By Robert Iafolla

WASHINGTON (Reuters) - The ethnic category “Hispanic” is a race under U.S. federal antidiscrimination laws, a U.S. appeals court ruled on Tuesday.

Christopher Barrella, a white candidate who was passed over for the position of police chief for the town of Freeport on New York's Long Island, filed a racial discrimination lawsuit in 2012 after the job went to Miguel Burmudez, a white Hispanic man.

Freeport argued in its defense that there could be no racial discrimination because Hispanic is not a distinct race.

But a three-judge panel of the U.S. 2nd Circuit Court of Appeals rejected the town's argument, finding that Hispanic has long been considered a separate race in civil rights cases. The judges pointed out that the U.S. Supreme Court has previously held that racial discrimination includes bias based on ancestry or ethnic characteristics.

The 2nd Circuit, which encompasses the states of New York, Connecticut and Vermont, also noted that it has repeatedly assumed ethnicity-based discrimination claims were understood as racially motivated without making an explicit ruling on that point.

But though the panel ruled in favor of Barrella on how antidiscrimination laws treat ethnic categories, it also wiped out the $1.35 million verdict a jury had awarded him.

The judges cited a separate evidentiary issue in vacating the verdict and ordering a new trial, ruling that the trial court should not have allowed non-expert witnesses to speculate on Freeport Mayor Andrew Hardwick’s motivations for choosing Burmudez over Barrella.

Lawyers for Barrella, Freeport and Hardwick each expressed confidence that their clients will prevail when the dispute goes back before a federal jury.

Freeport named Burmudez as its chief of police in 2010 over Barrella, who had a higher promotional test score, more education and more time in rank. Barrella sued Freeport and Hardwick in federal court in Brooklyn in 2012. A jury handed down verdicts against both defendants in 2014, awarding $1 million for lost future pay, $200,000 in punitive damages and $150,000 in back wages, plus attorney fees.

The appeal was set up when the trial judge denied Freeport’s post-verdict motion for a judgment as a matter of law on the grounds that Hispanic does not constitute a distinct race under antidiscrimination laws.

The case is Freeport v. Barrella, 2nd U.S. Circuit Court of Appeals, Nos. 14-2270, 14-2349, 14-4287, 14-4324 and 14-3615.