Kaspersky Lab, Inc. v. U.S. Dep't of Homeland SEC. & Kirstjen M. Nielsen
Opinion
Kaspersky Lab is a Russian-based cybersecurity company that provides products and services to customers around the world. Recently, however, Kaspersky lost an important client: the United States government. In September 2017, based on concerns that the Russian government could exploit Kaspersky's access to federal computers for ill, the Acting Secretary of Homeland Security directed federal agencies to remove the company's products from government information systems. And a few months later, Congress broadened and codified that prohibition in the National Defense Authorization Act. Kaspersky sued, arguing that the prohibition constitutes an impermissible legislative punishment-what the Constitution calls a bill of attainder. The government responded that the prohibition is not a punishment but a prophylaxis necessary to protect federal computer systems from Russian cyber-threats. In consolidated cases, the district court concluded that Kaspersky failed to adequately allege that Congress enacted a bill of attainder and that the company lacked standing to bring a related suit against the Department of Homeland Security. The district court thus granted the government's motions to dismiss. We affirm.
I.
According to the allegations contained in Kaspersky's complaint, which we "must ... accept ... as true" at the motion-to-dismiss stage,
Tellabs, Inc. v. Makor Issues & Rights, Ltd.
,
Ranking among the world's top four cybersecurity vendors, Kaspersky "has successfully investigated and disrupted" cyberattacks by "Arabic-, Chinese-, English-, French-, Korean-, Russian-, and Spanish-speaking" hackers. Id. ¶¶ 20-21. Founded by a Russian national and headquartered in Moscow, Kaspersky boasts that its "presence in Russia and its deployment in areas of the world in which many sophisticated cyber-threats originate ... makes it a unique and essential partner in the fight against such threats," including hacker groups with suspected connections to Russian intelligence services. Id. ¶ 20.
*451 But the U.S. government has come to disagree. Around the beginning of 2017, executive and legislative branch officials began voicing concerns that Kaspersky's ties to Russia make it a proverbial fox in the government's cyber-henhouse: a threat to the very systems it is meant to protect.
The chorus of concern about Kaspersky began to swell in the spring of 2017. Between March and July of that year, Kaspersky garnered attention in at least five committee hearings before both houses of Congress. For example, at one hearing dedicated to the subject of Russian cyber-operations, Senator Marco Rubio highlighted "open source reports" detailing ties between Kaspersky's founder, Eugene Kaspersky, and the Russian Federal Security Service, successor to the KGB. Disinformation: A Primer in Russian Active Measures and Influence Campaigns Panel II: Hearing Before the Senate Committee on Intelligence , 115th Cong., pt. 2, at 40 (2017). And at a later hearing, Senator Rubio asked six heads of various U.S. intelligence agencies, including the Central Intelligence Agency and the Federal Bureau of Investigation, whether they would install Kaspersky software on their own computers. All six replied no. See Open Hearing on Worldwide Threats: Hearing Before the Senate Committee on Intelligence (" Worldwide Threats "), 115th Cong. 48 (2017).
In September 2017, the Acting Secretary of Homeland Security issued Binding Operational Directive 17-01 (the "Directive"), which required most federal agencies to begin removing "Kaspersky-branded products" from their information systems within 90 days. National Protection and Programs Directorate; Notification of Issuance of Binding Operational Directive 17-01 and Establishment of Procedures for Responses ("BOD-17-01"),
More congressional hearings followed. In October, the House Science Committee's Subcommittee on Oversight held a hearing on the potential threat posed by Kaspersky products to federal information systems.
See Bolstering the Government's Cybersecurity: Assessing the Risk of Kaspersky Lab Products to the Federal Government: Hearing Before the House Subcommittee on Oversight, House Committee on Science, Space, and Technology
, 115th Cong. 3 (2017). Several members expressed deep concerns about Eugene Kaspersky's personal and professional ties to Russia, citing reports that he was "educated at a KGB cryptography institute" and "worked for the Russian intelligence services before starting his software company."
*452
The same subcommittee held a second hearing on November 14, this time to survey agencies' compliance with the Directive.
