The US Court of Appeals for the District of Columbia Circuit on Friday found that "the district court abused its discretion in denying Slatten's motion to sever his trial from that of his co-defendants and therefore vacates his conviction and remands for a new trial".
The four were working as security contractors in Iraq for the controversial firm Blackwater, which was rebranded as Xe Services amid worldwide uproar over the 2007 Nisour Square massacre of civilians, including women and children. The other three men were sentenced to 30 years each for manslaughter.
Slatten was convicted of first-degree murder for the killing of Ahmed Haithem Ahmed Al Rubia'y, the driver of a white Kia sedan falsely identified as a vehicle bomb threat.
They also ruled that the 30-year sentences for Slough, Liberty and Heard violated "the Eighth Amendment prohibition against cruel and unusual punishment".
By overturning his conviction, the court has forced the Justice Department to decide whether to prosecute again.
In overturning the 30-year terms, USA circuit judges Karen LeCraft Henderson and Janice Rogers Brown wrote "we by no means intend to minimize the carnage attributable to Slough, Heard and Liberty's actions".
A heavily armed, four-vehicle Blackwater Worldwide convoy the men were travelling in had been trying to clear a path for United States diplomats after a nearby auto bomb.
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The men claimed they were under fire from insurgents.
Jurors in 2014 convicted Echavarria of first-degree murder in a 2011 slaying over a debt related to a construction project.
Slattern's lawyer contended the evidence presented by the prosecution at trial didn't support the more serious charge he faced, and that he was a victim of vindictive prosecution.
At sentencing, Lamberth, a Ronald Reagan appointee and former Army captain, said the defendants, all USA military veterans, "appear overall to be good young men who have never been in trouble", but added, "It is clear these fine young men just panicked". They were each found guilty of manslaughter and firearms charges carrying mandatory 30-year terms. That statute, typically employed against gang members or bank robbers, had never been used against overseas security contractors working for the U.S. government.
The three-judge panel declared the contractors' sentences "grossly disproportionate to their culpability for using government-issued weapons in a war zone".
The North Carolina-based security firm's founder, Erik Prince, eventually left the company, which was renamed Xe Services, then later sold and renamed Academi.