In a whopper of a win for the Big Three networks and Fox Broadcasting Co., a Chicago court yesterday rejected new financial interest and syndication rules adopted by the Federal Communications Commission as “arbitrary and capricious.”
The 3-0 decision by the U.S. 7th Circuit Court of Appeals trashes the FCC for its adoption last year of what the court called “unreasoned and unreasonable” fin-syn rules. The case will be returned to the FCC, where the Chi court said the commission may reopen the proceeding “if that will help it reach an articulate, reasoned decision.”
The order raises the prospect of a rerun of the titanic lobbying battle between Hollywood and the networks that preceded last year’s controversial 3-2 FCC vote. However, the webs now seem to be in the catbird seat, since any revisions to the regs must ultimately be greenlighted by what appears to be a pro-network Chicago court.
The court’s rejection of the ruleswill not take effect for 30 days; in the interim, interested parties have been given 15 days to file legal arguments on how to proceed with the case.
Complicating the battle’s outcome is Bill Clinton’s victory over President Bush, which will result in two Clinton FCC appointees soon replacing FCC chairman Al Sikes and commissioner Sherrie Marshall.
Hollywood advocates yesterday were spinning the scenario that Tinseltown’s financial support for Clinton could pay off with a pro-studio chairman at the FCC, a possibility that network advocates view as far-fetched.
Writing yesterday’s blistering and often sarcastic opinion was Judge Richard A. Posner, whose impartiality in the case has been questioned. Posner, while serving as a professor of law at the U. of Chicago in 1977, filed an affidavit on behalf of CBS urging a Los Angeles court not to adopt fin-syn-related antitrust consent decrees (Daily Variety, Oct. 26).
One high-placed Hollywood representative yesterday expressed outrage over Posner’s decision not to remove himself from the case.
“Here you have a new president (Clinton) who wants to stop the peddling of influence by government officials once they leave office,” said the source. “Yet what Posner has done is just the opposite: He sold himself … as a consultant and then goes on the bench and recycles an opinion he wrote for CBS as a judicial decision.”
The Assn. of Independent Television Stations also said yesterday’s decision is “clouded” by Posner’s connection with CBS.
INTV prez James Hedlund said that “while not at all suggesting that Judge Posner was in any way biased, INTV is concerned that the reputation of the court might be tarnished given all the publicity … Judge Posner’s earlier position has been given.”
Hollywood’s Caucus for Producers, Writers & Directors–a lobbying group representing over 250 so-called hyphenates within the creative community–is also publicly protesting Posner’s role in the case and said it is working with counsel for the Alliance of Motion Picture & TV Producers regarding how best to proceed.
“We do intend to press the issue,” said Caucus chairman Jerry Isenberg, chairman of Hearst Entertainment.
In fact, the Caucus steering committee decided to take “a very strong position” regarding the judge’s perceived conflict at its meeting Wednesday, prior to yesterday’s ruling, according to Jerry Leider, the Caucus member principally charged with fin-syn matters.
Network lawyers are dismissing conflict of interest claims against Posner. “If every judge had to recuse himself from cases where he might have been involved with a similar issue in private practice, no decisions would ever get written,” said a web attorney.
Posner, through an aide, has declined comment on his past work for CBS.
At issue in the court case was an FCC decision last year to revise 20 -year-old fin-syn rules, which had prevented the networks from taking a financial interest in or reaping syndication profits from studio-produced programs.
The regs were adopted to prevent the once-dominant networks from unfairly extracting profits from producers in connection with program production.
Last year, the FCC agreed that the net influence had diminished over the years, but three of the five commissioners (Marshall, Ervin Duggan and Andrew Barrett) agreed that some fin-syn restrictions are still needed.
Voting against the new rules were Sikes and commissioner James Quello. A Sikes staffer said yesterday that the Chicago court’s decision “confirms many of the misgivings chairman Sikes expressed in his dissenting opinion.”
The new rules prevented the nets from participating in firstrun syndication distribution; capped at 40% the amount of in-house production in prime time that can be programmed by a network (up from 25% under previous guidelines); lifted all fin-syn restraints outside of prime time; and granted the nets 100% of foreign syndication rights.
The regs also defined a network as any entity programming 15 hours or more a week nationally in prime time and established a 30-day “two-step” process that prevented a web from immediately bidding for syndication rights to a program.
Posner wrote that the new FCC rules “flunk (the) test” of whether “a reasonable person upon consideration of all the points urged pro and con … would conclude that it was a reasonable response to a problem that the agency was charged with solving.
“The commission’s articulation of its grounds is not adequately reasoned. Key concepts are left unexplained, key evidence is overlooked, arguments that formerly persuaded the commission and that time has only strengthened are ignored, contradictions within and among commission decisions are passed over in silence.
“The impression created is of unprincipled compromises of Rube Goldberg complexity among contending interest groups viewed merely as clamoring supplicants who have somehow to be conciliated.”
CBS spokeswoman Ann Morfogen said the web is “very, very pleased” with the decision, while ABC’s Julie Hoover called the ruling “a step forward.” NBC couldn’t be reached.
Fox Broadcasting, which has avoided the “network” designation (and kept its lucrative syndication arm) by staying below the 15-hours-a-week programming limit, hailed the court decision.
The ruling “reveals the (fin-syn) emperor has no clothes,” said Fox prez-chief operating officer Jamie Kellner. “With a fourth network and scores of cable networks already in place and even more competition and diversity on the horizon from fiber, telcos, DBS and CD-ROM, the time is past due to set all networks free.”
Diane Killory, who represents Hollywood’s Coalition to Preserve the Fin-Syn Rules, said “we think it’s a bad decision which, if allowed to stand, would have a devastating impact on the entire production industry and program diversity. We’ll pursue every avenue of appeal.”
Mickey Gardner, a D.C. attorney who also represents Hollywood’s interests, said the court “in 32 days glibly rejected a thoughtful deregulatory decision reached by an FCC in a proceeding that lasted more than several years. This is disastrous for the entire U.S. TV production community.”
Sources speculated yesterday that Hollywood will now seek to have Posner removed from the case–a request that seems likely to be refused–and that the pro-fin-syn side will appeal the decision to the entire 11-judge Chicago court. An appeal to the U.S. Supreme Court is also considered a likely possibility.
Both sides privately agree that it is unlikely the appeals will be successful , and that the case will ultimately be decided by the FCC.