In its Thursday ruling, the appeals court said the contract at the heart of the dealers' class-action suit was "ambiguous." It also said evidence submitted by Ford was wrongly excluded.
"We hold that the trial court abused its discretion in excluding Ford's mitigating evidence at the damages trial," the court said in its ruling.
Ford disclosed the reversal in a quarterly filing with the U.S. Securities and Exchange Commission on Friday.
The decision could potentially save the Dearborn, Michigan-based automaker a significant amount of money it would have eventually had to pay disgruntled dealers.
"We look forward to trying the case before a jury that will now consider all the evidence that was improperly excluded during the first trial," said Ford spokeswoman Marcey Evans.
The dealers can request a review by the Ohio supreme court. James Lowe, an attorney for the dealers, said they would consider their options after reviewing the court's opinion.
The dealers first sued Ford in 2002. According to the suit, Ford breached its sales and service agreement with medium- and heavy-truck dealers by offering unpublished discounts through a program that effectively overcharged some dealers.
The suit covered all Ford dealers that bought 600-series larger trucks from 1987 to 1997.
In February 2011, a jury awarded the named plaintiff in the suit, Westgate Ford Truck Sales of Ohio, $4.5 million in damages. In June 2011, the court awarded the entire class of more than 3,100 dealers nationwide nearly $2 billion.
(Reporting by Deepa Seetharaman in Detroit; editing by Matthew Lewis)
