The U.S. Supreme Court denied Blackwater's request for a stay, meaning the case heads back to state court in North Carolina for trial.
The lawsuit was filed in January 2005 by the families of four men whose convoy was ambushed in Fallujah on March 30, 2004. In one of the most notorious incidents of the war, their bodies were burned and strung up from a bridge.
THE BLOTTER RECOMMENDS
The lawsuit claims Blackwater failed to provide them with armored vehicles, weapons and maps as promised, and did not give them a chance to learn local routes before being sent out on their fatal mission. As Brian Ross first reported on ABCNews PrimeTime last year, one of the men complained about the unprofessionalism in an e-mail home just before he died.
"They knew when they sent those poor men in there that there was little chance they'd ever come out," says Katy Helvenston, whose 38-year-old son Scott was among those killed. "I don't care about the money," she told ABC News, "I want accountability."
An attorney for the families, Marc Miles, says he expects the case to go to trial next summer.
Blackwater has expressed its regrets over the deaths but says the men knew what they were getting into in Iraq. The company says it will continue to fight the families' lawsuit, arguing that suing a military contractor in state court "could undermine...the United States government's ongoing efforts to combat international terrorism overseas."
Blackwater has more than a thousand contractors working overseas, including hundreds in Iraq. The company says it has lost 25 of its workers in the line of duty in Iraq and elsewhere.