Private email service, Lavabit, which is claimed to be used by Edward Snowden, appealed against a government order to surrender the unencrypted data of the NSA whistle-blower.
The 10-year-old mailing service was suspended by its founder Ladar Levison during last summer in protest against the order to provide real-time e-mail monitoring of one of its users.
In June 2013, when Snowden escaped from the US, the FBI produced a court order seeking data from an individual Lavabit account.
During the latest hearing, Lavabit and federal prosecutors presented their cases before a three-judge panel at the 4th US Circuit Court of Appeals in Richmond, Virginia.
Initially, the now defunct firm rejected to comply with the order before finally agreeing to the establishment of a so-called 'pen trap', which gathers all routing data for the individual.
Lavabit lawyers argued that the government's order to provide the defunct firm's encryption keys will offer them access to emails of 4m users as opposed to just the single account.
According to Judge Paul Niemeyer the issue had been driven out of proportion with all such contentions, mainly about the exploit and possible misuse of the SSL encryption keys, PC World reported.
"There's such a willingness to believe that the keys will be misused and that "the government will spy on everyone," Niemeyer said.
In addition, Niemeyer also implied that Levison took more time in replying to the first order for e-mail surveillance, leaving the government with no choice other than to demand the SSL keys.