By Dave Warner

(Reuters) - Seven students at a Camden, New Jersey, school forced to eat lunch on a gymnasium floor for two weeks as punishment won a $500,000 legal settlement, their attorney said on Tuesday.

The 2008 incident involved fifth-grade students at the Charles Sumner Elementary School who were disciplined after one child spilled water as he tried to lift a jug onto a cooler, said the lawyer, Alan Schorr.

The students filed a federal lawsuit against the Camden Board of Education, which agreed to the settlement, the attorney said.

He said the incident took place against a backdrop of discord between the black and Hispanic populations in the impoverished southern New Jersey city. The children were Hispanic.

Schorr said the vice principal, who was black, punished all 15 students in a bilingual class by making them eat off paper liners normally used on lunch trays. (While there were 15 students in the class, only seven sued.)

"The African American kids were eating at tables, with trays, taunting these Hispanic kids who were forced to eat on the ground," Schorr said.

The vice principal has since transferred.

The children's teacher was fired after encouraging them to tell their parents about the punishment. The teacher won a $75,000 settlement earlier.

Neither school officials nor their lawyers could be reached for comment.

(Editing by Ellen Wulfhorst and Ciro Scotti)