WASHINGTON, DC — The Federal Communications Commission acted “arbitrarily and capriciously” in fining CBS Corp. $550,000 for airing the “wardrobe malfunction” that briefly bared one of singer Janet Jackson’s breasts during the 2004 Super Bowl halftime show, a panel of three federal judges ruled Monday.The 3rd U.S. Circuit Court of Appeals in Philadelphia set aside the fine and cautioned the FCC about adhering to its own guidelines. For three decades prior to the Super Bowl incident, the FCC had overlooked “fleeting,” isolated bits of indecency that aired during the hours when children were likely to be watching or listening: 6:00 a.m. to 10:00 p.m.

“The commission’s conclusion on the nature and scope of its indecency regime — including its fleeting material policy — is at odds with the history of its actions in regulating indecent broadcasts,” the unanimous 102-page judicial ruling noted. “Like any agency, the FCC may change its policies without judicial second guessing. But it cannot change a well-established course of action without supplying notice of and a reasoned explanation for its policy departure.”

In addition, the court sided with CBS on the argument that Jackson and singer Justin Timberlake — who accidentally removed part of Jackson’s costume near the end of their halftime duet — were independent subcontractors, not network employees, and therefore CBS was not liable for their actions.

“The First Amendment precludes the FCC from sanctioning CBS for the indecent expressive conduct of its independent contractors without offering proof of scienter as an element of liability,” the judges wrote. “And it is unclear whether the FCC correctly applied a ‘willfulness’ standard to find CBS liable for failing to prevent the halftime show’s indecency… The airing of scripted indecency or indecent material in pre-recorded programming would likely show recklessness, or may even constitute evidence of actual knowledge or intent. But when unscripted indecent material occurs during a live or spontaneous broadcast, as it did here, the FCC should show that the broadcaster was, at minimum, reckless in causing the indecent material to be transmitted over public airwaves.”

Attorney and author Frederick Lane III, whose book The Decency Wars: The Campaign to Cleanse American Culture (Prometheus Books, 2006) chronicled the 2004 Super Bowl halftime show and the legal proceedings that followed, said the court’s ruling bespeaks a growing public distrust of the federal government’s sleight-of-hand and kowtowing to American religious extremists.

“The FCC’s tortured attempt to revise its policies to punish CBS was only marginally motivated by concern for public decency,” Lane said. “Instead, the Commission’s unusually aggressive investigation and punishment of CBS was motivated by a desire to deflect attention from [the agency’s] controversial deregulatory policies and the Bush White House’s interest in satisfying its Religious Right base in an election year.”

“For much of the past decade, social and religious conservatives have been trying to use the FCC to impose a narrow moral agenda on broadcasters,” Lane continued. “Some even want to extend the FCC’s jurisdiction to cable and the Internet. The Court’s opinion underscores the danger of allowing a small group of government regulators to impose their subjective views regarding speech on the entire country.”

CBS said it hoped the decision would cause the FCC to re-evaluate its recent policies governing indecency enforcement.

“This is an important win for the entire broadcasting industry because it recognizes that there are rare instances, particularly during live programming, when it may not be possible to block unfortunate fleeting material, despite best efforts,” a prepared statement released by the network stated.

The FCC did not comment immediately.

Jackson’s split-second “wardrobe malfunction” — as the episode that aired before an estimated 140 million viewers has come to be known — generated an immediate flood of consumer complaints to the FCC and led Congress to up indecency fines from $32,500 per station per incident to $325,000 per station per incident. The episode also led to a turning point in the FCC’s thinking about indecency on the airwaves. Under Chairman Kevin J. Martin, the agency has become ever more aggressive in enforcing indecency laws. After the wardrobe malfunction, the agency adopted a “zero-tolerance” policy, even fining companies for fleeting vocal vulgarities uttered during live broadcasts.

The new attitude was challenged by a consortium of broadcast networks, and last year the 2nd Circuit Court of Appeals in New York ruled in the networks’ favor. The Bush administration appealed that decision, and the U.S. Supreme Court will hear the appeal sometime this fall.