Huawei Techs. USA, Inc. v. United States
Decision Date | 18 February 2020 |
Docket Number | Civil Action No. 4:19-CV-159 |
Citation | 440 F.Supp.3d 607 |
Parties | HUAWEI TECHNOLOGIES USA, INC. and Huawei Technologies Co., Ltd. v. UNITED STATES of America, et al. |
Court | U.S. District Court — Eastern District of Texas |
Clyde Moody Siebman, Elizabeth Siebman Forrest, Siebman Forrest Burg & Smith LLP, Sherman, TX, Glen D. Nager, Ryan J. Watson, Karl Michael Remon Thompson, Michael A. Carvin, Shay Dvoretzky, Jones Day, Andrew D. Lipman, Russell M. Blau, Morgan Lewis & Brockius LLP, Washington, DC, Eric C. Tung, Jones Day, Los Angeles, CA, Michael Charles Smith, Siebman Burg Phillips & Smith, LLP, Marshall, TX, Steven Mark Geiszler, Futurewei Technologies, Inc., Plano, TX, for Huawei Technologies USA, Inc. and Huawei Technologies Co., Ltd.
Emily Sue Newton, United States Department of Justice, James Ryan Powers, U.S. Department of Justice, Civil Division, Washington, DC, James Garland Gillingham, United States Attorney's Office, Tyler, TX, Joshua M. Russ, Reese Marketos LLP, Dallas, TX, for United States of America.
Pending before the Court are Plaintiffs' Motion for Summary Judgment (Dkt. #27) and Defendants' Motion to Dismiss or, in the Alternative, for Summary Judgment and Opposition to Plaintiffs' Motion for Summary Judgment (Dkt. #33). Having considered the motions and the relevant pleadings, the Court finds that Plaintiffs' motion should be denied and Defendants' motion should be granted.
The dispute in this case surrounds Section 889 ("Section 889") of the John S. McCain National Defense Authorization Act for Fiscal Year 2019, Public Law 115-232, ("2019 NDAA"). However, the history of the case starts far earlier than the enactment of Section 889.
Plaintiff Huawei Technologies Co., Ltd. ("Huawei Technologies") is a limited liability company organized in Shenzhen, Guangdong Province in the People's Republic of China. (Dkt. #1 ¶ 9). Huawei Technologies is a global telecommunications company that provides both products and services within the field of telecommunications. (Dkt. #1 ¶ 29). Its subsidiary and/or affiliate, Plaintiff Huawei Technologies USA, Inc., ("Huawei USA") (collectively "Huawei" or "the Huawei Entities") is a corporation organized under Texas law. (Dkt. #1 ¶¶ 3, 8). Huawei USA provides telecommunications equipment and services to eighty-five active United States wireline and wireless carriers and numerous enterprise customers, which include corporations, schools, and other institutions. (Dkt. #1 ¶ 32). Huawei produces, markets, and sells, among other things, products—including routers and layer 3 switches—that are capable of routing and redirecting user data traffic. (Dkt. #1 ¶ 34). The Huawei Entities are "wholly-owned subsidiaries of Huawei Investment & Holding Co. Ltd. ("Huawei Investment")." (Dkt. #1 ¶ 10). Huawei Investment is a private company wholly owned by its 97,000 employees and Huawei's founder. (Dkt. #1 ¶ 12).
While Huawei is a privately owned company based on its registrations, in 2011, the U.S.-China Economic and Security Review Commission identified Huawei as a privately owned company subject to Chinese influence based on favorable government policies, which aim to support Huawei's development and pose obstacles to foreign competition. (Dkt. #34, Exhibit 4 at p 4). Around the same time, the U.S.-China Economic and Security Review Commission reported that "[n]ational security concerns have accompanied the dramatic growth of China's telecom sector" with "large Chinese companies—particularly those ‘national champions’ prominent in China's ‘going out’ strategy of overseas expansion" posing a threat as they "are directly subject to direction by the Chinese Communist Party." (Dkt. #34, Exhibit 3 at p. 4).
These concerns resulted in a year-long investigation into "the counterintelligence and security threat posed by Chinese telecommunications companies doing business in the United States." The investigation was led by the House Permanent Select Committee on Intelligence ("HPSCI") in November 2011, which published its findings in a report dated October 8, 2012 ("HPSCI Report"). (Dkt. #34, Exhibit 2). The investigation primarily focused on Huawei and ZTE Corporation ("ZTE")1 because they were "the two largest Chinese-founded, Chinese-owned telecommunications companies seeking to market critical network equipment to the United States" and thus posed the greatest threat. (Dkt. #34, Exhibit 2 at p. 14). After the investigation, the HPSCI determined that "Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems"; although, there was no explicit finding of wrongdoing. (Dkt. #34, Exhibit 2 at pp. 5, 30). The HPSCI made recommendations for excluding Huawei and ZTE's products and services from sensitive United States systems, including government systems and government contractors. The HPSCI further encouraged private-sector entities and United States network providers and system developers to seek telecommunications businesses other than Huawei and ZTE. (Dkt. #34, Exhibit 2 at p. 30). Similar concerns were echoed by various government committees, officials, and agencies from 2012 through 2018. (See generally Dkt. #27; Dkt. #33; Dkt. #36; Dkt. #40) (citing supporting documentation).
In December 2017, Congress enacted the National Defense Authorization Act for Fiscal Year 2018 ("2018 NDAA"). Section 1656 of the 2018 NDAA reads as follows:
(Dkt. #28, Exhibit 1 at pp. 4–5).
Early in 2018, bills entitled "Defending U.S. Government Communications Act" were introduced into both the House of Representatives ("House") and the United States Senate ("Senate"). Those bills were identified as: H.R. 4747 and S. 2391. The bills provided that:
(Dkt. #28, Exhibit 2; Dkt. #28, Exhibit 3). Both bills contain substantially similar findings:
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