On the 20^th September 2020 a Magistrate Judge in California issued a preliminary injunction against a Presidential Executive Order that sought to make major limitations on the use of the WeChat app within the US. This article explains the background to the litigation, the issues involved, the reason why the preliminary injunction was issued and what will happen next.

Part 1 - Background

WeChat

WeChat is an application (app) developed by Tencent Holdings Ltd in Shenzhen, China. In the 9 years since its launch in 2011 it has amassed over a billion active users per month. Unlike many of its competitors in the US, WeChat functions include calling taxis, ordering food, money transfers, fashion and a hist of other options. As a result WeChat has become embedded in the daily lives of its users in China as well as users outside of China seeking to communicate with friends or family in China.

In their filing, Plaintiffs state that there are in excess of 1.2 billion accounts worldwide, including approximately 19 million users in the US. These users are able to form groups and network within the app both socially and professionally. These networks, coupled with the options provided by the WeChat platform are described as essential underpinnings to the survival and success of Chinese-American businesses. For small business that cater primarily to Chinese-speaking clientele WeChat has become a primary source of revenue. In addition, large companies such as Walmart also rely on WeChat to market their products in China.

The Executive Orders

On August 6, 2020, President Trump issued Executive Order 13943, 85 Fed. Reg. 48,641 (the “WeChat EO”) prohibiting US residents from doing business with WeChat. Whilst US concerns about certain Chinese companies such as Huawei have been apparent for several years, the WeChat EO was a surprise to many as WeChat had not been named in any previous Whitehouse materials. T

On May 15, 2019 the President issued Executive Order 13873[1], “Securing the Information and Communications Technology and Services Supply Chain”, 84 Fed. Reg. 22689, 22689 (the “ICTS EO”) stating that :

“foreign adversaries are increasingly creating and exploiting vulnerabilities in information and communications technology and services, which store and communicate vast amounts of sensitive information, facilitate the digital economy, and support critical infrastructure and vital emergency services, in order to commit malicious cyber-enabled actions, including economic and industrial espionage against the United States and its people. I further find that the unrestricted acquisition or use in the United States of information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries augments the ability of foreign adversaries to create and exploit vulnerabilities in information and communications technology or services, with potentially catastrophic effects, and thereby constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States. “

In light of this the President invoked his authority under the Constitution and also the laws of the US to declare a national emergency with respect to this threat and also to prohibit transactions with foreign countries and persons that posed a risk to the “maintenance of information and communications technology or services in the United States” or to national security. The President further directed the Secretary of Commerce, in consultation with other officials, to identify the transactions that posed an undue or unacceptable risk to the national security of the United States, and further instructed the DNI[2], the Secretary of Homeland Security, and the Secretary of Commerce to continue to assess and report back to him on the threats from foreign adversaries with respect to entities, hardware, software and services, and the actions taken pursuant to the Executive Order. At this stage, neither China nor WeChat had been specifically named by the President.

After receiving reports from the DHS[3] and ODNI[4] the President renewed the existing declaration of emergency on May 13, 2020, one year after the initial ICTS EO. A week later the President presented a report to Congress specifically identifying the need to address US foreign policy with China entitled “United States Strategic Approach to the People’s Republic of China“[5]. One of the concerns raised in that report was the PRC National Cyber Security Law which the President claimed “requires companies to comply with Chinese data localization measures that enable CCP access to foreign data”. The President further stated that the purpose of the ICTS EO was to address this threat by preventing “certain companies associated with or answering to the intelligence and security apparatus of foreign adversaries from, for example, readily accessing the private and sensitive information of the United States Government, the United States private sector, and individual Americans”. This was the first time that China had been specifically named as being the subject of such concerns by the President. However, at this stage, neither Tencent nor WeChat had been specifically identified as posing any kind of risk.

The above events culminated in the President issuing the WeChat EO on August 6, 2020, approximately 15 months after the ICTS EO. In the WeChat EO the President stated that WeChat :

·       “automatically captures vast swaths of information from its users,”

·       “threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information.”

