Did a New York Official Impermissibly Coerce Companies Not to do Business with the NRA?

The Court will take up this question on Monday, March 18. Here's my argument preview, from the ABA Preview of United States Supreme Court Cases:

FACTS

In late 2017, the Superintendent of New York’s Department of Financial Services (DFS), Maria Vullo, launched an investigation into an NRA-endorsed affinity insurance program called “Carry Guard.” (An affinity insurance program is an insurance program endorsed by an organization and offered to the organization’s members. Affinity insurance programs are serviced and underwritten by third-party insurance companies (and not the organization itself), but the NRA’s program bears the organization’s name and logo, and the NRA receives a portion of its members’ premiums as a royalty.) Carry Guard provided insurance coverage for losses resulting from an insured person’s use of a licensed firearm. The program included criminal defense costs for a person’s use of a firearm with excessive force, even if the insured acted with criminal intent. According to the Second Circuit, “[i]n other words, it insured New York residents for intentional, reckless, and criminally negligent acts with a firearm that injured or killed another person.” Carry Guard policies were underwritten by a subsidiary of Chubb Limited and administered by Lockton Companies, LLC. (The NRA claims that Vullo’s investigation “quickly expanded to encompass not just Carry Guard, but insurance products that had nothing to do with firearms.”)

The investigation revealed that Carry Guard and at least two other NRA insurance affinity programs violated New York insurance law because, among other reasons, they provided coverage for intentional criminal acts. By November 17, 2017, Chubb and Lockton suspended the Carry Guard program.

The investigation also revealed that Lloyd’s of London provided underwriting for at least 11 other, similar NRA-endorsed programs. Lockton administered these programs, too.

On February 14, 2018, a shooter killed seventeen students and staff at Marjory Stoneman Douglas High School in Parkland, Florida. According to the plaintiffs, “[i]n the wake of the shooting, the NRA faced intensified criticism for its pro-gun rights advocacy from many corners, including [New York] Governor [Andrew] Cuomo and Superintendent Vullo.”

That same month, Vullo began meeting with insurance executives whose companies did business with the NRA to urge them to rethink their relationships with the organization. For example, Vullo told executives at Lloyd’s that the company “could avoid liability for infractions relating to other, similarly situated insurance policies, so long as it aided DFS’s campaign against gun groups.” After Vullo’s meetings with Lloyd’s, the company “agreed that it would instruct its syndicates to cease underwriting firearm-related policies and would scale back its NRA-related business.” DFS agreed to “focus its forthcoming affinity-insurance enforcement action” against Lloyd’s “solely on those syndicates which served the NRA, and ignore other syndicates writing similar policies.”

Soon after, Lockton’s chairman told the NRA that “Lockton would need to ‘drop’ the NRA” out of “fear of ‘losing [our] license’ to do business in New York.” Lockton then tweeted that it would stop offering brokerage services for all NRA-endorsed insurance programs. Days later, AIG, the NRA’s longtime “corporate carrier,” announced that “it was unwilling to renew coverage at any price.” According to the plaintiffs, AIG discontinued its relationship with the NRA “because it learned of” Vullo’s and Cuomo’s “threats directed at Lockton and feared it would be subject to similar reprisals.”

On April 19, 2018, Vullo issued two guidance letters on “risk management relating to the NRA and similar gun promotion organizations,” one to DFS-regulated insurance corporations and the other to DFS-regulated financial institutions. Citing the Parkland shooting and public sentiment, the letters urged DFS-regulated entities to “continue evaluating and managing their risks, including reputational risks, that may arise from their dealings with the NRA or similar gun promotion organizations, if any, as well as continued assessment of compliance with their own codes of social responsibility.” The letters specifically “encourage[d] regulated institutions to review any relationship they have with the NRA or similar gun promotion organizations and to take prompt actions to manag[e] these risks and promote public health and safety.” The letters, however, did not refer to any specific investigations or enforcement actions, like the investigation into Carry Guard.   

The same day, Cuomo issued a press release, stating that “I am directing the Department of Financial Services to urge insurers and bankers statewide to determine whether any relationship they may have with the NRA or similar organizations sends the wrong message to their clients and their communities.” The release quoted Vullo as saying, “DFS urges all insurance companies and banks doing business in New York to join the companies that have already discontinued their arrangements with the NRA, and to take prompt actions to manage the[] risks and promote public health and safety.” The release announced that two insurance companies, MetLife and Chubb, already stopped doing business with the NRA, and urged “all insurance companies and banks doing business in New York to join” them. Following up the next day, Cuomo tweeted, “The NRA is an extremist organization. I urge companies in New York State to revisit any ties they have to the NRA and consider their reputations, and responsibility to the public.”

Two weeks after Cuomo’s press release, DFS revealed the results of its investigations into Chubb and Lockton over the Carry Guard program. DFS imposed multi-million-dollar fines on both companies. It also entered into consent decrees with the companies, in which the companies agreed to halt the Carry Guard program and never again to offer any affinity insurance program to the NRA. (Under the decrees, Chubb and Lockton could still provide insurance to the NRA itself, or to help the NRA in procuring corporate insurance coverage.)

