest available definition" and encompass a pay ment obligation whether that obligation is intended to serve regulatory or commercial purposes. NextWave, 537 U.S. at 302-303 (quoting Johnson v. Home State Bank, 501 U.S. 78, 83 (1991)). But the resolution of that question of statutory interpretation offers no guidance here. At most, this Court held that an FCC obligation could have both regulatory and financial aspects. It did not hold that those two aspects are intertwined in every circumstance.

Likewise, petitioner relies (Pet. 26-27) on this Court's statements that cancellation for failure to pay runs afoul of 11 U.S.C. 525 irrespective of an agency's motivation for cancellation, and that there is no conflict between the Bankruptcy Code and the Communications Act because the latter does not require installment pay ments. See NextWave 537 U.S. at 301, 304. But those holdings, which focus on the meaning of 11 U.S.C. 525 and related language in the Bankruptcy Code, say noth ing about the unrelated question urged by peti tioner-whether the cancellation of a license in circum stances permitted by the Bankruptcy Code necessarily constitutes enforcement of a lien. There was no occasion for the Court to address that question, and it did not do so.

3. Petitioner contends (Pet. 17) that the decision below is erroneous because it "would free every federal agency that acts as a creditor from the constraints of federal creditor-debtor law whenever it invokes a regu latory motive or power for its creditor actions." Peti tioner is incorrect, because the cancellation of the spec trum licenses under FCC regulations "was separate and independent from the FCC's rights as a secured credi tor." Pet. App. 19a. Petitioner points to the security agreement in an effort to equate the cancellation and the exercise of a security interest, but neither that docu ment nor any other authority supports petitioner's argu ment.

a. Petitioner's argument mischaracterizes the pur pose and effect of the FCC's security interest in Magnacom's licenses. The FCC did not intend, and has never sought, to enforce a lien as an alternative to li cense cancellation in the event of default. Rather, the FCC required licensees to execute security agreements out of an abundance of caution, in light of uncertainty concerning the priority of payment obligations if a li censee were to purport to grant a security interest in a license to a private creditor. See, e.g., MLQ Investors, L.P. v. Pacific Quadracasting, Inc., 146 F.3d 746, 748 (9th Cir. 1998) (permitting only a limited third-party security interest in the proceeds of a licensee's sale of a license under the UCC, and only to the extent that it does not interfere with the Commission's regulatory interests), cert. denied, 525 U.S. 1121 (1999).2 The FCC has never sought to recover a license by foreclosing on its collateral in a security agreement, whether in a bank ruptcy proceeding or otherwise.

As the court of appeals explained, the security ag reement, by its terms, "does not make cancellation a lien-enforcement remedy." Pet. App. 15a. The agree ment merely points out that, in the event of non-pay ment, certain consequences will follow. One conse quence is that "the License shall be automatically can celed pursuant to 47 C.F.R. § 1.2110." Pet. App. 88a. Notably, the security agreement expressly provided that the creditor rights conveyed in that agreement did not override the FCC's regulatory rights to cancel the li censes for a regulatory violation (including a payment default). Pet. App. 82a (the security interest is "not in derogation of any of the Commission's regulatory au thority over the License"). And it also provided that, in the event of cancellation of the license, "Debtor has no right or interest in any moneys * * * given to the Commission by a subsequent licensee of the spectrum." Id. at 88-89.

Petitioner asserts (Pet. 23) that "regulatory cancella tion is the agency's primary remedy for default under the agreement itself." But the language of the agree ment refutes that characterization. Cancellation is "pursuant to" a previously established regulation, Pet. App. 88a, not pursuant to "the agreement itself." More over, petitioner overlooks that license cancellation is also a consequence of other violations of FCC regula tions and requirements, and is not unique to default for non-payment. For example, a license may be cancelled for the licensee's failure to build out a telecommunica tions network by the deadline set forth in the licenses, even if the licensee has no installment-payment obliga tion. See, e.g., P&R Temmer v. FCC, 743 F.2d 918, 928 (D.C. Cir. 1984) (affirming order cancelling channel as signments for failure to complete construction on time) In other words, cancellation is a generic consequence that applies in the event of non-payment and in other circumstances. That the agreement reminded Magna com that regulations provided for automatic cancellation upon default does not change the character of that regu latory mandate.

b. The decision below is also supported by funda mental principles of bankruptcy law, which recognize that filing for bankruptcy does not expand a debtor's interest in property. The nature and extent of a debtor's interest in property is determined by non-bankruptcy law, and the estate has no greater rights in property than the debtor would have outside of bankruptcy. See, e.g., In re Coupon Clearing Serv., Inc., 113 F.3d 1091, 1099 (9th Cir. 1997); In re Gull Air, Inc., 890 F.2d 1255, 1261 (1st Cir. 1989).