·       “captures the personal and proprietary information of Chinese nationals visiting the United States, thereby allowing the Chinese Communist Party a mechanism for keeping tabs on Chinese citizens who may be enjoying the benefits of a free society for the first time in their lives”

The President concluded that, in order to protect national security, 45 days after the date of the order, ie by September 20, 2020,  “any transaction that is related to WeChat by any [United States] person, or with respect to any [United States] property . . . with Tencent” shall be prohibited “as identified by the [Secretary] under section 1(c) of this order.” This EO, therefore, represented the first time that either Tencent or WeChat was specifically named.

The suddenness of the WeChat EO together with the lack of evidence presented on the threat posed by WeChat has cause many to question the motivation behind the EO. As detailed below, part of the complaint by Plaintiffs is that the WeChat EO is part of a deliberate campaign of anti-Chinese rhetoric. This view was also shared by the American Civil Liberties Union who state[6] :

If protecting the information of users in the United States were a true motivating factor, the U.S. government could, for example, support strong consumer privacy legislation that would limit the amount of data social media companies can collect in the first place.

The Parties

The Plaintiffs in this case are a number of WeChat users and also a group called US WeChat Users Alliance. The individual Plaintiffs stated that they used WeChat regularly for  number of reasons including, maintaining contact with family, for bible studies, posting information about church events, the provision of mental health education services and support, education purposes. Further, Plaintiff Chihuo Inc,  a company, provides digital marketing and advertising services to clients for commercial purposes and Plaintiff US WeChat Users Alliance describes itself as being founded to protect the lawful interests of average everyday WeChat users in the US. 

Part 2 – The Litigation Issues

Introduction

On August 21, the Plaintiffs including the US WeChat Users Alliance (hereinafter referred to as “USWUA”) officially filed a lawsuit in the Northern District Of California, San Francisco Division, suing DONALD J. TRUMP, in his official capacity as President of the United States, and WILBUR ROSS, in his official capacity as Secretary of Commerce.

Plaintiffs argued that the Executive Order does not define what those transactions include, leaving individuals and companies at a loss as to whether they will risk civil and/or criminal prosecution and penalties if they do not fundamentally change the way they communicate or run their businesses. The vaguely worded Executive Order was issued without further explanation or a media briefing, and states that the Secretary of Commerce shall identify what transactions are prohibited after 45 days—in effect, delaying identification of what transactions are prohibited until after such transactions are already prohibited.[7]

The vaguely word affected approximately 19 million users rely on the app in the United States[8]. WeChat users rely on the app to make telephone calls, hold video conferences, upload documents, share photos, make payments[9] and also used for numerous societally important purposes, including by public institutions. It has become essential to the conduct of daily life for its users. The Executive Order has a great influence on Chinese Americans and other non-Chinese users. For the above reasons, the Plaintiffs brought the action against the President and the Secretary.

Primary arguments advanced by Plaintiffs

The main points of the allegations made by Plaintiffs against President Trump are as follows:[10]

1.     the Executive Order violates Plaintiffs’ protected expressive and associative rights as guaranteed by the First Amendment.

2.     This disparate treatment is motivated by Defendants’ animus towards people of Chinese and/or Chinese American ancestry, and has the purpose of discriminating against people of Chinese and/or Chinese-American ancestry. the Executive Order therefore violates Plaintiffs’ rights to equal protection guaranteed by the Fifth Amendment to the United States Constitution.

3.     Sections 1(a) and 2 of Executive Order include only a conclusory description of prohibited “transactions related to WeChat,” which provides no notice to WeChat users or anyone else of the specific conduct that is prohibited. Sections 1(a) and 2 of Executive Order provide inadequate notice of the conduct they purport to penalize and are void for vagueness under the Fifth Amendment to the U.S. Constitution.

4.     The International Emergency Economic Powers Act (“IEEPA”) includes specific limits on Defendants’ authority to prohibit transactions related to WeChat.

5.     The President has acted ultra vires by exercising emergency powers purportedly authorized by the IEEPA without consulting with and reporting to Congress in the manner prescribed by 50 U.S.C. §§ 1621-22, 1641(c), and 1703.

6.     The Executive Order will result in substantial burdens upon the practice of religion of WeChat users in the United States by forcing them to abstain from participating in their practice of religion with other WeChat users or risk the threat of civil or criminal sanctions and violates Religious Freedom Restoration Act (“RFRA”).

