TLJ News from June 21-25, 2012

Supreme Court Grants Cert in Comcast v. Behrend

6/25. The Supreme Court granted certiorari in Comcast v. Behrend, a class action against Comcast alleging violations of federal antitrust law in connection with transactions that enabled Comcast to increase their share of the cable market in the Philadelphia area a decade ago.

Supreme Court review will be limited to the issue of class certification. In question is whether or not the District Court may look into the merits of the claims during the class certification process.

The Supreme Court stated in its June 25 orders list [20 pages in PDF] that "The petition for a writ of certiorari is granted limited to the following question: ``Whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.´´"

The law firm of Susman Godfrey filed a complaint in the U.S. District Court (EDPenn) alleging violation of Sections 1 and 2 of the Sherman Act in connection with provision of multichannel video programming distribution (MVPD) services in the Philadelphia designated market area (DMA).

The plaintiffs are nominally several individuals, who seek class action status. Susman Godfrey seeks to collect damages based on alleged injury to all current and former Comcast customers in the Philadelphia area since 1999 -- over 2 Million people. The Eastern District of Pennsylvania includes Philadelphia. However, it is also a forum of choice for plaintiffs' antitrust lawyers.

The complaint alleges violation of Section 1, which is codified at 15 U.S.C. § 1, for "imposing horizontal territory, market and customer allocations by conspiring with and entering into and implementing unlawful swap agreements, arrangements or devices", and violation of Section 2, 15 U.S.C. § 2, on theories of monopolization and attempted monopolization.

The plaintiffs argue that Comcast engaged in an anticompetitive "clustering scheme". They argue that Comcast companies concentrated their operations in regional geographic areas by acquiring cable systems in those regions where they already had a significant presence, by purchasing in region cable holdings, and selling out of region cable holdings.

The Court of Appeals wrote that the plaintiffs allege that "As a result of its clustering, Comcast allegedly harmed the class by eliminating competition, raising entry barriers to potential competition, maintaining increased prices for cable services at supra-competitive levels, and depriving subscribers of the lower prices that would result from effective competition. ... In other words, Comcast subscribers allegedly pay too much for their non-basic video programming cable service."

That is, the plaintiffs argue that a common business practice in the cable industry is a violation of antitrust law. Moreover, the Federal Communications Commission (FCC), which has statutory regulatory authority, has approved license transfers, in de facto antitrust merger reviews, in which companies are pursuing clustering strategies.

The plaintiffs filed a motion, pursuant to Rule 23, Federal Rules of Civil Procedure (FRCP), for class certification.

23(b) pertains to "Types of Class Actions". 23(b)(3) provides that "A class action may be maintained if Rule 23(a) is satisfied and if ... (3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include: (A) the class members’ interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action."

The Court of Appeals wrote that the plaintiffs proposed this class: "All cable television customers who subscribe or subscribed at any time since December 1, 1999, to the present to video programming services (other than solely to basic cable services) from Comcast, or any of its subsidiaries or affiliates in Comcast's Philadelphia cluster".

The District Court issued an order in which it certified the class. Applying the 3rd Circuit's 2008 opinion [55 pages in PDF] in In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305, the District Court held that the plaintiffs could establish antitrust impact through evidence common to a class comprising Comcast cable television customers in the Philadelphia DMA.

Comcast appealed to the U.S. Court of Appeals (3rdCir). It issued its divided opinion [98 pages in PDF] on August 23, 2011, affirming the judgment of the District Court.

Judge Ruggero Aldisert, who was born in 1919, wrote the opinion of the Court, in which Judge Fisher joined. Judge Jordan wrote a lengthy opinion (which begins at page 58), concurring in the conclusion, but offering a different reasoning.

The majority held that the District Court "did not exceed its permissible discretion in determining that Plaintiffs established by a preponderance of evidence that they would be able to prove through common evidence (1) class-wide antitrust impact (higher cost on non-basic cable programming), and (2) a common methodology to quantify damages on a class-wide basis. Accordingly, we will affirm."

Hydrogen Peroxide was decided in December of 2008. The District Court ruled in 2010. Subsequently, on June 20, 2011, the Supreme Court issued its opinion [42 pages in PDF] in Wal-Mart Stores, Inc. v. Dukes, a class certification case involving FRCP Rule 23(b)(2). The 3rd Circuit ruled two months later.

Both the Aldisert and Jordan opinions reference Wal-Mart, but only in footnotes. Judge Aldisert concluded that the "Supreme Court confirmed our interpretation" in Wal-Mart. Moreover, "The factual and legal underpinnings of Wal-Mart -- which involved a massive discrimination class action and different sections of Rule 23 -- are clearly distinct from those of this case. Wal-Mart therefore neither guides nor governs the dispute before us."

Comcast petitioned the Supreme Court for writ of certiorari, which the Supreme Court has just granted. Comcast relies heavily on Wal-Mart. It argued in its petition for writ of certiorari that the 3rd Circuit relied on pre-Wal-Mart opinions that are inconsistent with Wal-Mart.

Comcast also argued that there is a circuit split, with the 9th Circuit in 2011 adhering to Wal-Mart in Ellis v. Costco Wholesale Corp., 657 F.3d 970, and the 8th Circuit in 2011 in Bennett v. Nucor Corp., 656 F.3d 802, similarly requiring the courts to examine the merits of the plaintiffs' claim.

The District Court did not reach final judgment in this case. There has been no trial or no summary judgment. The District Court only certified the class. This, however, is a key decision in class action litigation.

