The New Jersey Supreme Court ruled yesterday that the Boy Scouts of America's policy of excluding homosexuals is illegal under state anti-discrimination law. The decision represents the first time a top state court has ruled against the group's ban on gays.

In a unanimous and sometimes strongly worded decision, the court rejected the Boy Scouts' argument that dismissing James Dale, an openly gay Scout leader, was justified on the grounds that the organization is a private club and can set its own admission policies.

Instead, the court ruled that because of the group's size, its policy of advertising in schools and its close relationship to the government, it is essentially a "public accommodation," and thus subject to New Jersey's Law Against Discrimination.

"The sad truth is that excluded groups and individuals have been prevented from full participation in the social, economic, and political life of our country," the ruling says. "The human price of this bigotry has been enormous. At a fundamental level, adherence to the principles of equality demands that our legal system protect the victims of invidious discrimination."

Gay rights groups hailed the decision as an important victory for the fledgling anti-discrimination laws around the country that protect homosexuals. By refusing to exempt the Boy Scouts, the court was continuing a civil rights tradition begun when the Supreme Court opened the once-exclusive Rotary and Kiwanis clubs to women and minorities, said Evan Wolfson, senior attorney at the Lambda Legal Defense Fund and the lawyer for Dale.

The Boy Scouts countered that the decision tramples its rights to free expression. "This is not a case about whether Mr. Dale is a nice man," said Greg Shields, a spokesman for the organization. "This is a case about whether the Boy Scouts, as a private voluntary organization, has a right to establish criteria for its membership and leadership.

"The Boy Scouts of America has long taught traditional family values," Shields continued. "And we maintain that we have a right to hold those values. That's what is at stake here."

Family values groups agreed. "It turns morality on its head, forcing an organization designed around teaching virtue to accept the values of homosexual activists," said Janet Parshall of the Family Research Council.

Shields described the New Jersey court's decision as an anomaly, noting that high courts in four other states--California, Oregon, Kansas and Connecticut--have upheld the Boy Scouts' ban on homosexuals. He said the group plans to appeal the latest decision to the Supreme Court on First Amendment grounds.

Dale's credentials as a Scout were not an issue in the case. A member since age 8, Dale was by all accounts an exemplary Scout, becoming an Eagle Scout, then a scoutmaster in Matawan, N.J., earning many awards along the way.

But in 1990, Boy Scout leaders discovered Dale was gay when a local newspaper ran an article about a seminar he was leading on counseling gay teenagers. That year, they revoked his membership, a decision Dale said he knew right away was contrary to all the group had taught him.

"For a long time the Boy Scouts taught me the difference between right and wrong," said Dale, 29, who now works on AIDS issues in New York. "And even nine years ago I knew this was wrong." He added that he hopes one day to work as a Boy Scout leader again.

The Boy Scouts argued that the group's views on homosexuality should be evident from the oaths Scouts take to be "morally straight" and "clean."

But the judges disagreed, saying those words more precisely implied qualities such as courage and honesty, and said nothing about sexuality. Justice Alan Handler took strong issue with the Boy Scouts' interpretations in a concurring opinion, writing: "One particular stereotype we renounce today is that homosexuals are inherently immoral."

Handler also addressed another issue he felt was implied by the Boy Scouts' argument, "the sinister and unspoken fear that gay scout leaders will somehow cause physical or emotional injury to scouts," calling it a myth countered by decades of social science research.

Over the last decade, the Boy Scouts of America has faced repeated challenges to its admissions policies barring homosexuals, atheists and agnostics. In the most recent case, the California Supreme Court ruled in a pair of unanimous decisions that Scouts could reject a gay Eagle Scout as well as 9-year-old twins who refused to declare a belief in God.

CAPTION: James Dale, who challenged his removal from Boy Scouts, is flanked by lawyers David Buckel, left, and Evan Wolfson.