U.S. District Judge James S. Gwin, in court documents ruling on the suit filed in Washington, said the unnamed Arabic translator had a constitutional right to sue Rumsfeld for what the translator said was torture and illegal imprisonment.
Rumsfeld had sought to have the case dismissed.
The translator was assigned to a U.S. Marine Corps Human Exploitation Team operating in U.S. military bases on the Iraq-Syria border in 2005, working with Marines to develop and gather military intelligence in the volatile Anbar Province.
On Nov. 4, 2005 he was transported to al Asad, a military base in Anbar, where he was to leave Iraq on leave.
There, U.S. government intelligence officials questioned him for several hours.
The translator was ultimately detained and held for nine months in two military prisons without charges, where he said he was placed in cells with known members of al-Qaida, and continually feared for his safety.
The contracted translator said guards where he was being held used "psychologically disruptive tactics designed to induce compliance" to force him to day he was an enemy combatant.
The contractor was released without charges in 2006.