ADVERSARY PROCEEDING COVER SHEET (Instructions on Reverse) Debtor

Transcription

Case 12-44027-dml11
B104 (FORM 104) (08/07)
Doc 226 Filed 08/23/12 Entered 08/23/12 14:13:07
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ADVERSARY PROCEEDING NUMBER
ADVERSARY PROCEEDING COVER SHEET
(Instructions on Reverse)
(Court Use Only)
PLAINTIFFS
DEFENDANTS
FiberTower Network Services Corp., et al.
Federal Communications Commission
ATTORNEYS (Firm Name, Address, and Telephone No.)
ATTORNEYS (If Known)
Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, Texas 75201, Attn: P. Silverstein and J. Brookner
Sean Lev, General Counsel
445 12th Street, SW
Washington, DC 20554
PARTY (Check One Box Only)
PARTY (Check One Box Only)
✔
Debtor
U.S. Trustee/Bankruptcy Admin
Debtor
U.S. Trustee/Bankruptcy Admin
Creditor
Other
Creditor
✔ Other
Trustee
Trustee
CAUSE OF ACTION (WRITE A BRIEF STATEMENT OF CAUSE OF ACTION, INCLUDING ALL U.S. STATUTES INVOLVED)
Declaratory judgment that the automatic stay applies to cancellation of the Debtors' FCC spectrum licenses or, in the alternative, for
a TRO and injunctive relief, precluding the cancellation of the Debtors' FCC spectrum licenses.
NATURE OF SUIT
(Number up to five (5) boxes starting with lead cause of action as 1, first alternative cause as 2, second alternative cause as 3, etc.)
FRBP 7001(1) – Recovery of Money/Property
11-Recovery of money/property - §542 turnover of property
FRBP 7001(2) – Validity, Priority or Extent of Lien
21-Validity, priority or extent of lien or other interest in property
FRBP 7001(3) – Approval of Sale of Property
31-Approval of sale of property of estate and of a co-owner - §363(h)
FRBP 7001(4) – Objection/Revocation of Discharge
41-Objection / revocation of discharge - §727(c),(d),(e)
FRBP 7001(5) – Revocation of Confirmation
51-Revocation of confirmation
FRBP 7001(6) – Dischargeability
66-Dischargeability - §523(a)(1),(14),(14A) priority tax claims
12-Recovery of money/property - §547 preference
13-Recovery of money/property - §548 fraudulent transfer
14-Recovery of money/property - other
62-Dischargeability - §523(a)(2), false pretenses, false representation,
actual fraud
67-Dischargeability - §523(a)(4), fraud as fiduciary, embezzlement, larceny
(continued next column)
FRBP 7001(6) – Dischargeability (continued)
61-Dischargeability - §523(a)(5), domestic support
68-Dischargeability - §523(a)(6), willful and malicious injury
63-Dischargeability - §523(a)(8), student loan
64-Dischargeability - §523(a)(15), divorce or separation obligation
(other than domestic support)
65-Dischargeability - other
FRBP 7001(7) – Injunctive Relief
✔ 71-Injunctive relief – imposition of stay
✔
72-Injunctive relief – other
FRBP 7001(8) Subordination of Claim or Interest
81-Subordination of claim or interest
FRBP 7001(9) Declaratory Judgment
✔ 91-Declaratory judgment
FRBP 7001(10) Determination of Removed Action
01-Determination of removed claim or cause
Other
SS-SIPA Case – 15 U.S.C. §§78aaa et.seq.
02-Other (e.g. other actions that would have been brought in state court
if unrelated to bankruptcy case)
Check if this case involves a substantive issue of state law
Check if this is asserted to be a class action under FRCP 23
Check if a jury trial is demanded in complaint
Other Relief Sought
Demand $ 0
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BANKRUPTCY CASE IN WHICH THIS ADVERSARY PROCEEDING ARISES
NAME OF DEBTOR
BANKRUPTCY CASE NO.
FiberTower Network Services Corp., et al.
12-44027-DML-11
DISTRICT IN WHICH CASE IS PENDING
DIVISION OFFICE
NAME OF JUDGE
Northern District of Texas
Fort Worth
D. Michael Lynn
RELATED ADVERSARY PROCEEDING (IF ANY)
PLAINTIFF
DEFENDANT
ADVERSARY
PROCEEDING NO.
