American businesses have found themselves on the front lines of the civil liberties flank in the war on terrorism — and they’re starting to grow restive. A major court challenge to the National Security Agency’s controversial warrantless wiretapping program may leave these companies without the ability to fully defend themselves in court, business groups say, if a recent judge’s ruling becomes a precedent.

So last month, the U.S. Chamber of Commerce filed a friend-of-the-court brief seeking to reverse a ruling by Vaughn Walker, the chief federal district judge for northern California, denying a government motion to dismiss the class action suit, Hepting v. AT & T.

The Electronic Frontier Foundation, a digital privacy rights group, maintains that AT&T Inc. violated communications privacy law when it made client data available to the NSA. The agency took the telephone company’s side and argued that the lawsuit should be dismissed because the NSA was invoking the federal government’s “state secret privilege” — which originates in a 1953 Supreme Court decision granting the government wide discretion to quash legal challenges when it concludes they would harm national security.

But the judge didn’t buy the argument. He concluded that the defendants had already undermined a state secrecy claim by weighing in publicly on the case. “Because of the public disclosures by the government and AT&T,” Walker wrote, “the court cannot conclude that merely maintaining this action creates a ‘reasonable danger’ of harming national security.” The 9th U.S. Circuit Court of Appeals is now reviewing Walker’s ruling.

AT&T’s business allies say that if it stands, the judge’s decision could have wide-ranging implications. “The judicial erosion of the state secrets privilege would seriously undermine this vital cooperative relationship between business and government,” the Chamber warns in its amicus brief. And it further cautions that 85 percent of the nation’s critical infrastructure — communications networks, chemical plants and other potential terrorism targets — is privately owned, with comprehensive security provisions achieved only via the sort of public-private partnerships they say that Walker’s ruling now threatens.

But a number of legal scholars and civil liberties groups view the business groups as crying wolf. After the decision came down last year, Steven Aftergood, the publisher of Secrecy News, noted that Walker’s ruling was unique in striking down the government’s secrecy claim on its merits, rather than a technicality. And the Bush White House has widely asserted state secrets claims in other venues, Aftergood says, which may have diluted its power here. “If the state secrets provision were an automatic ‘Get Out of Jail Free’ card, there would be no need for judges,” he says.

The Chamber hasn’t offered further comment on the case. But others in the private sector agree that without the secrecy claim, businesses facing legal actions would not be able to mount full-throated defenses that rely on references to classified materials. “What it potentially does is have a chilling effect on any company against working with the government to protect our national security,” says Timothy R. Sample, president of the Intelligence and National Security Alliance, which represents executives from all the nation’s top intelligence contractors.

Sample — who was staff director of the House Intelligence Committee when it was chaired by Porter J. Goss, the Florida Republican who went on to head the CIA — contends that Walker’s ruling presents another big legal roadblock: a passage suggesting that the defendants “might disclose, either deliberately or accidentally, other pertinent information about the communication records program as this litigation proceeds.” That could serve “as a dangerous precedent of presuming future leaks,” Sample says. He says his group will either join the Chamber’s amicus brief or mount its own offensive against the decision by Walker, who was put on the bench in 1989 by President George Bush.

He may not have much longer to decide. The Electronic Frontier Foundation files its appeal briefs this week. And the administration has renewed its request that lawmakers enact a shield law stifling lawsuits against businesses involved in post-Sept. 11 surveillance initiatives — even though Congress’ new Democratic majority could well derail it.

Digital privacy advocates say the solution isn’t a shield, but more sunlight. “There shouldn’t be anything classified about whether or not a phone company has provided confidential data on its customers to the security branches,” says Larry Fahn, executive director of As You Sow, an advocacy group that has gone after AT&T with the Securities and Exchange Commission over its involvement in the NSA program. “In my view, when in doubt, businesses — like everyone else — should err on the side of full disclosure and transparency.”