If I understand correctly, the sequences of events is like this:
A) FBI issues NSL to ISP, demanding information, and prohibiting disclosure.
B) ISP starts a proceeding challenging constitutionality of gag
C) FBI starts a separate proceeding reasserting validing of gag
D?) Wired also claims that the FBI claimed that step B violated the law, but I don't see that in the ruling link you posted.
Why is step C needed? Not that it seems that bad....
IANAL or a procedural expert, and more importantly I have not read all the filings so far, but my understanding is that the tension between steps B and C goes like this:
B) ISP files suit, argues 'this ain't constitutional, we shouldn't have to comply.' DoJ disagrees.
C) FBI counter-files, asserting that even if ISP prevails in step B), it should comply in the meantime rather than temporize pending the outcome. I can understand why they would, since they may in good faith consider time to be of the essence in obtaining the information they seek - which is part of their job, after all.
I'm not that troubled by D, insofar as undercover operations realistically require a degree of secrecy. What was troubling about the NSL regime was that it asserted this secrecy by default; I expect that in the future the government will still get NSLs but will first go through something like the FISA court and essentially ask a court for a gag order, presenting evidence under seal. This is IMHO how it ought to have been from the start.
Without having read all the stuff, and in fact mostly just having read the first few pages of the judgement that you posted, I think it's clear that a key part of (B) is that the ISP argued that the gag was unconstitutional. I have seen no evidence so far saying that the judgement against the FBI gets the ISP off the hook for turning over the data.
I agree that, insofar as (B) was about not turning over information, (C) seems reasonable.
I also agree that, as these things go, every time the "bad news" involves "was taken to court", we should remember that the news could be worse, involving arrest or ruin. So yay there. Then again, taking people to court often results in arrest and ruin, so it's kinda a partial victory. But still, yay for rule of law.
There's a place I disagree with you, though:
D, if true, horrifies me. "You're not only allowed to disobey, you're not allowed to ask the court for permission to disobey. Making use of the judiciary is a crime." That's a horrifying assertion to make.
D also, based on the account given, seems insane. The courts had already actively stated, in 2005, that both your version of (B) and my version of (B) are legal. As I write these sentences, I remind myself that any time someone else seems insane, odds are good that I don't have the whole picture.
I think it actually started with (A) the DOJ filing a action to compel the company to comply with the national security letter. Then (B) the company replied requesting the letter be invalidated on First Amendment (compulsory non-disclosure of the NSL) and statutory grounds. Then (C) the DOJ files another motion showing why they need the information and asking for the court to force the company to comply with the NSL while the case is pending so they can pursue their investigation.
The court ended up ruling that the non-disclosure provision violated the First Amendment and invalidated the NSL law as a whole.
I think the only law the DOJ was accusing Credo of violating was 18 USC § 2709[1] which requires carriers to turn over subscriber information and prohibits certain disclosure.
But you're correct that the Government argued that the court did not have jurisdiction to rule on the constitutionality of the law. This was because Credo brought its action under a statute that gives a court limited authority to modify or revoke the NSL. However, the court found the constitutional challenge was a necessary part of Credo's claim and allowed it.
