Civil liberties group the Electronic Freedom Foundation (EFF) took the case against telecoms giant AT&T, alleging that the firm collaborated with the National Security Agency in the US to pass on email and phone call information to the NSA illegally.
The EFF instigated a class action lawsuit against the telephone and internet provider in January but the US Government tried to stop the case going to trial because it said that state secrets could be exposed.
US District Judge Vaughn Walker said that the case must go ahead.
"The compromise between liberty and security remains a difficult one," he said. "But dismissing this case at the outset would sacrifice liberty for no apparent enhancement of security."
The EFF welcomed the decision. "We are gratified that Judge Walker rejected the Government's overbroad claims of secrecy, and that our case on behalf of AT&T customers can go forward," said EFF staff attorney Kevin Bankston. "Judge Walker correctly found that the government, after having already admitted to and extensively commented on the NSA's spying program, cannot now claim that it is a secret and sweep AT&T's role under the rug."
Walker did recognise that the security implications of the case were significant, and said that he intends to appoint a specialist to the court to help make decisions on the national security implications of the case.
"While the court has a duty to the extent possible to disentangle sensitive information from non-sensitive information, the court also must take special care to honour the extraordinary security concerns raised by the government here," wrote Walker in his judgment. "To help perform these duties, the court proposes appointing an expert pursuant to [the Federal Rules of Evidence] to assist the court in determining whether disclosing particular evidence would create a 'reasonable danger' of harming national security."
The case could be consolidated with other challenges to the alleged spying programme. The EFF claims that information on phone calls and emails was handed over to the authorities in contravention of existing eavesdropping laws and the first amendment of the US Constitution, which protects free speech. It says it expects AT&T and the government to appeal Walker's decision.
The case could still be moved to a secret court under a plan unveiled last week by the government and a US senator, Arlen Specter. The plan proposes that any legal challenges to the NSA would be heard by the Foreign Intelligence Surveillance Act (FISA).
The court established by that act hears arguments in secret and only from government lawyers, the EFF said. "As Judge Walker demonstrated today, the conventional court system is perfectly capable of handling these cases and can do so by balancing the public's need for transparency with proper protections for security," said EFF staff attorney Kurt Opsahl. "Any bill that would attempt to sweep these cases into a the secret court should be rejected."
