In an 8-7 decision, the court said the 2006 amendment to the Michigan Constitution is illegal because it presents an extraordinary burden to opponents who would have to mount their own long, expensive campaign through the ballot box to protect affirmative action.
That burden "undermines the Equal Protection Clause's guarantee that all citizens ought to have equal access to the tools of political change," said Judge R. Guy Cole Jr., writing for the majority at the 6th U.S. Circuit Court of Appeals in Cincinnati.
The court said having supporters and opponents debate affirmative action through the governing boards of each public university would be much fairer than cementing a ban in the constitution, which it referred to as home of "the highest level" of public policy.
The court did not comment on a portion of the amendment that deals with government hiring.
The decision is limited to states in the 6th Circuit, which includes Kentucky, Ohio and Tennessee. But it also raises the odds that the U.S. Supreme Court may get involved. A very similar law in California was upheld by a San Francisco-based appeals court, and the Supreme Court could choose to resolve the conflicting decisions of the 9th Circuit and the 6th Circuit on voter-approved bans.
Michigan Attorney General Bill Schuette, a supporter of the ban, said he will ask the nation's highest court to take the case.
"Entrance to our great universities must be based upon merit," he said.
George Washington, a Detroit attorney for the Coalition to Defend Affirmative Action, said the ruling is a "tremendous victory." He predicted the case will move to the Supreme Court.
"What this really means is thousands of blacks and Latinos who would not have had a chance to go to our most selective universities will have the chance to become lawyers, doctors and leaders of all fields," Washington said.
As the college admissions process for 2013 heats up, it wasn't immediately clear what campuses would do in light of the ruling. Officials at the University of Michigan and Michigan State University said they were reading the decision.
At the University of Michigan, 8 percent of undergraduates this fall are black or Hispanic, compared to almost 11 percent in 2008. The number of black female undergraduates is down 27 percent compared to 2008, according to university data.
This is the second time that the appeals court has examined Michigan's affirmative action issue. A three-judge panel last year also found the ban unconstitutional for similar reasons. But after a plea from Schuette, the entire court decided to take a fresh look at the matter, with new filings and arguments leading to the new ruling Thursday.
In a 32-page opinion, the court's majority explained the difficulties that it sees for students under the constitutional amendment. For example, there's nothing barring someone from citing family alumni connections when applying to a college. But the court said a student seeking to use race to influence the admissions process now is shut out unless the constitution is changed again.
"Michigan cannot force those advocating for consideration of racial factors to traverse a more arduous road without violating the Fourteenth Amendment," the court said. "We thus conclude that Proposal 2 reorders the political process in Michigan to place special burdens on minority interests."
In dissent, Judge Danny Boggs said the majority relied on an "extreme extension" of two Supreme Court cases to justify its decision, one in 1969 involving the repeal of a fair housing law in Akron, Ohio, and the other in 1982 involving an effort to stop racial integration in Seattle schools.
"We have the citizens of the entire state establishing a principle that would in general have seemed laudable," Boggs said of Michigan.
Another dissenter, Judge Julia Smith Gibbons, said the will of 58 percent of voters in 2006 has been shredded.
"Michigan has chosen to structure its university system such that politics plays no part in university admissions at all levels. ... The Michigan voters have therefore not restructured the political process in their state by amending their state constitution; they have merely employed it," Gibbons said.
Besides Michigan, six states have banned racial preferences in admissions: Washington, Nebraska, Arizona, New Hampshire, California and Florida. In Texas and Georgia, leading public universities use a race-neutral system, though the University of Texas has maintained some use of affirmative action.
Since a 2003 Supreme Court decision, universities have been allowed to use racial preferences if they choose, though they are not compelled to do so. The court last month heard arguments in a case that could change that precedent. Abigail Fisher, a rejected white applicant, is suing the University of Texas.