Comcast is represented before the Supreme Court by Miquel Estrada of the Washington DC office of the law firm of Gibson Dunn & Crutcher. The plaintiffs are represented by Barry Barnett of the Dallas office of the law firm of Susman Godfrey.

Former President Bush nominated Estrada for a seat on the U.S. Court of Appeals (DCCir). However, Senate Democrats successfully filibustered the nomination, preventing a vote in the Senate.

People and Appointments

6/25. President Obama nominated Sheri Chappell to be a Judge of the U.S. District Court (MDFl). See, White House news office release and release. She has been a US Magistrate Judge for the Middle District of Florida for nine years.

6/25. President Obama nominated Katherine Failla to be a Judge of the U.S. District Court (SDNY). See, White House news office release and release. She has been an Assistant U.S. Attorney for the last 12 years.

6/25. President Obama nominated Troy Nunley to be Judge of the U.S. District Court (EDCal). See, White House news office release and release. He has been a trial court judge in Sacramento, California, for the last ten years.

6/25. Facebook announced in a release that Sheryl Sandberg joined its Board of Directors. She is the company's Chief Operating Officer. The other directors are Mark Zuckerberg, Marc Andreessen (Andreessen Horowitz), Erskine Bowles, James Breyer (Accel Partners), Donald Graham (Ch/CEO of the Washington Post Company), Reed Hastings (Ch/CEO of Netflix), and Peter Thiel.

6/25. President Obama designated Irving Williamson as Chair of the U.S. International Trade Commission (USITC) for the term expiring June 16, 2014. See, letter to Congress.

More News

6/22. The Department of the Air Force published a notice in the Federal Register (FR) that announced that its Public Interface Control Working Group (ICWG) will hold a two day meeting on September 5-6, 2012, in El Segundo, California to discuss NAVSTAR GPS public Signals in Space documents. The deadline to submit comments is July 20, 2012. The deadline to register is August 6, 2012. See,  FR, Vol. 77, No. 121, Friday, June 22, 2012, at Page 37660.

Senators Introduce Information Security and Data Breach Notification Bill

6/21. Sen. Pat Toomey (R-PA) and others introduced S 3333 [LOC | WW], an information security and data breach notification bill.

This bill was referred to the Senate Commerce Committee (SCC). The original cosponsors of this bill are Sen. Olympia Snowe (R-ME), Sen. Jim DeMint (R-SC), Sen. Roy Blunt (R-MO), and Sen. Dean Heller (R-NV).

There are no Democratic cosponsors.

Sen. Toomey stated in a release that "A number of recent high-profile data breaches combined with the messy patchwork of 46 different state laws highlight how difficult it is for consumers to know their personal information is secure. Congress needs to provide businesses and consumers with certainty and establish a single reasonable standard for information security and breach notification practices. Our bill would eliminate the burden of complying with varying standards and laws, ensuring that all consumers and their personal information are afforded the same level of protection".

Michael Powell, head of the National Cable and Telecommunications Association (NCTA), praised this bill in a release. He wrote that "This important legislation instructs, in a straightforward manner, when and how notification is required in the event of a security breach of computerized data that includes personal information. We also appreciate that the bill takes the long-overdue step of establishing a level playing field that treats cable on the same basis as other covered entities."

Tim McKone, AT&T's EVP of Federal Relations, stated in a release that "The security of our customers' personal information is of utmost importance to us and is a priority in how we conduct our business. That is why we are pleased by Senator Toomey’s thoughtful and comprehensive bill, the ‘Data Security and Breach Notification Act of 2012.’  It is a common sense bill that will eliminate uncertainties and ultimately consumer confusion by establishing uniform requirements."

Information Security. The bill addresses both information security and data breach notification. However, Section 2 of the bill, which treats information security, is a single sentence.

It provides that "Each covered entity shall take reasonable measures to protect and secure data in electronic form containing personal information."

Data Breach Notification. The bill then addresses in greater detail, in Section 3, data breach notification.

The bill would mandate that "A covered entity that owns or licenses data in electronic form containing personal information shall give notice of any breach of the security of the system following discovery by the covered entity of the breach of the security of the system to each individual who is a citizen or resident of the United States whose personal information was or that the covered entity reasonably believes to have been accessed and acquired by an unauthorized person and that the covered entity reasonably believes has caused or will cause, identity theft or other financial harm."

In addition, "A covered entity shall notify the Secret Service or the Federal Bureau of Investigation of the fact that a breach of security has occurred if the number of individuals whose personal information the covered entity reasonably believes to have been accessed and acquired by an unauthorized person exceeds 10,000."

Also, the bill contains special requirements for data breaches involving third party agents and service providers.

Section 3 also addresses the method, timing and content of notifications.

Definitions. Section 5 contains definitions. It provides that with exemptions for entities already regulated by the Gramm Leach Bliley Act (GLBA) or the Health Insurance Portability and Accountability Act of 1996 (HIPAA), a "covered entity" means "a sole proprietorship, partnership, corporation, trust, estate, cooperative, association, or other commercial entity that acquires, maintains, stores, or utilizes personal information".

Also, with exclusions for encrypted data, and public record information, "personal information" means "an individual's first name or first initial and last name in combination with any one or more of the following data elements for that individual: (i) Social Security number. (ii) Driver's license number, passport number, military identification number, or other similar number issued on a government document used to verify identity. (iii) Financial account number, or credit or debit card number, and any required security code, access code, or password that is necessary to permit access to an individual's financial account."

Enforcement. Section 4 addresses enforcement. The bill gives the Federal Trade Commission (FTC) enforcement authority. Violations would be treated as unfair or deceptive trade practices.

