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Court likely to allow suit against AT&T, reject wiretap case
San Francisco Chronicle
Bob Egelko, Chronicle Staff Writer
August 16, 2007

A federal appeals court holding a high-stakes hearing Wednesday in San Francisco on President Bush's clandestine eavesdropping program appeared inclined to keep alive a lawsuit accusing AT&T of illegally letting the government intercept millions of Americans' phone calls and e-mails.

At the same hearing, however, the panel appeared skeptical about a suit by a defunct Islamic charity that said it had evidence that it and two of its lawyers had been wiretapped - the only such case in the nation filed by an alleged target of the surveillance program. The snag is that the evidence, a document that the government inadvertently released to the plaintiffs in 2004, is classified top secret and thus can't be used in court to prove that the calls were overheard.

The two-hour hearing by the Ninth U.S. Circuit Court of Appeals involved two different cases with a common theme: the Bush administration's argument that the details of the program were so sensitive that a lawsuit challenging any aspect of it would pose an unacceptable risk of exposing state secrets.

"Litigating this action could result in exceptionally grave harm to the national security," Justice Department lawyer Gregory Garre said in arguing for dismissal of the AT&T case. He said every essential issue in the lawsuit - whether a surveillance program existed, whether the company was part of it, and whether any particular messages were intercepted - was a secret whose disclosure could reveal intelligence methods and aid the nation's enemies.

Members of the three-judge panel seemed frustrated by the government's insistence that judges must defer to intelligence officials' assessment of the need for secrecy and dismiss the lawsuits without deciding whether the surveillance program was legal.

Judge Margaret McKeown paraphrased the government's position as, "We don't do it, trust us, and you can't ask about it."

Judge Harry Pregerson offered his own paraphrase: "Once the executive declares that certain activity is a state secret, that's the end of it. ... The king can do no wrong."

But the court appeared to be ready to draw a distinction between the AT&T suit, which claims the company colluded illegally with government eavesdropping and data-mining, and a suit by the now-defunct Al-Haramain Islamic Foundation, which is a direct challenge to the surveillance program.

Bush acknowledged in December 2005, after the New York Times revealed the program, that he had ordered the National Security Agency to intercept calls between Americans and terrorist suspects abroad since shortly after the terrorist attacks of Sept. 11, 2001, and that he had done so without seeking the court warrants required by a 1978 federal law.

The president said that Congress had implicitly authorized the surveillance after Sept. 11 and that he also had the power to order it as commander-in-chief. The only federal judge to consider those claims has rejected them, but her ruling was overturned last month by a federal appeals court in Cincinnati on the grounds that the plaintiffs were unable to prove that their calls were intercepted, and thus lacked the right to sue.

Congress explicitly approved Bush's program earlier this month by passing a law, due to expire in six months, that allows interception of calls and e-mails between Americans and any person in a foreign country who is an object of U.S. surveillance. The new law received little attention in Wednesday's hearing.

The AT&T suit, like several cases pending against other telecommunications companies, accuses the firm of giving the National Security Agency unlimited access to customers' phone calls, e-mails and message records. Plaintiffs in the AT&T case have submitted a declaration by a former company engineer who said he helped install equipment at the company's San Francisco office that would divert Internet messages to a room reserved for government-cleared employees.

Chief U.S. District Judge Vaughn Walker of San Francisco refused to dismiss the suit in July 2006, saying AT&T's role in the program could be inferred from public statements by government and company officials.

But Garre, the Justice Department lawyer, argued Wednesday that any inquiry into a company's possible "secret espionage relationship" with the government is off-limits.

"The government has said that whatever AT&T is doing with the government is a state secret," said Michael Kellogg, a lawyer for the company. As a result, he said, AT&T would be unable to offer evidence in its own defense.

The judges seemed unpersuaded. McKeown noted that Bush has publicly denied that the government intercepts domestic calls without a warrant, one of the issues in the case. Judge Michael Hawkins suggested the plaintiffs might prove their case without divulging any secrets by showing that the company had provided private information to the government without insisting on a warrant.

In the other suit, Al-Haramain, which was classified by the government as a terrorist organization affiliated with al Qaeda, said the records it was inadvertently given by the government in 2004 showed that its phones had been wiretapped earlier that year.

The organization returned the documents when federal officials learned of the error, then claimed the wiretapping violated both the 1978 federal law and constitutional restrictions on searches. With the records locked away, however, the government argued that Al-Haramain could not prove it had been subject to surveillance.

A federal judge in Oregon refused to dismiss the suit and ruled that the organization's lawyers could rely on their recollections of the document to try to prove that Al-Haramain's rights had been violated.

Justice Department lawyer Thomas Brody disputed that ruling Wednesday, saying evidence of the records' contents was inadmissible regardless of whether it came from writing or memories. Without government confirmation, he said, the plaintiffs can't show they were targeted by the program or that any surveillance was conducted without a warrant.

McKeown appeared to agree. She suggested that allowing evidence of someone's recollection of a secret document would "pull out the rug from under the classified nature" of the document.

Plaintiffs' lawyer Jon Eisenberg replied that such evidence, while essential to his case, would not affect national security because his clients now know they were under surveillance. If the suit is dismissed on secrecy grounds, he said, it means "the president can do whatever he wants in the name of national security in a time of war. That can't be right."

E-mail Bob Egelko at bgelko@sfchronicle.com.

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