The 3rd US Circuit Court of Appeals, reversing a judge's decision last year to dismiss the case, found the Muslim plaintiffs raised sufficient allegations of religious-freedom and equal-protection violations.
The court compared the spying to other instances of heightened scrutiny of religious and ethnic groups, including Japanese-Americans during World War II.
In dismissing the lawsuit, US District Judge William Martini had concluded the police could not keep watch "on Muslim terrorist activities without monitoring the Muslim community itself" and concurred with the city in blaming reporting by The Associated Press, which exposed the surveillance program, for any harm.
The lawsuit revived today was among legal actions that followed reports by the AP that revealed how city police infiltrated Muslim student groups, put informants in mosques and otherwise spied on Muslims as part of a broad effort to prevent terrorist attacks. The reporting was honored with a Pulitzer Prize.