See Bolstering the Government's Cybersecurity: A Survey of Compliance with the DHS Directive: Hearing Before the House Subcommittee on Oversight, House Committee on Science, Space, and Technology
, 115th Cong. 22 (2017). The subcommittee heard testimony from Jeanette Manfra, Assistant Secretary for Cybersecurity and Communications at the Department of Homeland Security, who described the Department's rationale for issuing the Directive. She emphasized three concerns. First, "certain Kaspersky officials" enjoy "ties" to "Russian intelligence and other government officials."
Congress apparently agreed with the Department of Homeland Security's assessment that Kaspersky software presented a serious threat. Earlier, in July 2017, when considering the Senate version of the National Defense Authorization Act for Fiscal Year 2018 ("NDAA"), the Senate Armed Services Committee, citing "reports that the Moscow-based company might be vulnerable to Russian government influence," recommended adding a provision that would prohibit the Department of Defense from using any Kaspersky software. Senate Armed Services Committee, NDAA FY18 Executive Summary 10 (2017), http://go.usa.gov/xU5JC; see also S. Rep. No. 115-125, at 302 (2017) (recommending "a provision that would prohibit any component of the Department of Defense from using, whether directly or through work with or on behalf of another element of the United States Government, ... any software platform developed, in whole or in part, by Kaspersky Lab or any entity of which Kaspersky Lab has a majority ownership"). Later, after the Senate received the House version of the NDAA, Senator Jeanne Shaheen introduced an amendment that would prohibit all federal agencies from using Kaspersky products. See S. Amd. 663, 163 Cong. Rec. S4578 (daily ed. July 27, 2017). The final version of the NDAA, which included a version of Shaheen's amendment, see H.R. Rep. No. 115-404, at 460-62 (2017) (Conf. Rep.), passed the House on November 14 and the Senate on November 16.
The legislative prohibition on Kaspersky products appears in section 1634 of the NDAA. Subsections (a) and (b) require that, beginning October 1, 2018:
No department, agency, organization, or other element of the Federal Government may use, whether directly or through work with or on behalf of another department, agency, organization, or element of the Federal Government, any hardware, software, or services developed or provided, in whole or in part, by-(1) Kaspersky Lab (or any successor entity); (2) any entity that controls, is controlled by, or is under common control with Kaspersky Lab; or (3) any *453 entity of which Kaspersky Lab has majority ownership.
NDAA, Pub. L. No. 115-91, § 1634,
The President signed the NDAA in mid-December 2017, just a few days after the Secretary finalized the Directive.
Kaspersky filed suit shortly thereafter-or, more precisely, two Kasperskys filed two suits. Kaspersky Lab, Inc., a Massachusetts corporation, and Kaspersky Labs Limited, its U.K. parent (collectively, "Kaspersky"), first filed a complaint against the Department of Homeland Security. See Complaint, Kaspersky Lab, Inc. v. U.S. Department of Homeland Security , No. 1:17-cv-02697, ¶ 21 (D.D.C. Dec. 18, 2017). This case challenged the Directive under the Administrative Procedure Act; we shall call this the "Directive Case." The same two companies then filed a second complaint, this time against the United States, alleging that the NDAA violates the Constitution's prohibition on bills of attainder. See Complaint, Kaspersky Lab, Inc. v. United States , No. 1:18-cv-00325, ¶ 4 (D.D.C. Feb. 12, 2018). We shall call this the "NDAA Case."
The district court consolidated the two cases for the purpose of resolving related dispositive motions, namely, cross-motions for summary judgment and a motion to dismiss in the Directive Case and a motion to dismiss in the NDAA Case.
Kaspersky Lab, Inc. v. U.S. Department of Homeland Security
, No. 1:17-cv-02697 (D.D.C. Feb. 16, 2018). The district court granted the government's motion to dismiss the NDAA Case for failure to state a claim, concluding that Kaspersky had failed to plausibly allege that section 1634 constitutes a bill of attainder.
See
Kaspersky Lab, Inc. v. U.S. Department of Homeland Security
,
Kaspersky now appeals both orders. We review de novo a "district court's dismissal of a complaint for lack of standing or for failure to state a claim."
Washington Alliance of Technology Workers v. U.S. Department of Homeland Security
,
II.
Article I, Section 9, Clause 3 of the Constitution provides that "[n]o Bill of Attainder ... shall be passed." Rarely litigated, the Bill of Attainder Clause nonetheless has real bite, and Kaspersky argues that section 1634's ban on the federal government's use of Kaspersky products violates the Clause's prohibition on legislative punishment.
