USCA Third Circuit, July 21, 2008

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The Third Circuit vacated an FCC order that CBS and its affiliates pay a fine of $550,000 for Janet Jackson’s exposed breast during the Superbowl Halftime Show in February, 2004.

A court can set aside an agency decision under the Administrative Procedure Act (5 U.S.C. § 706) if the agency decision is found to be “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law.” The court held that the FCC’s action was arbitrary and capricious because it did not enforce federal communications laws against broadcasters for “fleeting” instances of indecency for nearly 30 years and the agency did not formally announce a change in its policy until March, 2004. “[T]he 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.”

The court scrutinized three decades of FCC enforcement policy with regard to the broadcast of indecent material and found that the FCC did not enforce the policy with regard to fleeting instances of indecency. The court acknowledged that the FCC changed this policy in March, 2004, but the Halftime Show occurred in February, 2004, so the FCC could not enforce its new policy against CBS for a broadcast that took place before its announced change in policy. The court also rejected the FCC’s argument that its decades-old policy of non-enforcement for fleeting instances of indecency extended only to indecent utterances and not indecent images. The court examined previous FCC enforcement actions and policy statements and letters in which the FCC stated it was not initiating an enforcement action and concluded that the FCC did not differentiate between indecent utterances and images in the past.

The court also rejected all three of the FCC’s theories of liability. The FCC had argued that CBS was liable for the actions of Janet Jackson and Justin Timberlake under the theory of respondeat superior because Jackson and Timberlake were employees of CBS. The court disagreed, saying that the performers were independent contractors who deviated from the script of the show and that CBS was therefore not liable for their actions. In finding that the performers were independent contractors, the court noted that they were skilled performers hired for a one-time appearance; they were paid a single lump-sum amount plus promotional materials as opposed to a salary; they retained significant control over the choreography and costumes; and CBS did not pay employment tax for their work.

The court also rejected the FCC’s theory that CBS was vicariously liable for its independent contractors’ actions because broadcast licensees hold nondelegable duties to avoid the broadcast of indecent material and to operate in the public interest. CBS argued that this, in essence, would create a strict liability approach. The court acknowledged that the FCC has held broadcasters liable for the actions of independent contractors but only when the independent contractor has stepped into the shoes of the broadcaster by assuming maintenance and operations duties. The court declined to extend this theory of liability to independent contractors who are performers, noting that performances are a form of speech protected by the First Amendment. The court stated that the “First Amendment precludes a strict liability regime for broadcast indecency. The First Amendment requires that the FCC prove scienter when it seeks to hold a broadcaster liable for indecent material. In the case of scripted or pre-recorded indecent material, the scienter element likely would be satisfied. But when the indecent material is unscripted and occurs during a live broadcast, as in the Halftime Show, a showing of scienter must be made on the evidence.” Although CBS had approval over the script and other elements of the show, the performers chose their own choreography and in this case deviated from the script, so the court said there was no evidence that CBS had knowledge of the performers’ intent to broadcast indecent material.

Finally, the court also rejected the FCC’s argument that CBS was vicariously liable for the actions of the performers because it failed to take reasonable precautions, such as a video delay, to prevent the broadcast of indecent material. CBS argued that it did use an audio delay for the Halftime Show but that it did not have the ability to use a video delay. The court rejected the FCC’s theory of vicarious liability because the FCC failed to show that CBS was “reckless” in failing to implement video delay technology for the show.