On Thursday, March 26, 2026, U.S. District Judge Rita F. Lin of the Northern District of California granted Anthropic’s motion for a preliminary injunction, temporarily blocking the Administration’s supply chain risk designation, the Presidential Directive banning all federal agencies from using Anthropic, and Secretary Hegseth’s Directive blacklisting Anthropic from the defense industrial base. Citing, in part, Fluet’s writing on this topic, Judge Lin found that Anthropic is likely to succeed on the merits, that Anthropic likely faces irreparable harm absent relief, and that the balance of equities and public interest favor Anthropic.

The 43-page opinion is a sweeping, if not unexpected, rebuke. Judge Lin found that Anthropic is likely to succeed on the merits of all three of the legal theories the court addressed: First Amendment retaliation, Fifth Amendment due process, and Administrative Procedure Act statutory excesses. The court characterized the government’s actions on page 2 of its opinion as “classic illegal First Amendment retaliation,” found the supply chain risk designation “likely both contrary to law and arbitrary and capricious,” and concluded that the government had failed to follow the procedural safeguards Congress enacted in 10 U.S.C. § 3252.

The injunction is stayed for seven days to permit the government to seek an emergency appeal in the Ninth Circuit. For defense contractors, this ruling signals an initial answer to where the Anthropic supply chain risk designation stands.  But this ruling isn’t the final word, as the government will likely appeal, and doesn’t end the state of uncertainty clouding AI use in defense contracts.

Here are four critical takeaways:

1) First Amendment Retaliation May Be a Live Theory in Government Contracting

Perhaps the most surprising aspect of the ruling is the court’s finding that Anthropic is likely to succeed on its First Amendment retaliation claim. The court found that the timing, the language used by the President and Secretary Hegseth, and the scope of the government’s response all support the inference that Anthropic was punished for its public advocacy, not merely for its contracting position.

The court pointed to several factors. The usage restrictions at issue had been in place since the inception of Claude Gov and, during that time, the government repeatedly praised Anthropic and expanded its role—granting it a Top Secret facility clearance, FedRAMP High authorization, and a $200 million contract. It was only after Anthropic publicly aired its disagreement over newly imposed terms that the government took action. The court further noted that the memorandum from Under Secretary of Defense for Research and Engineering, Emil Michael, which formed the factual basis for the designation, explicitly cited Anthropic’s “increasingly hostile manner through the press” as a basis for the supply chain risk finding.

For government contractors, this could be a significant development. The court’s analysis establishes that when the government uses procurement authorities to punish a contractor for public speech on matters of public concern, First Amendment retaliation may be a viable claim.

That said, this is not the final word. We will have to wait and see how the Ninth Circuit and potentially the Supreme Court, as well as other courts addressing similar issues, resolve this.  This aspect of the ruling may be overturned or other courts may distinguish the facts in this case from other situations.  Even still, contractors might consider whether the government is taking detrimental contractual action in retaliation for criticizing the government, raising safety concerns, or engaging in advocacy, and follow the legal framework set forth in this opinion to challenge retaliatory government action.

2) The Court Validated Fluet’s Earlier Analysis—Across the Board

The court’s findings track the concerns Fluet raised in its initial analysis on March 3 and follow-up on March 10. In the first article, our Government Contracts Practice identified that the government had not cited specific legal authority, that each potential authority required procedural steps the government did not appear to have taken, and that Anthropic would likely fight and could well win. The court confirmed each of these points.

On the statutory authority question, the court found at page 35 of its opinion that the supply chain risk designation under § 3252 was “in excess of statutory authority and contrary to law” because Anthropic’s conduct does not meet the statutory definition of “supply chain risk,” which Congress intended to cover covert sabotage and subversion by hostile actors, not overt disagreements with the government.

The court also found that Secretary Hegseth likely failed to make the required “reasoned determination” that less intrusive measures were unavailable, as required under § 3252(b)(2)(B). The letters notifying congressional committees of the supply chain risk designation apparently contained no discussion of alternative measures, the risk assessment was prepared by Under Secretary Michael (who led the contract negotiations) rather than the Under Secretary of Defense for Intelligence and Security as required by DFARS 239.7304(a), and the administrative record raised an inference that it had been generated entirely after Secretary Hegseth had publicly announced the outcome on February 27.