This court has previously assumed without deciding that the Bill of Attainder Clause's protection applies to corporations such as Kaspersky.
See
BellSouth Corp. v. FCC
("
BellSouth I
"),
*454 Acknowledging that the question remains open, the government does not argue here that the Clause protects individuals only. See Appellants' Br. 18 n.3 (stating that the court "need not resolve the question [of the Clause's applicability to corporations] in this case"). Therefore, absent an argument to the contrary and as in our previous cases, we shall continue to assume that the Bill of Attainder Clause extends to corporations.
To subjects of the British crown, bills of attainder meant a very particular thing: "parliamentary acts sentencing named persons to death without the benefit of a judicial trial."
BellSouth I
,
In the last two centuries, legislatures have innovated beyond death and banishment. But as punishments evolved over time, so too did the courts' interpretation of the Clause. "Our treatment of the scope of the Clause has never precluded the possibility that new burdens and deprivations might be legislatively fashioned that are inconsistent with the bill of attainder guarantee."
Nixon v. Administrator of General Services
,
This job is not always straightforward. For example, in the post-Civil War years, the Supreme Court invalidated as bills of attainder laws prohibiting confederate sympathizers from serving as priests and lawyers,
see
Cummings v. Missouri
,
As this abridged history demonstrates, each bill of attainder case "has turned on its own highly particularized context."
Flemming
,
*455 Because the government concedes, as it must, that section 1634 applies with specificity to Kaspersky, we focus on the second element, punishment.
A "punishment" is something more than a burden.
See
Selective Service System v. Minnesota Public Interest Research Group
,
(1) whether the challenged statute falls within the historical meaning of legislative punishment; (2) whether the statute, "viewed in terms of the type and severity of burdens imposed, reasonably can be said to further nonpunitive legislative purposes"; and (3) whether the legislative record "evinces a congressional intent to punish."
Functional Test
Courts need a sorting mechanism for distinguishing statutes with punitive purposes from statutes with merely burdensome effects. Put another way, the ultimate question is whether the burden is a means to an end or an end in and of itself. Seeking to answer this question, the functional test asks "whether the law under challenge, viewed in terms of the type and severity of burdens imposed, reasonably can be said to further nonpunitive legislative purposes."
Nixon
,
Importantly, the functional test provides an inferential tool; it does not impose an independent requirement. Although a serious imbalance may support an inference that the legislature's purported nonpunitive objective serves as a "smokescreen" for some undisclosed punitive purpose,
BellSouth I
,
Over the years and across cases, courts have considered a wide variety of factors in conducting this functional inquiry. Generally speaking, these factors fall into two categories.
First, a statute performs poorly on the functional test when its effect is significantly overbroad.
See
Foretich
,
Second, a statute flounders on the functional test when its reach is underinclusive.
Foretich
,
Just how overbroad or underinclusive is too overbroad or underinclusive? On this issue, the cases are less than pellucid. On the one hand, the Bill of Attainder Clause does not require narrow tailoring. Congress enjoys leeway to select among more or less burdensome options, and it "may read the evidence before it in a different way than might this court or any other, so long as it remains clear that Congress was pursuing a legitimate nonpunitive purpose."
BellSouth II
,
So somewhere between the two poles of narrow tailoring and rational basis lies the functional test's tipping point. We have at times described the test as requiring a "coherent and reasonable nexus" or a "rational connection" between the burden imposed and nonpunitive purpose furthered.
*457 In this case, however, we have no need to choose between the rational-and-coherent or clear-and-convincing formulations, because section 1634 easily clears the latter, higher bar.
We begin with the nonpunitive interest at stake: the security of the federal government's information systems. Given the volume and variety of governmental functions conducted by and through computers, the district court hardly exaggerated when it described the government's networks as "extremely important strategic national assets."
Kaspersky Lab
,
While those cyber-threats emanate from all over the world, Russia might well top the list. As the Director of National Intelligence (DNI) testified to the Senate Select Committee on Intelligence in May 2017, "Russia is a full-scope cyber actor that will remain a major threat to [the] US Government.... Moscow has a highly advanced offensive cyber program, and in recent years, the Kremlin has assumed a more aggressive cyber posture."
