Washington ? The Obama administration has lost its argument that a potential threat to national security should stop a lawsuit challenging the government’s warrantless wiretapping program.

A federal appeals court in San Francisco on Friday rejected the Justice Department’s request for an emergency stay in a case involving a defunct Islamic charity.

Yet government lawyers signaled they would continue fighting to keep the information secret, setting up a new showdown between the courts and the White House over national security.

The Obama administration, like the Bush administration before it, claimed national security would be compromised if a lawsuit brought by the Oregon chapter of the charity, Al-Haramain Islamic Foundation, was allowed to proceed.

Now, civil libertarians hope the case will become the first chance for a court to rule on whether the warrantless wiretapping program was legal or not. It cited the so-called state secrets privilege as a defense against the lawsuit.

“All we wanted was our day in court and it looks like we’re finally going to get our day in court,” said Al-Haramain’s lawyer, Steven Goldberg. “This case is all about challenging an assertion of power by the executive branch which is extraordinary.”

But hours after the appeals court made its decision, government lawyers filed new papers insisting they still did not have to turn over any sensitive information.

“The government respectfully requests that the court refrain from further actions to provide plaintiffs with access to classified information,” said the filing, suggesting the Obama administration may appeal the matter again to keep the information secret and block the case from going forward.

The decision is a setback for the new Obama administration as it adopts some of the same positions on national security and secrecy as the Bush administration.