The bill does not reference the promulgation of regulations.

The bill expressly provides that "Nothing in this Act shall be construed to establish a private cause of action against a person for a violation of this Act."

Preemption of CA/FCC Regulatory Regime. While this bill does not regulate the information security and data breach notification practices of entities already regulated by the GLB Act or HIPAA, it does expressly apply to entities regulated by the Communications Act and Federal Communications Commission (FCC) rules.

The bill provides that "Sections 222, 338, and 631 of the Communications Act of 1934 (47 U.S.C. 222, 338, and 551), and any regulations promulgated thereunder, shall not apply with respect to the information security practices, including practices relating to the notification of unauthorized access to data in electronic form, of any covered entity otherwise subject to those sections." (Parentheses in original.)

47 U.S.C. § 222 pertains to carriers' customer proprietary network information (CPNI).

47 U.S.C. § 338, at subsection (i), addresses "Privacy rights of satellite subscribers".

47 U.S.C. § 551 pertains to the collect and use of personally identifiable information by cable operators.

Preemption of State Law. This bill provides that "This Act preempts any law, rule, regulation, requirement, standard, or other provision having the force and effect of law of any State, or political subdivision of a State, relating to the protection or security of data in electronic form containing personal information or the notification of a breach of security."

DOJ's Kimmelman Addresses Antitrust in Media and Other Sectors

6/21. Gene Kimmelman, the Department of Justice's (DOJ) Antitrust Division's Chief Counsel for Competition Policy and Intergovernmental Relations, gave a speech in Washington DC to the American Antitrust Institute (AAI) titled "Antitrust Enforcement and Media Industries: Competition and Beyond".

He addressed several DOJ proceedings: an obscure newspaper matter in West Virginia, the Comcast NBC Universal transaction, AT&T's attempt to acquire T-Mobile USA, and the DOJ's pending action against Apple.

The US judicial interpretation of the purpose of antitrust law is to promote consumer welfare by promoting competition and the consequential beneficial effects on prices, product quality and innovation.

However, Kimmelman also made the statement that "enforcement of the antitrust laws also can promote the dissemination of ideas, diversity of opinion, and creative expression".

Kimmelman first addressed a DOJ action regarding newspapers. He praised the DOJ's action against the Charleston, West Virginia, newspapers Daily Mail and Gazette. He stated that "We halted a plan that likely would have left the citizens of Charleston, West Virginia, with a single local daily newspaper that would have cost more and provided lower quality content."

See also, story titled "DOJ Antitrust Action Takes Segmented View of Media" in TLJ Daily E-Mail Alert No. 1,586, May 23, 2007, "More News" in TLJ Daily E-Mail Alert No. 1,784, June 23, 2008, and story titled "DOJ Requires Separate Operation of Two Print Daily Newspapers in Charleston WV" in TLJ Daily E-Mail Alert No. 2,037, January 20, 2010.

Kimmelman also addressed the Comcast NBCU transaction and the distribution of video programming. Both the DOJ and the Federal Communications Commission (FCC) allowed that transaction to proceed.

On January 18, 2011, the DOJ approved approved the transaction, with conditions. The DOJ and several states filed, and simultaneously settled, a complaint in the District Court. See also, proposed final judgment.

He said that "We obtained remedies designed to prevent Comcast from using its control of NBC Universal's programming and other assets to hamstring its rivals and thereby increase price and lower quality in the distribution of video programming."

Kimmelman also addressed the DOJ's suit to block AT&T's acquisition of T-Mobile USA. He asserted that "Developments since AT&T abandoned the acquisition seemingly confirm the Division's view that T-Mobile represents an important competitive factor in the wireless space."

On August 31, the DOJ filed a complaint [25 pages in PDF] in the U.S. District Court (DC) against AT&T, T-Mobile USA and Deutsche Telekom that sough an injunction against AT&T's acquisition of T-Mobile USA on the grounds that it would have substantially lessened competition in violation of Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18. See, story titled "DOJ Files Complaint to Block AT&T Acquisition of T-Mobile USA" in TLJ Daily E-Mail Alert No. 2,298, August 31, 2011. The companies later subsequently abandoned the transaction. See, story titled "AT&T and T-Mobile Abandon Merger Effort" in TLJ Daily E-Mail Alert No. 2,320, December 20, 2011.

Finally, Kimmelman touched on the Apple case. "Our current case against Apple and certain book publishers seeks to end a conspiracy that has inflated e-book prices." He added that "eliminating anticompetitive conduct in the e-book sector possibly could make it cheaper and easier for readers to get books and create new ways for authors to reach readers."

See, story titled "DOJ Sues Apple and Book Publishers Alleging E-Book Price Collusion" and related stories in TLJ Daily E-Mail Alert No. 2,368, April 11, 2012.

Former AG Mukasey Condemns Cyber Warfare Leaks

6/21. Former Attorney General Michael Mukasey wrote an opinion piece titled "Plugging the National Security Leaks" that was published in the June 21, 2012, issue of the Wall Street Journal in which he condemned disclosure by the Obama administration of national security related information, including information about the US cyber attacks on Iran's nuclear weapons development program.

Mukasey was the Attorney General late in the Bush Administration. From 1988 through 2006 he was a Judge of the U.S. District Court (SDNY). He was the presiding Judge in the criminal trials of terrorists Omar Abdel Rahman, El Sayyid Nosair, and others. He is now a partner in the New York City office of the law firm of Debevoise & Plimpton.

