Subject: [NEXTEL-1] NEXTWAVE- Justice Scalia delivered the opinion of the Court.

From: Marcel <[email-masked]>
Date: Mon, 27 Jan 2003 12:02:24 -0500

SUPREME COURT OF THE UNITED STATES

                                     Nos. 01—653 and 01—657

                   ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF
                       APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

                                         [January 27, 2003]
    Justice Scalia delivered the opinion of the Court.

    In these cases, we decide whether §525 of the Bankruptcy Code, 11 U.S.C. § 525
prohibits the Federal Communications
Commission (FCC or Commission) from revoking licenses held by a debtor in bankruptcy upon
the debtor’s failure to make
timely payments owed to the Commission for purchase of the licenses.

                                                I

    In 1993, Congress amended the Communications Act of 1934 to authorize the FCC to award
spectrum licenses “through a
system of competitive bidding.” 48 Stat. 1085, as amended, 107 Stat. 387, 47 U.S.C. §
309(j)(1). It directed the Commission
to “promot[e] economic opportunity and competition” and “avoi[d] excessive concentration
of licenses” by “disseminating
licenses among a wide variety of applications, including small businesses [and] rural
telephone companies.” §309(j)(3)(B). In
order to achieve this goal, Congress directed the FCC to “consider alternative payment
schedules and methods of calculation,
including lump sums or guaranteed installment payments … or other schedules or methods …
.” §309(j)(4)(A).

    The FCC decided to award licenses for broadband personal communications services
through simultaneous, multiple-round
auctions. In re Implementation of Section 309(j) of the Communications Act–Competitive
Bidding, 9 FCC Rcd. 2348, ¶¶54,
68 (1994). In accordance with §§309(j)(3)(B) and (4)(A), it restricted participation in
two of the six auction blocks (Blocks
“C” and “F”) to small businesses and other designated entities with total assets and
revenues below certain levels, and it
allowed the successful bidders in these two blocks to pay in installments over the term of
the license. 47 CFR § 24.709(a)(1)
(1997).

    Respondents NextWave Personal Communications, Inc., and NextWave Power Partners, Inc.
(both wholly owned
subsidiaries of NextWave Telecom, Inc., and hereinafter jointly referred to as respondent
NextWave), participated,
respectively, in the FCC’s “C-Block” and “F-Block” auctions. NextWave was awarded 63
C-Block licenses on winning bids
totaling approximately $4.74 billion, and 27 F-Block licenses on winning bids of
approximately $123 million. In accordance
with FCC regulations, NextWave made a downpayment on the purchase price, signed promissory
notes for the balance, and
executed security agreements that the FCC perfected by filing under the Uniform Commercial
Code. The security agreements
gave the Commission a first “lien on and continuing security interest in all of the
Debtor’s rights and interest in [each] License.”
Security Agreement between NextWave and FCC ¶1 (Jan. 3, 1997), 2 App. to Pet. for Cert.
402a. In addition, the licenses
recited that they were “conditioned upon the full and timely payment of all monies due
pursuant to . . . the terms of the
Commission’s installment plan as set forth in the Note and Security Agreement executed by
the licensee,” and that “[f]ailure to
comply with this condition will result in the automatic cancellation of this
authorization.” Radio Station Authorization for
Broadband PCS (issued to NextWave Jan. 3, 1997), 2 App. to Pet. for Cert. 388a.

    After the C-Block and F-Block licenses were awarded, several successful bidders,
including NextWave, experienced
difficulty obtaining financing for their operations and petitioned the Commission to
restructure their installment-payment
obligations. See 12 FCC Rcd. 16436, ¶11 (1997). The Commission suspended the installment
payments, 12 FCC Rcd.
17325 (1997); 13 FCC Rcd. 1286 (1997), and adopted several options that allowed C-Block
licensees to surrender some or
all of their licenses for full or partial forgiveness of their outstanding debt. See 12
FCC Rcd. 16436, ¶6; 13 FCC Rcd. 8345
(1998). It set a deadline of June 8, 1998, for licensees to elect a restructuring option,
and of October 29, 1998, as the last date
to resume installment payments. 13 FCC Rcd. 7413 (1998).