Worldwide Threats
, at 16 (statement of Daniel R. Coats). One need look no further, the DNI warned, than "Russia's efforts to influence the 2016 US election" to discern the "scope and sensitivity" of the targets Russia seems willing to attack.
Enter Kaspersky, a Russian company founded by a Russian citizen with its headquarters in Russia. In the months before enacting section 1634, Congress heard substantial expert testimony warning that Kaspersky's ties to Russia could jeopardize the integrity of the federal computers on which the company's products operate. With or without Kaspersky's willing cooperation, explained the experts, the Russian government could use Kaspersky products as a backdoor into federal information systems. Then, having gained privileged and undetected access, Russia could make all manner of mischief. The Acting Secretary of Homeland Security apparently agreed with these warnings. So Congress, after hearing all of this information, decided to disallow federal use of Kaspersky hardware, software, and services.
Viewed in context, section 1634 "has the earmarks of a rather conventional response" to a security risk: remove the risk.
BellSouth I
,
Kaspersky, however, accuses Congress of imposing a disproportionate burden. According to the company, Congress could have made section 1634 less burdensome by, for example, including a sunset provision, permitting the government to use Kaspersky products on the condition that the company cease operating in Russia, or prohibiting the use of Kaspersky's hardware and software but not its services. Or, so says Kaspersky, Congress could have done nothing, leaving it to the executive branch to remove the company from the rolls of approved federal contractors pursuant to the process (and procedural safeguards) contained in federal procurement regulations.
But the fact that Kaspersky can imagine slightly less restrictive measures does not demonstrate that the law Congress actually chose amounts to punishment. Take Kaspersky's suggestion that instead of legislating, "Congress could have referred the matter to the executive branch to consider" debarring Kaspersky under the procedures set forth in the Federal Acquisition Regulation. Appellants' Br. 36. Debarment, however, prevents the government only from inking future contracts; it would neither require agencies to remove already-purchased Kaspersky products from their systems nor completely prevent third-party contractors from using Kaspersky products in fulfilling their own federal contracts.
See
Similar deficiencies plague Kaspersky's other proposals: either the suggested alternative does not adequately protect federal information systems, or it does not substantially lessen the burden on Kaspersky. With respect to the proposals that fail to protect federal computers as well as section 1634 does-for example, including a sunset provision-those we reject for failure to offer genuinely workable alternatives. And with respect to the remaining proposals that lessen the burden on Kaspersky only slightly, or that swap one burden for another-for example, requiring Kaspersky to discontinue all Russian operations-we cannot infer from the marginal difference between those hypothetical statutes
*459
and the statute actually passed that Congress chose section 1634 with punishment in mind. "In other words, it does not matter that Congress arguably could have enacted different legislation in an effort" to secure federal networks, because "it cannot be legitimately 'suggested that the risks ... were so feeble that no one could reasonably assert them except as a smoke screen for some invidious purpose.' "
BellSouth II
,
Kaspersky also argues that it was unfairly "single[d] out" for mistreatment, Appellants' Br. 15, and that Congress should have instead "passed a law of general applicability that prohibits the federal government from using products or services of any cybersecurity software producer that provides information to [Russian intelligence agencies], does business in Russia, has servers in Russia, or uses Russian networks," Appellants' Reply Br. 16. But Kaspersky identifies no cyber-product as vulnerable to malicious exploitation as Kaspersky's. And although the company accurately points out that many cyber-companies operate in Russia, we conclude that Congress, based on the evidence before it, could have reasonably determined that Kaspersky's Russian ties differ in degree and kind from these other companies'. It was Kaspersky-not these other companies-about whom the experts sounded the alarm. Kaspersky, in other words, is in a class of its own.
Indeed, in this respect, this case closely resembles
Nixon v. Administrator of General Services
, which concerned a statute that had directed the Administrator of General Services "to take custody," at least temporarily, of former-President Nixon's presidential papers and tape recordings.
So too, here. No one argues that Kaspersky presents the only possible gap in the federal computer system's defenses. But Congress had ample evidence that Kaspersky posed the most urgent potential threat, and this court must give Congress "sufficient latitude to choose among competing policy alternatives," lest "our bill of attainder analysis ... 'cripple the very process of legislating.' "
Foretich
,
At the end of the day, the functional test does not require that Congress precisely calibrate the burdens it imposes to the goals it seeks to further or to the threats it seeks to mitigate. Instead, the test requires only that Congress refrain from " 'pil[ing] on' ... additional, entirely unnecessary burden[s]."