He wrote that "in May 2011, the Defense Department announced that a cyber attack that inflicted physical damage on the U.S. would be considered an act of war and would justify a kinetic response."

Michael MukaseyMukasey (at right) wrote that "Has a so-far-unnamed U.S. official, in boasting about the physical damage caused by a computer virus we allegedly helped to develop, now justified a kinetic response from Iran or some group claiming to act in its behalf? What protective steps will our enemies take to counteract the programs described in these newspaper articles? What valuable information  will foreign intelligence agencies now withhold from us in the justified belief that we cannot be trusted to protect secrets?"

Eric HolderAttorney General Eric Holder (at left) has named two U.S. Attorneys, Ronald Machen and Rod Rosenstein, who answer to Holder, to investigate. See, story titled "Holder Assigns Two to Investigate Cyber Warfare Leaks" and related stories, in TLJ Daily E-Mail Alert No. 2,394, June 9, 2012.

However, Mukasey wrote that the better course of action would be a Congressional investigation. He argued that "this inquiry should proceed in Congress". He argued also that the Constitution "empowers Congress to investigate, prosecute and try what our founding charter quaintly refers to as ``high crimes and misdemeanors,´´ a category that may include conventional crimes but is certainly no limited to them. Rather, it embraces all grave breaches of public trust, criminal or not, and the public trust was assuredly breached here." See, Constitution, Article II, Section 4.

Attorneys General, current and former, do not speak so openly and bluntly of each others' activities. However, it should be noted that on June 12 Holder alleged at a Senate Judiciary Committee (SJC) hearing that Mukasey had been briefed on matters relevant to the pending scandal referred to as "fast and furious". The DOJ on June 18 retracted Holder's defamatory allegation as "inadvertently" made.

Mukasey also pointed out that "Those empowered to classify information are also empowered to declassify it. If these disclosures came from, or with authorization from, people allowed to declassify information -- including but not limited to the President -- there was no crime even in the disclosure of purported cyber activity."

Senate Passes Farm Bill with Rural Broadband Provisions

6/21. The Senate passed S 3240 [LOC | WW], a huge bill pertaining to agriculture. It also includes provisions related to rural telecommunications, broadband and telemedicine.

The vote on final passage was 64-35. See, Roll Call No. 164. The House has yet to pass this bill.

See also, story titled "Senate to Take Up Farm Bill with Rural Broadband and Telemedicine Provisions" in TLJ Daily E-Mail Alert No. 2,391, June 6, 2012.

Broadband Loans and Grants. Section 6104 of the bill makes changes to Section 601 of the Rural Electrification Act (REA), which is codified at 7 U.S.C. § 950bb. Section 601 pertains to rural broadband loans and grants.

On June 20 the Senate approved an amendment (No. 2457) offered by Sen. Mark Warner (D-VA), Sen. Mark Kirk (R-IL), Sen. Jeanne Shaheen (D-NH), and others, that replaced Section 6104 of the bill as introduced.

Sen. Mark WarnerSen. Warner (at right) stated during debate in the Senate on June 20 that this "does three things in the broadband area. It accelerates access to those areas that are underserved. As a matter of fact, we have a 2009 USDA IG report which showed that less than 3 percent of loans provided by RUS went toward unserved communities."

Second, he said that "it creates greater access and transparency and accountability standards for RUS and applicants. These are items that were brought forward from the GAO and the IG of the USDA and CRS."

"It also allows greater levels of accountability in ensuring that those States that collect data by address -- that that information is related to RUS, so we don't have counties where certain parts are served and other parts are left unserved, never able to get access."

After brief discussion of this amendment, the Senate approved it by voice vote. Sen. Mark Begich (D-AK) and Sen. Ben Nelson (D-NE) stated that had there been a roll call vote, they would have voted no.

This amendment provides that "In making grants, loans, or loan guarantees" the RUS shall "give the highest priority to applicants that offer to provide broadband service to the greatest proportion of unserved rural households or rural households that do not have residential broadband service that meets the minimum acceptable level of broadband service established under subsection (e), as -- (I) certified by the affected community, city, county, or designee; or (II) demonstrated on -- (aa) the broadband map of the affected State if the map contains address-level data; or (bb) the National Broadband Map if address-level data is unavailable ..."

Then, after according this priority, the RUS shall "give priority to projects that serve rural communities -- (i) with a population of less than 20,000 permanent residents; (ii) experiencing outmigration; (iii) with a high percentage of low-income residents; and (iv) that are isolated from other significant population centers".

This amendment also provides that "As a condition of receiving a grant, loan, or loan guarantee ... a recipient of assistance shall provide ... address-level broadband buildout data that indicates the location of new broadband service that is being provided or upgraded within the service territory supported by the grant, loan, or loan guarantee ... for purposes of inclusion in the semiannual updates to the National Broadband Map that is managed by the National Telecommunications and Information Administration".

This also increases the authorization for appropriations from $25 Million per year through 2012 to $50 Million per year 2017.

The National Cable & Telecommunications Association (NCTA) stated in a release that this amendment "makes significant improvements to the RUS broadband program".

"Specifically, the amendment establishes new provisions that will improve program transparency and better target funding to projects that will extend broadband service to unserved areas. Given the scarcity of federal dollars, it is critical that government use its resources efficiently by limiting subsidized overbuilds and focusing its efforts on extending access to the roughly 18 million Americans currently without broadband."

Other Program Extensions. Section 6102 of the bill as passed by the Senate would amend Section 313A(f) of the Rural Electrification Act of 1936 (REA), which is codified at 7 U.S.C. § 940c-1(f). It authorizes the Department of Agriculture (DOA) to make loan guarantees for telephone purposes. It is set to expire on September 30 of this year. This bill would to extend this program through 2017.

