Opinion Part Four
Res Judicata
This brings us to the final and most difficult threshold
issue: whether NextWave's Bankruptcy Code arguments are
barred by res judicata. "The doctrine of res judicata pre-
vents repetitious litigation involving the same causes of action
or the same issues." I.A.M. Nat'l Pension Fund v. Indus.
Gear Mfg. Co., 723 F.2d 944, 946 (D.C. Cir. 1983). According
to the Commission, because NextWave litigated and lost its
Bankruptcy Code arguments in the Second Circuit mandamus
proceedings, it may not relitigate them here. Asserting a
right to make these arguments here, NextWave argues that
the Second Circuit's decision was jurisdictional--a decision
about "where NextWave's bankruptcy challenges should be
decided, not how they should be resolved." Appellants' Open-
ing Br. at 26 (emphasis added). As a result, the company
argues, res judicata does not bar it from presenting its
Bankruptcy Code arguments in this court.
The doctrine of res judicata "usually is parsed into claim
preclusion and issue preclusion." I.A.M. Nat'l Pension
Fund, 723 F.2d at 946. Because the Commission raises
arguments based on both theories, and because the two
theories differ in subtle but significant respects, we consider
each separately. "Under the claim preclusion aspect of res
judicata, a final judgment on the merits in a prior suit
involving the same parties or their privies bars subsequent
suits based on the same cause of action." Id. at 946-47.
Claim preclusion prevents parties from relitigating issues
they raised or could have raised in a prior action on the same
claim. See Allen v. McCurry, 449 U.S. 90, 94 (1980). "[D]is-
missals for lack of jurisdiction," however, "are not decisions
on the merits and therefore have no [claim preclusive] effect
on subsequent attempts to bring suit in a court of competent
jurisdiction." Kasap v. Folger Nolan Fleming & Douglas,
Inc., 166 F.3d 1243, 1248 (D.C. Cir. 1999); see also Fed R.
Civ. P. 41(b) ("a dismissal under this subdivision and any
dismissal not provided for in this rule, other than a dismissal
for lack of jurisdiction ... operates as an adjudication upon
the merits").
No one disputes that the Second Circuit thought the bank-
ruptcy court lacked authority to declare the notice of re-
auction invalid. In re FCC, 217 F.3d at 141. The question
dividing the parties is why the Second Circuit thought this.
According to NextWave, the Second Circuit reversed the
bankruptcy court because under section 402 of the Communi-
cations Act, "the FCC's licensing decisions are subject to the
exclusive jurisdiction of the federal courts of appeals." Id. at
129. In other words, the company claims, the Second Circuit
held that any arguments directly or collaterally challenging
the Commission's regulatory actions--including arguments
based on the Bankruptcy Code--must be brought in a court
of appeals. Cf. In re NextWave, 200 F.3d at 55. The
Commission has a different view of the Second Circuit's
decision. It argues that the Second Circuit decided not that
the bankruptcy court lacked jurisdiction to determine wheth-
er the license cancellation violated the Bankruptcy Code, but
rather that "the [Bankruptcy Code] provisions on which
NextWave relies do not reach regulatory actions such as
those at issue here." Appellee's Br. at 15. In other words,
the Commission claims that the Second Circuit reviewed the
bankruptcy court's Bankruptcy Code conclusions on the mer-
its and found that because the Commission's actions were
regulatory, the automatic stay, right to cure, and anti-
discrimination provisions of the Code did not reach those
actions.
We agree with NextWave's interpretation of the Second
Circuit's decision. As we read that decision, the court princi-
pally held that the Commission's license cancellation was a
regulatory act reviewable only by a court of appeals under
section 402 of the Communications Act, and thus that the
bankruptcy court lacked jurisdiction to apply the Code to
these acts. With one exception (which we shall explain later),
we do not understand the Second Circuit to have decided as a
substantive matter that nothing in the Bankruptcy Code
prevents the Commission from canceling NextWave's licens-
es.
