The D.C. Circuit grilled DOJ lawyers over the Pentagon's supply chain blacklisting of Anthropic, with one judge calling the move a "spectacular overreach."
A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit heard nearly two hours of oral argument on May 19 in Anthropic's challenge to the Department of Defense's designation of the AI company as a "supply chain risk," with one judge signaling deep skepticism of the government's legal basis for the action [1]. The panel, composed of Judges Karen Henderson, Gregory Katsas, and Neomi Rao, pressed DOJ attorneys on the statutory and evidentiary foundations of the designation [1]. Judge Henderson stated from the bench that she saw no support for the department's determination of a significant supply chain risk, calling the DOD's conduct a "spectacular overreach" [1].
The case, captioned Anthropic v. Hegseth, names Defense Secretary Pete Hegseth in his official capacity as the principal respondent [1]. The dispute has proceeded on parallel tracks in both the D.C. Circuit and courts in California, producing a split procedural posture that has complicated the litigation [1]. At the appellate level, Anthropic argues the Pentagon exceeded its authority under the relevant supply chain security statutes by applying a national security designation to a domestic AI firm without adequate evidentiary support [1]. DOJ lawyers countered that the designation was a legitimate exercise of executive discretion to respond quickly to emerging national security concerns [1].
The case carries significance beyond Anthropic's own contracting interests. It marks the first circuit-level review of the government's use of national security supply chain designations against a domestic American AI company, and the outcome will draw the outer boundaries of executive branch power to effectively bar U.S. firms from federal contracting on national security grounds [1]. Administrative law practitioners have tracked the matter closely because the government's theory, if accepted, would require minimal factual showing before a supply chain risk label attaches [1]. The panel's questions suggest at least one judge views the current evidentiary record as insufficient to sustain the designation [1].
The panel took the matter under advisement at the close of argument [1]. A written opinion, which could affirm, reverse, or remand the designation, is expected in the coming months. Given the circuit split in procedural posture, any ruling may also require coordination with the California proceedings before a final resolution is reached.