Primary arguments advanced by the US government

In response to the USWUA, the US government made the following allegations:[11]

1.     Plaintiffs are not likely to succeed on their First Amendment Claims because the Executive Order is content neutral so strict scrutiny does not apply, a content-neutral regulation survives constitutional scrutiny so long as it “advances important governmental interests unrelated to the suppression of free speech and does not burden substantially more speech than necessary to further those interests.”

2.     Plaintiffs contend that the Executive Order is unconstitutionally vague under the Fifth Amendment because it does not define the prohibited “transaction[s],” so that people “of common intelligence must necessarily guess at its meaning.”. Plaintiffs need not guess at the meaning of the Order, however, because under its express terms, “the Secretary shall identify the [prohibited] transactions.” Exec. Order § 1(c) (emphasis added).

3.     Plaintiffs’ claims of inconvenience regarding certain religious activities are entirely conclusory and do not on their face suggest any substantial burden on the exercise of religious.

4.     Plaintiffs’ theory that the Executive Order is ultra vires is lacking in merit.

Part 3 – The Preliminary Injunction

A preliminary injunction is a common law remedy ie it is found in US caselaw. The purpose of a preliminary injunction is to maintain the status quo and prevent an irreparable loss of rights before the main judgement is issued. Common examples of preliminary injunctions are :

i.                In IP cases, the plaintiff may seek a preliminary injunction preventing the defendant from using the IP in question until final judgement is given

ii.               In high value litigation the plaintiff may seek a temporary injunction to prevent the defendant either disposing of or moving assets until final judgement is given.

One of the first decisions by President Trump after taking office was to issue  travel ban on people from particular, predominantly Muslim, countries travelling to the US. Soon after that Executive Order was issued, a number cases were brought by various plaintiffs opposed to the Executive Order. A series of preliminary injunctions by different federal courts followed preventing the immediate implementation of the ban and the redrafted versions of the ban.

Article 100 of the PRC Civil Procedure Law sets out a similar remedy to US preliminary injunctions in cases where enforcement may be difficult or where one of the parties will suffer harm. Article 100 allows the court to order that certain property be preserved, that a party undertake specific actions or that a party be prohibited from taking certain actions. Whilst the tests to be applied by the court in deciding whether to an issue an article 100 order are slightly different from the tests in the US the end result of maintaining the status quo until the substantive hearing is completed is the same. The Supreme People’s Court has also provided enhanced guidance for such orders in IP litigation cases[12].

Under US law, in order to obtain a preliminary injunction a party must establish the following 4 factors[13] :

i.                The main application is likely to succeed on the merits;

ii.               The Plaintiff is likely to suffer irreparable harm in the absence of such preliminary relief;

iii.              The balance of equities tips in Plaintiff’s favour; and

iv.             An injunction is in the public interest

Plaintiffs further argued that as this appeal involved First Amendment issues, the caselaw for preliminary injunctions within such a context states that whilst Plaintiff has the general burden of establishing the elements necessary to obtain injunctive relief the government bears the burden of justifying the restriction on speech[14].

The 4 Factors

A summary of the parties pleadings on these four factors together with the Magistrate Judge’s findings follows.

1.     Likely to Succeed On the Merits

Plaintiff and Defendants main arguments are summarised above in Part 2. The test of ‘likely to succeed’ does not require Plaintiff to establish that he/she has a high probability of success, but conversely the Plaintiff needs to show more than the possibility of success.  

Whilst the Court found that many of Plaintiffs arguments were unlikely to succeed the court did accept that WeChat was the only means of communication for many in the US Chinese community, particularly those with limited English proficiency. Further the court found that the Plaintiff’s first amendment article was likely to succeed as the government had provided scant little evidence that the ban on WeChat addresses national security concerns and that there were alternatives to a complete ban such as barring WeChat from government devices.

2.     Likely To Suffer Irreparable Harm

Plaintiffs argued that the uncertainty in the WeChat EO coupled with the fear of criminal prosecution or civil penalties has caused them confusion, anxiety and fear. Further Plaintiffs fear being cut off from friends and family both in the US and China as well as being cut off from political discussions, campaign participation, religious events etc. Plaintiff Chihuo Inc stated that banning WeChat would cut off their primary method of communicated with business contacts. Plaintiffs also argued that given the popularity of WeChat amongst the Chinese diaspora there was no effective substitute. Lastly, the Plaintiffs argued that the constitutional injury they suffered was itself irreparable injury[15].

