Contracts and the First Amendment, Anthropic v. U.S. Department of [War?]
This Blog has had numerous posts about the interactions between contractual obligations and First Amendment rights. The most recent post is here, about a graduate student dismissed for giving a student a bad grade. Last year, there was this one about unionization efforts at Marquette University. The year before, there was contracts fall-out from the war in Gaza. Before that, there were COVID cases such as this one. Around the same time, there were cases brought by people fired due to social medial posts. I have staked out my position on contracts and the First Amendment in a series of posts and law review articles, including this one and that one. I won’t go on at length here about topics already covered.
The latest contracts and the First Amendment mash up features a showdown between Anthropic, PBC (Anthropic) the company behind Claude, and the Department of Defense (DoD), which the Complaint and the Court call the Department of War, but I’m sticking with DoD. Call me old fashioned.
As we discussed recently, Anthropic recently parted ways with the DoD, because it insisted that Claude not be used to assist in building autonomous weapons that could execute missions free from human oversight. The federal government responded with a federal hissy fit. The President announced that, from now on, no federal agency could work with Antrhopic (the Presidential Directive). Secretary of Defense Pete Hegseth went further, saying that DoD would not work with any business that worked with Anthropic (the Hegseth Directive). Finally, DoD declared anthropic a “supply chain risk” (the Supply Chain Designation), a designation never before applied to a U.S. business entity (collectively, the Challenged Actions). No doubt, the administration expected unconditional surrender.
But Pete Hegseth’s DoD excels at the sort of one-dimensional chess in which one imagines the opposing player has no countermoves and no allies. Surprise. Anthropic filed suit on March 9th, citing violations of the First Amendment, the Fifth Amendment Due Process Clause, and the Administrative Procedures Act (APA). Anthropic is seeking to enjoin all three Challenged Actions. According to Francis Sideco writing in Forbes, “Several large tech companies, including Google, Amazon, Apple and Microsoft, have backed Anthropic, claiming that the Pentagon’s actions demonstrate a dangerous precedent of government intervention.” Ya think?
Last month in Anthropic PBC v. U.S. Department of War, the District Court for the Northern District of California granted Anthropic’s motion for a preliminary injunction. Judge Rita Lin (below) did not mince words in finding that the DoD was seeking to punish Anthropic for its speech critical of the government. “Nothing in the governing statute supports the Orwellian notion that an American company may be branded a potential adversary and saboteur of the U.S. for expressing disagreement with the government.” Moreover, by imposing sanctions without giving Anthropic notice or an opportunity to be heard, the DoD also likely violated Anthropic’s due process rights.
As Judge Lin describes it, the record indicates that Anthropic took a very reasonable and measured position in its negotiations with DoD. It insisted on “guardrails” in two areas: surveillance and autonomous weapons. It volunteered to assist in an “orderly offboarding” [yuck] of Anthropic’s technology from DoD systems if the parties could not reach agreement. As recounted in Nik Popli’s reporting in Time Magazine, Pete Hegseth influenced the President, during his first term, to pardon convicted war criminals. Senator Mark Kelly recently pointed out that Secretary Hegseth’s statement, calling for “no quarter” to be given to our Iranian adversaries, would be a war crime if carried out. Anthropic’s concerns were not without justification. Secretary Hegseth’s reaction is summarized below.
Turning to the DoD’s justifications for declaring Anthropic a “supply chain risk,” Judge Lin finds that the record does not establish any such risk. Other than the two guardrails, Anthropic never sought to impose restrictions on any of DoD’s operations. There is no evidence that DoD considered or proposed less intrusive measures.
With respect to the Hegseth Directive that no federal agency should contract with any entity that did business with Anthropic, the DoD conceded that Secretary Hegseth had no statutory authority to issue such a directive and that it was without legal effect. Still, the DoD opposed the motion to enjoin any action that DoD might take to implement the Hegseth Directive on the ground that it was “continuing to assess the situation.”
More significantly, Anthropic was doing a lot of work for federal agencies when the DoD declared it a supply chain risk, and multiple agencies terminated their relationships with the company. Defense contractors and other government contractors are seeking to terminate their relationship with Claude.
Applying the test for a preliminary injunction, Judge Lin fond that was likely to succeed on its First Amendment claim. It had made out a prima facie case of retaliation, and the government has not rebutted that case. DoD is well within its rights to terminate its contracts with Anthropic, but its actions beyond that were clearly motivated by DoD’s desire to punish Anthropic for its speech critical of the government in connection with the dispute over maintaining guardrails on Claude.
Applying Matthews v. Eldridge, the Court also found that Anthropic is likely to prevail on its Due Process claim. Anthropic has a liberty interest in pursuing its chosen profession, and the Challenged Actions deprive Anthropic of that liberty interest, even if the deprivation is only partial. The deprivation occurred without notice, and the DoD has provided no evidence of urgency. Anthropic posed no threat that could have justified government action without notice and an opportunity to be heard.
Similarly, Anthropic was also entitled to injunctive relief on its APA claim. In the Court’s view, “Anthropic has shown that the Hegseth Directive and the Supply Chain Designation were likely in excess of statutory authority, contrary to law, and arbitrary and capricious.” DoD had no factual basis for the Supply Chain Designation. Moreover, while the Secretary of Defense is empowered to skip procedural requirements when making a supply chain designations, in order to do so, he must make a written determination that “less intrusive measures are not reasonably available to reduce such supply chain risk” after having considered less intrusive measures. In this case, DoD presented no evidence that it considered less intrusive measures. DoD also failed to comply with other procedural requirements provided by its own regulations.
The DoD declared the Hegseth Directive to be a final determination. As such, it too must be enjoined as a separate final agency action independent of the Supply Chain Designation. Anthropic is likely to succeed on its claim that both Challenged Actions were arbitrary and capricious. The Court concluded that Anthropic will suffer irreparable harm in the absence of an injunction and that the balance of equities favors Anthropic.
The Court granted injunctive relief against a long list of federal agencies. It denied relief with respect to the Executive Office of the President (EOP), because Anthropic had not shown that the EOP had taken any actions pursuant to the Presidential Directive. Still, the EOP is barred, as are all legal persons, from coordinating with the enjoined agencies to take any action that violates the injunction.
We’ll see, I suspect, if things look different on appeal. In the meantime, I have been working with ChatGPT this academic year, making use of a subscription that my library has made available to me. Now, Claude is also available at a lower price. Bizarrely, I feel something like a patriotic duty to side with the private entity that is enforcing reasonable guardrails on our government’s use of that entity’s technology. I’m switching to Claude.