Section 6103 of the bill as passed by the Senate would amend Section 315(d) of the REA, which is codified at 7 U.S.C. § 940e(d). It authorizes the DOA to make loans "for facilities and equipment to expand or improve in rural areas ... 911 access ... integrated interoperable emergency communications ... homeland security communications ... transportation safety communications ... or ... location technologies ...". It is set to expire this year. This bill would extend this program through 2017.

Section 6201 of the bill as passed by the Senate would amend 7 U.S.C. § 950aaa-5, which authorizes the appropriation of $100 Million per year for telemedicine and distance learning in rural areas. Current authority expires this year. This bill would extend this program through 2017.

Sen. DeMint's Amendments Rejected. The Senate rejected amendments offered by Sen. Jim DeMint (R-SC), who is likely to become the Chairman of the Senate Commerce Committee (SCC) in the event that Republicans win a majority in the Senate in November elections.

On June 20, the Senate rejected an amendment (No. 2273) offered by Sen. DeMint by a vote of 44-55 that would have eliminated the authority of the Secretary to increase the amount of rural broadband grants. See, Roll Call No. 141. Only one Democrat voted for this amendment.

Sen. Jim DeMintSen. DeMint (at right) stated during floor debate that the "bill adds a new grant component to the existing rural utility service broadband loans and loan guarantee program. My amendment would eliminate the authority of the Secretary of the Department of Agriculture to increase the taxpayer share of these broadband grants beyond 50 percent."

He added, "Please keep in mind that these are not direct loans, these are grants that require no payback. It is important that recipients have some skin in the game so that they make good decisions. My amendment allows the 50-percent threshold cost sharing but does not allow the Secretary to waive that and make that a 75-percent share by the taxpayer.

This amendment first provided that "The amount of any grant made under this section shall not exceed 50 percent of the development costs of the project for which the grant is provided."

Second, it provided that "The Secretary shall establish the grant rate for each project in accordance with regulations issued by the Secretary that shall provide for a graduated scale of grant rates that establish higher rates for projects in communities that have -- (i) remote locations; (ii) low community populations; (iii) low income levels; and (iv) developed the applications of the communities with the participation of combinations of stakeholders, including -- (I) State, local, and tribal governments; (II) nonprofit institutions; (III) institutions of higher education; (IV) private entities; and (V) philanthropic organizations.''

On June 19 the Senate rejected an amendment (No. 2263) offered by Sen. DeMint by a vote of 45-54 that would have maintained the rural broadband funding level at $25 Million per year. See, Roll Call No. 136. It was another nearly straight party line vote.

Sen. DeMint stated in the Senate that "The current level of spending is at $25 million. If anything, given our $16 trillion in debt, one would think we would come in somewhat below that. But the farm bill doubles our current level from $25 million to $50 million. My amendment keeps spending at the $25 million level."

Supreme Court Again Ducks First Amendment Issue in FCC v. Fox Television

6/21. The Supreme Court issued its opinion [23 pages in PDF] in FCC v. Fox Television, the long running proceeding regarding the Federal Communications Commission's (FCC) attempt to fine television broadcasters for unscripted fleeting expletives and nudity nearly a decade ago.

Summary. The Court of Appeals held in 2010 that the FCC violated the First Amendment free speech rights of broadcasters. The Supreme Court vacated. It held that the FCC failed to give notice, in violation of the Fifth Amendment due process clause. It added that it did "not address the First Amendment implications of the Commission's indecency policy".

On the one hand, the Supreme Court has left in place a judicial interpretation (FCC v. Pacifica) of the First Amendment that is hopelessly outdated in light of new programming delivery platforms, and parental control technologies. The FCC remains free, for now, to regulate and censor indecent content on broadcast television, and impose fines, provided that it has given advance notice of what is prohibited by its regulatory regime.

On the other hand, the Supreme Court may merely have ducked the First Amendment issue in order to decide it another day. In the just released opinion, Justice Ruth Ginsburg stated in a separate opinion, that she is ready to overturn the landmark opinion upon which FCC authority to censor broadcast indecency is based, FCC v. Pacifica

Also, while the Justice Clarence Thomas quietly joined in the opinion of the Court in the present opinion, he wrote in a concurring opinion to the Supreme Court's 2009 opinion in this proceeding that when the First Amendment issue is before the Court, he is ready to overturn not only Pacific, but also Red Lion.

On July 13, 2010, the U.S. Court of Appeals (2ndCir) issued its opinion [32 pages in PDF] holding that the FCC's indecency policy "violates the First Amendment because it is unconstitutionally vague, creating a chilling effect that goes far beyond the fleeting expletives at issue here".

The just released Supreme Court opinion vacates the judgments of the Court of Appeals, and remands. The Court held that the FCC "failed to give Fox or ABC fair notice prior to the broadcasts in question that fleeting expletives and momentary nudity could be found actionably indecent".

This disposition, it should be noted, also fails to put members of Congress, FCC officials and television broadcasters on notice regarding what are the First Amendment free speech clause limitations upon Congressional or FCC censorship of indecent speech.

While "It is emphatically the province and duty of the judicial department to say what the law is", Marbury v. Madison, 5 U.S. 137 (1803), after two Court of Appeals opinions, and two Supreme Court opinions, the nation is still left without a clear statement of what the law is on this key issue.

Constitution. The First Amendment provides in part that "Congress shall make no law respecting ... the freedom of speech, or of the press ...".