Defendant argued that the uncertainty and fear of civil/criminal penalties were purely conjectural as the prohibited transactions have yet to be defined. In addition, Defendant argued that uncertainty, fear, confusion etc were amorphous psychological injuries which were insufficient to confer standing[16]. Lastly Defendant argued that the first amendments cases cited by Plaintiff all found irreparable harm based on actual deprivation of constitutional rights, and such deprivation was absent from the Plaintiff’s circumstances as Plaintiff merely faced a potential and incidental burden on their ability to communicate through a medium they prefer.

The Court found that the imminent threat was the elimination of Plaintiff’s platform for communication, which would result in irreparable injury. The Court accepted the submission that “The loss of First Amendment freedoms, even for minimal periods of time, unquestionably constitutes irreparable injury[17]”

3.     Balance Of Equities

Plaintiffs argued that the WeChat EO was an unprecedented ban on speech and religion in the US and was directed against a group with a shared Chinese language, ancestry and culture and that Plaintiffs were worried whether they would face civil/criminal penalties and whether they would be able to maintain their current social and business communications. Plaintiffs also highlighted the 15 month delay between the ICTS EO and the WeChat EO as well as the 45 day implementation period for the WeChat Order, both of these, they argued, undercut the assertion that a threat was imminent. In addition Plaintiffs referred to the total lack of evidence presented by Defendant establishing any imminent threat.

Defendant responded that significant national security and foreign policy interests weighed strongly against an injunction particularly as substituting the views of WeChat users for that of the Executive Branch would not serve the public interest. In addition, Defendant stated that regulations defining the transactions to be banned would be issued within a mere 3 days of the injunction hearing.

The Court found that the injunction would merely maintain the status quo but to allow the ban to take effect would mean Plaintiffs losing all meaningful access to their community. Whilst the court accepted the importance of threats to national security, the specific evidence relating to WeChat was modest and the restrictions on the Plaintiff’s freedom of speech were more than necessary to further the governments national security interests.

4.     An Injunction Is In The Public Interest

Plaintiffs argued that  balance of equities and consideration of the public interest (ie issues 3 and 4) merge when the government is a party[18]. This appears to have also been the position of  the Defendant and also the Court.

Further Communications

On September 16^th , 4 days before the hearing on the preliminary injunction, the defendant notified Plaintiff that persons whose only connection with WeChat was the downloading of the app together with sending personal or business communication between users would not be targeted for any penalties. Plaintiffs responded by saying the notice continued to failed to clarify what would or would not happen after the EO took effect on the 20^th September. Further Plaintiffs raised the further argument that :

“Having first failed to articulate any actual national security concern, the administration’s latest “assurances” that users can keep using WeChat, and exchange their personal and business information, only further illustrates the hollowness and pre-textual nature of Defendants’ “national security” rationales.”

The Decision

Following a hearing concluding on the 19^th September 2020, the US Magistrate Judge considered all the written pleadings and also oral representations made by the parties. The Magistrate Judge concluded that the test for granting a preliminary injunction was met by Plaintiffs and proceeded to order that the President and Secretary of Commerce be enjoined from directly or indirectly prohibiting or limiting the WeChat application in the US or by US persons abroad. The Magistrate Judge made clear that the injunction would only last until final judgement of the court on the main issues (identified above in Part 2).

The court, on at least two occasions, mentioned the lack of evidence relating to any specific security threat posed by WeChat. It appears that the court applied something equivalent to a proportionality test, finding that the proposed ban was disproportionate to the security aims of the government which could be achieved in other, less wide-ranging ways.

As a result of the preliminary injunction, WeChat users in the US will not face any disruption in their use of WeChat.

Part 4 – What will happen next

According to CNBC, the Trump administration will challenge the preliminary injunction :

“Prohibiting the identified transactions is necessary to protect the national security of the United States, and the department expects to soon seek relief from this order,” the Commerce Department said, according to Reuters.

