WASHINGTON-A $148 million class-action lawsuit was filed last week accusing the Federal Communications Commission of breach-of-contract when it failed to redraw lottery applications for seven rural service area licenses when the original lottery winners were disqualified. Three of the seven licenses were eventually awarded to the original lottery winners after Congress stepped in.
“The case is simply about whether the government can take people’s money to hold a lottery, and then go back on its word. … Here, the government took the money, people filed their applications, the original winners were found disqualified, and the government decided to keep the money, and then award the licenses in some other way. Although the government can do that from a regulatory perspective, the folks who paid to enter the lottery are entitled to the benefit of their bargain, which in this case is their pro rata share of the fair-market value of those licenses,” said the attorney who filed the suit, Robert G. Kerrigan. Kerrigan previously represented Florida in the tobacco case.
The suit was brought in the United States Court of Federal Claims by Gene A. Folden, Coastal Communications Associates and Judith A. Longshore on behalf of all of the lottery applicants for the seven licenses. The class would have seven subclasses, according to the lawsuit.
The licenses in question are Barnes, N.D.; Goodhue, Minn.; Chambers, Texas; Polk, Ark.; Monroe, Fla.; Ceiba, Puerto Rico; and Bradford, Pa.
The suit proposes to split the $148 million-which is the estimated value of the licenses-based on the chances of winning a license. In other words, for licenses where there were fewer applicants, the payout would be higher per applicant because the chance of winning a license would be greater.
These licenses were originally part of a 1988 lottery. Rules in place at that time said that if the original winner-determined by its ball being chosen by a lottery machine-was found to be disqualified, then another ball would be drawn until a qualified applicant was chosen.
The suit alleges that did not happen with these licenses. Instead, the licenses were in limbo for a number of years until Congress removed the FCC’s lottery authority. At which time the FCC canceled the applications but kept the $200 per license filing fee, saying that since there had been a lottery-notwithstanding the fact that a qualified applicant had not been chosen-no refund was due.
To add insult to injury, three of the licenses became embroiled in a high-profile lobbying effort in Congress and were eventually awarded to the original winners after Congress passed legislation directing the FCC to do so.
The original-and eventual-winners of those licenses: Cellwave Telephone Services, FurtureWave General Partners and Great Western Cellular Partners at first did not qualify for the licenses under foreign-ownership rules in place at that time. Under the congressional mandate, the licensees are being allowed to pay a fee for the licenses based on the average pop price paid in the FCC’s Unserved Areas Auction. In addition, the licensees were allowed to resubmit their applications to show they are now in compliance with current foreign-ownership rules which were changed in 1997 with approval of the World Trade Organization agreement on telecommunications services.
