The four members of the Top Hatters Motorcycle Club sued the festival after they were asked to remove their vests or leave the event on July 30, 2000.
The festival had an unwritten dress code policy barring gang colors or other insignia, including motorcycle club insignia.
The motorcyclists' vests were decorated with a patch showing a skull with wings and a top hat along with the words "Top Hatters" and "Hollister."
An 11-judge panel of the 9th U.S. Circuit Court of Appeals dismissed the lawsuit by a 6-5 vote. The court majority said the private festival was not a government agency that was liable for violations of the right of free speech, while the five-member minority said there should be more trial court proceedings.
The ruling was the third time the club members lost their case. A federal judge in San Jose dismissed the lawsuit in 2005.
Then last year, a three-judge panel of the appeals court ruled that the vest wearing was not an expression of free speech because the four club members couldn't agree on what the symbols meant.
Later last year, an 11-judge panel agreed to reconsider the case, but in today's decision again dismissed the lawsuit, although on different legal grounds.
A lawyer for the club members said he had not yet seen the ruling and could not comment.