The full 5th U.S. Circuit Court of Appeals agreed to rehear the case after a three-judge panel from the court ruled in March that Farmers Branch's ordinance is unconstitutional and impermissibly interferes with the federal immigration system.
The court's 15 judges didn't indicate when they would rule after hearing arguments Wednesday from attorneys for the town and a group of landlords and tenants who sued to block the ordinance's enforcement.
Arguments largely focused on how the case is affected by a U.S. Supreme Court ruling in June on Arizona's tough immigration law. That ruling rejected major parts of the law, but upheld the so-called "show me your papers" requirement, which gives law enforcement authority to check a person's legal status if officers have reasonable suspicion he or she is in the U.S. illegally.
Kansas Secretary of State Kris Kobach, a national advocate for tougher illegal immigration laws who is also representing Farmers Branch, said that provision of the Arizona law closely mirrors a key portion of the Texas town's ordinance.
"The problem with the plaintiffs' argument is that they cannot identify a single federal statute that the Farmers Branch ordinance conflicts with," he said.
The ordinance, which replaced an earlier 2006 version, would require all renters to obtain a $5 city license and fill out an application that asks about their legal status. Then, the city's building inspector would have to check whether any immigrant applying for a license was in the United States legally. Illegal immigrants would be denied a permit, and landlords who knowingly allow illegal immigrants to stay as tenants could be fined or have their renters' license barred.
Kobach said the ordinance explicitly bars the town from making its own determination about whether someone is "lawfully present" in the U.S.
"It must always be done by the federal government," he said.
"It's a yes or no from the federal government, correct?" asked Judge Jennifer Elrod, who heard the case last year but issued a dissenting opinion.
"Correct," Kobach responded.
But plaintiffs' attorney Nina Perales said the information federal officials provide the building inspector is "very complex and varied" and doesn't explicitly state whether an applicant is "lawfully present" in the country.
"That's something that the building inspector is going to have to figure out for himself," Perales said.
Fellow plaintiffs' attorney Dunham Biles added: "No one other than the federal government has the authority to classify aliens."
Perales said the city's ordinance goes far beyond the Arizona law, forcibly removing illegal immigrants from rental housing instead of merely detaining them and letting the federal government decide whether to remove them from the country.
"This is a complete divergence from the federal system," she said.
A federal district judge ruled against the city in 2010 before the three-judge panel at the 5th Circuit upheld it earlier this year.
The full 5th Circuit is generally considered to be one of the nation's most conservative federal courts. Its decision to hear the Farmers Branch case is rare -- fewer than 5 percent of petitions for a full court hearing are granted -- though the court rehearing a case doesn't necessarily mean judges intend to reverse an earlier decision.