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February 5, 1953

American Broadcasting Co., Inc.
United States et al. National Broadcasting Co., Inc. v. United States et al. Columbia Broadcasting System, Inc. v. United States et al.

The opinion of the court was delivered by: LEIBELL

These three actions were instituted in August 1949 to enjoin and set aside an order of the Federal Communications Commission adopting certain interpretative rules of the Commission in relation to 'give-away' programs on radio and television. *fn1" Jurisdiction of this three-judge court is based on the provisions of the Federal Communications Act, 47 U.S.C.A. § 402(a) and the United States Judiciary and Judicial Procedure Act, T. 28 U.S.C. §§ 1336, 1398 and 2284. The right to a judicial review of the action of the Federal Communications Commission is also asserted by the plaintiffs under Section 10 of the Administrative Procedure Act. 5 U.S.C.A. § 1009.

The report of the Commission, released August 19, 1949, is entitled 'In the Matter of Promulgation of Rules Governing Broadcast of Lottery Information' and states in its opening paragraphs that:-

 'The Commission has this day determined to adopt the attached interpretative rules, set forth in the appendix to this Report, to be designated as Sections 3.192, 3.292 and 3.692. These rules set forth for the guidance of all broadcast licensees and other interested persons the Commission's interpretation of Section 1304 of the United States Criminal Code (18 U.S.C. § 1304) prohibiting the broadcast of any lottery, gift enterprise, or similar scheme which the Commission intends to follow in licensing proceedings in determining whether an applicant for a station license or renewal thereof is qualified to operate his station in the public interest. A Notice or Proposed Rule Making concerning this subject was issued by the Commission on August 5, 1948 and a Supplemental Notice of Proposed Rule Making was issued on August 27, 1948. Interested parties were afforded an opportunity to file briefs or statements setting forth why they believed the rules should or should not be adopted and oral argument on the matter was held before the Commission en banc on October 19, 1948.'

 The subsequent legal proceedings are summarized in the brief of defendants' counsel, in the American Broadcasting case, as follows:-

 'The Commission's order provided that it would go into effect on October 1, 1949. On August 31, 1949, plaintiff filed its complaint in this action. On September 19, 1949, Judge Rifkind convened a statutory court consisting of Judge Clark, Judge Leibell and himself, and on September 23, 1949, having heard a motion by plaintiff for a temporary restraining order, Judge Rifkind issued a restraining order and set down the application for an interlocutory injunction for hearing before the three- judge court at a later date. That application, however, did not come on for hearing because, following Judge Rifkind's issuance of a temporary restraining order, the Commission on its own motion postponed the effective date of its proposed rules until 30 days after final decision in this and the co-pending actions.

 'Following a number of discussions between counsel for the Commission and counsel for plaintiffs in the several actions, it was agreed that the cases could be and should be presented to the Court in a form not requiring a decision on questions of fact. For that purpose, amended complaints were prepared in the several actions and the amended complaint in the present action was filed on September 22, 1952. On the same day plaintiff moved on the complaint, a supporting affidavit and a stipulation with defendants' counsel, for summary judgment, and defendants filed a cross-motion for an order dismissing the complaint or, in the alternative, for summary judgment.'

 The stipulation in each action provided that all the allegations of the amended complaint be taken as admitted by the defendants and that either plaintiff or defendants may rely upon facts set forth in the amended complaint in the companion actions and upon any of the affidavits filed in either of said companion actions by either plaintiff or defendants therein.

 The three-judge court was thereafter reconstituted by the designation of Judge Weinfeld in place of Judge Rifkind, who had resigned as a District Judge. The motions in the three actions were consolidated for argument and were argued on December 15th, 1952.

 The Pleadings and Motions.

 The amended complaint of the American Broadcasting Company alleges jurisdictional facts and specifies the statutes under which the action is brought; it recites the adoption of the Rules by the Commission, the institution of the action, the parties thereto, the plaintiff's extensive broadcasting and television business and its large investment in broadcasting facilities for radio and television programs. Paragraphs 11 and 12 of American's amended complaint alleges:-

 '11. Plaintiff has expanded substantial sums of money in building up among the public, advertisers and broadcasting stations a valuable reputation and good will for the broadcasting stations it owns and operates and for the programs broadcast by its stations and furnished to affiliated stations for broadcasting by them. From time to time, plaintiff broadcasts programs having as the central feature the conduct of a contest in which prizes are awarded to the successful contestants. Such programs, or some of them, are within the terms of the Rules defining the types of programs which the Commission 'will in any event consider' as violations of Section 1304 of the Criminal Code, although none of such programs constitutes, or has been held by any court to constitute, a lottery, gift enterprise or similar scheme in violation of said Section. Such programs have not tended to demoralize or degrade the listening and viewing public but on the contrary have provided information and entertainment for the public. Many persons listen to, view and enjoy such programs although for one reason or another they are not eligible to win a prize. Such programs are highly popular, have contributed substantially to the reputation of and good will of plaintiff's stations and those affiliated with it and have produced substantial revenues and profits for plaintiff.