    On June 8, 1998, after failing to obtain stays of the election deadline from the
Commission or the Court of Appeals for the
District of Columbia Circuit, NextWave filed for Chapter 11 bankruptcy protection in New
York. See In re NextWave
Personal Communications, Inc., 235 B. R. 263, 267 (Bkrtcy. Ct. SDNY 1998). It suspended
payments to all creditors,
including the FCC, pending confirmation of a reorganization plan. NextWave initiated an
adversary proceeding in the
Bankruptcy Court, alleging that its $4.74 billion indebtedness on the C-Block licenses was
avoidable as a “fraudulent
conveyance” under §544 of the Bankruptcy Code, 11 U.S.C. § 544 because, by the time the
Commission actually conveyed
the licenses, their value had declined from approximately $4.74 billion to less than $1
billion. The Bankruptcy Court
agreed1–ruling in effect that the company could keep its C-Block licenses for the reduced
price of $1.02 billion–and the District
Court affirmed. NextWave Personal Communications, Inc. v. FCC, 241 B. R. 311, 318—319
(SDNY 1999). The Court of
Appeals for the Second Circuit reversed, holding that, although the Bankruptcy Court might
have jurisdiction over NextWave’s
underlying debts to the FCC, it could not change the conditions attached to NextWave’s
licenses. FCC v. NextWave Personal
Communications, Inc. (In re NextWave Personal Communications, Inc.), 200 F.3d 43, 55—56
(1999). The Second Circuit
also held that since, under FCC regulations, “NextWave’s obligation attached upon the
close of the auction,” there had been no
fraudulent conveyance by the FCC acting in its capacity as creditor. Id., at 58.

    Following the Second Circuit’s decision, NextWave prepared a plan of reorganization
that envisioned payment of a single
lump-sum to satisfy the entire remaining $4.3 billion obligation for purchase of the
C-Block licenses, including interest and late
fees. The FCC objected to the plan, asserting that NextWave’s licenses had been canceled
automatically when the company
missed its first payment-deadline in October 1998. The Commission simultaneously announced
that NextWave’s licenses were
“available for auction under the automatic cancellation provisions” of the FCC’s
regulations. Public Notice, Auction of C and
F Block Broadband PCS Licenses, 15 FCC Rcd. 693 (2000). NextWave sought emergency relief
in the Bankruptcy Court,
which declared the FCC’s cancellation of respondent’s licenses “null and void” as a
violation of various provisions of the
Bankruptcy Code. In re NextWave Personal Communications, Inc., 244 B. R. 253, 257—258
(Bkrtcy. Ct. SDNY 2000).
Once again, the Court of Appeals for the Second Circuit reversed. In re Federal
Communications Commission, 217 F.3d
125 (2000). Granting the FCC’s petition for a writ of mandamus, the Second Circuit held
that “[e]xclusive jurisdiction to
review the FCC’s regulatory action lies in the courts of appeals” under 47 U.S.C. § 402
and that since the re-auction decision
was regulatory, proclaiming it to be arbitrary was “outside the jurisdiction of the
bankruptcy court.” 217 F.3d, at 139, 136. The
Second Circuit noted, however, that “NextWave remains free to pursue its challenge to the
FCC’s regulatory acts.” Id., at
140.

    NextWave filed a petition with the FCC seeking reconsideration of the license
cancellation, denial of which is the gravamen
of the case at bar. In the Matter of Public Notice DA 00—49 Auction of C and F Block
Broadband PCS Licenses, Order
on Reconsideration, 15 FCC Rcd. 17500 (2000). NextWave appealed that denial to the Court
of Appeals for the D. C.
Circuit pursuant to 47 U.S.C. § 402(b), asserting that the cancellation was arbitrary and
capricious, and contrary to law, in
violation of the Administrative Procedure Act, 5 U.S.C. § 706 and the Bankruptcy Code. The
Court of Appeals agreed, holding
that the FCC’s cancellation of NextWave’s licenses violated 11 U.S.C. § 525: “Applying the
fundamental principle that federal
agencies must obey all federal laws, not just those they administer, we conclude that the
Commission violated the provision of
the Bankruptcy Code that prohibits governmental entities from revoking debtors’ licenses
solely for failure to pay debts
dischargeable in bankruptcy.” 254 F.3d 130, 133 (2001). We granted certiorari. 535 U.S.
904 (2002).

