By Dena Aubin

NEW YORK (Reuters) - An Arab-American family whose business and personal bank accounts were closed in 2014 without explanation can sue JPMorgan Chase for racial discrimination, a federal judge in Detroit has ruled.

Filed in February, the lawsuit by Najah Manni, his wife Kathy and their two children says the largest U.S. bank further discriminated against them by terminating a contract with their debt collection and services business in 2015, defaming Najah as a "reputational risk" in the process.

They are seeking damages for defamation and violations of Michigan's Elliot-Larsen Civil Rights Act and the U.S. Equal Credit Opportunity Act.

"We believe this case and the allegations of discrimination are without merit," said JPMorgan spokesman Darin Oduyoye.

In a decision on Wednesday, U.S. District Judge Sean Cox rejected the bank's motion to dismiss the lawsuit, finding discrimination was a plausible explanation for why the bank "unilaterally terminated" more than 30 profitable accounts held by the Mannis.

The judge noted the family's claims that other Arab-Americans had complained of similar account closures.

JPMorgan had argued that its deposit agreements permitted it to close accounts "at any time for any reason or no reason" and said there was no evidence of discrimination.

The Mannis, who state in their complaint that they are of Arab and Chaldean descent, own Michigan-based JM Adjustment Services. They claim they previously had $5 million deposited with JPMorgan.

JM Adjustment also provided services to JPMorgan until its contract was terminated in 2015. In their lawsuit, the Mannis claim JPMorgan told Najah the arrangement was ending because he posed a "reputational risk" to their business.

The Mannis had plausibly claimed the bank's explanation for the termination might be a pretext for discrimination, Cox said.

The Manni family is represented by former Michigan U.S. Senator Carl Levin, now a lawyer at Detroit's Honigman Miller Schwarz & Cohn in Detroit. Levin could not immediately be reached for comment.

A number of Arab-American groups have complained of sudden account closures in recent years. In 2013, the Arab-American Civil Rights League filed a proposed class action against Huntington National Bank, part of Ohio-based Huntington Bancshares, over the issue. The case is still pending, with a settlement conference set for August.

The JPMorgan case is: JM Adjustment Services et al v JPMorgan Chase Bank, U.S. District Court, Eastern District of Michigan, No 16-cv-10630

(Reporting By Dena Aubin; Editing by Anthony Lin and David Gregorio)