To begin with, and most obviously, the Second Circuit
repeatedly stated that it was making a "jurisdictional" deci-
sion based on section 402. Here are just three examples:
"We recognized that pursuant to ... 47 U.S.C. s 402, review
of the FCC's regulatory decisions and orders is entrusted
solely to the federal courts of appeals and is therefore outside
the jurisdiction of the bankruptcy and district courts," In re
FCC, 217 F.3d at 131 (describing initial opinion); " 'ecause
jurisdiction over claims brought against the FCC in its regu-
latory capacity lies exclusively in the federal courts of ap-
peals, see ... 47 U.S.C. s 402, the bankruptcy and district
courts lacked jurisdiction to decide the question of whether
NextWave had satisfied the regulatory conditions placed by
the FCC upon its retention of the Licenses,' " id. at 137
(quoting initial opinion); "[e]xclusive jurisdiction to review
the FCC's regulatory action lies in the courts of appeals," id.
at 139 (citing cases discussing section 402). Reinforcing the
jurisdictional nature of its opinion, the Second Circuit also
disavowed any intent to rule on the merits of NextWave's
challenges to the Commission's acts, stating explicitly that
NextWave was "free to pursue its challenge to the FCC's
regulatory acts" in an appropriate forum, id. at 140, and that
the court was making "no comment on the prospects" of such
an appeal. Id. at 129; see also id. at 138 n.8 ("we have no
occasion to opine on whether the Public Notice is valid or
whether the Licenses automatically canceled at some prior
date"); id. at 139 ("Even if the bankruptcy court is right on
the merits of its arguments against revocation--we have no
occasion to express an opinion--it is without power to act on
its determination.").
According to the Commission, these repeated references to
the bankruptcy court's lack of jurisdiction mean only that the
bankruptcy court lacked jurisdiction to decide whether the
Commission had applied the auction requirements of section
309(j) of the Communications Act arbitrarily and capriciously,
not that it lacked jurisdiction to review the Commission's
actions for compliance with the Bankruptcy Code. Likewise,
the Commission suggests, the Second Circuit's references to
the prospects of NextWave's appeal refer only to an appeal
based on section 309(j). In support of this interpretation, the
Commission points to language in the Second Circuit's opin-
ion suggesting that the bankruptcy court lacked jurisdiction
to question the Commission's regulatory judgments under
section 309(j). See, e.g., id. at 131-32 (" '[E]ven if the bank-
ruptcy and district courts were right in concluding that
granting the Licenses at a small fraction of NextWave's
original successful bid price best effectuated the [Federal
Communication Act's] goals, they were utterly without the
power to order that NextWave be allowed to retain them for
that reason or on that basis.' ") (quoting initial opinion); see
also id. at 136-37.
The Second Circuit, however, had good reason to address
section 309(j) directly: the bankruptcy court devoted several
paragraphs to evaluating the Commission's conduct in light of
that section. See NextWave VI, 244 B.R. at 271, 281-83.
Moreover, it is perfectly consistent to hold that section 402
prohibits the bankruptcy court from reviewing Commission
action both under section 309(j) and under the Bankruptcy
Code. True, as the Commission points out, other circuits
have recognized the jurisdiction of bankruptcy courts to
determine whether provisions of the Code such as the auto-
matic stay apply to agency actions. See, e.g., Commerce Oil
Co. v. Word (In re Commerce Oil Co.), 847 F.2d 291 (6th Cir.
1988); Universal Life Church, Inc. v. United States (In re
Universal Life Church, Inc.), 128 F.3d 1294 (9th Cir. 1997).
But that is irrelevant to the question we face here: how did
the Second Circuit view the bankruptcy court's jurisdiction?
Regardless of how other circuits--or even we--might inter-
pret section 402, we think the Second Circuit construed the
provision to confer "exclusive jurisdiction" on courts of ap-
peals to review even Bankruptcy Code challenges to the
Commission's regulatory acts. Many of the court's refer-
ences to section 402 are not clearly restricted to bankruptcy
court power under section 309(j). See, e.g., In re FCC, 217
F.3d at 139 ("Exclusive jurisdiction to review the FCC's
regulatory action lies in the courts of appeals."). And at least
once in its opinion, the Second Circuit expressly stated that
"[t]he bankruptcy court lacked jurisdiction to declare the
Public Notice [of reauction] null and void on [the] ground[s]
that the Public Notice violated the automatic stay, [or] that
the right to cure obviates any default"--that is, on Bankrupt-
cy Code grounds. Id. at 139 (emphasis added).
