While many colleges bar discrimination against gay people, many religious colleges do not, because their anti-bias regulations do not cover sexual orientation.

Seton Hall University, a Roman Catholic institution, is an exception. Its anti-bias policy specifically covers sexual orientation. And that set the stage for an unusual legal dispute over the university's right to assert its religious identity in denying recognition to a gay student group.

A New Jersey court had been poised to allow a suit against the university go forward. But an appeals court ruled Wednesday that Seton Hall was within its rights to deny recognition to the group.

The suit was brought by Anthony Romeo, a gay student at Seton Hall who says that he enrolled there in part because of the university's nondiscrimination policy. When he was denied the right to create a gay student group, he sued under New Jersey's anti-discrimination laws and for breach of contract.  Typically, religious colleges are exempt from bias regulations that conflict with their religious views, so Catholic colleges are exempt from requirements that they treat gay people equally.

Romeo's argument was that Seton Hall gave up that right when it pledged not to discriminate against gay people.

But the appeals court said otherwise. It cited a series of rulings in other courts that in essence make it impossible for a religious institution to give up its right to invoke its religious status. As a result, the court dismissed the suit, saying that it did not want to question the university's "fundamental religious ideals."

Thomas White, a spokesman for Seton Hall, said that the decision "affirms that religious organizations are legally permitted to act in accordance with their doctrines."

He said it was unfair to hold Seton Hall to a higher standard than other religious colleges because of its anti-bias policies. "We don't allow discrimination in admissions and hiring," he said. "We want our gay and lesbian students to feel comfortable on campus, but we also have to balance that with the mission and goals of being a Catholic institution."

Thomas D. Shanahan, Romeo's lawyer, said that the court's ruling would allow religious colleges to ignore their own policies any time they wanted. "Students should be able to hold a university to its own policy," he said.

Shanahan said he was planning to appeal to New Jersey's Supreme Court. He said that there would be no case if Seton Hall had not pledged not to discriminate. But he said that Romeo probably would have gone elsewhere and Seton Hall wouldn't have had him as a student.

"He made a decision based on how the school represented itself," Shanahan said. "It's a huge double standard for Seton Hall then to discriminate."