A palomino mare named Star grazes on Debbie DeLouise's clover meadow, hanging out at a salt lick there and frolicking with her foal Holly.

But a legal dispute may imperil their pastoral bliss: It threatens to close the only store where Ms. DeLouise can buy food for Star and Holly. Without their special diet, the horses would waste away and turn green.

"If there's no food, I'm not sure what will happen," says Ms. DeLouise, a Long Island, N.Y., librarian. "I certainly hope no one has to find out."

Star and Holly aren't real horses. They exist only within Linden Research Inc.'s "Second Life," an online virtual world where people can fashion a new existence. But while the buying, breeding and riding of horses happens in the virtual world, litigation over them happens in real-life federal court.

The case brushing up against the horses owned by Ms. DeLouise—whose "Second Life" avatar, or alter ego, is a younger, bigger-haired version of herself—began last fall.