DISTRICT IN WHICH ADVERSARY IS PENDING
DIVISION OFFICE
NAME OF JUDGE
SIGNATURE OF ATTORNEY (OR PLAINTIFF)
/s/Jason S. Brookner
DATE
August 23, 2012
PRINT NAME OF ATTORNEY (OR PLAINTIFF)
Jason S. Brookner
INSTRUCTIONS
The filing of a bankruptcy case creates an "estate" under the jurisdiction of the bankruptcy court which consists of
all of the property of the debtor, wherever that property is located. Because the bankruptcy estate is so extensive and the
jurisdiction of the court so broad, there may be lawsuits over the property or property rights of the estate. There also may be
lawsuits concerning the debtor’s discharge. If such a lawsuit is filed in a bankruptcy court, it is called an adversary
proceeding.
A party filing an adversary proceeding must also must complete and file Form 104, the Adversary Proceeding Cover
Sheet, unless the party files the adversary proceeding electronically through the court’s Case Management/Electronic Case
Filing system (CM/ECF). (CM/ECF captures the information on Form 104 as part of the filing process.) When completed,
the cover sheet summarizes basic information on the adversary proceeding. The clerk of court needs the information to
process the adversary proceeding and prepare required statistical reports on court activity.
The cover sheet and the information contained on it do not replace or supplement the filing and service of pleadings
or other papers as required by law, the Bankruptcy Rules, or the local rules of court. The cover sheet, which is largely selfexplanatory, must be completed by the plaintiff’s attorney (or by the plaintiff if the plaintiff is not represented by an
attorney). A separate cover sheet must be submitted to the clerk for each complaint filed.
Plaintiffs and Defendants. Give the names of the plaintiffs and defendants exactly as they appear on the complaint.
Attorneys. Give the names and addresses of the attorneys, if known.
Party. Check the most appropriate box in the first column for the plaintiffs and the second column for the defendants.
Demand. Enter the dollar amount being demanded in the complaint.
Signature. This cover sheet must be signed by the attorney of record in the box on the second page of the form. If the
plaintiff is represented by a law firm, a member of the firm must sign. If the plaintiff is pro se, that is, not represented by an
attorney, the plaintiff must sign.
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Paul N. Silverstein (admitted pro hac vice)
Jonathan I. Levine (admitted pro hac vice)
ANDREWS KURTH LLP
450 Lexington Avenue, 15th Floor
New York, New York 10017
Telephone: (212) 850-2800
Facsimile:
(212) 850-2929
Desc
Jason S. Brookner
Texas State Bar No. 24033684
ANDREWS KURTH LLP
Dallas, Texas 75201
Telephone: (214) 659-4400
Facsimile:
(214) 659-4401
Counsel to the Debtors
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
In re:
FIBERTOWER NETWORK SERVICES
CORP., et al.,
Debtors.
_____________________________________
FIBERTOWER NETWORK SERVICES
CORP. et al.,
Debtors.
v.
FEDERAL COMMUNICATIONS
COMMISSION,
Defendant.
§ Chapter 11
§
§ Case No. 12-44027-DML-11
§
§ Jointly Administered
§
§
§
§ Adversary No. 12-______
§
§
§
§
§
§
§
§
§
§
VERIFIED COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF
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The above-captioned debtors and debtors in possession (collectively, the “Debtors” or
“FiberTower”),1 for their Verified Complaint For Declaratory and Injunctive Relief against the
Federal Communications Commission (the “FCC”), allege as follows:
I.
NATURE OF THE ACTION
1.
This action for declaratory and injunctive relief is brought pursuant to 28 U.S.C.
§§ 1334(b) and (e), 28 U.S.C. § 2201, 11 U.S.C. § 105(a) and Rules 7001(7), (9) and 7065 of the
Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”).
2.
The Debtors hereby seek a judgment from this Court (i) declaring that (a) the
automatic stay of section 362(a) of title 11 of the United States Code (the “Bankruptcy Code”)
applies to the Debtors’ FCC spectrum licenses and (b) the exception to the automatic stay in
section 364(b)(4) of the Bankruptcy Code does not apply to the termination of the Debtors’ FCC
spectrum licenses, and (ii) preliminarily and permanently enjoining the actual termination of the
Debtors’ FCC spectrum licenses pending exhaustion of all avenues of review of the FCC’s
actions under applicable bankruptcy and non-bankruptcy law and entry of a final non-appealable
order in respect of cancellation of the Debtors’ FCC spectrum licenses.
II.
JURISDICTION AND VENUE
3.
The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C.
§§ 157 and 1334.
4.
Venue in this Court is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
5.
