A court has found Jeremy and Kristy Morris from Hayden in the US state of Idaho did suffer religious discrimination at the hands of their local housing association.
They claimed the West Hayden States First Addition Homeowners Association tried to block their festive celebrations - allegedly over concerns about noise, bright lights and its religious nature.
The Morris family informed the association in December 2014 of their intention to move into Ferndale Drive and plans to stage the annual festive celebration.
A letter allegedly sent by the association threatened "expensive litigation" if its rules were flouted, saying Jeremy and Kristy could not move into the neighbourhood unless they scrapped the nativity event.
The note read: "It's not the intention of the Board to discourage you from becoming part of our great neighborhood, but we do not wish to become entwined in any expensive litigation to enforce long standing rules and regulations and fill our neighborhood with the hundreds of people and possible undesirables.
"We have worked hard to keep our area peaceful, quiet, and clean."
"And finally, I am somewhat hesitant in bringing up the fact that some of our residents are non-Christians or of another faith. And I don't even want to think of the problems that could bring up."
Taking the association to court last year, the Morris family argued their plans did not violate the association's restrictions and said they had made arrangements - including special car parking plans - to mitigate any adverse impact.
They have been awarded $75,000 in damages by a district court after a jury ruled in their favour.
Previous events held by the Morris family during the five days prior to Christmas have attracted thousands of people.
It is unclear whether the Association will appeal the ruling of the case which was dubbed a "war on Christmas" in the US media.
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