## Facts

- The FCC auctioned broadband personal communications services spectrum licenses to NextWave and allowed payment by installments.
- NextWave made a down payment, executed promissory notes for the remaining balance, and granted the FCC a first lien and security interest in the licenses.
- The license agreements stated the licenses were conditioned on full and timely payment and would automatically cancel upon default.
- NextWave filed for Chapter 11 bankruptcy and suspended payments, including installment payments owed to the FCC, while pursuing reorganization.
- The FCC treated NextWave’s missed installment payment as triggering automatic cancellation and announced the licenses would be reauctioned.

## Issues

1. Whether 11 U.S.C. § 525(a) prohibits the FCC from canceling spectrum licenses held by a Chapter 11 debtor solely because the debtor failed to make timely installment payments owed for the licenses.
2. Whether a governmental unit’s asserted regulatory objectives can avoid § 525(a) when the operative cause of the cancellation is nonpayment of a dischargeable debt.

## Decision

- The Supreme Court affirmed the judgment invalidating the FCC’s cancellation of NextWave’s licenses.
- The Court held that § 525(a) barred the FCC, a governmental unit, from revoking a license held by a debtor solely because the debtor failed to pay a dischargeable debt.
- The Court rejected the FCC’s argument that regulatory motives removed the case from § 525(a); the statute turns on the cause of the action (nonpayment), not the agency’s purpose.
- The Court concluded that applying § 525(a) did not strip the FCC of general licensing authority; it limited only the grounds for cancellation when the debtor’s nonpayment involves a dischargeable obligation.

## Legal Principles

- 11 U.S.C. § 525(a) forbids a governmental unit from revoking a license solely because a bankruptcy debtor has not paid a debt that is dischargeable in the case.
- “Solely because” focuses on the operative reason for the adverse action; an agency’s regulatory motive does not negate a causal link to nonpayment.
- Independent regulatory agencies are bound by Bankruptcy Code anti-discrimination limits when their actions function as debt-based penalties against debtors.
- The Communications Act’s public-interest licensing framework coexists with the Bankruptcy Code; the FCC may regulate and revoke licenses on permissible grounds, but not solely for nonpayment of a dischargeable debt.

## Conclusion

The Court held that the FCC violated § 525(a) by canceling NextWave’s spectrum licenses based on the debtor’s failure to make installment payments that constituted a dischargeable debt, and it affirmed the judgment setting aside the cancellation.


FCC v. NextWave Pers. Commc’ns Inc., 537 U.S. 293 (2003)