Litigating a Chinese Company’s Inclusion on the Pentagon’s List of Chinese Military Affiliated Companies 

John B. Quinn (0:03)

This is John Quinn, and this is Law, Disrupted. And today, we're going to be talking about another one of our cases, in which we have successfully represented a Chinese client. We recently talked about the Pangong Criminal Prosecution, which after a 15-year fight, we persuaded the Department of Justice, three days into trial, to simply walk away from the case.

And today, we're going to be talking about another case where we've represented a Chinese company. This Chinese company was kind of blacklisted, you could say. Our Pentagon in Washington maintains a list of Chinese companies, which, according to them, are affiliated with the Chinese military.

And there's not a sanction, per se, that attaches to that, as I understand it. We're talking with my partner, Derek Shaffer. Are you there, Derek?

Derek Shaffer (0:59)

Yeah. Hey, John. I'm right here.

John B. Quinn (1:01)

So there's not a sanction associated with this explicitly, except it's kind of a black eye and can make people pause about doing business with you.

And this is a case in which we're representing the world's leading drone manufacturer, DJI, a company based in Shenzhen, China, which I recently visited, actually. And they are kind of famous for making drones of all kinds, except not for military use.

They don't make military drones. It's been part of their DNA from the very beginning. It's a global leading drone company. They've earned, I don't know what it is. I think I've seen numbers like 80 percent or 90 percent market share. Have you heard those numbers, Derek?

Derek Shaffer (1:49)

Yeah, they're huge outside of the military context. As you say, it's all civilian and recreational drones. All right.

John B. Quinn (1:57)

So just to remind folks, this year we're celebrating the 10th year anniversary of our founding of our first office on the mainland in China. That was in Shanghai. We thought we were going to be representing Western companies that were investing in China and helping them with issues they encountered in the Chinese market.

Not long after we opened that office, that market started to disappear. Western companies were not investing in China. The private equity firms, the venture capital firms went away. Sequoia broke off its Chinese operation, for example.

Our practice has evolved to representing Chinese companies and issues they face around the world. Part of what we do, at least in the United States, as I see it, is trying to hold the American legal system to standards and ideals and establish that it doesn't matter who you are, whether you're from China or not, you can get a fair trial and a fair hearing in the United States. That's our mission and we've had great success at doing that. So let's talk about what happened with DJI, with my partner Derek Shaffer, who's based in our Washington, DC office and is, among other things, one of our leading lawyers in bringing claims against the government, and bringing claims. He's actually also one of our leading appellate lawyers. So Derek, set the stage for us. Who is DJI? We've talked about that a little bit. But what was this case?

Derek Shaffer (3:25)

Sure. Yeah, it's the first of its kind, challenging one of these designations that you aptly described, John.

Basically, every year, the Department of Defense publishes a list of what it calls Chinese military companies that are designated as such and are deemed to have ties to by according to the Department of Defense or deemed to have ties to the Chinese military. That is very stigmatizing, as you might expect, when the US government does that. And it actually does have legal consequences as well. A publication on the list cuts a company off from being able to contract the federal government with DOD, Homeland Security, that prevents them from doing deals based with the Department of Energy as well. But then there are ripple effects from there, as you might expect. And for a company like DJI that has a huge global footprint, has to resolve around the world, and it helps out, among others, police and rescue operations, including in the United States. There are ripple effects. People take their cues from the DOD listing all too often and just assume if a company has been listed in this fashion, that's not someone that they want to be doing business with. So I assume...

John B. Quinn (4:39)

Well, yeah, I assume that before the Pentagon or Department of Defense, I think it's actually Department of War now, Derek. It's true.

Derek Shaffer (4:48)

I'm out of date. Yes.

John B. Quinn (4:50)

The new nomenclature. I assume that before you...

Derek Shaffer (4:53)

Forgive me for not calling you that. I'm going to resist that on the podcast and elsewhere. Yes, that is the official name these days.