Foretich
,
Historical Test
Having failed to make a persuasive showing on the functional test, Kaspersky faces an uphill battle.
Foretich
,
Under the historical test, we ask "whether the challenged statute falls within the historical meaning of legislative punishment."
Selective Service System
,
Despite the apparent redundancy of the historical inquiry, we must double-check our functional-test work by comparing section 1634 to the "ready checklist" of historical punishments. "This checklist includes sentences of death, bills of pains and penalties, and legislative bars to participation in specified employments or professions."
Foretich
,
As Kaspersky admits, " 'the particular burden imposed' " by section 1634 " 'is not precisely identical to any of the burdens historically recognized as punishment.' " Appellants' Br. 24 (quoting
Foretich
,
In support of this claim, Kaspersky highlights two characteristics shared by many historic bills of attainder: excluding or expelling individuals from a profession, and "mark[ing] specified persons with a brand of infamy or disloyalty."
Foretich
,
The historical punishments Kaspersky cites are readily distinguishable from the burden section 1634 imposes on the company. To begin with, although we assume that the Bill of Attainder Clause protects corporations as well as natural persons,
see
supra
at 453-54, we have no basis for likewise assuming that corporate entities feel burdens in the same way as living, breathing human beings. "[I]t is obvious," we have explained, "that there are differences between a corporation and an individual under the law," so "any analogy between prior cases that have involved individuals and this case, which involves a corporation, must necessarily take into account this difference."
BellSouth II
,
In particular, the stain of a "brand of infamy or disloyalty" matters most to flesh-and-blood humans. These are people who, most likely, have but one country of citizenship-a country in which they exercise civic privileges available exclusively to living individuals, such as voting, running for office, or serving in the armed forces. They are people who have neighbors and colleagues and communities in whose good graces they hope to remain. And they are people who have families and friends whose own reputations and happiness are tied, at least in part, to their own.
Corporations are very different. To be sure, corporations may derive substantial financial value from their brands' reputations. But that is precisely the point: reputation is an asset that companies cultivate, manage, and monetize. It is not a quality integral to a company's emotional well-being, and its diminution exacts no psychological cost. This is why, for example, "[t]he law of libel has long reflected the distinction between corporate and human plaintiffs by limiting corporate recovery
*462
to actual damages in the form of lost profits."
Martin Marietta Corp. v. Evening Star Newspaper Co.
,
Because human beings and corporate entities are so dissimilar, any analogy between the statutes that courts have found to qualify as bills of attainder and section 1634 is strained at best. Section 1634 is unlike the statute at issue in
Cummings v. Missouri
, which following the Civil War closed "office[s] of honor, trust, or profit" to individuals who had "expressed sympathy with any who were drawn into the Rebellion," thereby permanently associating even passive sympathizers with "the most active and the most cruel of the rebels." 71 U.S. at 317-18 ;
see also
Flemming
,
Furthermore, all of the Supreme Court's employment ban cases have involved "a legislative enactment barring designated individuals or groups from participation in specified employments or vocations."
Nixon
,
To the contrary, rather than an employment ban, section 1634 much more closely resembles the kinds of permissible "line-of-business restrictions" and "run-of-the-mill business regulations" that we approved in
BellSouth I
,
At bottom, then, a wide valley separates section 1634 from the small handful of statutes that courts have found to be unconstitutional bills of attainder. All four of the relevant Supreme Court cases involved flesh-and-blood humans whom the legislature deemed untrustworthy or subversive based on those individuals' political beliefs. And this court's case,
Foretich
, concerned a legislative determination that a father had sexually abused his own daughter. Those cases differ markedly from the situation we face here, where Congress simply decided to stop using a company's products based on its determination that those products posed a national security risk. Section 1634 may well cost Kaspersky some revenue, but it stretches credulity to view what is ultimately a procurement decision as a "brand of infamy or disloyalty."
