By Joseph Ax

NEW YORK, Nov 19 (Reuters) - A pending New York City regulation that bans worship services inside school buildings after-hours is an unconstitutional restriction on freedom of religion, the lawyer for a Bronx church argued before a federal appeals court on Monday.

It was the latest chapter in a nearly two-decade legal battle between the city's Board of Education and religious groups, including the Bronx Household of Faith, over a city regulation barring groups from holding services in public schools.

"They're focusing on a type of worship that is Judeo-Christian, and that is the type of religion being excluded," Jordan Lorence, a lawyer for the Alliance Defense Fund, the Christian nonprofit representing the Bronx church, told a three-judge panel of the 2nd U.S. Circuit Court of Appeals.

The rule "prohibits school buildings from being used for religious worship services or as a house of worship," although the city allows groups to use schools for non-religious activities. It was designed to ensure that the city does not appear to endorse religious activity in a public forum.

In June, U.S. District Judge Loretta Preska issued a permanent injunction against the regulation.

The church maintains that the rule specifically targets religion and must be justified by a compelling state interest.

The mere fear that allowing worship in a school might be perceived as endorsing religious activity is not enough, Lorence said at the hearing.

In addition, the rule permits some religious activity, including certain types of prayer, religious instruction and hymns. That would allow some religious groups to use schools for what is ostensibly worship, even though they don't use that word to describe it, Lorence argued.

'ROCK AND A HARD PLACE'

Jane Gordon, a lawyer for the city, countered that Preska's freeze had left the Board of Education in the position of potentially violating the Constitution's establishment clause, which separates church and state.

"The district court has put the department back between a rock and a hard place," she said.

The city had set up procedures to ensure it would not become involved in defining whether a group's activity constitutes worship, she said. At the same time, the city would take action if it became aware that a group was deliberately flouting the rule -- for example, by advertising worship services at a school on its website.

"We have to be deferential to the Constitution and to religious rights, but we don't have to be stupid," she said.

The dispute has drawn the attention of activists on both sides of the issue, with groups like the American Civil Liberties Union filing amicus briefs in support of the city and the Becket Fund for Religious Liberty doing so on behalf of the church.

The litigation, which first began in the mid-1990s, has seesawed between Manhattan federal court and various appeals courts for years.

In 2007, Preska barred the city from enforcing the rule.

The 2nd Circuit in 2011 vacated the injunction, which was based on a free speech argument, finding that the rule was a content-neutral restriction to prevent the establishment of religion in a public school. The U.S. Supreme Court then declined to hear the case.

The church successfully persuaded Preska to issue a new ban in June, this time based on the claim that the rule violated the church's right to free exercise of religion.

The judges on the panel Monday -- Guido Calabresi, John Walker an Pierre Leval -- were the same judges who ruled 2-1 to vacate Preska's earlier injunction.

The case is The Bronx Household of Faith v. Board of Education of the City of New York, U.S. Appeals Court for the Second Circuit, No. 12-2730.

For the church: Jordan Lorence of the Alliance Defense Fund.

For the city: Jane Gordon of the New York City Law Department.

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