11th Circuit Vacates Gray Fine as Judges Question FCC Authority on Rule

A broadcast lawyer told us that Note 11 issues arise infrequently. With the court ultimately upholding Note 11, the 11th Circuit decision doesn't put pressure on the agency to eliminate it, he said. Even if the rule is burdensome for some broadcasters, FCC Chairman Brendan Carr's stance on broadcasters seems to indicate the agency might not address Note 11.

Broadcast lawyer Jack Goodman told us that Note 11 will likely be made irrelevant by either forthcoming FCC action on the top-four ownership rule or by what comes out of the challenge brought by multiple broadcasters to the agency's media ownership rules currently before the 8th U.S. Circuit Court of Appeals (see 2407160069).

Free State Foundation President Randolph May said the FCC's enforcement regime "has been plagued by problematic examples of overreach and abuse in the past," which is a big reason that FSF filed an amicus brief in Gray's 11th Circuit appeal. He said the FCC's proposed $4.5 million robocall rules against Telnyx, as well as others, "may well fall into this category, raising similar due process and fair notice concerns regarding whether the conduct alleged to be violative of the agency’s rules was known or knowable."

The 11th Circuit, in a docket 22-14274 opinion, agreed with the FCC that Gray did violate Note 11. Nielsen data supports the assertion that buying the CBS affiliation of KTVA Anchorage resulted in Gray's KYES-TV Anchorage -- now KAUU -- becoming a top-four station, the court said. Since the Denali transaction resulted in Gray owning two of the top four stations in the Anchorage designated market area (DMA), that's a Note 11 violation, it said. Deciding were Judges William Pryor, Andrew Brasher and Adalberto Jordan, with Jordan penning the opinion.

The court rejected Gray's argument that the FCC didn't provide fair notice that network affiliation transactions other than swaps are subject to Note 11. It said Note 11 expressly prohibits the acquisition of a network affiliation that results in an entity owning two of the top-four stations in a DMA -- including the transaction at issue in the case.

But the judges agreed with Gray that the commission didn't adequately notify the broadcaster in the notice of apparent liability that the proposed forfeiture penalty was based in part on the FCC finding that Gray's behavior was egregious. There was a finding of egregiousness in the final forfeiture order. By not giving Gray a chance to respond to the NAL about why it wasn't acting egregiously, the FCC violated the law, the court said. Nor did the FCC "provide much of an explanation in the final forfeiture order as to why Gray’s conduct was egregious," the 11th Circuit said, adding that the agency also "should have explained in a more fulsome way" how it determined whether Gray acted in good faith in evaluating the forfeiture penalty.

In a concurring opinion joined by Pryor, Brasher said that while no one contests the FCC’s authority to license broadcasters, "there is no statutory authority for the FCC to regulate the affiliation that provides the content that a licensed station broadcasts." The agency's licensing authority doesn't cover supervisory control of the programs that a station broadcasts, Brasher said. Note 11, meanwhile, "regulates what a licensee can broadcast, not whether it can use the airwaves to do it," he said. Had the issue been properly raised in the case's briefing, "I very likely would have voted to vacate the forfeiture order in its entirety," Brasher said. Moreover, in future enforcement actions, the FCC should "address whether Note 11 is consistent with its statutory authority," he said.