The Second Circuit's reasoning in granting mandamus fur-
ther illustrates the jurisdictional nature of its opinion. The
court overturned the bankruptcy court's decision on two
"independently sufficient" grounds, each discussed in a sepa-
rate section of the opinion. See id. at 141. One ground was
that the bankruptcy court lacked "statutory jurisdiction" to
nullify the Commission's license cancellation. Id. Entitled
"Jurisdiction," this section of the opinion consists entirely of a
discussion of sections 402(a) and (b) of the Communications
Act--it never mentions the Bankruptcy Code. Id. at 139-41.
If, as the Commission maintains, the Second Circuit thought
the bankruptcy court lacked authority to invalidate the li-
cense cancellation principally because the Code does not
reach the Commission's regulatory acts (and if, as the Com-
mission also maintains, the Second Circuit's discussion of
"jurisdiction" merely refers to the peripheral issue of the
bankruptcy court's jurisdiction to review Commission actions
under section 309(j) of the Communications Act) it is difficult
to explain why the court failed to discuss the Bankruptcy
Code in this section of its opinion, given that the reasons
discussed here provide an "independently sufficient" basis for
mandamus.
The Second Circuit's other reason for granting mandamus
was that the bankruptcy court violated the appellate court's
earlier mandate. But as the Second Circuit made clear, its
initial opinion too was jurisdictional:
Our extraordinary mandamus power has two purposes:
to achieve compliance with the terms and spirit of our
mandates, and to constrain inferior courts to proper
exercises of their jurisdiction. In this case, the two uses
of mandamus overlap and reinforce one another. This
Court's previous opinion reversed a decision of the bank-
ruptcy court on the ground that that court lacked juris-
diction. The bankruptcy court again seeks to control the
FCC's allocation of licenses, notwithstanding this Court's
express holding that 'the bankruptcy and district courts
lack[ ] jurisdiction to decide the question of whether
NextWave had satisfied the regulatory conditions placed
by the FCC upon its retention of the Licenses.' Thus a
writ of mandamus protecting this Court's mandate also
confines the inferior court to the lawful exercise of its
jurisdiction.
Id. at 137 (quoting In re NextWave, 200 F.3d at 54).
To be sure, in the "mandate" section of its opinion, the
Second Circuit appeared to decide on the merits that at least
some parts of the automatic stay provision of the Bankruptcy
Code, 11 U.S.C. s 362, do not apply to the facts of this case.
See In re FCC, 217 F.3d at 138 ("Undoubtedly, the [Commis-
sion] is a governmental unit that is seeking 'to enforce' its
'regulatory power' [under subsection 362(b)(4)]."); id at 138
n.8 ("[W]e hold that the FCC's regulatory decisions fall within
[subsection] 362(b)(4)."). But leaving aside for the moment
the effect of this discussion under the doctrine of issue
preclusion, this portion of the Second Circuit's opinion does
not change our view that the court's decision was primarily
jurisdictional, for the court expressly couched its discussion of
the automatic stay in jurisdictional terms: the court prefaced
its discussion by noting that "[t]he bankruptcy court founds
its jurisdiction [to interfere with the FCC's enforcement of
its payment schedule] chiefly on the automatic stay provision
of [section 362]...." Id. at 138 (emphasis added). We need
not decide whether this jurisdictional interpretation of section
362 is correct--the Supreme Court has declined to express an
opinion on the issue, see Bd. of Governors of the Fed. Reserve
Sys. v. MCorp Fin., Inc., 502 U.S. 32, 41 n.11 (1991)--because
the Commission's res judicata argument requires only that we
determine what the Second Circuit meant, and here we think
it clear that the court treated section 362 as though it
provided a potential basis for bankruptcy court jurisdiction.
In addition to this direct evidence of the jurisdictional
nature of the Second Circuit opinion, the Commission's alter-
nate view of the opinion--that the court decided as a substan-
tive matter that nothing in the Bankruptcy Code prevents the
Commission from canceling NextWave's licenses--is implausi-
ble. Not only does this interpretation fail to account fully for
the opinion's jurisdictional language, see supra at 21-22, but
the Second Circuit never actually states that the Bankruptcy
Code as such does not reach the Commission's regulatory
acts: the entire opinion concerns the power and jurisdiction
of the bankruptcy court. Perhaps most telling, the Second
Circuit does not discuss any provision of the Bankruptcy
Code besides section 362, despite the fact that the bankruptcy
court discussed section 525 and made a ruling based on
sections 1123 and 1124. As NextWave argues, "[t]he exclu-
sively jurisdictional character of the Second Circuit's ruling
provides a complete explanation for its ... silence respecting
NextWave's principal bankruptcy arguments." Appellants'
Reply Br. at 4.
