updated 7/20/2006 4:35:26 PM ET 2006-07-20T20:35:26

A federal judge Thursday refused to dismiss a lawsuit challenging the Bush administration’s domestic spying program, rejecting government claims that allowing the case to go forward could expose state secrets and jeopardize the war on terror.

U.S. District Judge Vaughn Walker said the warrantless eavesdropping has been so widely reported that there appears to be no danger of spilling secrets.

Dozens of lawsuits alleging that telecommunications companies and the government are illegally intercepting Americans’ communications without warrants have been filed. This is the first time a judge has ruled on the government’s claim of a “state secrets privilege.”

“It might appear that none of the subject matter in this litigation could be considered a secret given that the alleged surveillance programs have been so widely reported in the media,” Walker said.

‘Dismissing this case ... would sacrifice liberty’
Walker also wrote that he did not see how allowing the lawsuit to continue could threaten national security.

“The compromise between liberty and security remains a difficult one,” Walker said. “But dismissing this case at the outset would sacrifice liberty for no apparent enhancement of security.”

And in declining to dismiss AT&T Inc. from the lawsuit, filed by the Electronic Frontier Foundation privacy group, Walker suggested the case had some merit. “AT&T cannot seriously contend that a reasonable entity in its position could have believed that the alleged domestic dragnet was legal,” he wrote.

The Justice Department did not immediately return calls seeking comment.

The lawsuit challenges President Bush’s assertion that he can use his wartime powers to eavesdrop on Americans without a warrant. It accuses AT&T of illegally cooperating with the National Security Agency to make communications on AT&T networks available to the spy
agency without warrants.

‘Of the highest order’
The government intervened in the case, telling Walker that Bush’s surveillance program, adopted after the Sept. 11 terror attacks, is “a secret of the highest order.”

The government argued that divulging any information about any alleged collusion between AT&T and the government to eavesdrop on Americans could subject AT&T employees and facilities to attack and would enable terrorists “to communicate more securely.”

The state secrets defense, first recognized by the U.S. Supreme Court in a McCarthy-era lawsuit, has been increasingly and successfully invoked by federal lawyers seeking to shield the government from court scrutiny.

The high court has upheld the legal tactic as recently as January, when it rejected an appeal from a former covert CIA officer who accused the agency of racial discrimination.

‘Wholesale surveillance’
The president confirmed in December that the NSA has been conducting warrantless surveillance of calls and e-mails thought to involve al-Qaida terrorists if at least one of the parties to the communication is outside the United States.

The administration contends the program is legal and necessary, but has been mum on whether purely domestic calls and electronic communications are being monitored, as the lawsuit alleges.

Under a deal reached this month with Sen. Arlen Specter, R-Pa., chairman of the Senate Judiciary Committee, Bush agreed to support a bill that could submit the program to the secretive Foreign Intelligence Surveillance Court for a constitutional review.

The EFF asked Walker to rule on whether the president possesses wartime powers to authorize warrantless eavesdropping in the United States. The EFF alleges that San Antonio-based AT&T, which neither confirms nor denies the allegations, practices “wholesale surveillance” of its customers.

The case is Hepting v. AT&T Inc., 06-0672.

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