At the Intersection Of Regulation and Bankruptcy: FCC v. Nextwave

Last Term, in FCC v. NextWave Personal Communications, Inc. ("Next-Wave"), the Supreme Court held that the Federal Communications Commission could not revoke wireless communications licenses held by a debtor-in-possession under the Bankruptcy Code, following that debtor's failure to make timely payments owed for their purchase. The Code, the Court held, prevented the agency from canceling licenses issued pursuant to its administrative authority, notwithstanding the licensee's violation of a "full and timely payment" requirement established by agency regulation. The decision is significant in its particulars: the holding concerned the allocation of valuable licenses to use wireless spectrum. Yet the case also has much broader ramifications for the treatment of government agencies in bankruptcy proceedings. Specifically, the Court's opinion signals three related principles that may impose significant limitations on the power of administrative agencies participating in bankruptcy proceedings. First, agencies are subject to the strictures of the Bankruptcy Code, even when they act in a regulatory capacity; second, bankruptcy law may prohibit the enforcement of a wide array of license conditions; and third, the Bankruptcy Code trumps agency licensing rules. At the same time, however, the opinion leaves in place lower court decisions limiting bankruptcy jurisdiction over administrative action. This Article describes the factual and procedural history of Next Wave's dispute with the FCC, and engages in a preliminary assessment of the case's broader implications for administrative agencies. Thus, it seeks to explore some of the consequences of the Court's decision for the treatment of government creditors in bankruptcy proceedings and for the jurisdiction of the bankruptcy courts over administrative matters. Finally, it explores the options remaining for government entities structuring licensing procedures in an attempt to comport with the NextWave decision's holdings.