Here, federal law makes clear that a spectrum li cense confers only limited rights and interests, which are circumscribed by statute and regulation. Most im portantly, the Communications Act precludes any pri vate property interest in the underlying wireless spec trum. See 47 U.S.C. 301 (FCC license "provide[s] for the use of such channels, but not the ownership thereof, by persons for limited periods of time, * * * and no such license shall be construed to create any right, be yond the terms, conditions, and periods of the license"). Thus, "once Magnacom's licenses were cancelled by the FCC, Magnacom's licenses had no value and Magna com's interest in the underlying spectrum was extin guished. This valueless asset could not generate any traceable proceeds for purposes of the Bankruptcy Code." Pet. App. 19a.

Even apart from Section 301, the decision below com ports with common sense. For example, a property owner may confer limited rights to use the property- such as by a lease or an easement-and may subject those rights to a requirement of timely payment. If the user fails to comply with the terms and the property ow ner cancels the agreement, the defaulting party would have no further right to use the property. A subsequent lease or grant of an easement to a new user would not be a transfer of the prior user's interest, but a creation of a new set of rights. And if changed market conditions dictated a higher price for the new lease or easement, the prior user would not be entitled to receive any addi tional amount charged by the property owner.

c. The UCC does not compel a different result. Pe titioner argues (Pet. 30-34) that the decision below is contrary to United States v. Kimbell Foods, 440 U.S. 715, 722-729 (1979), which held that the enforcement and priority of liens in favor of federal agencies is governed by federal law, which in turn may incorporate state law where there is no need for federal uniformity and where state law would not frustrate federal objectives. But that argument begs the question whether license cancel lation constitutes lien enforcement. Even if petitioner were correct that the UCC governed the security agree ment, petitioner could not prevail because the cancella tion of the licenses was not equivalent to lien enforce ment under the UCC. Pet. App. 15a-19a.

In any event, it is far from clear that the UCC ap plies to the security agreement under the Kimbell Foods standard. Cf. In re Airadigm Commc'ns, Inc., No. 07-2212, 2008 WL 649704, at *8 (7th Cir. Mar. 12, 2008) ("[L]iens held by the FCC are unlike liens held by the federal government as part of other federal lending pro grams, where the lien secures the loan by attaching to property that is otherwise defined by state law. Instead, the property itself-the license-is a creature of federal law.") (citation omitted). The FCC has determined that the UCC does not apply, and that the Communications Act preempts the UCC's requirement that a secured party account to the debtor for any surplus over the amount remaining on the debtor's obligation. See Leon ard J. Kennedy, Esq., 11 F.C.C.R. at 21,580 n.4. The court below had no need to address that question, Pet. App. 15a, and no other court of appeals has resolved it. Since the potential inapplicability of the UCC would pro vide an alternate ground for affirming the decision be low, the unsettled nature of that issue counsels against this Court's reaching out to decide it in the first in stance.

4. This Court's review is also unwarranted because the question presented in this case is unlikely to recur. The FCC has discontinued the practice of allowing in stallment payments by licensees. See Public Notice, 15 FCC Rcd at 19,489-19,490; Sixth Report and Order and Order on Reconsideration, In Re Amendment of the Commission's Rules Regarding Installment Payment Financing for Personal Communications Services (PCS) Licensees, 15 F.C.C.R. 16,266 (2000). Thus, the FCC has ceased to act as both a creditor and a regulator in this context, and licensees who seek bankruptcy pro tection will not be able to retain their licenses for less than the promised auction payment (as in NextWave). Nor will defaulting licensees be in a position to invoke the UCC as a theoretical basis for seeking payment from the Treasury based on higher winning bids paid by fu ture licensees (as in this case). For that reason, the question presented here is of little or no future signifi cance.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

PAUL D. CLEMENT
Solicitor General
JEFFREY S. BUCHOLTZ
Acting Assistant Attorney
General
WILLIAM KANTER
H. THOMAS BYRON III
Attorneys

MARCH 2008

1 Petitioner's argument is not bolstered by the D.C. Circuit's obser vation that the Second Circuit had earlier declined to reach the question whether license cancellation constitutes lien enforcement for purposes of 11 U.S.C. 362(b). See Pet. 23 n.10 (citing NextWave, 254 F.3d at 148- 149, and In re FCC, 217 F.3d 125, 138 nn.7-8 (2d Cir. 2000), cert. denied, 531 U.S. 1029 (2000)). That observation merely demonstrates that no court has previously addressed the substance of petitioner's argument.

2 The licenses and security agreements at issue here were executed before MLQ Investors was decided, and the FCC was concerned that a court could enforce a putative security interest in spectrum licenses themselves, thereby defeating the FCC's priority right to payment of the winning bid amount.