## Facts

- Beach Television Partners (BTP), a Florida general partnership, operated two independent television stations.
- Orix Credit Alliance, Inc. financed most of BTP’s broadcasting equipment and took a security interest in BTP’s personal property, including “general intangibles” and the stations’ FCC broadcasting licenses.
- BTP filed Chapter 11 bankruptcy in 1990; the case was later converted to Chapter 7, and George E. Mills, Jr. was appointed trustee.
- The trustee obtained FCC approval and sold the two broadcast licenses for about $140,000, holding the proceeds for the estate.
- Orix sought turnover of the sale proceeds, arguing its perfected security interest extended to the proceeds of the licenses.
- The trustee opposed, asserting federal communications law and FCC policy barred any security interest in licenses and therefore barred a lien in the proceeds.
- The bankruptcy court denied Orix’s request; the district court affirmed and denied rehearing; Orix appealed.

## Issues

1. Whether federal communications law and FCC policy bar a creditor from holding a valid UCC Article 9 security interest in proceeds of an FCC broadcast license transferred with FCC approval.
2. Whether a security agreement covering “general intangibles” and related property can attach to, and continue in, cash proceeds generated by an FCC-approved license sale in bankruptcy.

## Decision

- The Eleventh Circuit reversed the district court’s affirmance of the bankruptcy court.
- The court held that, although a creditor cannot hold a security interest in an FCC broadcast license itself, a creditor may hold a valid security interest in the proceeds of an FCC-approved sale of the license.
- The case was remanded for further proceedings consistent with treating Orix as a secured creditor in the license-sale proceeds.

## Legal Principles

- Federal law and FCC policy protect the FCC’s control over licensing, assignment, and transfer decisions; they prohibit liens that would permit a creditor to seize, control, or compel transfer of a broadcast license without FCC oversight.
- A licensee nevertheless has a transferable, FCC-regulated economic interest that may be sold with FCC consent; once transferred, the resulting cash proceeds are ordinary property subject to creditor claims.
- Under UCC Article 9 (as adopted in Florida), a security interest may attach to “general intangibles” and automatically continues in identifiable “proceeds” of collateral upon disposition.
- Recognizing a lien in sale proceeds does not conflict with federal objectives when enforcement affects only distribution of money after an FCC-approved transfer and does not affect who holds the license or whether it may be transferred.
- Courts should distinguish between an impermissible lien in the license itself and a permissible lien in the economic value realized from an approved sale.

## Conclusion

The Eleventh Circuit ruled that federal communications policy does not preempt Article 9 as applied to proceeds of an FCC-approved broadcast-license transfer, allowing a secured creditor’s perfected lien to attach to and be enforced against the sale proceeds even though the creditor cannot take a security interest in the license itself.


Orix Credit All., Inc. v. Mills (In re Beach Television Partners), 38 F.3d 535 (11th Cir. 1994)