                                               II

    The Administrative Procedure Act requires federal courts to set aside federal agency
action that is “not in accordance with
law,” 5 U.S.C. § 706(2)(A)–which means, of course, any law, and not merely those laws that
the agency itself is charged with
administering. See, e.g., Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402,
413—414 (1971) (“In all cases
agency action must be set aside if the action was ‘arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance
with law’ or if the action failed to meet statutory, procedural, or constitutional
requirements”). Respondent contends, and the
Court of Appeals for the D. C. Circuit held, that the FCC’s revocation of its licenses was
not in accordance with §525 of the
Bankruptcy Code.

    Section 525(a) provides, in relevant part:

“[A] governmental unit may not … revoke … a license … to … a person that is … a debtor
under this title … solely because
such … debtor … has not paid a debt that is dischargeable in the case under this title …
.”2

No one disputes that the Commission is a “governmental unit” that has “revoke[d]” a
“license,” nor that NextWave is a
“debtor” under the Bankruptcy Act. Petitioners argue, however, that the FCC did not revoke
respondent’s licenses “solely
because” of nonpayment, and that, in any event, NextWave’s obligations are not
“dischargeable” “debt[s]” within the meaning
of the Bankruptcy Code. They also argue that a contrary interpretation would unnecessarily
bring §525 into conflict with the
Communications Act. We find none of these contentions persuasive, and discuss them in
turn.

                                               A

    The FCC has not denied that the proximate cause for its cancellation of the licenses
was NextWave’s failure to make the
payments that were due. It contends, however, that §525 does not apply because the FCC had
a “valid regulatory motive” for
the cancellation. Brief for Petitioners Arctic Slope Regional Corp et al. 19; see Brief
for Petitioner FCC 17. In our view, that
factor is irrelevant. When the statute refers to failure to pay a debt as the sole cause
of cancellation (“solely because”), it cannot
reasonably be understood to include, among the other causes whose presence can preclude
application of the prohibition, the
governmental unit’s motive in effecting the cancellation. Such a reading would deprive
§525 of all force. It is hard to imagine a
situation in which a governmental unit would not have some further motive behind the
cancellation–assuring the financial
solvency of the licensed entity, e.g., Perez v. Campbell, 402 U.S. 637 (1971); In re The
Bible Speaks, 69 B. R. 368, 374
(Bkrtcy. Ct. Mass. 1987), or punishing lawlessness, e.g., In re Adams, 106 B. R. 811, 827
(Bkrtcy. Ct. NJ 1989); In re
Colon, 102 B. R. 421, 428 (Bkrtcy. Ct. ED Pa. 1989), or even (quite simply) making itself
financially whole. Section 525
means nothing more or less than that the failure to pay a dischargeable debt must alone be
the proximate cause of the
cancellation–the act or event that triggers the agency’s decision to cancel, whatever the
agency’s ultimate motive in pulling the
trigger may be.

    Some may think (and the opponents of §525 undoubtedly thought) that there ought to be
an exception for cancellations that
have a valid regulatory purpose. Besides the fact that such an exception would consume the
rule, it flies in the face of the fact
that, where Congress has intended to provide regulatory exceptions to provisions of the
Bankruptcy Code, it has done so
clearly and expressly, rather than by a device so subtle as denominating a motive a cause.
There are, for example, regulatory
exemptions from the Bankruptcy Code’s automatic stay provisions. 11 U.S.C. § 362(b)(4).
And even §525(a) itself contains
explicit exemptions for certain Agriculture Department programs, see n. 2, supra. These
latter exceptions would be entirely
superfluous if we were to read §525 as the Commission proposes–which means, of course,
that such a reading must be
rejected. See United States v. Nordic Village, Inc., 503 U.S. 30, 35—36 (1992).