However, the Supreme Court has construed this clause as if it provided that "Congress may make laws limiting freedom of speech ... if they satisfy the evolving standards or principles set by the Judiciary".

In particular, the Supreme Court has held that the FCC, which derives it authority from Congressional statute, may regulate television broadcast speech which it deems indecent.

See, 1978 opinion in FCC v. Pacifica Foundation, 438 U.S. 726. That opinion upheld the FCC's order penalizing the broadcast of a dirty words monologue by a comedian named George Carlin. See also, 1969 opinion in Red Lion v. FCC, 395 U.S. 367. That opinion upheld the FCC's regulatory regime named "fairness doctrine", under which the FCC compelled speech.

The Fifth Amendment provides in part that "No person shall ... be deprived of life, liberty, or property, without due process of law ..."

Administrative History: the FCC Fines. The just released opinion relates to FCC penalties imposed on television broadcasters for unscripted or fleeting statements or nudity dating back to 2002.

The FCC relied upon 18 U.S.C. § 1464, which provides in full that "Whoever utters any obscene, indecent, or profane language by means of radio communication shall be fined under this title or imprisoned not more than two years, or both."

However, neither the statute, nor any FCC rule, provided that fleeting expletives and momentary nudity could be found actionably indecent.

On November 6, 2006, the FCC adopted and released an Order [36 pages in PDF] regarding complaints that four broadcast television programs contained indecent and/or profane material within the meaning of § 1464. This order is FCC 06-166.

The Order concluded, among other things, that comments made by Nicole Richie during "The 2003 Billboard Music Awards" and by Cheryl LaPiere during the "The 2002 Billboard Music Awards" were indecent and profane. Both used the word "fuck" in unscripted live statements.

LaPiere said, "I've also had my critics for the last 40 years saying that I was on my way out every year. Right. So fuck 'em." Richie said, "Have you ever tried to get cow shit out of a Prada purse? It's not so fucking simple." The Supreme Court noted that the episode of an ABC television program titled "NYPD Blue" at issue disclosed "nude buttocks of an adult female character for approximately seven seconds and for a moment the side of her breast".

See also, stories titled "FCC Releases Indecency Orders" in TLJ Daily E-Mail Alert No. 1,332, March 20, 2006, and "FCC Releases Order on Remand Regarding Broadcast Indecency" in TLJ Daily E-Mail Alert No. 1,484, November 7, 2006.

Judicial History. Broadcasters filed petitions for review with the Court of Appeals. In 2007, the U.S. Court of Appeals (2ndCir) vacated the order of the FCC on the grounds that the FCC violated the Administrative Procedure Act (APA). It did not rule on the First Amendment issues, but suggested that the FCC order would not satisfy First Amendment scrutiny. In 2009, the Supreme Court reversed, on APA grounds, without addressing the First Amendment issues. The Second Circuit, on remand in 2010, issued its second opinion, and again vacated the FCC order -- this time on First Amendment grounds.

Broadcasters fined by the FCC, including Fox Television Stations and ABC, filed petitions for review of the FCC's order with the Second Circuit. They argued both that the order is arbitrary and capricious in violation of the APA, and unconstitutional under the First Amendment.

On June 4, 2007, the Court of Appeals issued its divided opinion finding that "the FCC's new policy sanctioning ``fleeting expletives´´ is arbitrary and capricious" under the APA. The Court of Appeals did not also rule on the Constitutional challenge, but strongly hinted that if required to address that issue, it would find the FCC's policy unconstitutional. See, story titled "2nd Circuit Vacates and Remands FCC Profanity Order" in TLJ Daily E-Mail Alert No. 1,590, June 4, 2007. That opinion is reported at 489 F. 3d 444.

The FCC did not then withdraw or modify its order. Rather, it petitioned the Supreme Court for writ of certiorari. On April 28, 2009, the Supreme Court issued its divided opinion [72 pages in PDF], reversing the Court of Appeals.

The Supreme reversed and remanded in a 5-4 split. Justice Scalia wrote the majority opinion in which Justices Roberts, Thomas, Alito and Kennedy joined. The majority ruled solely on the APA issue: "We find no basis in the Administrative Procedure Act or in our opinions for a requirement that all agency change be subjected to more searching review. The Act mentions no such heightened standard."

The Court wrote that the Constitutional issues "will be determined soon enough, perhaps in this very case. ... We see no reason to abandon our usual procedures in a rush to judgment without a lower court opinion. We decline to address the constitutional questions at this time."

See, story titled "Supreme Court Reverses in FCC v. Fox" in TLJ Daily E-Mail Alert No. 1,932, April 28, 2009.

On July 13, 2010, the Second Circuit issued its opinion [32 pages in PDF], on remand from the Supreme Court. That opinion is also reported at 613 F. 3d 317.

It held that the FCC's indecency policy "violates the First Amendment because it is unconstitutionally vague, creating a chilling effect that goes far beyond the fleeting expletives at issue here". It vacated the FCC's order.

See also story titled "2nd Circuit Holds FCC Indecency Policy Violates First Amendment" in TLJ Daily E-Mail Alert No. 2,103, July 13, 2010.

The government again sought review by the Supreme Court.

Opinion of the Supreme Court. Justice Anthony Kennedy wrote the just released opinion of the Supreme Court. Chief Justice Roberts, and Associate Justices Scalia, Thomas, Breyer, Alito, and Kagan joined. Justice Ginsburg wrote a separate opinion. Justice Sonia Sotomayor did not participate.

