UPDATE 3-US court overrules Obama nominee in race bias case

* Ruling could affect promotion policies across U.S.

* Court splits 5-4 on conservative/liberal lines

* Lower-court ruling by Judge Sotomayor rejected

* Sotomayor's conservative critics seize on decision (Recasts lead, updates with White House, other reaction)

By James Vicini

WASHINGTON, June 29 (Reuters) - The U.S. Supreme Court overruled President Barack Obama's high court nominee Sonia Sotomayor on Monday in an important race discrimination case, but the White House remained confident she would be approved.

The court's 5-4 ruling held that the city of New Haven, Connecticut, violated federal civil rights law when it threw out the results of a promotion exam which had yielded too many qualified white applicants and no acceptable black candidates.

Civil rights groups and legal experts said the ruling in the closely watched racial discrimination case could affect promotion policies for employers nationwide, many of which operate under "affirmative action" programs designed decades ago to foster diversity and redress past bias.

"This decision will change the landscape of civil rights law," Fordham University law professor Sheila Foster said. Other legal experts said the ruling rolled back 25 years of precedent.

Dividing along conservative and liberal lines, the justices overturned an earlier ruling by a three-judge U.S. appeals court panel that included Sotomayor, who is Obama's choice to replace retiring Supreme Court Justice David Souter.

"I don't foresee that...this will represent anything that would prevent her from a seat on the Supreme Court," White House spokesman Robert Gibbs told reporters.

Conservative critics seized on the decision, authored by Justice Anthony Kennedy, to demonstrate that Sotomayor was "out of sync" with mainstream legal thinking.

Senate confirmation hearings begin on July 13 and if approved she will be the top court's first Hispanic justice.

'UNTOLD' DAMAGE

The liberal judges on the Supreme Court issued an impassioned dissent to Monday's ruling.

"Congress endeavored to promote equal opportunity in fact and not simply in form. The damage today's decision does to that objective is untold," Justice Ruth Bader Ginsburg said, taking the rare step of reading her dissent from the bench.