FCC Gets Way—for now—in Case for Gray To Put Station Into Incentive Auction
The FCC got its way for now in what lawyers called an unusual court case they said Thursday will help one station sell all its spectrum in the incentive auction. The Georgia Supreme Court unanimously with one abstention gave Gray Television a stay Wednesday of a Superior Court March 2 preliminary injunction (see 1603110074) requiring the broadcaster reinstate to its past condition for WAGT Augusta. Officials and court records said that would have meant the station, which Gray agreed to sell in the auction so the company wouldn't have a duopoly in the market, couldn't be included in the auction that starts Tuesday. Instead, it would have been restored to a discontinued joint sales agreement with Media General.
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Media General, which had WAGT in a JSA with its WJBF Augusta, won the lower court decision that would have meant WAGT would stay in the arrangement it had when WAGT was owned by Schurz Communications. As part of buying Schurz's TV stations, Gray agreed to put WAGT into the incentive auction and if it didn't sell there put it in a divestiture trust, said Gray Executive Vice President-Chief Legal and Development Officer Kevin Latek in an interview. He noted Gray also said it would broadcast programming from that NBC affiliate on a Class A station with the same call letters as WAGT, which it also picked up in the Schurz deal, using the full-power ex-JSA partner station's antenna, channel and tower. Gray's remaining WRDW-TV Augusta would also simulcast such programming, said Latek. "It’s a win-win for the FCC," which gets a station to buy whose spectrum could be sold to a wireless carrier while "the public will not lose any service," he added.
The FCC sided with some Gray stances. "Injunctive relief here is inappropriate," Media Bureau Chief Bill Lake emailed lawyers March 6. "The actions ordered by the injunction that Media General has sought and obtained involve prima facie violations of Section 310(d) of the Communications Act and the Commission’s order approving the Gray/Schurz transaction. We believe that federal law mandates that Gray continue operating station WAGT as it sees fit." Whatever the "contractual liability," overriding the Media Bureau February order OK'ing Gray/Schurz TV "contravenes the Commission’s merger order to continue the JSA once Gray owns the station," wrote Deputy FCC General Counsel David Gossett in a March 9 letter to DOJ. That day, Justice sent the letter to U.S. District Court in Augusta in a related case. Commission officials had no comment Thursday.
A local contracts law professor confirmed the case isn't a typical one for the Georgia Supreme Court. "It is rare; this is an unusual occurrence" to have a case where contract and federal law are enmeshed and for the state Supreme Court to issue a stay, said University of Georgia Law School Associate Dean Usha Rodrigues. "Usually, contractual law is a matter of state law. The questions are so distinct" in terms of contract and the other legal issues, she said. "A stay isn’t something that we typically would expect.”
Gray didn't get the expedited appeal of the preliminary injunction it sought from the Georgia Supreme Court, and the one-page order didn't comment on the merits. Media General had said the FCC wasn't a neutral party but an interested buyer of WAGT (see 1603140065). Media General declined to comment Thursday. The highest price WAGT could fetch in the auction is $210.4 million, the opening price, according to FCC calculations. The highest opening price for any station in the reverse auction is $900 million for WNJU Linden, New Jersey.
Schurz is "glad that the Georgia Supreme Court recognized that the injunction required the parties to violate federal law and appropriately lifted it while it considered the case," said broadcast lawyer Jack Goodman, who represents the company. He said Schurz's only station, which it bought from JSA partner Perkin Media as part of the Gray transaction, is KSPR Springfield, Missouri. Schurz also owns cable systems and newspapers, Goodman noted.