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Class Action Defense Cases–Hepting v. AT&T Corp.: California Federal Court Rejects Defense Motion to Dismiss Class Action Challenging Warrantless Surveillance Program

San Francisco Federal Court Denies Motion by Class Action Defense and Federal Government to Dismiss Lawsuit on Grounds of “State Secrets” Privilege and Immunity, But Certifies Order for Interlocutory Appeal

After the federal government’s warrantless surveillance program was revealed in the press, and after AT&T and President Bush admitted the existence of the program, a putative class action was filed in San Francisco federal court against AT&T alleging that its participation in the program violated numerous constitutional and federal laws, as well as California’s unfair competition law (UCL), California Bus. & Prof. Code, §§ 17200 et seq. AT&T moved to dismiss the class action complaint on grounds of standing, failure to plead that AT&T did not have a government certification, and immunity; the federal government intervened and moved for dismissal or summary judgment based on the state secrets privilege. Yesterday, the California district court denied the defense motions, but certified its order for immediate appeal. Hepting v. AT&T Corp., ___ F.Supp.2d ___ (N.D. Cal. July 20, 2006). The court’s order is exceptionally detailed; we provide but a brief summary of it below. The entire opinion may be downloaded from the link at the end of this article.

The district court first addressed the federal government’s “state secrets” defense. “‘The state secrets privilege is a common law evidentiary rule that protects information from discovery when disclosure would be inimical to the national security.'” Slip Opn., at 5 (citation omitted). Importantly, an inquiry into the state secrets privilege does not turn on “a balancing of ultimate interests at stake in the litigation,” Halkin v. Helms, 690 F.2d 977, 990 (D.C. Cir. 1982). Rather, the question is whether the harm that may result from the disclosure at issue requires that the information be withheld as a matter of “absolute right,” id. The district court in Hepting applied the standard set forth in the Ninth Circuit’s “definitive opinion on the state secrets privilege,” Kasza v. Browner, 133 F.3d 1159 (9th Cir. 1998). Slip Opn., at 12. The federal government asserted that Kasza required dismissal because “(1) the very subject matter of this case is a state secret, (2) plaintiffs cannot make a prima facie case for their claims without classified evidence and (3) the privilege effectively deprives AT&T of information necessary to raise valid defenses.” Slip Opn., at 15 . The court rejected each of these arguments.

First, the district court examined whether the information at issue was actually “secret”: it concluded that it may be even though an argument could be made that information “could [not] be considered a secret given that the alleged surveillance programs have been so widely reported in the media.” Slip Opn., at 24. It then proceeded to determine that the state secrets privilege did not apply, in part because “the very subject matter of this action is hardly a secret.” Id., at 34. Second, the court rejected the federal government’s claim that AT&T will not be able to mount an effective defense without disclosing state secrets because it would be “premature” to make that determination before plaintiffs’ lawyer could conduct “at least some discovery,” id. The court then found that much of the evidence plaintiffs will rely upon has been disclosed publicly, explaining at pages 39-40:

If the government’s public disclosures have been truthful, revealing whether AT&T has received a certification to assist in monitoring communication content should not reveal any new information that would assist a terrorist and adversely affect national security. And if the government has not been truthful, the state secrets privilege should not serve as a shield for its false public statements. In short, the government has opened the door for judicial inquiry by publicly confirming and denying material information about its monitoring of communication content.

The district court then turned to AT&T’s motion to dismiss. The court first concluded that plaintiffs had adequately alleged injury in fact to establish standing to prosecute the class action. Slip Opn., at 46-50. It then held that regardless of whether plaintiffs were required to affirmatively allege that AT&T acted without a government certificate, dismissal was not warranted because the complaint was premised on the theory that AT&T acted outside of any such authority. Id., at 51-54. The district court also rejected AT&T’s “absolute commonly law immunity” defense, id., at 55-60, and its “qualified immunity” defense, id., at 60-68.

Finally, the court certified its order for immediate appellate review because “the state secrets issues resolved herein represent controlling questions of law as to which there is a substantial ground for difference of opinion.” Slip Opn., at 70. The court’s opinion is well worth reading.

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