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Several months ago, a panel of the Ninth Circuit Court of Appeals created shockwaves throughout the noncommercial broadcasting community by holding that the Communications Act's prohibitions against the sale of advertising time by noncommercial stations was unconstitutional when applied to political advertising. That decision may be short-lived, as the full Court of Appeals, in reviewing the decision of the initial three judge panel, has indicated that the case should not be relied on as precedent in any other court decision until the full Court can complete its review. While one must be careful in pre-judging any court decision, especially when all we have to divine the intent of the Court is a two sentence order, this at least hints that the full Court may have misgivings about the initial decision in this case.

The initial decision by the three judge panel suggested that the limits on political speech placed unjustified burdens on the First Amendment, and that there was no overriding non-speech related objectives served by these restrictions. The panel suggested that political ads were different than other commercials trying to sell a service or product, as political speech did not sell a commercial product, but instead encouraged civic discourse not unrelated to the educational mission of noncommercial stations.  Many noncommercial stations saw the potential that this decision could lead to a new source for revenue to support their operations, while others expressed fears that it could erode the noncommercial nature of educational stations. The FCC, while questioning the decision, had initially stated that it would allow stations in the Ninth Circuit to accept political ads as soon as the panel's decision became effective (in the FCC's notice of proposed rulemaking asking for comments on other noncommercial fundraising issues). Given the Court's order in this case, we will wait to see if the FCC revisits this finding as to stations in the Ninth Circuit.  Look for a final decision in this case in the coming year. In the meantime, stations outside the Ninth Circuit should not look for any immediate relief, and stations in the states in the circuit should proceed cautiously in considering any political advertising on their stations.

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The FCC has adopted a Notice of Proposed Rulemaking suggesting, with significant limitations, a liberalization of its rules that prohibit noncommercial broadcasters from raising funds for an entity other than the station itself if the fundraising suspends or alters normal programming of the station. As we've written before, the FCC prohibits noncommercial broadcasters from raising funds for charities and other non-profit organizations through telethons or other special programming.  The prohibition has been in place for some time, and was reaffirmed by the FCC's orders in the early 1980s which established the basic rules that still today govern most noncommercial fundraising and sales activities. 

The prohibition on third-party fundraising reflected the Commission's concern that educational stations are "licensed to provide a noncommercial broadcast service, not to serve as a fund-raising operation for other entities by broadcasting material that is akin to regular advertising."  Doing too much fundraising for these third parties, in the Commission's view when the rule was adopted, would distract stations from their principal mission of service to the public.   While the Communications Act was changed in the early 1980s to allow noncommercial broadcasters to accept paid promotional spots for nonprofit groups, the FCC did not change the rule on third-party fundraising that disrupts normal programming.  In the NPRM just adopted, the Commission recites that they still believe the justification for the rule to be true, even though noncommercial stations can now run what is essentially paid advertising for nonprofit organizations, as long as those spots are incorporated into the normal programming of the stations. What the Commission now proposes is a limited degree of liberalization of the third-party fundraising prohibition, subject to many conditions set forth below.

The NPRM adopts a very protective, almost paternalistic, view of noncommercial stations.  It suggests that any liberalization of the prohibition on third-party fundraising be approached very cautiously, with significant limitations.  While the waivers of the rules that have been granted many times in the last few years to allow for relief efforts for major disasters of "historical proportion" have shown that such fundraising can be conducted without significant harm, the FCC asks many questions about limitations that it thinks should remain in place even if the absolute prohibition is lifted, seemingly not trusting stations to police themselves.  The FCC asks questions including the following:

• Should any relaxation apply just to stations that are not funded by CPB?  The National Religious Broadcasters Association requested the change in the rules.  The Commission states that some CPB-funded stations were concerned about a liberalization of the prohibition, as they do not want to be in a position of choosing between competing organizations who may be worthy recipients of funds raised by a station
• Should only particular types of nonprofits be allowed to be the beneficiaries of the fundraising - suggesting that only 501(c)(3) tax-exempt charities be able to receive such funds
• Does the FCC need to insure that the fundraising is consistent with the mission of the noncommercial broadcaster?
• Should fundraising be limited only to local nonprofit organizations?
• How much flexibility should be allowed?
  • The Commission suggests a limit on third-party fundraising of 1% of a station's airtime 
• Should the station be required to collect all of the donations that are raised, or can they promote contributions directly to the third party?
• Should stations be required to produce all third-party fundraising messages themselves, as opposed to being able to air programming containing fundraising messages that is provided by the charity itself?
• Will audiences find such appeals confusing?
  • Should a specific type of disclosure be required so audiences are informed that funds will be given to third-parties?
  • How often should such a disclosure be aired?  Just at the beginning and end of the appeal, or more often?
• Should stations electing to do third-party fundraising have to notify the FCC of the fact that they are doing such fundraising?
  • Should they have to file reports with the FCC about the fundraising, e.g. who the funds were raised for and how much was collected, and what interruptions to normal programming were incurred
• Should there be a public file obligation with respect to such fundraising?
• Should there be a license renewal certification with respect to such fundraising?

