A federal judge in San Francisco has denied the Justice Department's request to dismiss a lawsuit against AT&T for their cooperation with the National Security Agency in the terrorist eavesdropping program.

The suit brought by the Electronic Frontier Foundation, a privacy rights group, alleged that by working with the NSA, AT&T was violating the law and the privacy of its customers. The Justice Department intervened in the litigation saying that allowing the case to go forward would damage national security by disclosing state secrets and sensitive intelligence gathering methods.

The government filed a motion asserting the state secrets privilege in the case on May 15.

Judge Vaughn Walker in his ruling disputed the need of the state secrets privilege since the government has held press briefings on the issue and confirmed New York Times reports about the NSA Program.

"The very subject matter of this action is hardly a secret...public disclosures by the government and AT&T indicate that AT&T is assisting the government to implement some kind of surveillance program," Walker wrote in a 72-page opinion.

"AT&T and the government have for all practical purposes already disclosed that AT&T assists the government in monitoring communication content...the government has publicly admitted the existence of a 'terrorist surveillance program,' which the government insists is completely legal."

The Judge disputes that litigating the case would aid terrorists from obtaining further information in the case. "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."

Walker, the Chief Judge at the U.S. Court in San Francisco, was appointed by Pres. George H.W. Bush. This is the first defeat for the government in several ongoing NSA-related lawsuits. Federal judges in Michigan and New York have not ruled whether the government can claim a state secrets privilege.

Judge Walker's ruling provides the government the ability to appeal immediately. "Given that the state secrets issues resolved herein represent controlling questions of law as to which there is a substantial ground for difference of opinion and that an immediate appeal may materially advance ultimate termination of the litigation, the court certifies this order for the parties to apply for an immediate appeal," Walker wrote.

A Justice Department spokesman said they are reviewing the opinion, "No determination has been made as to what the government's next step will be in this matter."