The Court wrote that "A fundamental principle in our legal system is that laws which regulate persons or entities must give fair notice of conduct that is forbidden or required." It added that "This requirement of clarity in regulation is essential to the protections provided by the Due Process Clause of the Fifth Amendment."

This principle "requires the invalidation of laws that are impermissibly vague." The Court elaborated that a punishment fails to comply with due process if a regulation under which it is obtained "fails to provide a person of ordinary intelligence fair notice of what is prohibited, or is so standardless that it authorizes or encourages seriously discriminatory enforcement."

Moreover, the Court wrote, there are two elements: "first, that regulated parties should know what is required of them so they may act accordingly; second, precision and guidance are necessary so that those enforcing the law do not act in an arbitrary or discriminatory way."

The Court then wrote that the regulatory history of this proceeding "makes it apparent that the Commission policy in place at the time of the broadcasts gave no notice to Fox or ABC that a fleeting expletive or a brief shot of nudity could be actionably indecent; yet Fox and ABC were found to be in violation. The Commission’s lack of notice to Fox and ABC that its interpretation had changed so the fleeting moments of indecency contained in their broadcasts were a violation of §1464 as interpreted and enforced by the" FCC failed to provide fair notice.

The FCC "failed to give Fox or ABC fair notice prior to the broadcasts in question that fleeting expletives and momentary nudity could be found actionably indecent."

Back in 2007, in its first opinion, the Supreme Court held that this change of interpretation of the statute did not amount to a violation of the APA. In this opinion, the Supreme Court holds that it does amount to a violation of the 5th Amendment due process clause.

The Court ducked the First Amendment issue, and by failing to address whether Pacifica remains good law, left Pacifica in place, at least until the Court decides to decide.

The Court added that "because the Court resolves these cases on fair notice grounds under the Due Process Clause, it need not address the First Amendment implications of the Commission’s indecency policy. It is argued that this Court’s ruling in Pacifica ... should be overruled because the rationale of that case has been overtaken by technological change and the wide availability of multiple other choices for listeners and viewers." However, "These arguments need not be addressed here. In light of the Court’s holding that the Commission's policy failed to provide fair notice it is unnecessary to reconsider Pacifica at this time."

Finally, the Court wrote this: "this opinion leaves the Commission free to modify its current indecency policy in light of its determination of the public interest and applicable legal requirements. And it leaves the courts free to review the current policy or any modified policy in light of its content and application."

Ginsburg Opinion. Justice Ruth Ginsburg wrote a one paragraph opinion, labeled as "concurring in judgment".

She wrote that "In my view, the Court's decision in FCC v. Pacifica Foundation ... was wrong when it issued. Time, technological advances, and the Commission's untenable rulings in the cases now before the Court show why Pacifica bears reconsideration."

She also referenced Justice Thomas concurring opinion in the Supreme Court's 2009 opinion.

Justice Thomas. Justice Clarence Thomas joined in the opinion of the Court in the just released opinion. However, he wrote a concurring opinion to the Supreme Court's 2009 opinion. At that time he suggested that he was ready to overturn both Red Lion and Pacifica.

His failure to write a separate opinion to the just released opinion may indicate that he has retreated from his 2009 stand. Or, it may be the case that having expressed his views in 2009, it would have been redundant and unnecessary to restate them.

In 2009, Thomas noted "the questionable viability of the two precedents that support the FCC's assertion of constitutional authority to regulate the programming at issue in this case. ... Red Lion and Pacifica were unconvincing when they were issued, and the passage of time has only increased doubt regarding their continued validity."

He reviewed the scarcity and pervasiveness rationales, and concluded that these opinions expound a "legal rule that lacks any textual basis in the Constitution", and that they possess "logical weakness" as well as "doctrinal incoherence".

He continued that "even if this Court's disfavored treatment of broadcasters under the First Amendment could have been justified at the time of Red Lion and Pacifica, dramatic technological advances have eviscerated the factual assumptions underlying those decisions. Broadcast spectrum is significantly less scarce than it was 40 years ago."

Moreover, "traditional broadcast television and radio are no longer the ``uniquely pervasive´´ media forms they once were. For most consumers, traditional broadcast media programming is now bundled with cable or satellite services. ... Broadcast and other video programming is also widely available over the Internet. ... And like radio and television broadcasts, Internet access is now often freely available over the airwaves and can be accessed by portable computer, cell phones, and other wireless devices. ... The extant facts that drove this Court to subject broadcasters to unique disfavor under the First Amendment simply do not exist today."

FCC to Continue to Enforce Broadcast Indecency Policy

6/21. The five Commissioners of the Federal Communications Commission (FCC), and key members of Congressional oversight committees, made statements regarding the Supreme Court's June 21, 2012, opinion [23 pages in PDF] in FCC v. Fox Television Stations.

They appear intent on continuing the FCC's indecency based regulation of broadcast speech.

FCC Chairman Julius Genachowski stated in a release that "the FCC will carry out Congress's directive".

FCC Commissioner Mignon Clyburn stated in a release that "Citizens depend on laws that protect their families, and look to both industry and government to ensure that no child is unduly influenced by harmful material before they reach the age of understanding."

FCC Commissioner Jessica Rosenworcel stated in a release that "I will work with my colleagues to help ensure that parents can protect their children from harmful content and that the agency faithfully implements its authority under the law."

FCC Commissioner Robert McDowell stated in a release that "We owe it to the American public and the broadcast licensees involved to carry out our statutory duties with all deliberate speed. I look forward to working with the Chairman, my Commission colleagues and FCC staff to reduce the backlog of indecency cases, along with more than 300 license renewal applications that have remained pending in light of this litigation, as soon as possible."

