The lawsuit was filed in Texas federal court. The ICE agents argue that the Deferred Action/Dream Act policy violates the separation between the legislative and executive branches of government.
So far, the Supreme Court has ruled that the government has the power of “Prosecutorial Discretion,” which is what defenders of the Deferred Action/Dream Act argue.
http://www.foxnews.com/politics/2012/08/23/immigration-agents-file-suit-against-napolitano-over-amnesty-program/?cmpid=cmty_%7BlinkBack%7D_Immigration_agents_file_suit_against_Napolitano_over_'amnesty'_program