Faced with the Second Circuit's silence about sections 525
and 1123, the Commission suggests that even though the
court failed to mention these provisions, it necessarily decided
that they do not bar the license cancellation because "manda-
mus relief is warranted only where the petitioner has demon-
strated that its right to such relief is clear and indisputable,"
and "the Second Circuit would not have granted our request
for extraordinary relief if it had thought that the bankruptcy
court's decision was sustainable on the basis of [section] 525"
or 1123. Appellee's Br. at 21 n.13 (internal quotation omit-
ted); id. at 24 n.15. The assumption that the Second Circuit
"necessarily" resolved these arguments, however, is valid only
if the Commission's view of the case is correct--that is, if the
Second Circuit meant to decide as a substantive matter that
the Bankruptcy Code did not reach the Commission's actions.
If instead the Second Circuit principally decided, as much of
the opinion's language suggests, see supra at 20-22, that the
bankruptcy court lacked jurisdiction to hear these arguments,
that conclusion would also have provided a basis for manda-
mus, without requiring the court to consider or decide any-
thing about sections 525 and 1123 at all.
The Commission offers a second, equally unpersuasive ex-
planation for the Second Circuit's silence regarding sections
525 and 1123. The bankruptcy court's analysis of those
provisions, the Commission says, "hinges on its characteriza-
tion of the FCC as an ordinary creditor," Appellee's Br. at 24,
and by rejecting decisively this characterization, the Second
Circuit in effect decided that these parts of the Code do not
apply. Apart from the fact that it seems odd that the Second
Circuit would have decided that sections 525 and 1123 do not
apply without ever mentioning them, this argument fails
because, like the previous argument, it assumes the correct-
ness of the Commission's reading of the Second Circuit's
opinion. But the alternate reading of the opinion--that the
bankruptcy court lacked jurisdiction to hear challenges to the
Commission's regulatory actions based on the Bankruptcy
Code or otherwise--also relies upon the notion that the
Commission is not an ordinary creditor but a regulator in this
situation. The fact that the Second Circuit decided that the
Commission was not acting as an ordinary creditor when it
canceled the licenses thus does not indicate that the court
implicitly decided that sections 525 and 1123 are inapplicable
to this case.
Having thus concluded that the Second Circuit's opinion
was jurisdictional and that claim preclusion does not bar
NextWave from re-litigating its Bankruptcy Code arguments
in this court, we turn to the Commission's second major res
judicata argument: that each of NextWave's Bankruptcy
Code arguments is barred by issue preclusion. "Under the
issue preclusion aspect of res judicata, a final judgment on
the merits in a prior suit precludes subsequent relitigation of
issues actually litigated and determined in the prior suit,
regardless of whether the subsequent suit is based on the
same cause of action." I.A.M. Nat'l Pension Fund, 723 F.2d
at 947. Issue preclusion is most often invoked where "a
subsequent action is brought on a different claim," id. at 947
n.3, and as a result claim preclusion does not apply. Issue
preclusion, however, may also apply to subsequent actions
brought on the same claim: if a judgment "does not preclude
relitigation of all or part of the claim on which the action was
brought"--if, for example, as here, the judgment was jurisdic-
tional--it may still preclude relitigation of any issues "actual-
ly litigated and determined" in the first action. Id. For
issue preclusion to apply, however, "the issue must have been
actually and necessarily determined by a court of competent
jurisdiction in the first trial." Connors v. Tanoma Mining
Co., 953 F.2d 682, 684 (D.C. Cir. 1992) (internal quotation and
emphasis omitted). If the "basis" of a prior decision is
"unclear, and it is thus uncertain whether the issue was
actually and necessarily decided in [the prior] litigation, then
relitigation of the issue is not precluded." Id.
It may appear that the only issue potentially barred by
issue preclusion from a case dismissed for lack of jurisdiction
is the jurisdictional determination itself. Cf. Kasap, 166 F.3d
at 1248. In this case, it may thus seem that the Second
Circuit cannot have ruled on the merits of any of NextWave's
Bankruptcy Code arguments, because the court only decided
that the bankruptcy court lacked jurisdiction to hear them.
And indeed, under our jurisdictional interpretation of the
Second Circuit's decision, we do not think the court "actually
and necessarily" decided whether sections 525 and 1123 bar
the license cancellation. We thus conclude that issue preclu-
sion does not bar relitigation of these issues.