                                               B

    Petitioners contend that NextWave’s license obligations to the Commission are not
“debt[s] that [are] dischargeable” in
bankruptcy. 11 U.S.C. § 525(a). First, the FCC argues that “regulatory conditions like the
full and timely payment condition are
not properly classified as ‘debts’ ” under the Bankruptcy Code. Brief for Petitioner FCC
33. In its view, the “financial nature of
a condition” on a license “does not convert that condition into a debt.” Ibid. This is
nothing more than a retooling of petitioners’
recurrent theme that “regulatory conditions” should be exempt from §525. No matter how the
Commission casts it, the
argument loses. Under the Bankruptcy Code, “debt” means “liability on a claim,” 11 U.S.C.
§ 101(12), and “claim,” in turn,
includes any “right to payment,” §101(5)(A). We have said that “[c]laim” has “the broadest
available definition,” Johnson v.
Home State Bank, 501 U.S. 78, 83 (1991), and have held that the “plain meaning of a ‘right
to payment’ is nothing more nor
less than an enforceable obligation, regardless of the objectives the State seeks to serve
in imposing the obligation,”
Pennsylvania Dept. of Public Welfare v. Davenport, 495 U.S. 522, 559 (1990). See also Ohio
v. Kovacs, 469 U.S. 274
(1985). In short, a debt is a debt, even when the obligation to pay it is also a
regulatory condition.

    Petitioners argue that respondent’s obligations are not “dischargeable” in bankruptcy
because it is beyond the jurisdictional
authority of bankruptcy courts to alter or modify regulatory obligations. Brief for
Petitioners Arctic Slope et al. 28—29 (citing
In re NextWave Personal Communications, Inc., 200 F.3d, at 55—56); Brief for Petitioner
FCC 30—31. Dischargeability,
however, is not tied to the existence of such authority. A preconfirmation debt is
dischargeable unless it falls within an express
exception to discharge. Subsection 1141(d) of the Bankruptcy Code states that, except as
otherwise provided therein, the
“confirmation of a plan [of reorganization] . . . discharges the debtor from any debt that
arose before the date of such
confirmation,” 11 U.S.C. § 1141(d)(1)(A) (emphasis added), and the only debts it excepts
from that prescription are those
described in §523, see §1141(d)(2). Thus, “[e]xcept for the nine kinds of debts saved from
discharge by 11 U.S.C. § 523(a), a
discharge in bankruptcy discharges the debtor from all debts that arose before bankruptcy.
§727(b).” Kovacs, supra, at 278
(emphasis added).     Artistically symmetrical with petitioners’ contention that the
Bankruptcy Court has no power to alter
regulatory obligations is their contention that the D. C. Circuit has no power to modify
or discharge a debt. See Brief for
Petitioner FCC 31—32; Brief for Petitioner Arctic Slope et al. 32, n. 9. Just as the
former is irrelevant to whether the
Bankruptcy Court can discharge a debt, so also the latter is irrelevant to whether the D.
C. Circuit can set aside agency action
that violates §525. That court did not seek to modify or discharge the debt, but merely
prevented the FCC from violating §525
by canceling licenses because of failure to pay debts dischargeable by bankruptcy courts.

                                               C

    Finally, our interpretation of §525 does not create any conflict with the
Communications Act. It does not, as petitioners
contend, obstruct the functioning of the auction provisions of 47 U.S.C. § 309(j), since
nothing in those provisions demands that
cancellation be the sanction for failure to make agreed-upon periodic payments. Indeed,
nothing in those provisions even
requires the Commission to permit payment to be made over time, rather than leaving it to
impecunious bidders to finance the
full purchase price with private lenders. What petitioners describe as a conflict boils
down to nothing more than a policy
preference on the FCC’s part for (1) selling licenses on credit and (2) canceling licenses
rather than asserting security interests
in licenses when there is a default. Such administrative preferences cannot be the basis
for denying respondent rights provided
by the plain terms of a law. “ ‘[W]hen two statutes are capable of coexistence, it is the
duty of the courts, absent a clearly
expressed congressional intention to the contrary, to regard each as effective.’ ” J. E.
M. Ag Supply, Inc. v. Pioneer Hi-Bred
International, Inc., 534 U.S. 124, 143—144 (2001) (quoting Morton v. Mancari, 417 U. S
535, 551 (1974)). There being
no inherent conflict between §525 and the Communications Act, “we can plainly regard each
statute as effective.”
J. E. M., supra, at 144. And since §525 circumscribes the Commission’s permissible action,
the revocation of NextWave’s
licenses is not in accordance with law. See 5 U.S.C. § 706.

