If the FCC is treated differently than other creditors, then you will have a slew of regulatory agencies (EPA, FAA, PBGC, OHSA etc.) free to assert monetary claims against a debtor (under the guise of their regulatory power) whilst other creditors would be stayed. As a practical matter, that will result in judicial repeal of Chapter 11.
Although an regulatory agency can exercise its police power for health, and safety reasons (e.g., even if in Chapter 11, unsanitary restaurant can be shut down) precisely nothing in Chapter 11 suggests that government claims for money are to be treated differently than other creditors' claims except as provided for the IRS (which has a priority for repayment) in the context of confirming a Chapter 11 plan.
For example, Congress created a very particular carve-out from bankruptcy that allows State (not federal) licensing body to take actions regarding licensure of the debtor as an educational institution). That means a State can revoke fly-by-night school's license. Nothing similar for the FCC.
So, the FCC must argue that somehow it is different under the Bankruptcy Code than other creditors because it licenses to the NextWave. But again, there is nothing to support a position that different treatment of government licensors is what Congress intended when it enacted Chapter 11. There are several provisions that prevent the change in property rights and/or contracts on the basis on a Chapter 11 petition or the financial condition of the debtor. Other licensors must wait to be paid from a Chapter 11 plan.
Even the IRS is prevented from getting money from the Chapter 11 debtor. The Bankruptcy Code spells out that the IRS can audit, issue notices, demand tax returns, and assess taxes. But it cannot take collection steps which is essentially what the FCC is doing by purporting to revoke the licenses it granted to NextWave.
I assume NextWave's argument will be that the FCC should beseech Congress, not the SC, if it wishes the Bankruptcy Code to be re-written. That said, this is a pure conflict between a federal regulatory scheme (the FCC) and a federal statute (the Bankruptcy Code) so it is not at all surprising that the SC took the case. There may be a strategy among the conservatives on the SC to drill home the point (to the extent it has not previously done so) that courts are not free to legislate. |
