NAB reports (Jan-Dec 1946)

the activities and/or policies of the licensee, its officers, directors, stockholders, agents, and/or employees, with respect to the operation of the station, the public service rendered thereby, and the response of the public to such activities and/or service in the past and the proposals for future policies, activities and operation.” The Commission declined to amend and enlarge the hear¬ ing issues on the ground that those originally designated were “broad enough to permit, within reasonable bounds, the introduction of the evidence suggested by the proposed issues of the petitioner.” Hearings were held in July, August and September, 1943, at which evidence of many witnesses was received and numerous exhibits were filed as parts of the record. It developed that Smith and Curtis each held twenty-five and one-half per cent of the capital stock of the appellant, that The Press Company had exercised its option in 1932 to purchase twenty-five per cent of the stock for $25,000, and that the remaining twenty-four per cent had stood in the name of R. K. Phelps on the corporation register since July 2, 1934. Phelps testified that he knew nothing of the transfer of the stock to him, that he was not and had never had been the actual owner of it and that he had been im¬ posed upon by Pickard in that respect. It appeared that dividend checks regularly had been issued by the cor¬ poration to Phelps and had been addressed to him in care of Pickard, and that Mrs. Pickard had endorsed Phelps’ name to the checks, then had placed thereon her own en¬ dorsement and had accounted for the dividends in her personal income tax returns. Certain waivers of notice of meetings, with Phelps’ name signed to them, were sent to the appellant, but it appears that they were signed by Mrs. Pickard. Mrs. Phelps, sister to Mrs. Pickard, testi¬ fied that she intercepted pieces of mail from WOKO, Inc., addressed to her husband and did not bring them to his attention. It appears clearly from the evidence that the Pickards received the dividends on the two hundred forty shares of stock, and the Commission’s conclusion that they were the beneficial owners of it throughout the entire period in question is well grounded in the evidence. Smith testified that he believed Phelps to be the owner until he was ad¬ vised otherwise by Pickard’s letter of June 15, 1942. Pick¬ ard said that he did not inform Smith of the actual fact with respect to beneficial ownership until he wrote that letter. Nevertheless there is enough in the record to jus¬ tify the conclusion of the Commission that Smith knew, or should have known, that Phelps was not actually the owner of the stock. So, it may be treated as established by the evidence that Smith, in making reports and applications for the appellant from 1934 to 1942, gave the Commission only the name of the record owner of two hundred forty shares of stock, and withheld the name of the beneficial owner, which he knew, or should have known. The Commission did not find that this concealment of fact had influenced it in making any decision throughout the years involved, nor did it find that it would have acted in any manner differently from the way it did act on the various applications for renewal of license, had it known that the Pickards were the beneficial owners of these shares of stock. The Commission did not find that the Pickards were aliens or that they were disqualified in any way to own the number of shares of the appellant’s stock which they beneficially owned. Indeed, such findings could not have been made by the Commission because there is no evidence upon which it could have based them. There is no finding that Curtis, who owned twenty-five and one-half per cent of the appellant’s capital stock, and The Press Company, which owned twenty-five per cent of the appellant’s capital stock, had any part in, or knowledge of, Smith’s concealment of the Pickard interest. It does appear that Curtis and The Press Company knew of the original issue of two hundred forty shares to Pickard or his nominee, but there is no suggestion that either partici¬ pated in or knew of Smith’s deception. Having found that the appellant had failed to reveal to it and to its predecessor, the Federal Radio Commission, the fact of the Pickards’ beneficial ownership of two hun¬ dred forty shares of stock, the Commission proceeded to the conclusion that the appellant “cannot be entrusted with the responsibilities of a license.” The findings close thus: “The Commission, therefore, finds that a grant of the application for renewal of the license for the opera¬ tion of WOKO by the appellant corporation would not serve public interest, convenience, or necessity and therefore should be denied.” The question posed by this appeal is whether it clearly appears that this finding of the Commission is arbitrary or capricious, for the statute provides (U. S. C., Title 47, § 402) : “That the review by the court shall be limited to ques¬ tions of law and that findings of fact by the Commission, if supported by substantial evidence, shall be conclusive unless it shall clearly appear that the findings of the Commission are arbitrary or capricious.” This limitation of judicial review of decisions of the appellee is consistent with the general body of law con¬ cerning the finality of administrative proceedings. The Congress of the United States, which has plenary power to regulate the radio industry, has designated the Commis¬ sion as its administrative agent, because it desired to have the regulatory work done by technically trained experts, skilled and experienced in the technical duties of radio regulation. The Congress defined the scope of the author¬ ity of its agent or, as is sometimes said, it established the standard according to which the agent should act. The broad scope of authority, or standard of action, established by the Communications Act is that public interest, con¬ venience and necessity must be served. Within that frame¬ work the administrative agent is free to exercise its expert judgment; it cannot act unconstitutionally, for neither could its principal, the Congress, and the stream cannot rise higher than the source; it must proceed within the scope of the authority granted to it, that is to say, it must observe the standard established; and it cannot act arbitrarily or capriciously. The broad sweep of the power given to the administra¬ tive agent to proceed according to a standard which neces¬ sarily is expressed in very general and widely inclusive terms proves how pertinent was the observation of Mr. Justice Justin Miller when he said, speaking for this court, that radio station licensees must be protected from arbitrary action of the Commission in the exercise of its regulatory power.1 Broad as the standard is, the Supreme Court has said that it is not so indefinite as to confer unlimited power.2 The doctrine is that the act of the administrative agent is the act of Congress itself, as long as the agent stays within the boundaries of the standard and does not act arbitrarily or capriciously. Judicial review is limited, therefore, to the ascertainment of whether there has been an uncon¬ stitutional thing done by the agent, or whether the agent has exceeded its delegated authority by crossing the bound¬ ary of the standard, or has acted arbitrarily or capri¬ ciously. Subject to the specific statutory provisions against the ownership or holding of radio station licenses by aliens, foreign governments or corporations which have an alien tinge through stock ownership,3 the Communications Act 1 After showing that the Act does not recognize that licensees have any common law rights in radio broadcasting, this court in Yankee Net¬ work v. Federal Communications Commission, 71 App. D. C. 11, said that nevertheless the Act does recognize certain riqhts of licensees and their ownership of their stations. The statute prohibits the use or oper¬ ation of a broadcasting station except pursuant to a license and punishes as a criminal act the operation of such a station without a license. The opinion continues thus : “It is apparent, therefore, that a radio broadcasting station is valueless without a license to operate it. It is equally apparent that the granting of a license bv the Commission creates a highly valuable property right, which, while limited in character, nevertheless pro¬ vides the basis upon which large investments of capital are made and large commercial enterprises are conducted. As it is the pur¬ pose of the Act to secure the use of the channels of radio communi¬ cation by private licensees under a competitive system, those licen¬ sees must be protected in that use, not merely from unlicensed sta¬ tions and unlicensed operators, but from improper activities of licensed stations and operators, and from arbitrary action by the Commission, itself, in the exercise of its regulatory power.” 2 Federal Radio Commission v. Nelson Bros. Company, 289 U. S. 266, 285. 3 The Communications* Act (U. S. C., Title 47, §310) contains a provision that a radio station license shall not be granted to or held by an alien, nor by a corporation of which any officer or director is an alien or of which more than one fifth of the capital stock is owned of record or voted by aliens, as well as other restrictive provisions designed to keep the broadcasting service of the nation under domestic control. (Continued, on next page) JANUARY 2S, 1946