Media Bureau to grant 9 LPFM applications on reconsideration
Issues related to de facto/hidden parties in interest, registered agents, familial interests and conflicting applications were all addressed by the Media Bureau.
On Tuesday, the Media Bureau released a decision letter in the matter of nine LPFM applications filed during the Third Generation 2023 LPFM Filing Window for new stations in California, Florida and Wisconsin:
Heartland Educational Broadcasting Corporation, Sebring, FL
Sturgeon Bay LifeStyle Educational Radio, Sturgeon Bay, WI
Visalia Life Education Foundation, Inc., Visalia, CA
Winwood Lifestyle Educational Radio Corporation, Rhinelander, WI
Oxford Lifestyle Educational Radio, Oxford, WI
Lake Wales Educational Broadcasting Corporation, Lake Wales, FL
Lake Placid Spanish Educational Broadcasting Corporation, Lake Placid, FL
Lake Placid Educational Broadcasting Corporation, Lake Placid, FL
There were two other related applications that were previous dismissed but were not further pursued through the appeals process:
Grants Pass Lifestyle Educational Radio Corporation, Grants Pass, OR
Desoto Educational Broadcasting Corporation, Arcadia, FL
Pleadings filed in this case
Informal Objections filed by Triangle
Following the close of the window and after these applications were accepted for filing, they are all met by Informal Objections filed by Triangle Access Broadcasting, the licensee of WRLY-LP, Raleigh, North Carolina. Triangle has been very active in filing pleadings against broadcast applications, including LPFM and FM translator stations in an effort to uphold the integrity of the licensing process at the agency and to call out concerns that may get overlooked by Media Bureau staff. REC Networks also engages in this type of activity in certain situations where it is deemed appropriate. REC had no involvement with any of these applications, nor with any associated pleadings.
Triangle opposed the two Lake Placid applications because while a recusal statement was provided, pursuant to §73.858(a) of the rules, Triangle claims that the applicant’s corporations are not a “multifaceted organization” where a director can recuse themselves from certain activities.1 Triangle also raised concern because of an allegation that both Lake Placid applications may have been filed by family members to try to circumvent the “one to a customer” policy in order to obtain two stations in the same area. Likewise, Triangle also objects to the Sebring application because one of the directors listed was also listed on a different LPFM application for Ignite Radio, Inc. in Frostproof, FL. Ignite would subsequently withdraw their LPFM application.
Triangle would subsequently file an Informal Objection against all of these applications alleging they all had common ownership because at the time of filing, all of these corporations had a provision in their Articles of Incorporation that a single entity, Heartland, Inc. had the power to appoint each applicant’s directors. Triangle also points to the fact that the corporations associated with all of these applications had a common registered agent registered with the Florida Secretary of State. At the time, none of the LPFM applicants had filed any responsive pleading, despite Staff informally reminding them that they could do so.
Staff dismisses all of the applications
On October 23, 2024, Staff had dismissed nine applications stating that Heartland, Inc. had the power to appoint each applicant’s directors, the applicants were commonly controlled by Heartland and is as such, a real party in interest.2 Remember, none of the LPFM applicants had not filed a responsive pleading to Triangle’s original Informal Objection prior to the dismissals.
Petitions for Reconsideration filed
In late November, Petitions for Reconsideration were filed on seven of the nine applications. The Grants Pass and Desoto applications were not prosecuted and we mentioned in footnote 2 why Sturgeon Bay and Winward were not included. In the Petition, they stated that Heartland Inc. could not be a real party in interest because the organization does not exist and therefore had no control over the LPFM station’s operations. Michael Palsgrove, the person who was the registered agent on all of the corporation filings was portrayed as an “LPFM enthusiast” who assisted various LPFM applicants by helping them create corporations. They claim that the Heartland provision was supposed to be a backup mechanism to replenish the applicant’s board of directors should they become depleted and that they never intended to have the Heartland provision included in the articles of incorporation have pledged to remove this provision through amendment.
On November, 26, 2024, Triangle argues that the Petitioner’s argument that Heartland does not exist is procedurally inadmissible because it could have been presented prior to the dismissal letter (in an Opposition to Triangle’s original Informal Objections). Triangle claims that had Heartland been created, it would have a legal right to appoint each station’s directors and threfore exerted common control over the stations at the end of the 2023 filing window, even if the articles were amended at a future time. Triangle also argues that if Heartland was never created, the petitioners never had validly appointed boards in the first place. Triangle still restates that the two Lake Placid applications are commonly controlled due to a “close familial relationship between the parties to the application and due to an invalid recusal pledge on the Lake Placid Spanish application.
In December, Winwood and Sturgeon Bay filed amendments to make their applications singleton and were accepted for filing and subject to the original Triangle Informal Objections. For these two stations, oppositions were filed reiterating the points made in the Petitions for Reconsideration on the other stations.
In early 2025, the LPFM applicants advised the Commission that they had amended their Florida filings to appoint a new registered agent and remove the Heartland provision from their articles of incorporation.