The team also flagged in our March 10 update that the supply chain risk designation functions as de facto debarment. Judge Lin adopted this framing explicitly at page 26 of the opinion, finding that the Presidential Directive constitutes “a permanent debarment with absolutely no pre- or post-deprivation process” and that the combination of the challenged actions “inflict both reputational harm and an immediate alteration of Anthropic’s status.”

3) 10 U.S.C. § 3252 Has Limits as a Policy Tool

The court’s interpretation of § 3252 is particularly important for the defense industrial base. Consistent with Professor Tillipman’s writing about the limitations of regulation by contract, the court found that the function and purpose of § 3252 are not fit to be used as weapons for enforcing Administration preferences.

The ruling makes clear that:

  • The statute targets covert sabotage, not contract disputes. The court traced § 3252’s legislative history to its origin as Section 806 of the National Defense Authorization Act for Fiscal Year 2011, enacted in response to concerns about “the globalization of the information technology industry” and the risk of “counterfeit or malicious code.” The court found at page 31 that Anthropic’s public advocacy and contract negotiation “does not appear to bear any relation to the conduct at issue in Section 3252.”
  • The supply chain risk designation cannot be extended beyond covered systems. The court emphasized at page 12 that “nothing in Section 3252 authorizes the Secretary to exclude a company from providing services to other government agencies,” nor does it “contain any authorization to require all contractors with DoW . . . to stop working with the entity.”
  • Procedural safeguards are not optional. The court found that the government likely failed to comply with the institutional safeguards Congress built into § 3252, including the requirement for a reasoned written determination regarding less intrusive measures and the regulatory requirement for a risk assessment by the Under Secretary of Defense for Intelligence and Security. These safeguards exist precisely because, in part, § 3252 bypasses the normal procedural protections for suspension and debarment.

For contractors, this court order could mean § 3252 designations cannot be used as a catch-all exclusion authority. The government must demonstrate that the source poses a genuine risk of sabotage or subversion, not merely that it has been a difficult negotiating partner.

4) The Conflict Continues

The preliminary injunction restores the status quo that existed before February 27. It enjoins all named Defendant Agencies from implementing the Presidential Directive, the Hegseth Directive, and the Supply Chain Designation. Importantly, the court was careful to note at page 40 that the injunction “does not require the Department of War to use Anthropic’s products or services and does not prevent the Department of War from transitioning to other artificial intelligence providers, so long as those actions are consistent with applicable regulations, statutes, and constitutional provisions.”

However, the order includes a seven-day administrative stay, meaning it will not take effect until approximately April 2, 2026, giving the government time to seek an emergency stay from the Ninth Circuit. If the Ninth Circuit grants a stay pending appeal, the designations and directives would remain in effect during the appeal. If the Ninth Circuit denies the stay, the injunction takes effect and the government’s restrictions are paused for the duration of the litigation.

Additionally, the D.C. Circuit case challenging the 41 U.S.C. § 4713 determination remains pending and is not affected by this ruling. That case involves a separate statutory authority with different procedural requirements and a different appellate posture.

What to Watch Next

  • Ninth Circuit Emergency Motion. The government has seven days to seek a stay. The Ninth Circuit’s ruling on that motion will determine whether the injunction takes immediate effect. Given the stakes, expedited briefing and decision are likely.
  • D.C. Circuit Proceedings. Anthropic’s challenge to the § 4713 determination has not been decided. That case involves different statutory authority and could produce a different or parallel result.
  • Implementation Guidance. If the injunction takes effect, agencies and contracting officers will need to issue guidance on how to handle contracts, modifications, and certifications that were initiated in response to the now-enjoined actions.
  • Congressional Oversight. The court noted that Secretary Hegseth’s letters to congressional committees contained no discussion of the less intrusive measures Congress required under § 3252(b)(3)(B). Congressional reaction—particularly from the Armed Services Committees—could shape the trajectory of the dispute.

Contractors navigating this rapidly evolving situation should seek qualified counsel to assess their specific exposure and obligations. Fluet’s team includes attorneys who have served at the Department of War, the National Security Council, civilian agencies, and the Intelligence Community, bringing unparalleled insight into government contracting, enforcement remedies, AI governance, supply chain security, and policy.