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An excellent article discussing the legal aspects:

FISA vs. the Constitution

http://www.opinionjournal.com/editorial/feature.html?id=110007734

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"Ultimately, as the courts have noted, the test is whether the legitimate government interest involved--in this instance, discovering and preventing new terrorist attacks that may endanger tens of thousands of American lives--outweighs the privacy interests of individuals who are communicating with al Qaeda terrorists. And just as those of us who fly on airplanes have accepted intrusive government searches of our luggage and person without the slightest showing of probable cause, those of us who communicate (knowingly or otherwise) with foreign terrorists will have to accept the fact that Uncle Sam may be listening.

Our Constitution is the supreme law, and it cannot be amended by a simple statute like the FISA law. Every modern president and every court of appeals that has considered this issue has upheld the independent power of the president to collect foreign intelligence without a warrant. The Supreme Court may ultimately clarify the competing claims; but until then, the president is right to continue monitoring the communications of our nation's declared enemies, even when they elect to communicate with people within our country."

First, let me apologize for the long excerpts. I don't want to try to mislead anyone with fancy quoting techniques so I am erring on the side of excess.

"Our Constitution is the supreme law, and it cannot be amended by a simple statute like the FISA law. Every modern president and every court of appeals that has considered this issue has upheld the independent power of the president to collect foreign intelligence without a warrant."

This will no doubt be an issue as this moves forward (assuming it does move forward). The most clear cut case that can be made of law barring the action of the president eavesdropping with out a warrant would be from FISA itself which specifically forbids anyone going around it.

In this case the question is, is the President bound by an act of congress that specifically controls his discretion?

Going back to the DOJs argument, the cases cited that most directly address this question are the Prize Cases.

In the Prize cases, the President ordered the capture of a number of merchant ships. Much of this case is not directly applicable to the question at hand. In the decision however the subject is broached.

The key passages are as follows (highlights are mine):

"In case of civil war, the President may, in the absence of any Act of Congress on the subject, meet the war by the exercise of belligerent maritime capture.

The same overwhelming reasons of necessity govern this position, as the preceding.

This position has been recognized by every Court into which the prize causes have been brought in this country, by Judge Dunlop, the District of Columbia; Judge Giles, in Maryland; Judge Marvin, in Florida; Judge Betts, in New York; Judge Sprague, in Massachusetts; Judge Cadwalader, in Pennsylvania.

There are general Acts of Congress clothing the President with power to use the army and avy to suppress insurrections. Act 1795, ch. 36, sec. 2; Act 1807, ch. 39.

And it must be admitted that the function of using the army and navy for that purpose is an Executive function. But it is contended that before they are used as belligerent powers, before captures can be made, on grounds of blockade and enemy property, Congress must pass upon the case, and determine whether the powers shall be exerted.

Now, if Congress must so adjudge in the first instance, why not throughout the war? Civil wars change their character, from day to day and place to place. Congress should be a council of war in perpetual session, to determine when, how long, and how far this or that belligerent right shall be exerted.

The function to use the army and navy being in the President, the mode of using them, within the rules of civilized warfare, [67 U.S. 635, 661] and subject to established laws of Congress, must be subject to his discretion as a necessary incident to the use, in the absence of any Act of Congress controlling him. "

"The capture, in this case, was before the passage of the act. The statute does not retroact."

In the Prize Cases, it was deemed that it was within the President's discretion to seize the ships since there was no act of congress limiting him from doing so.

In the current case however, there is an act of congress embodied in FISA itself that specifically bars anyone to bypass it.