Unreported / Non-Citable
Background
The Department of Defense publicly designated Alibaba Group Holding Limited a "Chinese military company" on February 13, 2026, and again included it on an updated 1260H List published in June 2026 on the stated bases of indirect affiliation with SASAC and status as a military-civil fusion contributor affiliated with MIIT. Section 4663 of title 10, effective June 30, 2026, bars the Department from contracting with an entity, its parent, or its subsidiary if that entity is a party to a contract with a covered lobbyist—an entity engaging in lobbying activities for a company on the 1260H List. Alibaba reported that its lobbyists, including some who had represented it for nearly a decade, withdrew their registrations because of Section 4663, leaving it with no registered lobbyists by the effective date.
Alibaba Group Holding Limited and its U.S. subsidiary, Alibaba Group (U.S.) Inc., sued on June 23, 2026, asserting Administrative Procedure Act claims, as-applied and facial First Amendment challenges, and due-process void-for-vagueness challenges to Section 4663. Four days later they moved for a temporary restraining order and preliminary injunction based solely on the First Amendment claim, requesting removal from the 1260H List, a statute-wide bar on enforcing Section 4663, or an injunction protecting entities that contract with Alibaba's lobbyists. A stipulated temporary restraining order enjoined enforcement of Section 4663 solely as to Alibaba and was set to expire October 26, 2026. After briefing and argument on August 27, 2026, the court issued this order on October 26, 2026.
The Court’s Holding
The court found that Alibaba made a colorable First Amendment claim because Section 4663 predictably pressures lobbying firms to drop Alibaba rather than forgo defense contracts, burdening Alibaba's ability to speak to and petition the government even though it is not completely silenced. The court applied strict scrutiny because the statute restricts core political speech based on the speaker's identity as a designated Chinese military company. The government asserted compelling interests in preventing access to sensitive military information and improper influence, but offered only a joint explanatory statement that directed a study of consulting firms and made no findings about lobbyists; it also failed to show that less restrictive alternatives, such as disclosure requirements, were inadequate. The court therefore found a likelihood of success on the as-applied challenge and noted that the government's showing failed even intermediate scrutiny.
The facial overbreadth challenge failed at this preliminary stage because Alibaba did not develop the record needed under Moody v. NetChoice to show the statute's unconstitutional applications substantially outweigh its constitutional ones. The court found irreparable harm in Alibaba's lost opportunities to petition Congress and the Executive Branch on pending legislation and regulation, and held that the balance of equities and the public interest favor protecting First Amendment rights. On scope, the court declined to vacate Alibaba's 1260H designation because that remedy belongs to the unresolved APA claims and requires an administrative record. It instead enjoined Defendants from enforcing Section 4663's contracting prohibition based on lobbying activities for Alibaba, separately barred Defendants from refusing or denying any entity a contracting opportunity on that ground, and ordered Alibaba to post a $100 bond with proof due October 30, 2026.
Key Takeaways
- The preliminary injunction protects only lobbying relationships involving Alibaba from Section 4663's contracting consequences; it does not remove Alibaba from the 1260H List or enjoin the statute nationwide.
- The court treated the predictable withdrawal of lobbying firms as a direct burden on protected political speech and the right to petition, not merely an incidental commercial effect.
- Strict scrutiny applied because the statute restricts political speech based on speaker identity, and the government's national-security justifications failed for lack of record evidence and failure to address less restrictive alternatives.
- The facial challenge was rejected at this stage for an underdeveloped record, and the APA and due-process claims remain unresolved.
- The injunction lasts until further order of the court, and Alibaba must post a $100 bond with proof filed by October 30, 2026.
Why It Matters
The decision draws a line between an interim, company-specific First Amendment remedy and a nationwide invalidation of Section 4663 or a ruling on the lawfulness of Alibaba's military-company designation. Its reasoning turns on the direct, predictable effect of the contracting bar on political advocacy and on the government's sparse evidentiary showing, while expressly leaving broader applications of the statute, the facial challenge, and the administrative-record questions for later proceedings.