ELKHART (AP) — A federal appeals court has cleared the way for residents near a wood recycling plant to move ahead with a lawsuit alleging that fumes and other plant emissions are endangering their health.

The 7th Circuit Court of Appeals in Chicago on Tuesday reversed a lower court's ruling, allowing the lawsuit filed by residents near VIM Recycling's Elkhart plant to proceed. The Elkhart Truth reports neighbors sued VIM in federal court in 2009, claiming fumes from treated wood, dust and other plant emissions posed a threat to their health.

Tuesday's ruling struck down on procedural grounds a federal judge's April 2010 decision that had dismissed the neighbors' case.

"We reverse and remand to allow the plaintiffs to pursue their citizen suit," the court said in its decision.

Attorney Kim Ferraro of the Valparaiso-based Legal Environmental Aid Foundation called the decision "great news" and a big victory for Indiana residents. She said about 150 residents were party to the lawsuit.

"The decision upholds citizens' rights to enforce environmental laws and hold polluting companies accountable when regulatory agencies refuse or are unable to do so," she said in a statement. "But the fight is far from over. We now have to prove our case in court — a lengthy process."

VIM, which grinds wood waste into animal bedding and mulch, faces several lawsuits stemming from its operation. That includes a 2009 suit by state environmental regulators who allege that the business illegally dumped wood waste on the company's grounds because it lacked the proper permits for those operations.

The neighbors' suit alleges that the plant's emissions are a nuisance and threaten their health because the wood wastes the plant processes from Elkhart-area manufacturers contain glues and other substances they say can be released into the atmosphere.

Ferraro said harmful vapors and tiny dust particles are being released by the plant, and that those are likely causing respiratory ailments, skin rashes, severe itching and nose, eye and throat irritation in people living near the plant.

VIM attorney Amy Romig did not immediately respond to a message seeking comment Thursday.

A preliminary agreement the state and VIM reached in December called on the company to move larger pieces of waste to an indoor storage area. Smaller pieces can be stored outdoors. That agreement called on VIM to screen and sort all 60,000 cubic yards of waste at the site by June 14.

A state inspection at VIM's site recently revealed that efforts by the company to move exposed raw wood inside a storage building had all but stopped, apparently because of limited storage space, The Elkhart Truth reported last month.

The state wants to see control of VIM transferred to its would-be buyer, Soil Solutions, which has the necessary state permits to accept and grind the wood wastes in question.