SAN FRANCISCO – It was perhaps inevitable that someone would compare President Bush's extrajudicial wiretapping operations to Richard Nixon's 1970s-era surveillance of journalists and political enemies. Both were carried out by Republican presidents; both bypassed the courts; both relied on the cooperation of U.S. telecommunications companies.

But there's some irony in the fact that it was AT&T to first make the comparison in a federal courtroom here, while defending itself from charges of complicity in Bush's warrantless spying.

Company attorney Bradford Berenson cited the case of The New York Times reporter Hedrick Smith, who'd been illegally wiretapped by Nixon's Plumbers as part of an investigation into White House leaks. In 1979, the U.S. Court of Appeals for the District of Columbia Circuit ruled that Smith couldn't sue Chesapeake & Potomac Telephone Company – then part of AT&T's Bell System – for installing the wiretaps at the Plumbers' behest.

The Nixon Defense was one of several arguments offered Friday by AT&T and the Justice Department in their bid to win summary dismissal of the Electronic Frontier Foundation's class-action lawsuit. The suit accuses the company of providing the National Security Agency with access to customer and non-customer internet traffic passing through AT&T's systems, without a warrant. (Disclosure: Wired News has filed a motion to intervene in the case asking the court to make public evidence filed under seal of AT&T's alleged wiretapping activities.)

Without confirming the allegations, AT&T said if it is cooperating with the NSA, it can't be held responsible, because – as in the Nixon case – it's serving as a "passive instrument or passive agent of the government," said Berenson.

"AT&T could refuse, could it not, to provide access to its facilities?" countered U.S. District Judge Vaughn Walker.

Berenson replied that AT&T would refuse any clearly illegal request, and a courtroom overflowing with EFF supporters broke into murmured, sardonic laughter. In the back, late-coming observers unable to win a seat pressed their faces against the windows of the courtroom door.

The government's surveillance activities of the 1970s were an ever-present ghost in the nearly three-hour-long hearing Friday, in a case that's emerging as a crucial challenge of the law passed in response to Watergate-era abuses. The Foreign Intelligence Surveillance Act, or FISA, requires the government to obtain a court order before performing electronic surveillance in national security cases, except for surveillance targeting only foreign nationals or for emergency wiretaps lasting no longer than 72 hours.

A related law allows private parties to sue a telecommunications company for cooperating in government surveillance that doesn't meet FISA's requirements or the demands of criminal wiretap laws. But that law grants companies immunity if the U.S. attorney general first presents them with a letter certifying that the surveillance is legal.

AT&T won't confirm or deny that it received such a letter. But Walker, who's privy to the government's classified evidence in the case, spent some time posing questions about how a letter would affect the litigation's outcome. EFF attorney Kevin Bankston argued that AT&T has a duty to know the law, and wouldn't be protected by a written request to assist in an illegal surveillance operation. "That piece of paper could not authorize the conduct that we allege here," Bankston said.

The government argued that the existence or nonexistence of a letter from the attorney general addressed to AT&T is one of the many secrets that cannot be disclosed without causing grave damage to the United States. The Justice Department asked that the entire case be dismissed on national security grounds under the rarely used "state-secrets privilege."

Never passed by Congress, the state-secrets privilege has its roots in English common law and was cemented into American jurisprudence by a landmark 1953 Supreme Court case titled U.S. v. Reynolds. In Reynolds, the widows of three men who died in a mysterious Air Force crash sued the government, and U.S. officials quashed the lawsuit by claiming that they couldn't release any information about the accident without endangering national security. The Supreme Court upheld the claim, establishing a legal precedent that today allows the executive branch to block the release of information in any civil suit – even if the government isn't the one being sued.

"It is an area of the law where the degree of deference from the court to the executive is at its highest," said Justice Department attorney Peter Keisler, who argued Friday that the case must be dismissed because its basic allegations can't be addressed without harming national security.

Acknowledging or disavowing any cooperation between the NSA and a particular telecommunications company, for example, would help terrorists communicate securely. "What the terrorist does when he decides to communicate ... is balance the risk that a particular communication will be intercepted against the operational inefficiencies" of finding another way to talk, said Keisler. Identifying a company as cooperating with the government would take some of the guesswork out of that assessment, and could even subject the company to terrorist reprisals.

But Walker showed some signs that he was taking a more nuanced look at the state-secrets privilege, and might consider making some information – such as the existence or nonexistence of the attorney general's letter – available for use in the case. "The state-secret privilege is not unlimited," Walker said.

Walker asked if the government would oppose the court retaining an expert to help sift through the classified evidence and evaluate its sensitivity; Keisler argued that such an analysis wouldn't show proper deference to the executive branch, and suggested it might prove problematic to grant such an expert the necessary security clearance.

For its part, EFF argued that the case can go forward without access to any government documents or testimony, thanks to the written statement and papers provided by former AT&T technician Mark Klein, which purports to show AT&T establishing a secure room in its San Francisco switching center to transmit intercepted internet traffic to the NSA.

EFF technical consultant J. Scott Marcus, a former FCC technology adviser, performed an analysis of the documents. Marcus concluded that AT&T's taps suck down about 10 percent of all U.S. internet traffic. The operation can pick up traffic transiting AT&T's network on its way somewhere else, so even non-AT&T customers are intercepted, he wrote.

"AT&T has constructed an extensive – and expensive – collection of infrastructure that collectively has all the capability necessary to conduct large-scale covert gathering of (internet protocol)-based communications information, not only for communications to overseas locations, but for purely domestic communications as well," Marcus wrote.

The government dismissed Klein's and Marcus' statements as "hearsay and speculation" Friday.

"They don't know as much as they think they know," said Keisler. AT&T agreed. "Pieces of cable go into a room," said company attorney Bruce Ericson. "That's as far as they take us."

There were few clues to where the judge was leaning Friday, but as the hearing drew to a close, he asked both sides how they would want to proceed should he deny the government's motion to dismiss – suggesting he's considering allowing some portion of EFF's case to proceed.

Speaking to reporters outside the courthouse, whistle-blower Klein said the evidence he provided was sufficient to make the case, without exposing any national security secrets. AT&T, he said, helped with "massive interception, without warrant, of everyone's information."

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This story has been modified to add a disclosure regarding Wired News' involvement in the case.