One of the city’s most costly courtroom losses — an $81 million award made to seven protesters arrested at a 1992 rally — no longer looms large on the city’s ledgers. In 2004, a Bronx trial judge whittled the jury’s award down to $650,000. Yesterday, an appellate court in Manhattan tossed out even that reduced amount.

The ruling will likely keep the lawsuit from occupying a spot in tort law lore that had once seemed certain.

“To my knowledge, this is the highest false arrest verdict in the history of the United States,” a lawyer for the plaintiffs, Mark Kressner, said yesterday.

The five-judge appellate panel unanimously ruled yesterday that the conduct of the police officers who arrested the protesters had been legally acceptable. The city should never have faced liability, the court found.

The lawsuit stemmed from a Labor Day, 1992 anti-discrimination protest against Anheuser-Busch that was held at Orchard Beach in the Bronx. Sometime toward evening, people began throwing rocks and bottles at several police officers, according to the decision. Several of the plaintiffs claimed that they were hit with flashlights or poked in the eye by police officers. The court found that there was no evidence of any lasting injuries.

The court said the 2003 jury award of $81 million for damages was “beyond any rational limit,” according to the decision. Even the reduced award of $650,000 was “exorbitant,” the court wrote.

Mr. Kressner said he believed the jurors delivered such a large verdict because they believed the “police were intentionally backing each other” in their testimony.

“We are gratified that the court adopted our arguments and recognized that the plaintiffs’ claims simply weren’t supported by the evidence,” a lawyer for the city, Stephen McGrath said in an e-mail statement.