This adversary proceeding presents a core proceeding pursuant to 28 U.S.C. §
157(b)(2)(A).
1
The Debtors in these chapter 11 cases are: (i) FiberTower Network Services Corp.; (ii) FiberTower Corporation;
(iii) FiberTower Licensing Corp.; and (iv) FiberTower Spectrum Holdings LLC.
VERIFIED COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF -- PAGE 2
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III.
THE PARTIES
6.
Each of the Debtors is a corporate entity organized under the laws of the State of
Delaware. The Debtors’ principal offices are located at 185 Berry Street, Suite 4800, San
Francisco, CA 94107.2
7.
Upon information and belief, the FCC is a federal administrative agency with its
headquarters at 445 12th Street, S.W., Washington, D.C. 20554. The FCC has authority under
the Communications Act, 47 U.S.C. §§ 151, 303(y), to allocate electromagnetic spectrum and
regulate wireless communications used in interstate and foreign commerce.
IV.
FACTUAL BACKGROUND
8.
On July 17, 2012 (the “Petition Date”), each of the Debtors filed with this Court a
petition for relief under chapter 11 of the Bankruptcy Code. The Debtors are operating their
businesses and managing their properties as debtors in possession pursuant to sections 1107(a)
and 1108 of the Bankruptcy Code.
9.
An official committee of unsecured creditors (the “Committee”) was appointed by
the Office of the United States Trustee on July 26, 2012. Notice of the Committee’s appointment
was filed on July 27, 2012 [Main Case Docket No. 94]. No trustee or examiner has been
appointed.
10.
The Debtors are a provider of facilities-based backhaul services to wireless
carriers, businesses and government entities, and a national provider of millimeter-band
spectrum services. Backhaul is the transport of voice, video and data traffic from a wireless
2
The principal office for FiberTower Network Service Corp., the lead Debtor herein, is 2613 Gravel Drive, Fort
Worth, TX 76118. For purposes of this adversary proceeding, all notices should be sent to the Berry Street address
in San Francisco.
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carrier’s cell site or tower to its switching center (or other exchange point). The Debtors provide
these backhaul services nationally by utilizing fiber, copper and FCC wireless spectrum licenses
to construct and operate high-coverage, high-capacity fiber and hybrid microwave networks.
The Debtors provide spectrum leasing services directly to other carriers and enterprise clients,
and also offer their spectrum services through spectrum brokerage arrangements and through
fixed wireless equipment partners.
11.
As of the Petition Date, the Debtors provide fixed wireless spectrum leasing
services and fixed wireless microwave extension links to government and commercial customers
nationwide.
Additionally, the Debtors provide hybrid fixed wireless fiber-optic service to
approximately 5,390 customer locations at approximately 3,188 deployed sites in thirteen (13)
markets throughout the U.S. The Debtors’ biggest hybrid service markets are Dallas/Fort Worth
and Washington, D.C./Baltimore, with additional markets in Atlanta, Boston, Chicago,
Cleveland,
Denver,
Detroit,
Houston,
New
York/New
Jersey,
Pittsburgh,
San
Antonio/Austin/Waco and Tampa.
12.
The Debtors have customer service agreements to provide the above services to
major U.S. wireless carriers. The Debtors also hold separate national-scope service agreements
with Verizon Business and CenturyLink which allow them to provide government grade
transport services to the United States General Services Administration and other governmental
entities. Further, the Debtors use their FCC spectrum licenses to offer critical fixed wireless
services directly to (i) federal and local government agencies and (ii) mobile carriers who
directly serve federal, state and local government officials, as well as other key public safety
personnel employed by hospitals, utilities and other essential facilities.
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hundred fifty five (155) 24 GHz systems are in operation throughout the National Capital Region
(District of Columbia) supporting exactly these types of operations.
13.
One of the Debtors’ most significant assets is their ownership of a national
spectrum portfolio of 24 GHz and 39 GHz wide-area spectrum licenses, including over 740 MHz
in the top twenty (20) U.S. metropolitan areas and, in the aggregate, approximately 1.72 billion
channel pops (calculated as the number of channels in a given area multiplied by the population,
as measured in the 2010 census, covered by these channels) (collectively, the “Licenses” or the
“Spectrum Portfolio”). The Debtors believe that the Spectrum Portfolio represents one of the
largest and most comprehensive aggregations of millimeter wave spectrum in the U.S., covering
areas with a total population of over 300 million.
14.
