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The Feb. 19 decision by the U.S. Court of Appeals for the D.C. Circuit to reject two Federal Communications Commission rules on media ownership meant a big win for mega-communications companies like Disney, Viacom and Rupert Murdoch’s News Corp., which have suddenly become much freer to acquire new broadcast properties and keep the ones they own. It was also a significant victory for lawyers from the Washington, D.C., office of Chicago’s Kirkland & Ellis, which led the charge for the television networks, and for AOL Time Warner Executive Vice President and General Counsel Paul Cappuccio, who happens to be a former Kirkland partner. Edward Warren of Kirkland shared argument time at the D.C. Circuit with Cappuccio. Both found success, as a panel composed of Chief Judge Douglas Ginsburg and Judges David Sentelle and Harry Edwards ruled unanimously in favor of the large broadcast interests. The case involved two distinct FCC rules, both of which the agency opted to retain in 1998 while under Democratic control. The Telecommunications Act of 1996 requires the FCC to look at the ownership rules every two years to see if they are “necessary in the public interest,” and the case marked the first judicial test of the agency’s actions under this provision. One of the rules prohibits any company from owning interests in television stations that collectively reach more than 35 percent of the TV households in the nation. The other rule prohibits a company from owning both a cable television system and a TV station in the same metropolitan area. The judges were unconvinced by a variety of justifications for the rules that were advanced by lawyers for the agency, public interest groups and the National Association of Broadcasters. Warren and Cappuccio divided the appellate argument, with Warren, on behalf of the News Corp., which owns Fox, arguing against the 35 percent rule. The News Corp., as a result of its recent acquisition of Chris-Craft Industries Inc., now has an interest in stations that reach 39 percent of the U.S. market. The D.C. Circuit found that the FCC had not come up with an adequate justification of this stricture and sent it back to the FCC for another try. Cappuccio argued against the cable rule. AOL Time Warner owns cable systems in New York City and would have been barred from owning a TV station there. The circuit struck down this rule outright, finding that defending it against the assertion that it is arbitrary and capricious was “a hopeless cause.” Cappuccio did not return a call, and Warren declines comment. One lawyer involved in the case says litigators from several firms should share the credit, as they engaged in “an extraordinarily collaborative process.” They include Bruce Sokler of Boston-based Mintz, Levin, Cohn, Ferris, Glovsky and Popeo’s D.C. office, who worked with Kirkland lawyers on behalf of Fox; John Roberts Jr. of D.C.-based Hogan & Hartson on behalf of NBC; and Stuart Gold of New York’s Cravath, Swaine & Moore on behalf of Viacom Inc., which owns CBS. Andrew Schwartzman of the D.C.-based Media Access Project says his group plans to seek Supreme Court review. Schwartzman says the case has caused consternation at the FCC because the circuit appeared to be second-guessing the agency’s decisions to retain its rules. If the ruling stands, he says, the agency would be forced to rejustify — as opposed to simply review — all of its ownership rules every two years. That, Schwartzman contends, is a significant departure from the usual standards of administrative law. One commissioner, Michael Copps, has strongly urged the commission to seek certiorari, telling Communications Daily that “if we have to go through this kind of rulemaking every two years, it will add an administrative burden that will be impossible for the commission to discharge.”

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