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EXHIBIT 5.3
[LETTERHEAD OF LUKAS, MCGOWAN, NACE & GUTIERREZ, CHARTERED]
June 13, 1996
(202) 828-9475
Lehman Brothers Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
Chase Securities, Inc.
Toronto Dominion Securities (USA) Inc.
c/o Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
Re: PCS Development Corporation
Ladies and Gentlemen:
This letter will discuss the impact of the Adarand decision on the
FCC's "Designated Entities" program and update the letter from this firm to
Patrick Daugherty on this subject dated June 21, 1995.
The FCC is resigned to the fact that no race-based auction preferences
can withstand "strict scrutiny" under Adarand unless the agency is able to
establish a record of discrimination against minority groups. Since the
Adarand decision, the FCC has eliminated from its competitive bidding rules any
preferences, or proposed preferences, for minorities or women owned businesses.
Recently, however, pursuant to a requirement under the Telecommunications Act
of 1996, the FCC has commenced a proceeding in which it seeks data to identify
whether small businesses owned by minorities or women have experienced barriers
to entry into the telecommunications industry. The pleading cycle for this
proceeding terminates on August 23, 1996.
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June 13, 1996
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Neither Adarand nor the FCC's action since the Adarand decision has
altered our view that PCSD's licenses are not subject to a direct or collateral
constitutional attack. Our view is based on the following considerations:
1. The FCC's action granting PCSD's applications is now final and
immune from administrative reconsideration or judicial review. Consequently,
the grants are insulated from any direct attack based on the
unconstitutionality of the preferences accorded to PCSD. (The licenses,
however, are subject to revocation under 47 U.S.C. Section 312(a) for reasons
unrelated to the constitutionality of the FCC's auction process.)
2. I can foresee no scenario under which the PCSD licenses could
be subjected to a sustainable Adarand- based collateral attack. PCSD would be
vulnerable to such an attack only if there is ongoing litigation that could
result in a judgment requiring the FCC to vacate the grant of PCSD's
applications. See Alianza Federal de Mercedes v. FCC, 539 F.2d 732, 735-36
(D.C. Cir. 1976). There is no such case pending, and no party can now bring a
constitutional challenge to the FCC's rules that could retroactively endanger
PCSD's licenses.
3. The FCC's designated entities program could be declared
unconstitutional only in the unlikely event that the agency decides to go
forward with its existing rules. In that event, those rules could be struck
down on due process/equal protection grounds either in (a) a direct appeal from
a final order issued by the FCC in the rulemaking proceeding itself; (b) an
appeal of an adjudicatory order by which the FCC applied its rules in a future
narrowband PCS auction, see Functional Music, Inc. v. FCC, 274 F.2d 543, 546-47
(D.C. Cir. 1959); or (c) in a federal court action for a declaratory judgment.
However, any decision invalidating the FCC's rules for designated entities
would be applied retroactively to all pending cases. See Harper v. Virginia
Dept. of Taxation, 113 S.Ct. 2510, 2516-18 (1993). But again, the grant of
PCSD's licenses cannot be at issue in any future case. Those licenses are
clearly beyond the reach of any retroactive application of a constitutional
ruling under Adarand.
4. Certainly, no ruling striking down the FCC's auction rules --
even one issued by the FCC -- could provide grounds to revoke PCSD's licenses.
Revocation on such grounds would be warranted only if the constitutional ruling
could be considered a "condition[] coming to the attention" of the FCC which
would have warranted the denial of PCSD's original application. See 47 U.S.C.
Section 312(a)(2). However, the FCC was aware that its auction rules were
suspect under the Fifth Amendment when it granted PCSD's applications.
Consequently, the FCC cannot later assert the unconstitutionality of its rules
as grounds to revoke those licenses.
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June 13, 1996
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Finally, with respect to the offering documents, the language
suggested in our previous letter with respect to Designated Entity matters
remains accurate. It reads as follows:
In particular, FCC counsel has advised the Partnership that
PCSD's licenses cannot be adversely affected by the Supreme
Court's recent decision subjecting all federal race-based
classifications, such as the FCC's "designated entity"
classification, to "strict scrutiny" by the courts.
If we can be of further assistance with regard to this matter, please
let us know.
Sincerely,
David A. LaFuria
cc: William deKay (via facsimile)