As set forth more fully in the Declaration of Kurt Van Wagenen in Support of
Chapter 11 Petitions and First Day Motions [Main Case Docket No. 2] (the “First Day
Declaration”), which is incorporated by reference herein, the Debtors filed for relief under
chapter 11 to de-lever their capital structure and restructure their business pursuant to a proposed
chapter 11 plan (the “Proposed Plan”) negotiated at arm’s length with an ad hoc committee of
holders of the Debtors’ 9.00% Senior Secured Notes due 2016 (the “2016 Notes”).3 The Debtors
intend to reorganize around a restructured legacy backhaul network, spectrum services and
carrier services.
15.
The Debtors’ reorganized spectrum services business will build on the Debtors’
current nationwide practice of offering and leasing and developing solutions for their 24 GHz
and 39 GHz spectrum for point-to-point or area-specific deployments, including (but not limited
to) traditional fixed wireless, emerging small-cell and government fixed wireless markets.
3
The Proposed Plan is attached as an exhibit to the First Day Declaration.
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Spectrum leasing will be supported by the Debtors’ own direct sales force and sales will be
augmented by leveraging existing relationships with equipment vendors, spectrum brokers,
government agencies and customers.
16.
As set forth in the Plan Support Agreement (“PSA”) the Debtors entered into with
the holders of approximately 65% of the 2016 Notes (which is attached as an exhibit to the First
Day Declaration), the Debtors’ retention of the Spectrum Portfolio is a condition precedent to the
Debtors’ emergence from chapter 11.4
V.
THE DEBTORS’ SPECTRUM PORTFOLIO
17.
The success of the Proposed Plan and the Debtors’ reorganization is dependent on
the Debtors’ continued ownership of the Spectrum Portfolio.
If the FCC terminates the
Spectrum Portfolio, the Debtors will not be able to reorganize their business as contemplated and
they very likely will be forced to liquidate and cease all business operations. Indeed, the
Debtors’ entitlement to use cash collateral will terminate if the Licenses are cancelled. See
paragraph 4(a)(i) of the Final Order (i) Authorizing Use of Cash Collateral Pursuant to Section
363 of the Bankruptcy Code and (ii) Providing Adequate Protection to Secured Parties Pursuant
to Sections 361, 362 and 363 of the Bankruptcy Code [Main Case Docket No. 219] (the “Cash
Collateral Order”) (providing that a “Termination Event” under the PSA constitutes a
“Termination Date” under the Cash Collateral Order).
18.
In 2008, a substantial portion of the Spectrum Portfolio was renewed conditioned
upon, or subject to, the Debtors making what is referred to as a “substantial service” showing by
4
See PSA § 7.1(a)(vi) (stating that Consenting Noteholders under PSA may terminate the PSA if the FCC issues a
“binding adverse order, ruling or determination: (i) finding that the Debtors do not meet the substantial service
conditions; and/or (ii) denying the Debtors’ request for an extension or waiver of the ‘safe harbor’ construction
rules”); see also Proposed Plan § 10.1(f).
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June 1, 2012. “Substantial service” is defined in the FCC’s rules as “a service that is sound,
favorable, and substantially above a level of mediocre service which might minimally warrant
renewal.” See, e.g., 47 C.F.R. § 101.527(a). A showing of substantial service will “depend upon
the particular type of service offered by the licensee.” Amendment of Commission’s Rules
Regarding the 37.0-38.6 GHz and 38.6-40.0 GHz Bands, Report and Order and Second Notice of
Proposed Rulemaking, 12 FCC Rcd 18600, 18624-25 ¶ 46 (1998) (the “39 GHz Order”).
19.
Although the FCC has provided a “safe harbor” example of the type of
construction that would, by itself, be sufficient to satisfy the substantial service requirement - e.g., Id. at 18624-25 ¶ 46 (stating that a 39 GHz licensee may be deemed to provide substantial
service by building “four links per million population within a service area”); Amendments to
Part 1, 2, 87, and 101 of the Commission’s Rules to License Fixed Services at 24 GHz, Report
and Order 15 FCC Rcd 16934, 16951 ¶ 38 (2000) (“24 GHz Order”) (stating the same for 24
GHz licensees), Service Rules for the 698-746, 747-762 and 777-792 MHz Bands, Notice of
Proposed Rule Making, Fourth Further Notice of Proposed Rule Making, and Second Further
Notice of Proposed Rule Making, 21 FCC Rcd 9345, 9356 ¶ 16 (2006) (“Service Rules”)
(providing for a safe harbor for licensees that provide a point-to-multipoint signal to 20% of the
population of a license area) - - it has also made clear that the substantial service requirement
“can be met in other ways,” and that the FCC “will review licensees’ showings on a case-by-case
basis.” 24 GHz Order at 16951-52 ¶ 38; see also 39 GHz Order at 18624 ¶ 46 (explaining that
substantial service as applied to 39 GHz licenses “will permit flexibility in system design and
market development”).