What the FCC was thinking here…
The “sit back and hope” doctrine
The FCC has had a very long standing policy that any relevant information must be presented at the first possible moment to do so. In other words, a party cannot just “sit back and hope and hope that a decision will be in its favor, and when it isn’t, to parry an offer of more evidence.”3 In this case, the LPFM applicants had a series of Informal Objections applied against them. I know that Triangle is very good about service (which is technically not required for Informal Objections under the current rules), and the LPFMs could have responded with this information (i.e. Heartland is not a real corporation) at that time. They were also prompted by the Commission to respond to the allegations during the Informal Objection phase (which is something they commonly do in these situations). The LPFM applicants did nothing. It wasn’t until things got serious (the dismissals) that they decided to get off their duffs and do something. Therefore, staff determined that the Petitions for Reconsideration were procedurally defective.
The “public interest” loophole
Even if the FCC denies reconsideration on a technicality, they can still find it in the public interest to consider the issues and to make clarifications and corrections to their analysis. This is what the FCC did here.
Dependence on the notes in §73.3555
§73.3555 is the rule that deals with multiple ownership of commercial radio and TV stations. Not only does it deal with the local ownership caps in radio and the national audience caps in TV, but the notes in this rule deal directly in what is a considered attributable interest. This section is cross-referenced in the LPFM rule §73.858.
With our current regulatory environment and a Commission that is more likely to make changes to or to eliminate the local radio ownership and national TV audience rules, we must be vigilant that the Commission does not fully “delete” §73.3555, especially the notes. These notes are necessary for other services, such as in the case of LPFM cross- or multiple ownership and in the case of full-service NCE, for use in the filing window point system as it relates to diversity points as well as counts of applications and authorizations in the tie-breakers, also as it relates to application caps in NCE FM as well as any application caps that may be put in place for future FM translator filing windows in order to comply with Section 5 of the LCRA.
Third party appointing directors
Staff is depending heavily on Note #2 in §73.3555 for these burning questions about attributable interest. Staff has determined that there is no provision in §73.3555 which is silent on whether the ability for a third-party entity (in this case, Heartland) to have the power to appoint board members to a broadcast license entity would be considered as an attributable interest.
de facto control
Of all of the broadcast services, LPFM has the strictest ownership limits (only one station for most entities) and thus, is the most vulnerable to gamesmanship. As someone with 25-years of experience on this subject, I can say outright that proving de facto control in LPFM is very difficult and existing regulations and past policies, which were not originally designed for LPFM’s strict ownership caps substantially restricts the FCC on what kind of a finding they can make.
This is one of the reasons why many of the Cesar Guel applications from 2013 could not be dismissed.4 The FCC had determined in those cases, that certain commonalities on their own do not necessarily warrant the FCC to pursue a finding of de facto control. In the Guel LPFM cases, each application had a boilerplate educational statement, the same engineer and all had the same registered agent with all of the corporation filings which were made in the same state, even where the proposed facility is in a different state.
Like with Guel, de facto control cannot be determined nor seriously investigated based solely on the name of the registered agent.5 Any person acting solely in the role of a registered agent is not going to be a party with an attributable interest as that person (especially on out of state filings, like in many of these cases) is not directly associated with the station. De facto control can be only proven if there is solid evidence in the public eye. If the parties to an application show one set of names, but the SOS records show otherwise, then there may be a hidden party in interest.
When determining if de facto control exists, the Commission looks at not where the legal and financial interests are, but who establishes the policies governing a station’s programming, personnel and finances. There are several groups of LPFM stations that are simulcasting programming on multiple stations and operating multiple stations like a single entity to the listener. These types of operations do raise serious de facto control issues.
Also, LPFM stations that use “host organizations” can be troublesome. This is where a group of people would align with an existing non-profit organization that has a local community presence for more than two years and applies under that organization during a filing window in order to get the “coveted fifth point” and thus an advantage in the event of mutual exclusivity. If an entity is the licensee of an LPFM station but the organization is “hands off” in its operation, but instead has another person or entity actually control the programming, finances, etc., then there’s another entity that has de facto control of the station and this can be troublesome if it is ever called out.
In the matter of this case ONLY
In the current case, staff is resting on the fact that because Heartland did not exist at the time of the applications and does not exist today, there was no way that this organization could have any kind of de facto control or otherwise be a hidden party in interest. This opinion by staff is troublesome only to the point that they have made it easier to game the LPFM station. They are now suggesting that a non-real party in interest could possibly hide behind a non-existent corporate entity in order to game multiple stations.
Therefore, staff has concluded that because Heartland did not exist; that each station had an independent slate of directors (did anyone in staff verify if those were real people who had full understanding of their involvement with the board of directors of a nonprofit organization?); the fact that the “Heartland” language was removed from the articles of incorporation for all of the applicants'; and based on statements that the “drafter” of the Heartland provision denied any present or future participation in the stations’ operations, that in the “attenuated circumstances” here, that Heartland’s initial relevance with respect to the applications does not rise to the level of a real party in interest.