Far less clear, however, is whether issue preclusion bars
NextWave's section 362 argument. As we have seen, the
Second Circuit explicitly discussed section 362's automatic
stay, finding that the bankruptcy court could not rely on the
provision as an independent basis for jurisdiction because the
license cancellation was a regulatory act exempt under sub-
section 362(b)(4). See supra at 23-24. It is true, as we have
said, that this was a jurisdictional discussion, but this does
not preclude it from having issue preclusive effect: if a court
makes a substantive determination in order to arrive at a
jurisdictional holding, the substantive determination can have
issue preclusive effect so long as it was "actually litigated and
determined in the prior action." See I.A.M. Nat'l Pension
Fund, 723 F.2d at 947 n.3. The Restatement gives the
following example:
A brings an action against B for personal injuries arising
out of an automobile accident. Jurisdiction is asserted
over B, a nonresident, on the basis that the automobile
involved in the accident was being operated in the state
by or on his behalf. After trial of this issue, the action is
dismissed for lack of jurisdiction. In a subsequent action
by A against B for the same injuries, brought in the state
of B's residence, the prior determination that the auto-
mobile was not being operated by or on behalf of B is
conclusive.
Restatement (Second) of Judgments s 27, illustration 3
(1980).
Here, the Second Circuit appears to have decided that
section 362 does not confer jurisdiction on the bankruptcy
court because subsection 362(b)(4)'s "regulatory power" ex-
ception applies as a substantive matter. We thus agree with
the Commission that issue preclusion bars NextWave from
relitigating the question of whether the license cancellation
falls within subsection 362(b)(4). The Second Circuit spoke
clearly and unequivocally about this issue, stating that "n-
doubtedly, the FCC is a governmental unit that is seeking 'to
enforce' its 'regulatory power,' " In re FCC, 217 F.3d at 138,
and that "we hold that the FCC's regulatory decisions fall
within [subsection] 362(b)(4)." Id. at n.8. And under the
Second Circuit's jurisdictional reading of section 362, this
decision was necessary to the case: if subsection 362(b)(4) did
not apply, section 362 could have provided a basis for the
bankruptcy court to assert jurisdiction over the license can-
cellation. In considering NextWave's Bankruptcy Code argu-
ments, see Section III infra, we will thus assume that the
license cancellation falls within the regulatory power excep-
tion to the automatic stay.
We are less sure, however, that the Second Circuit "actual-
ly and necessarily" decided as part of its jurisdictional deci-
sion that all provisions of section 362 do not apply to the
license cancellation. In particular, as the Second Circuit
implicitly acknowledged, subsection 362(b)(4)'s "regulatory
power" exception does not apply to subsections 362(a)(4) and
(5), which stay actions to enforce liens. See In re FCC, 217
F.3d at 138. Although the bankruptcy court thought the
cancellation of NextWave's licenses "unarguably violate[d]"
these subsections, NextWave VI, 244 B.R. at 267, and explicit-
ly quoted the language in the security agreements creating a
"first lien on and continuing security interest in" the licenses,
id. at 267 n.7, the Second Circuit, in a footnote, simply observed:
"Subsections (4) and (5) are concerned with liens. The bank-
ruptcy court does not explain why they are implicated here."
In re FCC, 217 F.3d at 138 n.7. Thus, unlike in its subsection
362(b)(4) discussion, the Second Circuit never said it was
"hold[ing]" that subsections 362(a)(4) and (5) do not apply to
the cancellation of NextWave's licenses. Cf. id. at 138 n.8.
Instead, the court merely observed that the bankruptcy court
did not explain why they are implicated. It is thus unclear
whether the Second Circuit decided that subsections 362(a)(4)
and (5) do not block cancellation of NextWave's licenses, or
whether it simply concluded that it had no need to reach the
issue because the bankruptcy court failed adequately to ad-
dress it. Since under our decision in Connors, if it is "uncer-
tain whether [an] issue was actually and necessarily decided
in [prior] litigation, then relitigation of the issue is not
precluded," 953 F.2d at 684, we conclude that NextWave is
not barred from arguing that subsections 362(a)(4) and (5)
prohibit cancellation of its licenses.
Having resolved these threshold issues, we turn to the
merits of NextWave's appeal.
[ continued in part five ] |
