BY JONATHAN STEMPEL

NEW YORK (Reuters) – A panel of judges on Thursday declared unlawful a directive from President Donald Trump to exclude people who are in the United States illegally from representation when apportioning congressional seats.

The decision by a three-judge panel, which could be appealed to the U.S. Supreme Court, is a victory for the 38 states, cities and counties, plus several immigrants rights nonprofits, that sued over the July 21 directive.

The mostly Democratic-leaning plaintiffs, led by New York state, accused the Republican president of having a “xenophobic” purpose in pushing an unconstitutional directive that reflected “discriminatory animus” toward Hispanics and other immigrant communities.

They said the directive could leave several million people uncounted and shift a few House of Representatives seats, with California, Texas and New Jersey most likely to suffer losses.

In its 86-page decision, the panel said Trump exceeded his statutory authority in ordering the directive.

It said federal law required the use of one set of numbers to count people for census and apportionment purposes, and that so long as they resided in the United States, “illegal aliens qualify as ‘persons in’ a ‘state'” who should be counted.

“The President must act in accordance with, and within the boundaries of, the authority that Congress has granted,” the panel said. “We conclude that the President did not do so.”

The White House and the Department of Commerce, which oversees the census, did not immediately respond to requests for comment.

Thursday’s decision is a fresh census-related legal setback for Trump, who has made curbing immigration a focus of his presidency and reelection campaign.

His directive came one year after the Supreme Court blocked his attempt to add a citizenship question to the census.

“President Trump’s repeated attempts to hinder, impair, and prejudice an accurate census and the subsequent apportionment have failed once again,” New York Attorney General Letitia James said in a statement.

In defending the directive, government lawyers said Trump had broad discretion to decide who to count, and that any harm was speculative.

The plaintiffs countered that the directive would cause irreparable harm by dissuading immigrant households from census participation and reducing political power.

Census data is also used to allocate billions of dollars of federal funds.

“The law is clear – every person counts in the census,” said American Civil Liberties Union lawyer Dale Ho, who represented the nonprofits.

The panel consisted of Circuit Judges Richard Wesley and Peter Hall, both appointed to the bench by Republican President George W. Bush, and District Judge Jesse Furman, an appointee of Democratic President Barack Obama.

(Reporting by Jonathan Stempel in New York; Additional reporting by Ted Hesson in Washington, D.C.; Editing by Sandra Maler, Leslie Adler and Tom Brown)