Prosecutors notified the trial judge in Moussaoui's case that they will appeal to the 4th Circuit, based in Richmond.
The key issue is the government's refusal to make three al Qaeda prisoners available to Moussaoui. The government defied two district court orders that gave Moussaoui the right to question the captives because they might help his defense.
To sanction the government for its defiance, U.S. District Judge Leonie Brinkema on Thursday barred the government from seeking the death penalty or presenting any evidence that could link Moussaoui to the Sept. 11 suicide hijackings.
If the government cannot restore its full prosecution case, it would be more likely the Bush administration would move the case to a military tribunal, where rules might be more favorable to prosecutors.
Though Moussaoui was indicted in December 2001, the government said the appeal "is not taken for the purpose of delay."
Brinkema concluded that it was unfair for the government to present Sept. 11 evidence and seek Moussaoui's death without allowing him to present witnesses who might support his contention that he was not a conspirator in the attacks.
Moussaoui was charged with a broad conspiracy that includes - but is not limited to - the Sept. 11 attacks. His is the only U.S. criminal case spawned by the suicide hijackings.
A three-judge appellate panel has heard oral arguments on a previous government challenge to the order granting Moussaoui access through a satellite hookup to one of the prisoners - Sept. 11 planner Ramzi Binalshibh.
However, the hearing before the appellate panel took place before Brinkema gave Moussaoui satellite access to two additional prisoners: Khalid Shaikh Mohammed, the mastermind of the attacks, and Mustafa Ahmed al-Hawsawi, a suspected paymaster for al Qaeda.
The appellate judges would likely want the prosecution and defense to submit new arguments related to the government's refusal to make Mohammed and al-Hawsawi available as witnesses.
The appellate panel rejected the initial appeal without reaching a decision on the merits of the argument, saying the trial judge first had to make her decisions on sanctions.
The government would be expected to renew arguments that the courts have no authority to interfere with decisions made by the executive branch about prisoners captured in a war. The government also has contended - and will again - that every word uttered by the prisoners could reveal classified information.
Moussaoui's legal team has said Moussaoui has a constitutional right to introduce favorable witnesses and that he cannot receive a fair trial without them.
If the appellate court orders a full schedule of written briefs, it could be late November or early December before new oral arguments could be scheduled.
By Larry Margasak