20.
In April 2012, the Debtors timely filed a petition with the FCC seeking either a
waiver of the FCC’s safe harbor construction rules or a 3-year extension to allow for market-
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based builds for the Debtors’ wide-area licenses that remain subject to substantial service
requirements. See FiberTower Corporation, Request for Extension of Time or, in the Alternative,
Limited Waiver of Substantial Service Requirement (Apr. 30, 2012) (the “FiberTower Extension
Request”);5 FiberTower Corporation, License Renewal Request and Substantial Service Showing
(June 1, 2012) (the “License Renewal Request”).6 As indicated above, the FCC previously
granted a 4-year extension (until June 1, 2012) of the Debtors’ deadline for meeting the
substantial service requirements for most of the Debtors’ Licenses. See, e.g., ART Licensing
Corporation Requests for Waiver, Extension of Time to Meet Coverage Requirements, and
Extension of License Period, Order on Reconsideration and Memorandum Opinion and Order, 23
FCC Rcd 14116 (2008) (the “2008 FiberTower Extension Order”).
21.
On and before June 1, 2012, the Debtors separately filed with the FCC, on a
License-by-License basis, notifications for the almost 700 wide-area Licenses at issue in the
April 2012 petition, stating that the Licenses in question had met the FCC substantial service
standard. See, e.g., FCC Universal Licensing System File No. 0005244246.
22.
One method to guarantee meeting the substantial service standard is to satisfy a
“safe harbor,” as defined by the FCC. As noted above, that “safe harbor” can be met by building
four links per million people within a license area, or by building a multipoint system that
transmits signal to an area that comprises at least 20% of the population in the license area. See
39 GHz Order at 18624-25 ¶ 46; 24 GHz Order at 16951 ¶ 38; Service Rules at 9356 ¶ 16. A
significant majority of the Debtors’ substantial service filings do not indicate that the safe harbor
5
A copy of the FiberTower Extension Request is available at:
https://wireless2.fcc.gov/UlsEntry/attachments/attachmentViewRD.jsp?applType=search&fileKey=1001495916&at
tachmentKey=18904732&attachmentInd=applAttach.
6
A copy of the License Renewal request is attached to FCC Universal Licensing System File No. 0005244246, and
is available at: http://wireless2.fcc.gov/UlsApp/ApplicationSearch/applAdmin.jsp?applID=6855152.
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was met, as market demand has not yet developed for such construction. Building those links
without market-ready customers essentially requires the construction of “defensive” links
(referred to as “links to nowhere”). These “links to nowhere” would not result in any customer
receiving service and/or any customer being willing to pay amounts sufficient for the Debtors to
recover deployment and operation costs. Moreover, the quality of such links can be sub-optimal.
23.
The substantial service rules allow for the FCC to determine if licensees have
satisfied substantial service requirements by means other than meeting the “safe harbor.” See 24
GHz Order at 16951-52 ¶ 38; see also 39 GHz Order at 18624 ¶ 46 (explaining that substantial
service as applied to 39 GHz licenses “will permit flexibility in system design and market
development”). While the FCC has historically only narrowly focused on the safe harbor
standard, it has yet to address squarely other means for satisfying its substantial service
requirements.
24.
The Debtors have asked the FCC to serve the public interest by interpreting its
substantial service rules to recognize the Debtors’ market leadership and other significant actions
taken by the Debtors to deploy the wide-area spectrum, rather than only assessing the Debtors’
development of its Licenses through the “safe harbor” standard. See FiberTower Extension
Request at 5-16, 22-23; License Renewal Request at 8-23. For example, FiberTower has been a
competitive backhaul industry leader, having invested heavily in, among other things, the
development and testing of innovative equipment specifically designed to work in the 24 and 39
GHz spectrum, and having deployed a state-of-the-art network operations center from which to
run its network. See FiberTower Extension Request at 2-4, 22-33; License Renewal Request at
12-16.