Foretich
,
Motivational Test
The motivational test asks "whether the legislative record 'evinces a congressional intent to punish.' "
Selective Service System
,
Kaspersky not only fails to offer such unmistakable evidence; it very nearly fails to offer any evidence whatsoever. Kaspersky relies solely on a handful of public comments made by Senator Shaheen, the sponsor of the amendment that became section 1634. In a September 2017 New York Times op-ed, the senator warned that the "threat ... posed by antivirus and security software products created by Kaspersky Lab, a Moscow-based company with extensive ties to Russian intelligence" creates an "alarming national *464 security vulnerability." Jeanne Shaheen, The Russian Company that Is a Danger to Our Security , N.Y. Times, Sept. 4, 2017. Similarly, in a press release several weeks later, Shaheen stated that the "case against Kaspersky Lab is overwhelming," warning that "[t]he strong ties between Kaspersky Lab and the Kremlin are alarming and well-documented." Shaheen's Legislation to Ban Kaspersky Software Government-Wide Passes Senate as Part of Annual Defense Bill , Jeanne Shaheen (Sept. 18, 2017), https://www.shaheen.senate.gov/news/press/shaheens-legislation-to-ban-kaspersky-software-government-wide-passes-senate-as-part-of-annual-defense-bill-.
The trouble with Kaspersky's reliance on Shaheen's comments is twofold. First, we detect no punitive intent in the senator's statements. To the contrary, she expressed a desire to take action to protect federal information systems-a nonpunitive objective. And second, even if Shaheen's statements did reveal a personal desire to punish Kaspersky, the company cites no corroborating evidence indicating that other members of Congress shared her supposedly punitive motivations. " '[S]everal isolated statements are not sufficient to evince punitive intent,' and cannot render a statute a bill of attainder without any other indicia of punishment."
Foretich
,
III.
Before concluding our consideration of the NDAA Case, we need to address a procedural concern raised by Kaspersky. As a general rule, " Federal Rule of Civil Procedure 12(d) forbids considering facts beyond the complaint in connection with a motion to dismiss the complaint for failure to state a claim."
United States ex rel. Shea v. Cellco Partnership
,
Although we cannot rule out the possibility that the district court improperly comingled facts from the two separate cases, we need not reach that issue. Because we are reviewing the district court's dismissal de novo, even if that court impermissibly ventured outside the pleadings, we can affirm based on the available permissible evidence. Among the information a court may consider on a motion to dismiss are "public records subject to judicial notice."
Kaempe v. Myers
,
*465 We therefore consult section 1634's legislative record to provide evidence of statutory purpose only-that is, what information Congress had before it when enacting the statute. And in this case, that is enough to resolve Kaspersky's claim. Relying just on the legislative record and, of course, the NDAA Case's complaint itself, we conclude for all the reasons already discussed that Kaspersky's complaint fails to plausibly allege that section 1634 is a bill of attainder. We shall therefore affirm the district court's dismissal of Kaspersky's NDAA Case for failure to state a claim upon which relief can be granted.
IV.
Having concluded that section 1634 is not a bill of attainder, and thus having affirmed dismissal of the NDAA Case, we turn to Kaspersky's other suit against the Department of Homeland Security. In its complaint, the company alleges that Binding Operational Directive 17-01 violates the Administrative Procedure Act, and it seeks the Directive's invalidation. See Complaint, Kaspersky Lab, Inc. v. U.S. Department of Homeland Security , No. 1:17-cv-02697, at 22 (D.D.C. Dec. 18, 2017).
As the district court recognized, however, Kaspersky has a serious standing problem. Section 1634 prohibits all the same conduct as the Directive-and then some. Indeed, section 1634 sweeps more broadly than the Directive in two respects: it covers more Kaspersky products and applies to more agencies.
See
Kaspersky Lab
,
And indeed it does. Thus, as the district court explained, "even if ... the Court were to order the rescission of the [Directive], [Kaspersky's] harms would not be redressed."
Kaspersky Lab
,
V.
For the foregoing reasons, we affirm the district court's dismissal of the NDAA Case for failure to state a claim upon which relief can be granted, as well as its dismissal of the Directive Case for lack of jurisdiction.
So ordered.
Reference
- Full Case Name
- KASPERSKY LAB, INC. and Kaspersky Labs Limited, Appellants v. UNITED STATES DEPARTMENT OF HOMELAND SECURITY and Kirstjen M. Nielsen, in Her Official Capacity as Secretary of Homeland Security, Appellees
- Cited By
- 38 cases
- Status
- Published