FCC v. NextWave Personal Communications Inc.

In 1993 Congress allowed the Federal Communications Commission (FCC) (creditor) to award spectrum licenses through competitive bids. To ensure that small businesses could access the licenses, the FCC offered installment plans under which small businesses could pay for licenses in installments. The FCC held an auction for spectrum licenses, and NextWave Personal Communications Inc. (NextWave) (debtor) won the licenses with a bid of approximately $4.7 billion. NextWave entered into an installment plan with the FCC and gave the FCC a security interest in the licenses. Under the security agreement, the FCC would automatically cancel the licenses if NextWave failed to make payments. NextWave experienced financial troubles and filed for bankruptcy in June 1998. In accordance with the bankruptcy proceedings, NextWave suspended all payments to its creditors, including the FCC. A reorganization plan was eventually approved under which NextWave agreed to pay the FCC a lump sum for the licenses. NextWave missed its first payment deadline in October 1998, and the FCC canceled NextWave’s licenses. NextWave sought emergency relief in bankruptcy court. The bankruptcy court held that the FCC’s cancellation of NextWave’s licenses violated multiple provisions of the Bankruptcy Code. The court of appeals affirmed, holding that the FCC violated 11 U.S.C § 525(a). Section 525(a) prohibited federal agencies from discriminating against a bankrupt debtor by revoking licenses solely because of the debtor’s failure to make payments. The FCC appealed. The United States Supreme Court granted certiorari.