                                               III*

    The dissent finds it “dangerous . . . to rely exclusively upon the literal meaning of
a statute’s words,” post, at 2 (opinion of
Breyer, J.). Instead, it determines, in splendid isolation from that language,3 the
purpose of the statute, which it takes to be “to
forbid discrimination against those who are, or were, in bankruptcy and, more generally,
to prohibit governmental action that
would undercut the ‘fresh start’ that is bankruptcy’s promise,” post, at 4. It deduces
these language-trumping “purposes” from
the most inconclusive of indications. First, the ambiguous title of §525(a), “Protection
against discriminatory treatment,” post, at
5. This, of course, could as well refer to discrimination against impending bankruptcy,
aka insolvency. Second, its perception
that the other prohibitions of §525(a) apply only to acts “done solely for
bankruptcy-related reasons.” Ibid. We do not share
that perception. For example, the prohibition immediately preceding the one at issue here
forbids adverse government action
taken because the debtor “has been insolvent before the commencement of the case under
this title, or during the case but
before the debtor is granted or denied a discharge.” That seems to us clearly tied to
insolvency alone (plus the mere fact of
subsequent or contemporaneous bankruptcy), and does not require some additional motivation
based on bankruptcy. The
dissent’s third indication of “purpose” consists of the ever-available snippets of
legislative history, post, at 5—6.

    The dissent does eventually get to the statutory text at issue here: Step two of its
analysis is to ask what interpretation of that
text could possibly fulfill its posited “purposes.”4 “One obvious way,” the dissent
concludes, “is to interpret the phrase ‘solely
because’ of nonpayment of ‘a debt that is dischargeable,’ as requiring something more than
a purely factual connection . . . .
The statute’s words are open to the interpretation that they require a certain
relationship between (1) the dischargeability of
the debt and (2) the decision to revoke the license.” Post, at 7. To demonstrate that
“openness,” the dissent gives the example
of a “rule telling apartment owners that they cannot refuse to rent ‘solely because a
family has children who are adopted.’ ”
Post, at 10. Such a rule, it says quite correctly, is most reasonably read as making the
adoptive nature of the children part of the
prohibited motivation. But the example differs radically from the case before us in two
respects: (1) because an adopted child is
the exception rather than the rule, and (2) because the class of children other than
adopted children is surely not a disfavored
one. In the case before us, by contrast, the descriptive clause describes the rule rather
than the exception. (As the dissent
acknowledges, “virtually all debts” are dischargeable, post, at 2.) And the debts that do
not fall within the rule
(nondischargeable debts) are clearly disfavored by the Bankruptcy Code. To posit a text
similar to the one before us, the
dissent should have envisioned a rule that prohibited refusal to rent “solely because a
family has children who are no more than
normally destructive.” Would the “no-more-than-normal-destructiveness” of the children be
a necessary part of the apartment
owner’s motivation before he is in violation of the rule? That is to say, must he refuse
to rent specifically because the children
are no more than normally destructive? Of course not. The provision is most reasonably
read as establishing an exception to
the prohibition, rather than adding a motivation requirement: The owner may refuse to rent
to families with destructive children.
And the same is obviously true here: The government may take action that is otherwise
forbidden when the debt in question is
one of the disfavored class that is nondischargeable.

    In addition to distorting the text of the provision, the dissent’s interpretation
renders the provision superfluous. The purpose
of “forbid[ding] discrimination against those who are, or were, in bankruptcy,” post, at
4, is already explicitly achieved by
another portion of §525(a), which prohibits termination of a license “solely because [the]
bankrupt or debtor is or has been . .
. a bankrupt or debtor under the Bankruptcy Act.” 11 U.S.C. § 525(a) (emphasis added). The
dissent would have us believe
that the language “solely because [the] bankrupt or debtor . . . has not paid a debt that
is dischargeable” merely achieves the
very same objective through inappropriate language. We think Congress meant what it said:
The government is not to revoke a
bankruptcy debtor’s license solely because of a failure to pay his debts.

