(Reuters) - An appeals court threw out on Wednesday a federal agency's decision to fine CBS Corp television stations $550,000 for airing singer Janet Jackson's "wardrobe malfunction" during the 2004 Super Bowl broadcast.
A divided 3rd U.S. Circuit Court of Appeals in Philadelphia said that in imposing the fine, the Federal Communications Commission "arbitrarily and capriciously" departed from prior policy that exempted "fleeting" indecency from sanctions.
In a statement, the FCC said it is disappointed by the decision, but plans to use "all the authority at its disposal" to ensure that broadcasters serve the public interest when they use the public airwaves.
CBS spokeswoman Shannon Jacobs said the New York-based company is gratified by the decision, and hopes the FCC will "return to the policy of restrained indecency enforcement it followed for decades."
Jackson's right breast was briefly exposed to almost 90 million TV viewers after the singer Justin Timberlake accidentally ripped off part of her bustier during a halftime show performance. CBS was fined $27,500 for each of the 20 stations it owned.
The 3rd Circuit in 2008 voided the fine, but that decision was vacated when the Supreme Court in 2009 upheld the FCC policy as rational, in an opinion involving News Corp's Fox TV stations. It did not decide whether the policy was constitutional, and returned the CBS case to the 3rd Circuit.
Writing for a 2-1 majority, 3rd Circuit Judge Marjorie Rendell said that the FCC had for three decades maintained a "consistent refusal" to treat fleeting nude images as indecent, and that there was no justification to change policy for CBS.
She said FCC regulations governing indecency treat images and words interchangeably, and "it follows that the Commission's exception for fleeting material under that regulatory scheme likewise treated images and words alike."
Judge Anthony Scirica dissented, saying the Fox opinion "undermines" the 2008 decision in the CBS case, which he had written. He said the CBS case should be sent to the FCC so it could apply the proper standards.
The Supreme Court is expected in its current term to decide whether the FCC policy is constitutional.
It is reviewing a decision by a federal appeals court in New York that voided the policy as unconstitutionally vague.
That court said it was improper to fine broadcasters over expletives by the singers Bono and Cher on awards shows, or showing a woman's buttocks on "NYPD Blue."
The 3rd Circuit case is CBS Corp et al v. FCC, 3rd U.S. Circuit Court of Appeals, No. 06-3575.
Reporting by Jonathan Stempel in New York; Additional reporting by Jeremy Pelofsky in Washington, D.C.; Editing by Gerald E. McCormick and Steve Orlofsky