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Urbina's ruling does not resolve whether the shooting was proper. Rather, the 90-page opinion underscores some of the conflicting evidence in the case.
Some Blackwater guards told prosecutors they were concerned about the shooting and offered to cooperate. Others said the convoy had been attacked. By the time the FBI began investigating, Nisoor Square had been picked clean of bullets that might have proven whether there had been a firefight or a massacre.
The Iraqi government has refused to grant Blackwater a license to continue operating in the country, prompting the State Department to refuse to renew its contracts with the company.
In a statement released by its president, Joseph Yorio, the company said it was happy to have the shooting behind it.
The top US commander in Iraq, Gen. Raymond Odierno, declined to comment on the specifics of the case, but said, "I do worry about it, because clearly there were innocent people killed in that attack ... it is heart-wrenching."
The case against the five men fell apart because, after the shooting, the State Department ordered the guards to explain what happened. In exchange for those statements, the State Department promised the statements would not be used in a criminal case. Such limited immunity deals are common in police departments so officers involved in shootings cannot hold up internal investigations by refusing to cooperate.
The five guards told investigators they fired their weapons, an admission that was crucial because forensic evidence could not determine who had fired.
Because of the immunity deal, prosecutors had to build their case without those statements, a high legal hurdle that Urbina said the Justice Department failed to clear. Prosecutors read those statements, reviewed them in the investigation and used them to question witnesses and get search warrants, Urbina said. Key witnesses also reviewed the statements and the grand jury heard evidence that had been tainted by those statements, the judge said.
The Justice Department set up a process to avoid those problems, but Urbina said lead prosecutor Ken Kohl and others "purposefully flouted the advice" of senior Justice Department officials telling them not to use the statements.
It was unclear what the ruling means for a sixth Blackwater guard, Jeremy Ridgeway, who turned on his former colleagues and pleadedghdad contributed to this report.