By Jonathan Stempel

(Reuters) - A divided federal appeals court on Monday overturned a $1.85 million award that former Minnesota Governor and professional wrestler Jesse Ventura won after claiming he was defamed by the late author of the best-selling memoir "American Sniper."

The 8th U.S. Circuit Court of Appeals voided a St. Paul, Minnesota jury's July 2014 award of $500,000 for defamation and about $1.35 million for unjust enrichment against the estate of former U.S. Navy Seal Chris Kyle. It ordered a new trial on the defamation claim.

Kyle had been the deadliest sniper in U.S. military history, responsible for 160 kills during his career. He was shot to death at age 38 at a Texas shooting range in February 2013. His memoir became a blockbuster movie.

Ventura's lawyer did not immediately respond to requests for comment.

Lawyers for Kyle's widow Taya referred requests for comment to News Corp's HarperCollins, the memoir's publisher. A spokeswoman, Erin Crum, said HarperCollins was reviewing the decision.

In his 2012 memoir, Chris Kyle wrote that he had in October 2006 punched out a man identified as "Scruff Face" in a southern California bar, following the funeral of a fellow SEAL.

He said the incident occurred after Scruff Face criticized the Iraq war and former U.S. President George W. Bush, said the SEALs deserved "to lose a few," and took a swing at Kyle.

While promoting the memoir, Kyle identified Ventura as Scruff Face.

Ventura, a former SEAL, has said he was at the bar, but that the altercation was made up, and the memoir hurt his reputation.

By a 2-1 vote, the appeals court said the defamation award must be voided because of improper questioning of two witnesses, and improper remarks by Ventura's lawyer during closing arguments, suggesting that insurance might cover any judgment against Kyle's estate.

"It is difficult to see how Ventura's counsel's comments were anything other than a deliberate strategic choice to try to influence and enhance damages by referencing an impersonal deep-pocket insurer," Chief Judge William Riley wrote.

The appeals court unanimously voided the $1.35 million award for unjust enrichment, representing some profits from Kyle's memoir, saying Minnesota law did not support Ventura's claim. Jurors had recommended the award, which the trial judge adopted.

Ventura was Minnesota's governor from 1999 to 2003.

"American Sniper" became a 2014 movie starring Bradley Cooper and directed by Clint Eastwood, and grossed more than $500 million worldwide.

The case is Ventura v Kyle et al, 8th U.S. Circuit Court of Appeals, No. 14-3876.