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In both of their April and June 2012 FCC filings, the Debtors stated that it would
not be in the public interest for wide-area licensees to be forced to build defensive links, see
License Renewal Request at 17-18; FiberTower Extension Request at 16-19, 23, when the stated
purpose of the substantial service requirement is to “ensure that service is indeed being provided
to the public.” See 2008 FiberTower Extension Order ¶ 15; 39 GHz Order ¶¶ 28-42; see also 24
GHz Order ¶ 36 (stating that the purpose of the substantial service requirement is to ensure that
the spectrum is used effectively and service deployed rapidly).
26.
Indeed, the FCC has recognized that the construction of temporary “stop-gap”
facilities deployed solely to satisfy a coverage or service requirement (“defensive links”) does
not serve the public interest. See Consolidated Request of the WCS Coalition for Limited Waiver
of Construction Deadline for 132 WCS Licenses, Order, 21 FCC Rcd 14134, 14140 (WTB 2006).
Thus, the building of “links to nowhere,” where no customers exist to pay for such links and
such links could not provide services to customers, would result in the diversion of scarce
resources from areas where market demand exists.
27.
The Debtors have made demonstrable steps toward being able to build market-
ready links and/or “defensive” links in the wide-area license bands, if the FCC required such
“defensive” links to be built (and the Debtors’ April 2012 and June 2012 FCC filings make that
clear). These steps include, without limitation, the following:

In 2006 thru 2012, Debtors purchased market-quality transceivers and
maintained distribution systems for those transceivers.

In 2011 and 2012 Debtors announced spectrum-lease and equipment
combination deals with third parties.

In 2012, the Debtors engaged with numerous equipment manufacturers
directly or through their sales agent or distributor to identify defensive-link
quality equipment. Debtors are now in the review phase with some of those
respondent manufacturers or distributors.
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
In 2012, the Debtors issued a Request for Proposal (“RFP”) to 57 potential
contractors to construct defensive links nationwide. As of July 6, 2012, RFP
responses were received from 11 potential contractors.

The Debtors have established teams to build engineering, mapping, logistics,
financing, equipment acquisition, equipment distribution and staging, site
access, customers, management, regulatory compliance, spectrum-leasing and
construction systems for both market-based and defensive-link builds.

The Debtors have acquired a significant amount of network equipment that
would enable them to promptly construct a network. See FiberTower
Extension Request, Supplement #1 (filed July 26, 2012).7 For example, the
Debtors have acquired for testing and evaluation 24 and 39 GHz radio
equipment and have purchased a substantial number of 39 GHz DS3 radios to
support a number of links. The Debtors also have the right to immediately
purchase, through a third party supplier, additional DS3 radios to support
another 210 links. In addition to 85 links in the existing network that can be
repurposed for new builds (using a combination of 24 GHz and 39 GHz
spectrum), the Debtors have acquired nearly 400 24 GHz systems, all of
which remain ready for deployment.
The Debtors’ Spectrum Portfolio is a key asset of the Debtors’ estates, without
which (i) the Debtors’ reorganization efforts will be irreparably harmed and derailed and (ii) the
Debtors very likely would be required to shut down their existing backhaul business, because the
Debtors’ authorization to use cash collateral will have terminated. Based on recent contacts with
the FCC, however, and contrary to prior indications from the FCC, it is now clear that the FCC
intends to cancel the Spectrum Portfolio - - despite the Debtors’ substantial service showing and
alternative request for an extension or waiver of the safe harbor construction rules.
VI.
THE NEED FOR INJUNCTIVE RELIEF
29.
The Debtors understand that the FCC intends imminently to terminate the
Debtors’ Licenses on the grounds that either (i) the Debtors have not met the substantial service
7
A copy of Supplement #1 is attached to FCC Universal Licensing System File No. 0005207557, and is available at:
http://wireless2.fcc.gov/UlsApp/ApplicationSearch/applAdmin.jsp?applID=6807331#.
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conditions placed on the renewal of their Licenses to operate in the 24 GHz and 39 GHz bands,
and/or (ii) an extension or a waiver of those conditions is not warranted or necessary.
30.
The FCC’s actions to terminate the Debtors’ Licenses are not within the purview
of section 362(b)(4) of the Bankruptcy Code.
The Debtors request a declaration that the
automatic stay applies to their FCC spectrum Licenses and immediate entry of an order of this
Court enforcing the automatic stay of section 362 and its Order Directing Parties to (i) Comply
with Section 362 And Other Provisions of the Bankruptcy Code and (ii) Continue to Perform
Under Terms of Contracts and Leases [Main Case Docket No. 76].
