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'The Legal Principle'

Gray Television Appeals $518,000 FCC Forfeiture in 11th Circuit

A Gray Television petition asking the courts to set aside the FCC’s $518,000 forfeiture order against the company (see 2211010077) suggests it's targeting agency policy rather than simply seeking to overturn the fine, attorneys told us. “The Commission’s Order is erroneous and improper for several reasons,” said Gray’s petition for review in the 11th U.S. Circuit Court of Appeals (docket 22-14274) last week.

The FCC said in November Gray violated rules against owning two top-four stations in a market when it bought the network affiliation of an Anchorage TV station. Gray’s court filing, echoing the company’s August response to the initial notice of apparent liability, said the forfeiture order is a retroactive application of a newly created rule, violates the First Amendment and improperly imposes the maximum possible fine.

A petition for review isn't a common strategy for opposing an FCC forfeiture order, communications attorneys said. More usually, companies disputing such an order don’t pay the forfeiture, and wait for the agency to come after them in U.S. District Court, said Arthur Belendiuk of Smithwick & Belendiuk. The forfeiture amount isn’t a crippling sum for Gray -- the broadcaster reported $909 million in total revenue in Q3 -- and the company is likely to pay a similar amount to its law firm Cooley to litigate the case, multiple attorneys said.

Former FCC Commissioner Robert McDowell is representing Gray in the case. “What they are appealing isn’t the dollar amount, it is the legal principle,” said Belendiuk. An FCC loss could “put another arrow” in the rule against commonly owned top-four stations in the same market, said broadcast attorney Jack Goodman. A strong decision for Gray could allow broadcasters to put multiple top-four networks on a single station, taking advantage of the increased capacity of ATSC 3.0, a longtime broadcast attorney said. Conversely, an FCC win could discourage future affiliate swaps, he said.

The FCC and Gray declined to comment Wednesday, but the broadcaster said in November it anticipated “strong judicial vindication of its position and another strong judicial repudiation of a federal agency overstepping its authority.” Attorneys said Gray likely appealed the matter in the 11th Circuit because it's perceived to be more receptive to challenges to agency authority than the 9th Circuit, which covers Alaska.

The FCC forfeiture order against Gray concerned the broadcaster’s buy of the CBS affiliation of Denali Media's station KTVA Anchorage in 2020 in a sale of “non-license assets” and subsequent shifting of the programming to Gray’s station KYES-TV Anchorage -- now KAUU -- while continuing to own NBC affiliate KTUU-TV Anchorage. “The affiliation acquisition it engaged in was the functional equivalent of a station license transfer,” the FCC said then. The forfeiture amount is based on the agency’s calculation that Gray violated the rules for 215 days, from July 31, 2020, to March 3, 2021, the order said.

The FCC approved the order 3 to 1, with Commissioner Nathan Simington dissenting. The presence of dissent can aid in legal challenges to FCC orders because it helps show there was disagreement or controversy about the agency’s decision, a communications attorney said. The forfeiture order could make deals and affiliation swaps too risky and chill growth, Simington said then.

The FCC said in the forfeiture order that Gray violated the Note 11 restriction, a 2016 rule against using channel swaps instead of license transfers to make deals that result in one group owning more than one top-four station in a single market. “Such manipulation would reduce competition and intentionally circumvent Commission review of such transactions,” the forfeiture order said.

Gray argued then -- and repeated in its 11th Circuit filing -- that the station Gray bought was already a top-four station before the transaction and the agency failed to prove the rule against swaps would apply to purchases of programming assets. Gray also said the agency’s interference in what network’s programming a station carries is a violation of the First Amendment. Gray “respectfully requests that this Court hold unlawful, vacate, enjoin, and set aside the Order,” said the petition.