 '12. Among such programs which are or may be within the terms of the Rules, and which we are informed and believe the Commission considers as coming within the Rules, are the following:

 "Stop The Music' (radio show)

 "Stop The Music' (television show)'

 The amended complaint further alleges that unless the Commission's Order and the Rules be permanently enjoined and set aside, plaintiff's applications for renewal licenses for its broadcasting stations and for permits or licenses to extend its system will automatically be denied and its investments will be destroyed; or in any event plaintiff will be forced to discontinue the broadcasting of programs which may be within the Commission's Rules and plaintiff will suffer irreparable injury; that the Order and Rules are beyond the jurisdiction and authority of the Commission, violate the provisions of the Administrative Procedure Act, and are illegal and void; that the Rules are in violation of certain provisions of the Constitution of the United States and of the amendments thereto.

 The prayer for relief asks that a three-judge court be constituted to hear and determine the action; that plaintiff be granted an interlocutory injunction; and that upon final hearing and determination of this action, the court 'enter a decree permanently enjoining, setting aside and annulling said Order of the Commission adopted August 18, 1949, and the Rules adopted thereby'.

 Annexed to the amended complaint of the American Broadcasting Company is a description of its 'Stop The Music' program- the radio version and the television version. The contestants are of two kinds: telephone participants and studio participants. The telephone participants are selected by lot or chance from telephone directories. The telephone participant is not required to be listening at his radio to the broadcast at the time he is called. If the telephone participant fails to identify the melody, a studio participant is given an opportunity to do so. The prizes are furnished by the manufacturer, in return for a brief advertisement of his product. Those who are selected from the television audience express in advance, through postcards, their desire to participate. From the cards received a random selection is made and the participants are telephoned.

 An affidavit of G. B. Zorbaugh, Secretary and Acting General Attorney for American, is submitted in support of American's motion for a summary judgment. Annexed to it are many exhibits which are also annexed to the affidavits submitted by National or Columbia. They will be hereinafter considered. But one thing should be noted now. The Solicitor of the Post Office Department in a letter of May 9, 1949 advised American that the postcard in relation to the 'Stop The Music' program would not be regarded as unmailable matter under the postal lottery statute. He added that whether or not the program conflicted with Section 1304 would be for the Federal Communications Commission to determine.

 Further, in May 1949 the Solicitor of the Post Office sent the attorneys for the Columbia Broadcasting System a copy of a general ruling made by the Solicitor for the benefit of all the postmasters, in February 1947, from which the following is quoted:

 'In order for a prize scheme to be held in violation of this section, it is necessary to show (in addition to the fact that the prizes are awarded by means of lot or chance) that the 'consideration' involves, for example, the payment of money for the purchase of merchandise, chance or admission ticket, or as payment on an account, or requires an expenditure of substantial effort or time. On the other hand, if it is required merely that one's name be registered at a store in order to be eligible for the prize, consideration is not deemed to be present. (P.O. Bulletin February 13, 1947).'

 The amended complaint of the National Broadcasting Company alleges the jurisdictional basis of the action; the order and rules of the Federal Communications Commission; the extent of the National Broadcasting Company's radio and television network; the annual income from the programs of National Broadcasting Company that would be affected by the CommissionS Order and Rules; and a description of its four programs thus affected. 'You Bet Your Life' is a studio audience participation program; 'The $ 64 Question' is also a studio program; 'What's My Name' is a studio and listening audience program; and 'Double Or Nothing' is a program in which the primary participation is by members of the studio audience, although members of the listening audience are invited to submit questions on a label of one of the sponsor's products. On the 'What's My Name' program there is a selection at random of participants from the listening audience.

 The amended complaint alleges the importance of these programs to National Broadcasting Company and the danger to it of a loss of its license when it is up for renewal, if the Commission enforces its rules in relation to Section 1304 of the United States Criminal Code. There are also allegations that the Commission is without power to promulgate or enforce the rules; that they incorrectly interpret Section 1304; that the rules violate provisions of the Communications Act and the Administrative Procedure Act; and finally that they are unconstitutional under the First, Fifth and Sixth Amendments, and under Clause 3 of Section 9 of Article 1 (Bill of Attainder). The prayer for relief asks that after final hearing, the three-judge court adjudge and decree that the Commission's Order is beyond the lawful authority of the Commission, in violation of plaintiff's legal rights and wholly void; and that the Commission's Order be vacated and set aside and the enforcement thereof perpetually restrained and enjoined. Annexed to the amended complaint are the scripts of the National Broadcasting Company programs mentioned above.