31.
Alternatively, to the extent the Court determines that section 362(b)(4) of the
Bankruptcy Code applies here, the Debtors request (i) immediate entry of a temporary restraining
order pursuant to section 105(a) of the Bankruptcy Code, restraining and enjoining the actual
cancellation of the Debtors’ Licenses and (ii) entry of a preliminary and permanent injunction
precluding and enjoining the actual cancellation of the Debtors’ FCC Licenses pending full and
final administrative and judicial review of the FCC’s actions under applicable non-bankruptcy
law and entry of a final, non-appealable order with respect to the same.
32.
Immediate entry of the relief requested herein is required to ensure that the value
of the Debtors and their respective estates, and their reorganization efforts, are not irreparably
harmed and derailed. As indicated herein, if the Debtors’ Spectrum Portfolio is cancelled, the
Debtors would no longer be entitled to use cash collateral to fund their operations. The Debtors’
ability to operate their existing backhaul network would be severely impaired and the Debtors
would likely no longer be able to provide backhaul and related services to customers.
33.
The threatened FCC action, if it occurs, therefore, would not only result in the
loss of the bulk of the Debtors’ Spectrum Portfolio, it would very likely put mobile networks,
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first responder networks, government networks, school networks, and other operations in direct
jeopardy and risk.
VII.
CLAIMS FOR RELIEF
A.
First Claim for Relief: Declaratory Judgment that the Automatic Stay Applies to the
FCC and the Licenses
34.
The Debtors repeat and reallege the allegations set forth in paragraphs 1 through
33 above, as if set forth at length herein.
35.
The Spectrum Portfolio constitutes “property of the estate” under section 541 of
the Bankruptcy Code. Section 541 is construed broadly to encompass all conceivable interests of
the debtor in property, wherever located and by whomever held. As such, the Spectrum Portfolio
is subject to this Court’s exclusive jurisdiction.
36.
As a “person” under section 101(15) of the Bankruptcy Code and a
“governmental unit” under section 101(27) of the Bankruptcy Code, the automatic stay applies to
the FCC.
37.
Administrative licensing cancellations/revocations are subject to the automatic
38.
Because the automatic stay applies to the FCC and the Licenses, the FCC may not
stay.
cancel/revoke the Licenses absent further order of this Court.
39.
The Court should, therefore, enter a declaratory judgment in the Debtors’ favor,
ruling that the automatic stay of section 362(a) applies to the FCC and the Spectrum Portfolio.
B.
Second Claim for Relief: Declaratory Judgment that Section 362(b)(4) of the
Bankruptcy Code Does Not Apply to the Actual Cancellation of the Licenses
40.
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41.
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The limited “police or regulatory” exception of section 362(b)(4) applies only
where a governmental unit is suing a debtor to prevent or stop violation of fraud, environmental
protection, consumer protection, safety, or similar police or regulatory laws, or attempting to fix
damages for violation of such law.
42.
In this case, the actual termination of the Spectrum Portfolio does not fall within
the safe harbor of section 362(b)(4). The proceedings before the FCC regarding the Debtors’
Spectrum Portfolio must be distinguished from the actual act of revoking or cancelling the
Spectrum Portfolio. The continuation of proceedings before the FCC regarding the Debtors’
Licenses may fall within the FCC’s police or regulatory powers under section 362(b)(4) of the
Bankruptcy Code and may not involve control over property of the Debtors’ estates.
43.
However, any act of the FCC to revoke or cancel the Debtors’ Spectrum Portfolio
constitutes “control” over property of the Debtors’ estates in violation of the automatic stay
provisions of sections 362(a)(1) and 362(a)(3) of the Bankruptcy Code. The FCC, thus, may not
actually terminate or cancel the Debtors’ Spectrum Portfolio without first seeking relief from the
automatic stay.
44.
In addition, under the “pecuniary purpose” test of section 362(b)(4) of the
Bankruptcy Code, the section 362(b)(4) police or regulatory power exception will not apply
where the government action in question relates primarily to the protection of the government’s
pecuniary interest in the debtor’s property pursued solely to advance a pecuniary interest of the
governmental unit.
45.
