A federal appeals court yesterday ruled that an Islamic group, the Council on American-Islamic Relations, cannot pursue a $2 million libel lawsuit against a former Congressman who accused the organization of fund-raising for terrorists and for causing the end of his marriage.

In 2003, the group, known as Cair, sued the then-Congressman from North Carolina, Cass Ballenger, over a newspaper interview in which he alleged that Cair was a “fund-raising arm for Hezbollah,” a terrorist group active in the Middle East.

Mr. Ballenger also made the eyecatching claim that the group caused the breakup of his marriage. He said that, after the September 11, 2001, terrorist attacks, his wife,Donna, grew disturbed by the fact that the couple’s Washington home was located across the street from Cair’s headquarters. Mr. Ballenger said women “wearing hoods” going in and out of the Cair office were a particular source of distress for his spouse.

The ruling handed down yesterday dealt not with Cair’s alleged links to terrorism, but with the more arcane question of whether the breakup of a lawmaker’s marriage has sufficient implications for his official duties as to shroud his comments relating to the divorce from legal liability.

Under federal law, a lawsuit against a federal employee over acts “within the scope of his office or employment” can be automatically converted by the attorney general into a case against the federal government. This effectively ends libel and slander suits because the federal government is immune from such litigation.

An attorney for Cair, Jeremiah Denton III, argued that Mr. Ballenger’s statement about Cair and his marriage was “simply too remote from any Congressional duty” to qualify for protection.

However, the unanimous three-judge panel said there was enough of a connection. “There was a clear nexus between the congressman answering a reporter’s question about the congressman’s personal life and the congressman’s ability to carry out his representative responsibilities effectively,” Judges David Sentelle, Judith Rogers, and Thomas Griffith, wrote.

Mr. Denton also argued that granting what is, in effect, immunity to Mr. Ballenger would open the door to “gratuitous slander” of private citizens by government officials. However, the judges said they had no such fear and expected future cases to be decided based on the context in which any allegedly libelous statements were made.

Under the Constitution, members of Congress also enjoy absolute immunity from suits stemming from legislative speech and debate, but that provision was not discussed in yesterdays ruling.

An assistant to Mr. Denton said he was unavailable for comment yesterday. A spokesman for Cair did not reply to a message seeking an interview. Efforts to reach Mr. Ballenger were unsuccessful.

Critics have accused Cair of using libel suits to intimidate its critics. A $1.35 million lawsuit the organization brought in Virginia in 2004 against the operator of an “anti-Cair” Website, Andrew Whitehead, petered out last month with both sides agreeing to dismiss the case out of court. The settlement is confidential, but Mr. Whitehead’s Website still contains statements calling Cair “a terrorist-supporting front organization.”