Airadigm Communications, Inc. v. Federal Communications Commission (In re Airadigm Communications, Inc.)

Airadigm Communications, Inc. (Airadigm) (plaintiff) obtained 15 licenses for personal communications services from the Federal Communications Commission (the FCC) (defendant). Airadigm agreed to pay off the licenses on an installment plan. Later, Airadigm filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. The FCC canceled Airadigm’s licenses and filed a proof of claim for the remaining amounts owed. The plan of reorganization hinged on financing from a third party, Telephone and Data Systems (TDS). After the bankruptcy, Airadigm sought to have the licenses reinstated. Following a recent court ruling on a case with similar circumstances, the FCC decided that its cancellation of Airadigm’s licenses had been ineffective. Airadigm filed a second Chapter 11 petition, and the bankruptcy court approved a second plan of reorganization. The plan included a release from liability of TDS for all claims arising in connection with the plan, with the exception of willful misconduct. The bankruptcy court considered the release a vital factor in inducing TDS’s participation in the plan. Airadigm commenced an adversary proceeding against the FCC, seeking to eliminate the FCC’s interest in the licenses, which had carried over from the original plan. The FCC objected to the release from liability of TDS, arguing that such a release was not permissible under the Bankruptcy Code. The matter was appealed to federal district court, which affirmed the bankruptcy court in all relevant respects. Both parties appealed. The United States Court of Appeals for the Seventh Circuit granted certiorari.