How are state wiretaps obtaining plaintext from encrypted transmissions? According to the US 2011 Wiretap Report, encryption — on the off chance that it is encountered — has been no hurdle to retrieving the content of a conversation.


  Public Law 106-197 amended 18 U.S.C. § 2519(2)(b) in 2001 to require
  that reporting should reflect the number of wiretap applications
  granted in which encryption was encountered and whether such
  encryption prevented law enforcement officials from obtaining the
  plain text of the communications intercepted pursuant to the court
  orders. In 2011, encryption was reported during 12 state wiretaps, but
  did not prevent officials from obtaining the plain text of the
  communications.


— US 2011 Wiretap Report, page 8–9 (emphasis added)

Why was this encryption not successful?

Unfortunately the report includes very little detail about what kind of transmission and encryption was involved in any of the 12 cases.
Many reasons, including:


federal law requiring companies (e.g. telephone) to surrender encryption keys
interception before encryption (it's pretty easy to eavesdrop on keyboard input purely via electromagnetic radiation even several meters away)
MITM on an insecure channel (quite effective)
outright broken encryption algorithms
social engineering to recover key
Van Eck phreaking
weak keys
if all else fails, save the ciphertext for until you can subpoena the suspect and retrieve the key (but I guess this doesn't count)


etc... when you are being heavily monitored, purely cryptographic measures become too intangible and no longer suffice. You need to employ physical means to remain in a secure position.