There is a huge “HOWEVER…” in this case…
The FCC only reached this conclusion because Heartland, the corporate entity, did not exist. I find it beyond troubling that staff stopped at this point, but given how administrative procedures work, it is not surprising.
Staff does warn future LPFM applicants that “in slightly different circumstances, a similar provision in an applicant’s organizational documents could easily lead to a finding of an impermissible attributable interest in multiple new LPFM stations.”
It seems to be what they are trying to say here is if the language references an existing entity (corporation or person) that would otherwise be accountable, then this type of arrangement would bestow a prohibited attributable interest.
Prohibited familial interests to circumvent ownership rules
The Commission has long had policies regarding familial interests where it comes to use of immediate family members in order to circumvent local ownership rules. The FCC only considers such relationships that fall into the following:
Spousal (husband/wife, husband/husband, wife/wife).
Parent/child (mother/son, mother/daughter, father/son, father/daughter).
Sibling (brother/sister, brother/brother, sister/sister).
… including in-laws. It does not take into consideration other relationships such as grandparents, aunts/uncles, cousins, etc.
This policy, while applied in the past to full-service ownership could be applicable in LPFM given it’s strict multiple and cross-ownership restrictions. However, there must be substantial evidence that the family relationship is being used to circumvent the rules. This may be hard to prove. Just the existence of such a family restriction is not enough. In the 25 years of LPFM, I do not recall any time that this has been fully tested until now. I have raised familial interests in the past only to have the question mooted by other issues or events (such as the applicant withdrawing).
In the current case, the FCC had denied Triangle’s claims of a familial interest between the two Lake Placid applications. In this specific case, the decision letter suggests that Triangle failed on the most essential argument of demonstrating familial relationship, stating what kind of relationship it is (spousal, parent/child or sibling). The FCC also stated that Triangle had failed to demonstrate how the two family members were acting in concert in order to circumvent the ownership rules. You would think that the process would be easier, but due process does not allow for assumptions. The FCC needs more solid information up front.
Conflicting applications
A conflicting application, in the LPFM context is a situation where more than one application is filed during a filing window and happens to share a common board member. Normally in these cases, one of the applications will remain grantable. When the FCC discovers this situation, they will normally move forward with the application that was filed first (based on lower file number) and then dismiss any other application(s). This may be trickier if there is more than one board member that exists on different applications. I don’t think we have seen this happen in any of the three filing windows.
In the current case, Triangle raised an issue because the Sebring application and other application for Ignite Radio, Inc. shared a board member. Since the Ignite application was voluntarily dismissed in February, 2024, there is no longer a conflicting application and therefore, the issue raised by Triangle is now moot.
What the FCC eventually did here
Since the FCC has determined that there are no de facto or otherwise hidden parties in interest in any of the applications, that prohibited familial interests were not properly demonstrated and that conflicts in applications (same board member) have already been resolved and considering that the two applications that were previously MX and then became singleton are well passed their public notice dates, the FCC has ordered the grant of 8 of the 9 construction permits. The Lake Placid application was not yet granted because of a technical shortcoming that can fixed on an amendment. Once that is amended and otherwise accepted, it will be ripe for a grant.
Please remember through all of this, I am not an attorney (nor do I play one on the radio), therefore, this article should not be construed as “legal advice”. If you need legal advice, please seek the services of a qualified communications attorney. If you need advice that is not construed as legal advice, please contact REC, the advice is always free, but we do welcome and encourage donations.
An example of such as multifaceted organization would be an application from a very well-established community services organization that was not created for the purpose of broadcasting (the original intention of the LPFM service) having a board member who has an attributable interest in a local radio station. Under the recusal policy, that organization would not have to remove that board member as long as they are disclosed and they are not going to have any involvement on any issues related to the LPFM station, such as making decisions on providing other non-broadcast community services that the organization has been engaged in well before wanting to run a radio station.
This includes the applications listed above in both sections, but did not include the applications for Sturgeon Bay and Winward because at the time of the dismissals, these two applications were in MX Groups and were not accepted for filing. Eventually, modifications would be made on these two applications to break them out of their respective MX Groups and thus making them other acceptable for filing. Those applications would eventually get dismissed.
Canyon Area Residents for the Environment, Memorandum, Opinion and Order, 14 FCC Rcd. 8152, 8154 (1999) (quoting Coloradio Radio Corp. v. FCC, 118 F. 2d 24, 26 (D.C. Cir. 1941)).
It is important to remember that with the ongoing case regarding Antonio Cesar Guel and Hispanic Christian Community Network before an FCC Administrative Law Judge is not related to the many LPFM applications that he was involved with in 2013. The case before the ALJ is related to cases involving LPTV stations and alien ownership. His involvement in LPFM applications is on the record, but only in the context of the variety of FCC applications he has been involved with.
Registered agents are people who are physically located in the state where the Secretary of State (SOS) filing is being made, even if the corporation is physically in another state. For example, the LPFM organization that I am president of, Riverton Radio Project Association, is a Delaware corporation as opposed to a Maryland corporation. I have to use a Delaware-based registered agent. If I had registered in Maryland, I could be my own registered agent.