The FCC has a direct financial motive for cancelling or revoking the Spectrum
Portfolio. If the Spectrum Portfolio is cancelled, the FCC will most likely take the Licenses back
into the FCC’s spectrum inventory to be re-sold via auction. Were the FCC to decide to reassign
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the Spectrum Portfolio by a method other than an auction - - something that rarely, if ever,
occurs - - then the FCC must explain how and why it is in the public interest to do so. Thus, the
FCC’s motive for cancelling or revoking the Spectrum Portfolio is unquestionably pecuniary: by
taking the Spectrum Portfolio back into its spectrum inventory, the FCC can - - and most likely
will - - auction them off to the highest bidder, thus increasing/enhancing the public fisc.8
46.
The Court should, therefore, enter a declaratory judgment in favor of the Debtors
that section 362(b)(4) does not apply to the actual revocation or cancellation of the Debtors’
Licenses by the FCC.
C.
Third Claim for Relief: Injunction
47.
48.
To the extent the Court determines that section 362(b)(4) of the Bankruptcy Code
applies in this case, the Debtors request (A) immediate entry of a temporary restraining order,
pursuant to section 105(a) of the Bankruptcy Code, restraining and enjoining the FCC from
canceling the Debtors’ Licenses and (B) entry of a preliminary injunction precluding and
enjoining the FCC from terminating or canceling the Debtors’ FCC Licenses pending entry of a
final non-appealable order on the License cancellation.
49.
Absent this Court’s grant and entry of injunctive relief, the Spectrum Portfolio
may, at any moment, be cancelled and revoked. Any such cancellation or revocation would
irreparably harm and effectively derail the Debtors’ reorganization efforts and would very likely
result in a shutdown of the Debtors’ business to the detriment of all concerned, including
8
Indeed, this would be at least the second time the Debtors’ Licenses were sold by the FCC: the first time, most, if
not all, of the Debtors’ 24 GHz and 39GHz Licenses were sold to third party auction winners who (i) then sold them
to the Debtors and/or (ii) were pre-merger predecessors of the Debtors.
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creditors, customers and the public at large. Indeed, License cancellation would very likely
result in the Debtors’ inability to continue using cash collateral, as the same will constitute a
termination event under both the PSA and the Cash Collateral Order.
50.
Enjoining the FCC with respect to the Spectrum Portfolio preserves this Court’s
exclusive jurisdiction over the Spectrum Portfolio and is within the Court’s authority to enter any
order, process or judgment that is necessary or appropriate to carry out the provisions of title 11.
51.
The Debtors have no adequate remedy at law.
52.
The FCC will not suffer any cognizable harm if the relief requested herein is
granted as the FCC’s ability to safeguard the “public interest” will still be preserved, as will this
Court’s jurisdiction to hear and determine core bankruptcy matters.
53.
Conversely, the Debtors will suffer immeasurable and irreparable harm if the
Spectrum Portfolio is cancelled, as it will irreparably harm, derail and likely destroy the Debtors’
reorganization efforts and very likely result in a shutdown and liquidation of the Debtors’
backhaul business.
54.
The public interest supports issuance of the requested injunctive relief because, in
addition to the above, it will (i) provide the Debtors with a chance to effectively and successfully
reorganize and (ii) enable to the Debtors’ businesses to continue operations for the benefits of
creditors, customers and the public at large.
55.
The Court should, therefore, issue the requested injunctive relief.
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WHEREFORE, Debtors respectfully request that the Court (i) enter the requested
declaratory and injunctive relief and (ii) grant such other and further relief as may be just and
proper.
Respectfully submitted this 23rd day of August, 2012.
ANDREWS KURTH LLP
By: /s/ Jason S. Brookner
Jason S. Brookner
Texas State Bar No. 24033684
Dallas, Texas 75201
Telephone: (214) 659-4400
Facsimile: (214) 659-4401
Email:
[email protected]
Paul N. Silverstein (admitted pro hac vice)
Jonathan I. Levine (admitted pro hac vice)
450 Lexington Avenue, 15th Floor
New York, New York 10017
Telephone: (212) 850-2800
Facsimile: (212) 850-2929
Email:
[email protected]
Email:
[email protected]
Counsel to the Debtors
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VERIFICATION
I, Kurt Van Wagenen, am an officer of each of the Debtors, plaintiffs herein. I have read
the foregoing Verified Complaint and declare under penalty of perjury pursuant to 28 U.S.C. §
1746 that the factual allegations set forth therein are true and correct to the best of my
knowledge, information and belief
Executed this 23rd day of August, 2012.
/s/Kurt Van Wagenen
Kurt Van Wagenen
DAL:839430.7

ADVERSARY PROCEEDING COVER SHEET (Instructions on Reverse) Debtor

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