    The dissent makes much of the “serious anomaly” that would arise from permitting
“every car salesman, every residential
home developer, every appliance company [to] threaten repossession of its product if a
buyer does not pay,” but denying that
power to the government alone, post, at 3. It is by no means clear than any anomaly
exists. The car salesman, residential home
developer, etc., can obtain repossession of his product only (as the dissent acknowledges)
“if [he] has taken a security interest
in the product,” ibid. It is neither clear that a private party can take and enforce a
security interest in an FCC license, see, e.g.,
In re Cheskey, 9 FCC Rcd. 986, ¶8 (1994), nor that the FCC cannot. (As we described in our
statement of facts, the FCC
purported to take such a security interest in the present case. What is at issue, however,
is not the enforcement of that interest
in the bankruptcy process,5 but rather elimination of the licenses through the regulatory
step of “revoking” them–action that the
statute specifically forbids.) In any event, if there is an anomaly it is one that has
been created by Congress–a state of affairs the
dissent does not think intolerable, since its own disposition creates the anomaly of
allowing the government to reclaim its
property by means other than the enforcement of a security interest, but not permitting
private individuals to do so.

                                              * * *

    For the reasons stated, the judgment of the Court of Appeals for the District of
Columbia Circuit is

Affirmed.

Notes

1.  We do not reach the merits of the determination that the licenses should be valued as
of the time they were conveyed, rather
than as of the time NextWave won the auction entitling it to conveyance.

2.  The full text of 11 U.S.C. § 525(a) reads as follows: “Except as provided in the
Perishable Agricultural Commodities
Act, 1930, the Packers and Stockyards Act, 1921, and section 1 of the Act entitled ‘An Act
making appropriations for the
Department of Agriculture for the fiscal year ending June 30, 1944, and for other
purposes,’ approved July 12, 1943, a
governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit,
charter, franchise, or other similar grant
to, condition such a grant to, discriminate with respect to such a grant against, deny
employment to, terminate the employment
of, or discriminate with respect to employment against, a person that is or has been a
debtor under this title or a bankrupt or a
debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has
been associated, solely because
such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor
under the Bankruptcy Act, has been
insolvent before the commencement of the case under this title, or during the case but
before the debtor is granted or denied a
discharge, or has not paid a debt that is dischargeable in the case under this title or
that was discharged under the Bankruptcy
Act.”

*. * Justice Stevens does not join this Part.

3.   The portion of the dissenting opinion that deduces the statute’s purposes, Part II,
post, at 4—7, contains no discussion of
the portion of §525(a) at issue here.

4.  The second of the purposes, by the way–prohibiting government action that “would
undercut the ‘fresh start’ that is
bankruptcy’s promise,” post, at 4–plays no real role in the dissent’s analysis, if indeed
such a circular criterion could ever play a
role in any analysis. The whole issue before us can be described as asking what the
Bankruptcy Code’s promise of a “fresh
start” consists of. Rather than reframing the question, our interpretation concretely
accords a “fresh start” where the dissent
would not–where there is revocation of a license solely because of a bankrupt’s failure to
pay dischargeable debts.

5.  The FCC initially participated in the bankruptcy proceedings as a creditor. See, e.g.,
In re NextWave Personal
Communications, Inc., 235 B. R. 314 (Bkrtcy. Ct. SDNY 1999). However, after NextWave
prepared a plan of
reorganization the FCC asserted that the licenses had been automatically cancelled and
gave notice of its intent to reauction
them. The Second Circuit treated this decision as “regulatory,” and thus outside the scope
of the Bankruptcy Court’s
jurisdiction. See In re Federal Communications Commission, 217 F.3d 125, 139, 136 (2000).
The decision by the D. C.
Circuit recognized and seemingly approved that distinction. See 254 F.3d 130, 143 (2001).