A state appeals court has revived a lawsuit challenging a law that allows illegal immigrants and other nonresidents to pay the same college fees as California residents.

The three-justice panel ruled Monday that a Yolo County Superior Court judge had improperly dismissed the class-action suit against California's three higher-education systems: the community colleges, California State University and the University of California.

The legal battle focuses on a 2001 law that made more students eligible for in-state fees, which are significantly lower than those paid by nonresident students. The law, which took effect in 2002, applies to students who attended California high schools for at least three years.

To be eligible for the exemption, undocumented immigrants must promise to seek citizenship as soon as they are able.

In their 84-page opinion, the justices said the law creates a "surrogate residence requirement" that is unfair to out-of-state students who pay higher fees. The lawsuit was brought by some of those students and their parents, including Rep. Brian Bilbray, R-Carlsbad, who helped pay the higher fees for two of his children who attended California campuses.

"Asking for more documentation from someone they perceive to be here legally just turns the whole rule of law on its head," said Bilbray, whose children were Virginia residents when they started college. "It's never passed the smell test."

Attorneys and spokespeople for the schools said thousands of citizens whose families moved to California relatively recently also use the exemptions. Of the 1,639 UC students who received exemptions in 2006-07, 271 were classified as "potential undocumented" immigrants.

Community-college leaders estimated that their 109 schools granted 19,300 exemptions last year. About 10 percent are believed to be U.S. citizens.

A Cal State spokeswoman said that system does not collect data on the exemptions.

All three systems were deciding whether to appeal Monday's ruling. If they do not appeal, the case will head back to Yolo County for a trial.

"It does create an uphill battle," said Christopher Patti, a UC attorney.

An attorney for the plaintiffs called the ruling historic and said it could doom similar laws in a handful of other states. It also could affect other public benefits to illegal immigrants, said the lawyer, Mike Hethmon of the Immigration Law Reform Institute.

"This goes well beyond post-secondary education benefits," Hethmon said. "This is potentially a very sweeping decision in all areas."

Matt Krupnick covers higher education. Reach him at 925-943-8246 or mkrupnick@bayareanewsgroup.com.