## Facts

- AT&T customers sued AT&T Corp. and AT&T Inc. in a putative nationwide class action alleging AT&T assisted the National Security Agency in warrantless surveillance of communications and related records.
- Plaintiffs alleged AT&T intercepted, disclosed, diverted, and used communications and disclosed contents and records to the government without lawful process.
- The complaint relied in part on a former AT&T technician’s declaration and materials describing equipment installed at an AT&T facility that allegedly copied Internet backbone traffic to government-related equipment.
- Plaintiffs also cited public statements by senior executive-branch officials acknowledging a “terrorist surveillance program,” and AT&T statements about classified work and national-security cooperation.
- Claims included alleged violations of the First and Fourth Amendments (premised on AT&T acting as a government agent), FISA, ECPA/Title III, the Communications Act, the Stored Communications Act, and California unfair competition law.
- The United States intervened and invoked the state-secrets privilege, seeking dismissal (or summary judgment) on the theory that the litigation’s subject matter and necessary proof were state secrets.
- AT&T moved to dismiss on overlapping grounds, including state secrets, standing, and failure to state a claim.

## Issues

1. Whether the government’s assertion of the state-secrets privilege required dismissal because the “very subject matter” of the case was a state secret or because privileged evidence would be necessary to litigate.
2. Whether publicly available evidence and asserted nonprivileged materials permitted adjudication of at least some claims without disclosing protected national-security information.
3. Whether plaintiffs plausibly alleged standing and actionable statutory and constitutional violations at the pleading stage.

## Decision

- The court denied the United States’ motion to dismiss based on the state-secrets privilege.
- The court denied AT&T’s motion to dismiss to the extent it sought dismissal on state-secrets and related threshold grounds addressed in the order.
- The court held the case could proceed using nonprivileged evidence, subject to later privilege rulings on specific evidence as the litigation developed.

## Legal Principles

- The state-secrets privilege requires independent judicial assessment and is not a basis for dismissal merely upon executive assertion.
- Dismissal under the “very subject matter” doctrine is reserved for cases where the core subject is genuinely secret; where core aspects have been publicly acknowledged, litigation is not automatically barred.
- The privilege may be applied to specific evidentiary items rather than requiring termination of the entire suit at the outset.
- Plaintiffs may establish standing at the motion-to-dismiss stage by plausibly alleging injury from an allegedly broad surveillance program affecting customers whose communications traverse a defendant’s network.
- Statutory surveillance and privacy regimes (including FISA and ECPA) provide judicially manageable standards and may permit civil liability for private entities that unlawfully intercept or disclose communications.

## Conclusion

The court refused to end the case at the threshold on state-secrets grounds, finding that public acknowledgments and other nonprivileged materials allowed plaintiffs’ surveillance-related statutory and constitutional claims against AT&T to proceed while reserving the ability to exclude truly privileged evidence later.


Hepting v. AT&T Corp., 439 F. Supp. 2d 974 (N.D. Cal. 2006)