Gray Television convinced a federal appeals court to toss a fine of more than $500,000 the FCC imposed for exceeding a cap on how many stations it can own in the same area.

The Federal Communications Commission properly found that Gray violated a rule—known as Note 11—against owning two top-four stations in the same market, said Judge Adalberto Jordan Friday in an opinion for the US Court of Appeals for the Eleventh Circuit. Ratings data showed both stations under Gray’s ownership were in the top four of audience share, Jordan said.

But the agency didn’t give the company a …