 To the affidavit submitted by Mr. Margraf, Vice President and General Attorney of National Broadcasting Company, on the motion for summary judgment, there are a number of exhibits annexed, among them the following: a copy of Chairman Fly's letter of December 30, l943, addressed to Senator Wheeler, then Chairman of the Interstate Commerce Committee, asking that he support certain legislation (draft enclosed) directed at radio programs 'where members of the radio audience not in the studio are selected by lot or chance to win a prize if they can show that they were listening to the particular program'. The draft of the proposed new Section 316 would have prohibited the broadcasting of 'any program which offers money, prizes or other gifts to members of the radio audience (as distinguished from the studio audience) selected in whole or in part by lot or chance'.

 Mr. Margraf's affidavit also annexes copies of letter sent by the Commission's Chairman to the Attorney General's office in February and March 1940, calling his attention to the following programs 'alleged to be in violation of Section 316 of the Communications Act of 1934.' The 'meads Bakery Mystery Woman' program; the 'Pot of Gold' program; the 'Dixie Treasure Chest' program; the 'Sears Grab Bag' program; the 'Especially for You' program; the 'Musico' program; the 'Songo' program. On April 20, 1940, the Attorney General wrote the Commission that after a thorough examination of the material submitted, the Department had concluded that prosecutive action under Section 316 should not be instituted in the matter of the 'Pot of Gold' and 'Meads Bakery' programs. On April 29, 1940, the Attorney General wrote the Commission that after careful consideration no action was warranted by the Department in the 'Dixie Treasure Chest' program. On the same day similar letters were sent by the Attorney General to the Commission in respect to the 'Sears Grab Bag' program, the 'Especially for You' program, the 'Songo' program and 'Musico'.

 Mr. MarGraf's affidavit also annexes documents showing that in 1939 the Solicitor of the Post Office made two contradictory rulings with respect to whether a radio program, known as 'Musico', was a lottery. On July 1, 1939 he ruled that the program did not violate the Federal lottery laws. oN September 29, 1939, he ruled that the 'Musico' program did violate the Federal lottery laws. When the attorneys for Columbia Broadcasting System inquired in 1949 about those two rulings, the Solicitor of the Post Office replied on May 3, 1949: 'It is likely that if the Musico plan were submitted to this office today, it would be held, in view of the change reflected in the enclosed notice (a general ruling for all postmasters concerning prize activities dated February 13, 1947) not to conflict with the postal lottery laws.' The Solicitor also ruled on March 2, 1950 concerning the radio program 'Truth and Consequences' that the contest post cards were mailable, although they were used for a random selection of contestants. The Commission had issued its proposed interpretative rules in August 1949.

 The amended complaint of the Columbia Broadcasting System alleges the statutory provisions under which this action was instituted; the corporate organization of plaintiff; and the nature and extent of plaintiff's nationwide radio network and television network. It also alleges that 'Sing It Again' and 'Hit the Jackpot' are two network programs which involve the award of prizes; the revenue those programs produce; how the contestants from the listening audience are selected at random from phone books; and that on the 'Hit the Jackpot' program studio contestants were selected by pre-broadcast interviews and non-studio contestants were selected by chance from post cards sent in. It is alleged that because of the Commission's Rules, sponsors have discontinued the programs; that there never has been any court adjudication that these programs violate Section 1304 of the United States Criminal Code; and that there is no finding of fact by the Commission that the said program or programs similar thereto 'have had a demoralizing or other deleterious, harmful or evil effect on the public'. The amended complaint further alleges that plaintiff's stations have a value of many millions of dollars which will be destroyed if its licenses therefor are not renewed. fInally, it is further alleged that the Commission's Rules do not correctly interpret and apply Section 1304 of the United States Criminal Code; that they violate provisions of the United States Constitution and amendments thereto; that they violate other statutes of the United States (the Communications Act and the Administrative Procedure Act); and that plaintiff will suffer irreparable damage unless it is accorded relief in this action. The prayer for relief seeks a permanent injunction and a judgment setting aside the Commission's order of August 18, 1949 and the rules adopted thereby.

 Annexed to the amended complaint are transcripts of the program 'Sing It Again' and of the program 'Hit the Jackpot'; also copies of the Commission's Order, Opinion and Rules.

 In support of its motion for summary judgment the Columbia Broadcasting System, Inc. submits an affidavit of Mr. Freund, one of plaintiff's attorneys, to which he annexes copies of the judgment (November 1939) in the case of Clef, Inc. v. Peoria Broadcasting Company in the Circuit Court of Peoria County, Tenth Judicial District, Illinois. That judgment held that the radio program 'Musico' was not a lottery and did not violate any statutes of the United States. Mr. Freund also refers to various rulings of the Post Office Department, and to the opinions of the Attorney General in April 1940 in relation to a number of radio programs which were submitted by the Federal Communications Commission to the Department of Justice for action under Section 316 of the Communications Act. All of these ...

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