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Supreme Court: Five-Year Statute of Limitations for FCC to Sue to Collect Fines Begins to Run on Date of Violation

April 3, 2013

The FCC’s Public Notice indicating that it has cleared a large backlog of indecency complaints because many were “beyond the statute of limitations” (covered in a previous client alert) may have left some broadcasters wondering whether they are among those that are now in the clear but just don’t know it yet.  Until earlier this year, we might not have been able to tell for sure either, but the Supreme Court gave us one part of the answer in February.

There are two different “statutes of limitation” that apply to FCC enforcement actions, and our  focus here is on the one that applies to the collection of a fine.  A federal statute – 28 U.S.C. § 2462 – says that if the government wants to bring a lawsuit to collect a civil fine, penalty or forfeiture, it has to do so within five years after the underlying claim “accrues.”  The question of when a claim “accrues” was previously subject to differing interpretations; one possibility was always that a claim accrued on the date of the violation, but it was also possible that a claim might accrue when the government learned of it through a complaint, or on some other date.  In Gabelli v. Securities and Exchange Commission (SEC), the SEC, which is also subject to Section 2462, argued that the “discovery rule” should apply and a claim should therefore not accrue until it was discovered by the government.  The Supreme Court disagreed, holding that, no, a claim accrues on the date of the violation.  This result, the Court found, was “the most natural reading of the statute,” and the only one that would “set[] a fixed date when exposure to the specified Government enforcement efforts ends, advancing ‘the basic purpose of all limitations provisions:  repose, elimination of stale claims, and certainty about a plaintiff’s opportunity for recovery and a defendant’s potential liabilities.’”  It is not clear whether this Supreme Court decision played any role in the FCC’s decision to finally clear its backlog of indecency complaints, but that action is certainly consistent with the Court’s ruling in Gabelli.

There are also limits on the time within which the FCC may issue a Notice of Apparent Liability (NAL), an action which in the vast majority of cases precedes the filing of a lawsuit to collect a fine.  The Communications Act – in 47 U.S.C. § 503(b)(6) – says that the FCC cannot issue an NAL for conduct which occurred either (a) more than one year prior to the NAL or (b) prior to the commencement of licensee’s current license term, whichever is earlier.  The one year cap is easy to evaluate, but the second part of Section 503(b)(6) can be more complex.  This is because the “current” term of a license extends until the next license renewal application is granted, even if the prior term has technically expired.  As a result, the FCC can evade the one-year limit by refusing to process renewal applications for stations that are the subject of pending complaints, a practice commonly known as the placing of an “enforcement hold” on an application.

What does all of this mean for broadcasters?  That it is now much easier to determine whether the government can still collect a fine for a rule violation, because now we have a definitive answer regarding when the five-year clock begins to tick.  If more than five years has passed since the violation, then the answer to that question is no.  One note of caution is in order, however:  It remains possible that the FCC might issue an NAL regarding an alleged violation that occurred more than five years ago but with the “current” term of a license, but whether it will bother to do so – particularly in the area of indecency – remains to be seen.

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