The federal government may spy on Americans' communications without warrants and without fear of being sued, a federal appeals court ruled Tuesday in a decision reversing the first and only case that successfully challenged President George W. Bush's once-secret Terrorist Surveillance Program.

"This case effectively brings to an end the plaintiffs' ongoing attempts to hold the executive branch responsible for intercepting telephone conversations without judicial authorization," a three-judge panel of the 9th U.S. Circuit Court of Appeals wrote. (.pdf)

The case concerned a lower court decision in which two American attorneys – who were working with the now-defunct al-Haramain Islamic Foundation – were awarded more than $20,000 each in damages and their lawyers $2.5 million in legal fees after a tortured legal battle where they proved they were spied on without warrants.

They sued under domestic spying laws Congress adopted in the wake of President Richard M. Nixon's Watergate scandal. The government appealed their victory, and the appeals court Tuesday dismissed the suit and the damages.

Jon Eisenberg, the lawyer for the two attorneys, said he may request the court to reconsider its decision with a larger panel of judges, or petition the Supreme Court.

"This case was the only chance to litigate and hold anybody accountable for the warrantless wiretapping program," he said in a telephone interview. "As illegal as it was, it evaded accountability."

Jon Eisenberg. Photo: Ryan Singel/Wired

The San Francisco-based appeals court ruled that when Congress wrote the law regulating eavesdropping on Americans and spies, it never waived sovereign immunity in the section prohibiting targeting Americans without warrants. That means Congress did not allow for aggrieved Americans to sue the government, even if their constitutional rights were violated by the United States breaching its own wiretapping laws.

"Under this scheme, Al-Haramain can bring a suit for damages against the United States for use of the collected information, but cannot bring suit against the government for collection of the information itself," Judge M. Margaret McKeown wrote for the majority. She was joined by Judge Michael Daly Hawkins and Judge Harry Pregerson. "Although such a structure may seem anomalous and even unfair, the policy judgment is one for Congress, not the courts."

The court, during oral arguments in June, expressed concern that it may reach this result.

Judge Hawkins, during those arguments, noted that the law spells out that those who were illegally spied upon may seek monetary damages. But if Congress did not intend for the government to be sued, "it would make the remedy illusory," Hawkins said.

The court did not comment on the spying allegations of those involved in the case. It also dismissed claims against FBI Director Robert Mueller, saying there was not enough evidence linking him to the spy program the Bush administration adopted in the wake of the 2001 terror attacks.

Subsequently, Congress authorized Bush's spy program in 2008, five years after the illegal wiretapping involved in this case.

The Bush spy program was first disclosed by The New York Times in December 2005, and the government subsequently admitted that the National Security Agency was eavesdropping on Americans' telephone calls without warrants if the government believed the person on the other end was overseas and associated with terrorism. The government also secretly enlisted the help of major U.S. telecoms, including AT&T, to spy on Americans' phone and internet communications without getting warrants as required by the 1978 Foreign Intelligence Surveillance Act, the law at the center of the al-Haramain dispute.

A lower court judge found in 2010 that two American lawyers' telephone conversations with their clients in Saudi Arabia were siphoned to the National Security Agency without warrants. The allegations were initially based on a classified document the government accidentally mailed to the former al-Haramain Islamic Foundation lawyers Wendell Belew and Asim Ghafoor.

The document was later declared a state secret, removed from the long-running lawsuit and has never been made public. With that document ruled out as evidence, the lawyers instead cited a bevy of circumstantial evidence that a trial judge concluded showed the government illegally wiretapped the lawyers as they spoke on U.S. soil to Saudi Arabia.

The other major case challenging the wiretapping program, the Electronic Frontier Foundation's case against the government, alleges a wholesale vacuuming of Americans' communications. That case wassent back to a district court after it survived an appeals court ruling in December.