In a dramatic ending before it recessed for the summer, the U.S. Supreme Court on Monday ruled 5-4 that the city of New Haven, Conn., violated the civil rights of white and Hispanic firefighters when it tossed out the results of a promotion exam after no African-Americans had passed it.

The city argued it discarded the results because it feared that it would be sued by the African-American applicants for violating Title VII by relying on a test that had “disparate impact” on minorities. That justification did not meet the court’s standard announced on Monday, which requires a “strong basis in evidence” before an employer can make employment decisions based on fear of Title VII liability. The court said instead that the city’s action was based on race and amounted to a “disparate treatment” violation of the same civil rights law.

The ruling in Ricci v. DeStefano, written by swing Justice Anthony Kennedy, was immediately denounced by civil rights advocates as a blow to employers, public and private, who are trying to equalize job opportunities for minorities. “We still have far to go to fulfill Title VII’s promise of equal employment opportunity. This is a giant leap backward,” said Sarah Crawford of the Lawyers’ Committee for Civil Rights Under Law. “The Supreme Court’s interpretation imposes new burdens on employers and makes it more difficult to maintain a discrimination-free workplace,” said John Payton, president of the NAACP Legal Defense and Educational Fund.

The ruling also had a quick, if uncertain, impact on the Supreme Court nomination of Judge Sonia Sotomayor of the 2nd U.S. Circuit Court of Appeals, who was part of a panel that upheld New Haven’s action. (Monday was the final day on the bench for retiring Justice David Souter, whom Sotomayor will replace if confirmed.)

“Judge Sotomayor’s reading of the law undermined the Constitution,” said Roger Clegg, president and general counsel of the Center for Equal Opportunity, which opposes affirmative action programs. “Today the Supreme Court sent a clear message that there is nothing in the Constitution’s text that suggests an exception when discrimination is of a politically correct variety.”

Jay Sekulow of the conservative American Center for Law and Justice said Monday’s ruling puts Sotomayor’s views on judicial activism “front and center” at her confirmation hearing, which is set to begin on July 13.

But Thomas Goldstein of Akin Gump Strauss Hauer & Feld said the ruling “doesn’t call the confirmation into question, and I don’t think it will persuade anyone to change their views.”

Also on Monday, the Supreme Court ruled 5-4 in Cuomo v. Clearing House Association that the National Banking Act does not pre-empt enforcement of state fair-lending and other consumer laws against national banks. Conservative Justice Antonin Scalia wrote the opinion, joined by moderate-to-liberal colleagues John Paul Stevens, David Souter, Ruth Bader Ginsburg and Stephen Breyer.

In an unusual disposition of its other pending case, the court scheduled a new hearing for Sept. 9 in Citizens United v. Federal Election Commission, on whether the so-called “Hillary movie,” a movie critique of then-presidential candidate Hillary Clinton, violated campaign finance laws. The court’s action puts the case on the docket in an odd limbo period during the court’s usual summer recess. The justices may hope that by scheduling new arguments for Sept. 9, they can issue a decision by the time the current term ends just before Oct. 5.

In part because of Sotomayor’s participation, the New Haven firefighters’ case was one of the most anticipated decisions of the term. Kennedy said the “stakes were high” for firefighters who took the promotion exam in 2003, noting that “firefighters prize their promotion to and within the officer ranks.” When whites outperformed minorities in the exams, and no African-Americans qualified for promotion, the city threw out the exams, even though Kennedy said officials had no “objective, strong basis” for deciding that the exam was inadequate or biased.

Without that evidence, Kennedy concluded that the city could not reject the exam just because of the racially disparate results. “Fear of litigating alone cannot justify an employer’s reliance on race to the detriment of individuals who passed the examinations and qualified for promotions,” Kennedy wrote. Chief Justice John Roberts Jr. joined the Kennedy opinion, as did justices Scalia, Clarence Thomas and Samuel Alito Jr.

After Kennedy summarized his opinion in a matter-of-fact tone from the bench, Ginsburg read mournfully from her dissent. New Haven had acted properly in the face of test results that opened the city to a civil rights suit, she said, and as a result “cannot be fairly characterized as race-based discrimination.” She said the city had “good reason” to fear that the unsuccessful minority applicants would sue if the promotions had gone ahead.

Ginsburg noted that a long history of discrimination in fire and police departments nationwide was one of the reasons Congress in 1972 extended Title VII to outlaw race discrimination by public as well as private employers. “Congress endeavored to promote equal opportunity in fact, and not simply in form,” she said. “The damage today’s decision does to that objective is untold.”

There was scant reference to the 2nd Circuit’s brief ruling in the case — the one in which Sotomayor participated — upholding a district court finding in favor of the city. But Ginsburg made one comment that appeared directed at the debate over nominee Sotomayor. Referring to Kennedy’s majority, Ginsburg said from the bench the white and Hispanic applicants who passed the exam only to have the results tossed out “understandably attract the court’s empathy.” In the text of her opinion, she used the word “sympathy” instead of empathy, but by using “empathy” in her oral recitation, she used the same word President Barack Obama has invoked to describe a quality he wants in Supreme Court justices. Conservatives have attacked Obama and, through him, Sotomayor, for valuing that criterion. Ginsburg’s comment was a pointed assertion that conservatives use empathy too. Joining Ginsburg in dissent were Stevens, Souter and Breyer.

Civil rights groups on Monday said the ruling won’t shut the door entirely to race-conscious efforts by employers to boost minority hiring, but may make them more difficulty to defend. “The ruling does not eliminate the legal responsibility of employers to find nondiscriminatory solutions in hiring, promoting and compensating employees,” said Wade Henderson of the Leadership Conference on Civil Rights. “However, employers will now face a convoluted minefield when attempting to protect workers from discrimination.”

Mayer Brown partner Andrew Pincus said the ruling may have far-reaching consequences for public workplaces employing 19 million people nationwide. Local governments, he said, will have to meet a higher threshold for what Kennedy described as “race-based action,” and that could mean increased litigation. “As a practical matter, that’s just huge costs, huge delay and a huge burden,” Pincus said.

Rep. Lamar Smith, R-Texas, the top Republican on the House Judiciary Committee, praised the decision. “The Supreme Court today reminded all courts and governments that equal justice under the law means refusing to tip the scale in favor of one race over another.”

The court also bade farewell to Souter on Monday, his final day on the bench. Roberts read from a joint letter to Souter describing the “profound sense of loss” justices have felt since Souter announced his retirement on May 1. “We deeply value the times we have shared in judicial service,” Roberts added. “We understand your desire to trade white marble for White Mountains. The letter expressed the hope that “your sturdy friendship will endure long beyond your departure from the bench and tables we have shared.” Souter plans to return to his home in New Hampshire.

The shy Souter, who looked down while Roberts read the letter, leaned forward to read his reply letter, expressing his appreciation for the justices’ sentiments. Souter said he would not “retire from our friendship, which has held us together despite the pull of the most passionate dissent. It has made the work lighter through all my tenure here, and for as long as I live, I will be thankful for it, and be under a very grateful obligation to each one of you.” Souter’s voice seemed to quiver as he spoke.

Tony Mauro can be contacted at tony.mauro@incisivemedia.com. Reporter David Ingram contributed to this report.