Obviously, the FCC seem to, at best, be reluctantly moving into the approval of third-party fundraising by noncommercial stations.  Comments on these proposal will be due 30 days after these proposals are published in the Federal Register, and replies due 30 days later.  There are certain to be many issues raised about the FCC's proposals.

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The Communications Act's ban on noncommercial broadcast stations running political and issue advertising was struck down as unconstitutional by the US Court of Appeals for the Ninth Circuit.  While the Court upheld the prohibition on commercial advertising for products and services, the majority of the Court felt that the ban on political advertising could not be justified.  Bob Corn-Revere of Davis Wright Tremaine's DC office, who is quite experienced in First Amendment litigation and is a frequent speaker and author on these issues, offers this summary of the constitutional issues raised by this case:

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A divided panel of the U.S. Court of Appeals for the Ninth Circuit held that Communications Act provisions that ban political and issue advertising on public broadcasting stations violate the First Amendment.  The court left intact another provision that prohibits commercial advertising on public stations.  The majority opinion in Minority Television Project, Inc. v. FCC, written by Judge Carlos Bea, reasoned that Congress lacked substantial evidence that the ban on political and issue advertising set forth in 47 U.S.C. § 399b was necessary to serve the government’s purpose of preserving the mission and quality of public broadcasting, and that the statute was not narrowly tailored.  At the same time, the court held that allowing commercial advertising would undermine the purpose of public broadcasting to provide educational and niche programming.

Synthesizing three decades of First Amendment case law, Judge Bea wrote that Congress must have substantial evidence to justify a content-based speech restriction “at the time of the statute’s enactment.”  The evidence must show “that the speech banned by a statute poses a greater threat to the government’s purported interest than the speech permitted by the statute.”  The decision principally relied on FCC v. League of Women Voters, a 1984 Supreme Court case that struck down a similar Communications Act prohibition on editorializing by public broadcast stations.  Judge Bea’s opinion also relied on a 1993 commercial speech case, Cincinnati v. Discovery Network, for “[a]dditional instruction on what narrow tailoring requires.  That case invalidated a municipal ordinance that imposed differential regulation on newsboxes, depending on whether they contained commercial or noncommercial matter.

Judge John Noonan concurred in the result but disagreed that the commercial speech precedents applied.  Rather, he wrote that “in this delicate and difficult field of rapid change, it would be hard to believe that the restrictions on political speech established by the statute over thirty years ago are constitutionally valid even if they met constitutional criteria when they were published.”  Judge Richard Paez dissented and agreed with Judge Noonan that Discovery Network does not apply to a case assessing the constitutionality of broadcast regulation.  He wrote that the law should be upheld under the standard articulated in League of Women Voters.

The one point on which all of the judges agreed was that intermediate scrutiny – not  strict scrutiny – should be applied, even though the law imposed a content-based restriction on political speech.  Judge Bea cited the network brief filed in FCC v. Fox Television Stations and ABC, Inc. and observed that “the Supreme Court itself may soon declare that the era of special broadcast exemption from strict scrutiny is over.”  But he added, “that case has not yet been decided, “ and “just as golfers must play the ball as it lies, so too we must apply the law of broadcast regulation as it stands today.”

Nevertheless, Judge Bea applied what he described as “a robust form of intermediate scrutiny” that calls for “judicial ‘wariness’ within the standard described” because the restrictions prohibited core political speech.  Apart from some assertions made by the government, he found no evidence, either in the record or in the legislative history, to support the restrictions on issue and political advertising.  Thus, he concluded, even under intermediate scrutiny, the government “cannot simply assert its way out of the ‘substantial evidence’ requirement of the First Amendment.

The FCC may seek rehearing by the Ninth Circuit panel or en banc, which is likely given the significance of the decision and the divided panel opinion.  If the circuit court denies rehearing or upholds the panel decision, the FCC may seek review by the Supreme Court.  It would be expected to do so in such circumstances, since the panel decision invalidated sections of a federal statute

In a separate unpublished opinion, the panel unanimously rejected the Minority Television Project’s argument that the statute is unconstitutionally vague.  The court noted that a statute need not have “mathematical certainty” to survive a vagueness challenge, and that, in case of doubt about the law’s scope, the FCC’s rules allow for declaratory rulings for broadcasters who fear they might run afoul of Section 399b.

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