The Commerce Department said it anticipated a long legal battle over the ban.[19]

Also, according to the prediction of USWUA, in the next few days, the US government may appeal to the Ninth Circuit Court of the United States to re-examine the preliminary injunction.  Considering the significance of the case, the possibility of appeal is very high. If the Court of Appeal agrees to speed up the trial, the appeal stage could be completed within 1-2 months. The losing party can choose to continue to appeal to the Supreme Court. However, it is up to the Supreme Court justices to decide whether to accept cases (accepting cases requires the consent of four justices. )[20].

The USWUA said it is ready to defend the hard-won victory, according to Xinhua.[21]

[1] https://www.federalregister.gov/documents/2019/05/17/2019-10538/securing-the-information-and-communications-technology-and-services-supply-chain

[2] Director of national Intelligence

[3] Department of Homeland Security

[4] Office of the Director of National Intelligence

[5] https://www.whitehouse.gov/wp-content/uploads/2020/05/U.S.-Strategic-Approach-to-The-Peoples-Republic-of-China-Report-5.24v1.pdf

[6] https://www.aclu.org/news/free-speech/dont-ban-tiktok-and-wechat/

[7] See U.S. WECHAT USERS ALLIANCE, CHIHUO INC., BRENT COULTER, FANGYI DUAN, JINNENG BAO, ELAINE PENG, and XIAO ZHANG, v. DONALD J. TRUMP, in his official capacity as President of the United States, and WILBUR ROSS, in his official capacity as Secretary of Commerce

[8] Rick Smith, Crackdown on WeChat could hinder millions of US users who rely on social media tool, WRAL TECHWIRE (Aug. 19, 2020), https://www.wraltechwire.com/2020/08/19/crackdown-on-wechat-could-hinder-millions- of-us-users-who-rely-on-social-media-tool/.

[9] Bani Sapra, This Chinese super-app is Apple’s biggest threat in China and could be a blueprint for Facebook’s future. Here’s what it’s like to use WeChat, which helps a billion users order food and hail rides, BUSINESS INSIDER (Dec. 21, 2019), https://www.businessinsider.com/chinese-superapp-wechat-best-feature-walkthrough- 2019-12.

[10] https://img1.wsimg.com/blobby/go/99f042e6-97b7-444a-8718-617637ced7b5/%5BDkt.%2001%5D%20Complaint%20for%20Declaratory%20and%20Injunc.pdf

[11] https://img1.wsimg.com/blobby/go/99f042e6-97b7-444a-8718-617637ced7b5/DOJ%20Opposition%20to%20Motion%20for%20Preliminary%20Injun.pdf

[12] On December 12, 2018, the Supreme People's Court issued Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in Reviewing the Injunction Cases involving Intellectual Property Disputes that were officially implemented on January 1, 2019

[13] Winter v. NRDC, 555 U.S. 7, 22 (2008)

[14] Klein v. City of San Clemente, 584 F.3d 1196, 1201 (9th Cir. 2009)

[15] “[T]he loss of First Amendment freedoms, for even minimal periods of time, unquestionably constitutes irreparable injury.” Associated Press v. Otter, 682 F.3d 821, 826 (9th Cir.2012) (quoting Elrod v. Burns, 427 U.S. 347, 373 (1976))

[16] Citing Clay v. Fort Wayne Cmty. Sch., 76 F.3d 873, 877 n.4 (7th Cir. 1996)

[17] Elrod v. Burns, 427 U.S. 347, 373 (1976)

[18] E. Bay Sanctuary Covenant v. Barr, 964 F.3d 832, 845 (9th Cir. 2020); Drakes Bay Oyster Co. v. Jewell, 747 F.3d 1073, 1092 (9th Cir. 2014)

[19] Trump administration challenges order that blocked WeChat app store ban, https://www.cnbc.com/2020/09/21/trump-admin-challenges-order-that-blocked-wechat-app-store-ban.html

[20] These American Chinese who sued the president for WeChat, Sina Technology, https://tech.sina.com.cn/i/2020-09-04/doc-iivhvpwy4773941.shtml

[21] Xinhua Headlines: U.S. judge temporarily blocks Trump's order on WeChat ban, http://www.xinhuanet.com/english/2020-09/21/c_139385348.htm