FCC Commissioner Ajit Pai stated in a release that the opinion "does not call into question the Commission's overall indecency enforcement authority or the constitutionality of the Commission’s current indecency policy."

Sen. John Rockefeller (D-WV), the Chairman of the Senate Commerce Committee (SCC), stated in a release that "I am encouraged by the Supreme Court's decision today to throw out the ruling by the 2nd U.S. Circuit Court of Appeals on regulating broadcast indecency standards."

Sen. Rockefeller said that "The decision leaves in place the FCC's authority to protect children from indecent programming.  This is a victory for those of us who believe that we must be doing more, not less, to give the FCC and parents all across America the resources they need to protect their children from indecent programming."

Rep. Greg Walden (R-OR), the Chairman of the House Commerce Committee's (HCC) Subcommittee on Communications and Technology, used this occasion to tout his bill, HR 3309 [LOC | WW], the "Federal Communications Commission Process Reform Act of 2011". See, story titled "House Passes FCC Process Reform Act" and related stories in TLJ Daily E-Mail Alert No. 2,361, March 30, 2012.

He stated in a release that "once again the need for the FCC to conduct its business through a more transparent and orderly process, allowing for better input and decision-making. How much longer can we allow bad process to produce bad results? The time is now for reform, such as those included in the FCC Reform Act."

Reaction to Supreme Court Opinion in FCC v. Fox

6/21. Technology groups have long argued that the Federal Communications Commission's (FCC) regulation of broadcast speech is inconsistent with the First Amendment free speech clause.

The Center for Democracy and Technology (CDT), Public Knowledge (PK), Tech Freedom (TF), Cato Institute and Electronic Frontier Foundation (EFF) filed an amicus curiae brief in this case in which they argued that "In the modern media environment, the FCC no longer has the constitutional authority to regulate speech under a reduced standard of scrutiny based on FCC v. Pacifica Foundation, 438 U.S. 726 (1978), when the same speech, if communicated by any medium other than broadcast television, would receive full First Amendment protection."

They also argued that "Not only are new technologies changing the way people watch programs, they are changing the way content is controlled by the consumer. Consumers now have unprecedented freedom of choice to avoid exposure to inappropriate content".

After the Supreme Court released its opinion, Emma Llanso, Policy Counsel at the CDT, stated in a release that "Between the Second Circuit's earlier opinion finding that the FCC's indecency policy violated the First Amendment, and Justice Ginsburg and Thomas today raising similar doubts about the policy's constitutionality, the FCC is on notice that the courts are increasingly skeptical of its regulation of broadcast indecency".

She added that "Broadcast has become just one of many ways that people can access media, and user empowerment tools give parents a greater ability than ever before to select content they decide is appropriate for their children. These developments undermine any argument that the FCC's regulation of broadcast indecency is necessary or constitutional under the First Amendment."

Berin Szoka, head of the TF, stated in a release that "For the second time, the Supreme Court has allowed the FCC to continue censoring broadcast television."

He criticized Pacifica, and added that "Today's decision lets stand an odious precedent that will allow the FCC to write censorship rules for the third time. Essentially, the Court has kicked the can down the road to some future court to decide whether some media are less equal than others under the First Amendment."

John Bergmayer of the PK stated in a release that "We have been, and still are, concerned with the First Amendment problems caused by the FCC's current indecency rules. But those problems will have to be addressed another time."

Broadcasters stated that their programming will not change. Dennis Wharton of the National Association of Broadcasters (NAB) stated in a release that the "NAB has long believed that responsible industry self-regulation is preferable to government regulation in areas of programming content. We don't believe that broadcast programming will change as a result of today's decision, given the expectation from viewers, listeners and advertisers that our programming will be less explicit than pay-media platform providers."

He added that "As broadcasters, we will continue to offer programming reflective of the diverse communities we serve, along with program blocking technologies like the V-chip that empower parents in monitoring media consumption habits of children."

Groups that lobby the Congress and FCC for government censorship of indecency are pleased with the Supreme Court's ruling.

For example, Patrick Trueman of Morality in Media stated in a release that "The real import of today's ruling is that the FCC is free to enforce indecency law". He also complained about "the foul language and pornography that is now so common on cable television", which is not subject to the 18 U.S.C. § 1464 regulatory regime.

People and Appointments

6/21. The Senate Judiciary Committee (SJC) held an executive business meeting at which it approved the nomination of Brian Davis to be a Judge of the U.S. District Court (MDFl) by a vote of 10-7.

6/21. The Senate Judiciary Committee (SJC) held an executive business meeting at which it held over consideration of the nominations of Terrence Berg (USDC/EDMich), Jesus Bernal (USDC/CDCal), and Lorna Schofield (USDC/SDNY). All three nominations are again on the agenda for the SJC's next executive business meeting on June 28, 2012. See, notice.

More News

6/21. The Federal Communications Commission (FCC) published a notice in the Federal Register (FR) that sets comment deadlines for its Notice of Proposed Rulemaking (NPRM) [22 pages in PDF] regarding creating a Do-Not-Call registry for public safety answering points (PSAPs). The FCC adopted this item on May 21, 2012, and released the text on May 22. It is FCC 12-56 in CG Docket No. 12-129. See, FR, Vol. 77, No. 120, Thursday, June 21, 2012, Pages 37362-37367. Deadline to submit initial comments is July 23, 2012. The deadline to submit reply comments is August 6, 2012.

Go to News from June 16-20, 2012.