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'You Might Lose'

Panelists: FCC 'Paper Hearings' Lead to Expensive Discovery Requests

The FCC’s administrative hearing process increasingly results in huge discovery requests that can be expensive for entities with matters before the agency’s administrative law judge and faces an uncertain future due to a host of recent administrative law cases, panelists said during a Federal Communications Bar Association virtual event Tuesday. Discovery is the most time-consuming part of the process, said FCC ALJ Jane Halprin. In addition, the expense of pursuing a lengthy case before the ALJ is sometimes more than many licensees can stomach, said Smithwick and Belendiuk attorney Arthur Belendiuk during a separate panel. “Even if you win, you might lose,” he said.

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The FCC’s hearing process was revamped in 2020 to favor “paper hearings” conducted primarily though written filings rather than a live oral hearing. Belendiuk and Institute for Justice attorney Andrew Ward -- who both have represented owners of small radio stations facing license revocation proceedings -- said the process led to discovery requests from the Enforcement Bureau for more than 20,000 documents in each of their two cases. The FCC has reached consent decrees with the largest broadcasters after requesting just a few hundred documents, Belendiuk said.

The intent of written hearings was to streamline the process” said Halprin. She took office in 2018, and has presided over only paper hearings as an ALJ. Though she said discovery has become the most lengthy part of ALJ hearings, Halprin also said she’s unsure that the process needs a shot clock or other changes; however, she believes the rules are due for examination. “It's always worth taking a look at these rules.” Many rules governing administrative law hearings stem from the 1940s and 50s, when competitive license hearings were common and FCC commissioners themselves heard them, Halprin said. “There are extraneous rules that are sort of lingering in there, and it's worth a look whether we can do something to make the process easier and quicker.”

In-person ALJ hearings provided a better opportunity for a negotiated settlement, Belendiuk said. He and Ward said that the Enforcement Bureau wasn’t open to settlement discussions in their cases. Ward, who represents broadcaster Arm & Rage (see 2309150056), was critical of a long-standing FCC policy that requires a hearing proceeding for any FCC licensee convicted of a felony, no matter the charge or specifics of the case. If the agency were more flexible, it would be easier to reach an accord in cases involving old, minor crimes, said Ward. His client, Joseph Armstrong, was convicted of making a false statement on a tax form.

Recent and anticipated U.S. Supreme Court administrative law decisions such as Axon v. FTC, SEC v. Cochran (see 2304170062) and SEC v. Jarkesy (see 2311290028) seem likely to lead to a shakeup in the FCC’s administrative law process, said former FCC General Counsel Tom Johnson -- now a partner at Wiley -- and Harris Wiltshire partner Jason Neal. Clients facing possible enforcement actions from the FCC have “a lot of doubt and regulatory uncertainty” because it isn’t yet clear how concepts like the major questions doctrine or a possible decision against SEC ALJs will influence FCC policy, Neal said.

SCOTUS decisions in Axon and Cochran paving the way for entities to challenge agency moves in court during the enforcement process are additional arrows in an attorney’s quiver, Johnson said. The prospect of a court challenge could be used to leverage a settlement or a stay, he suggested. Johnson has written a white paper (see2401290075) about how the FCC could avoid such court challenges by modifying its enforcement policies. Some agency officials have spoken to him about the proposals, Johnson said Tuesday. Belendiuk is doubtful about the likelihood of possible hearing revisions and there being an appetite for updating the hearing process at the FCC. “No and no,” he said. The FCC didn’t immediately comment.