Richard Wolf and Alan Gomez, USA TODAY 2:03 a.m. EST November 10, 2015

A federal appeals court dealt a potentially fatal blow Monday to President Obama's immigration plan, leaving more than 4 million undocumented immigrants in legal limbo and setting up a possible Supreme Court battle at the sunset of his administration.

The U.S. Court of Appeals for the 5th Circuit upheld a challenge to the deferred deportation program brought by Texas and 25 other states with Republican governors, who argued that Obama lacked the authority to protect about one-third of the nation's undocumented immigrants by executive fiat.

The authority that the administration claimed, the court said in a 2-1 ruling, would allow it "to grant lawful presence and work authorization to any illegal alien in the United States."

The White House said in a statement that it strongly disagreed with the court and that the departments of Justice and Homeland Security will review the ruling to determine the "next steps" in the case.

"The Supreme Court and Congress have made clear that the federal government can set priorities in enforcing our immigration laws," the statement read. "This lawsuit is preventing people who have been part of our communities for years from working on the books, contributing to our economy by paying taxes on that work, and being held accountable."

The decision had been anticipated by the administration and immigration rights groups, who have hung their hopes on the Supreme Court rather than the conservative appeals court with jurisdiction over Texas, Louisiana and Mississippi. But the four-month wait for a ruling, since oral arguments were held before the three-judge panel, could mean that the justices won't get the case during their current term — and won't decide it before Obama leaves office.

Under that scenario, the 4.3 million undocumented immigrants deemed eligible for the program would be at the mercy of the next president — either a Democrat who favors giving them temporary protection from deportation, or a Republican who most likely would have campaigned against it.

That makes the panel's decision a major blow to Obama, who has hoped to overhaul the nation's immigration system before leaving office even if Congress won't go along. And it's a crushing defeat for millions of immigrant families who hope to win protections that would make them eligible for three-year work permits and a host of health care, disability and retirement benefits.

"The most directly impacted are the five million U.S. citizen children whose parents would be eligible for temporary relief from deportation," said Marielena Hincapié, executive director of the National Immigration Law Center. "We now call on the Department of Justice to seek Supreme Court review immediately, where we are more likely to obtain justice for our communities."

Greisa Martinez, advocacy coordinator of United We Dream, a youth-led immigration advocacy group said, "This ruling means that millions of immigrants, including my mother, will continue to live in fear, unable to work legally, and be at risk of being deported until this matter is resolved. But today's ruling only strengthens our resolve as a movement and we know that we are on the right side of history."

Texas Attorney General Ken Paxton hailed the ruling. "Today, the 5th Circuit asserted that the separation of powers remains the law of the land, and the president must follow the rule of law, just like everybody else," he said. "Throughout this process, the Obama administration has aggressively disregarded the constitutional limits on executive power, and Texas, leading a charge of 26 states, has secured an important victory to put a halt to the president's lawlessness."

House Judiciary Committee Chairman Bob Goodlatte, R-Va., a longtime critic of Obama's immigration policy, also celebrated the ruling. "Today's decision from the federal appeals court is a victory for the Constitution and the American people. President Obama's decision to ignore the limits placed on his power and act unilaterally to rewrite our nation's immigration laws is an affront to the Constitution."

Obama unveiled the program last November as an extension of his 2012 policy delaying the threat of deportation for about 770,000 undocumented immigrants brought to the country as children. The new plan would broaden that program and add protections for adults with children who are U.S. citizens.

Federal District Court Judge Andrew Hanen temporarily blocked the program in February, ruling that the states were likely to win their argument that Obama lacked executive authority to carry out the plan without congressional action, or at the least a formal period for public comment. In May, the appeals court panel refused to let the program continue while it considered the appeal.

In his ruling Monday night, Circuit Court Judge Jerry Smith said Obama's program "would allow illegal aliens to receive the benefits of lawful presence solely on account of their children's immigration status, without complying with any of the requirements ... that Congress has deliberately imposed." He was joined by Judge Jennifer Walker Elrod.

Their ruling said the program "would dramatically increase the number of aliens eligible for work authorization, thereby undermining Congress's stated goal of closely guarding access to work authorization and preserving jobs for those lawfully in the country."

Judge Carolyn Dineen King dissented, arguing that the deferred action program was an "exercise of prosecutorial discretion" beyond the reach of federal court judges. She also criticized her court for stalling well beyond its normal 60-day period of review.

"I have a firm and definite conviction that a mistake has been made," she said. "That mistake has been exacerbated by the extended delay that has occurred in deciding this 'expedited' appeal. There is no justification for that delay."

The administration had argued that it was merely formalizing an existing policy of targeting the most dangerous undocumented immigrants and making millions of others a lower priority.

"The policies are a quintessential exercise of prosecutorial discretion, an executive function that is not subject to judicial review," it argued in court papers. "And they are an exercise of authority that Congress expressly granted to the (homeland security) secretary to establish policies for enforcement of the immigration laws, a uniquely federal domain into which states may not intrude."

The states opposed to the program argued that it would confer legality, if not citizenship, upon millions of immigrants who came to the country unlawfully — forcing Texas and others to issue driver's licenses and incur other costs.

The program "would be one of the largest changes in immigration policy in our nation's history," they told the appeals court. "Once this program goes into effect, it will be practically impossible to unwind all of its derivative consequences."

(c) Copyright 2015 USA TODAY, a division of Gannett Co. Inc.  To subscribe or visit go to:  www.usatoday.com

http://www.usatoday.com/story/news/politics/2015/11/09/appeals-court-obama-immigration-plan/75491724/