Within a week of the consent decrees, Lloyd’s directed its underwriters to halt all insurance programs associated with the NRA, and not to provide any insurance to the NRA in the future. Then, in December 2018, Lloyd’s entered into its own consent decree with terms similar to the Chubb and Lockton decrees.

The plaintiffs claim that “[p]rivately, these companies stated that the decision to sever ties with the NRA arose from fear of regulatory hostility in New York.” They also contend that the NRA is having “serious difficulties obtaining corporate insurance coverage to replace coverage withdrawn by the [NRA’s] Corporate Carrier,” AIG, and that the organization has “spoken to numerous carriers,” but “nearly every carrier has indicated that it fears transacting with the NRA specifically in light of DFS’s actions against Lockton, Chubb, and Lloyd’s.” Finally, the plaintiffs assert that “numerous banks withdrew bids for the NRA’s business after Vullo issued the Guidance Letters.”

The NRA sued Vullo, Cuomo, and others, alleging that Vullo’s actions punished the organization for its protected speech. The district court dismissed all the NRA’s claims, except two First Amendment claims against Vullo. The Second Circuit reversed, holding that the NRA failed to plausibly allege that Vullo coerced DFS-regulated entities in violation of the First Amendment, and that Vullo enjoyed qualified immunity. The Court then granted review on the First Amendment issue, but declined to include the qualified immunity question.

CASE ANALYSIS

As a general matter, government officials have wide latitude to express their views. As a result, officials can express a preference for a position or viewpoint; they can criticize organizations and corporations; and they can even try to persuade individuals and organizations to adopt certain behaviors, including disassociating themselves from particular advocacy groups or viewpoints. Government officials engage in speech like this all the time, and the First Amendment does not prohibit it.

That said, government officials cannot coerce a person or organization to disassociate themselves from a speaker, advocacy organization, or viewpoint by using threats or inducements. In determining the line between (permissible) persuasion and (impermissible) coercion, courts assess a government official’s behavior on the whole and in context. Drawing on the Court’s ruling in Bantam Books v. Sullivan, 372 U.S. 58 (1963), lower courts typically look to several factors, including the authority of the government official over the individuals or organizations they are addressing; the content, style, and purpose of the communications; and the effect of the official’s conduct on their intended audiences. (The NRA counts these as three factors, and Vullo counts them as four; but they amount to the same thing.) All this means that at the motion-to-dismiss stage (as here), a plaintiff must allege that, on the whole and in context, they “reasonably understood” a government official’s statements as a threat of adverse government action if they declined to comply. 

The NRA argues that the Bantam Books factors line up in its favor. As to the first factor, the organization says that by virtue of Vullo’s position she had “outsized influence over the banks and insurers whom she urged to cut ties with the NRA.” As to the second, it claims that Vullo “directly invoked her statutory authority” in her actions; she directed regulated entities to take “prompt action” and to consider their “reputational risks” or face multi-million-dollar fines; and she offered benefits to the NRA’s insurance partners for cutting off ties with the NRA, “extract[ing] promises” from the three who did. As to the third factor, the NRA contends that regulated corporations well understood Vullo’s behavior as coercion and “heard her message loud and clear.” The NRA asserts that taking the complaint’s allegations as true (as we must at this stage), the complaint sets out “a campaign of threats and inducements designed to retaliate against the NRA’s protected political speech in violation of the First Amendment.”

The NRA contends that the Second Circuit got it wrong by holding otherwise. The organization says that the Second Circuit “mangled basic pleading standards, dismissed or ignored critical allegations of coercion, and failed to consider the cumulative effects of Vullo’s actions.” Moreover, it claims that the lower court’s “suggestion that Vullo’s political blacklisting campaign was justified because of the NRA’s unpopularity in New York” effectively invites similar “blacklisting campaigns” against any unpopular group. And finally, the NRA contends that Vullo’s actions—“urg[ing] every bank and insurance company in New York State to cut all business ties with the NRA” (emphasis in original)—far exceeded what was necessary to address the Carry Guard program. “By her words and deeds, Vullo made clear that her goal was a political blacklist, not legitimate law enforcement.”

Vullo counters that the Court lacks jurisdiction. Vullo says that because the question presented is limited to the NRA’s First Amendment claim, the Second Circuit’s ruling on her qualified immunity will stand. (An official can enjoy qualified immunity on the ground that the law was not clearly established at the time, even if the Court clearly establishes it later.) As a result, she enjoys qualified immunity regardless of how the Court rules on the First Amendment claim, and the First Amendment issue is therefore merely “advisory.”

Vullo argues next that even if the Court has jurisdiction the NRA’s “claims suffer from [four] fatal problems” that would allow the Court to duck a First Amendment ruling. First, Vullo says that “the bulk of the NRA’s allegations turn on enforcement acts protected by absolute prosecutorial immunity.” Next, she claims that the NRA “failed to plausibly allege that [she] retaliated against speech, as opposed to regulating third parties’ conduct,” especially “in light of the insurers’ own admissions that they and the NRA were engaged in wide-ranging illegal conduct.” Third, Vullo contends that her actions limited “only what the NRA could do, not what it could say.” And fourth, as to the Lloyd’s meeting, she asserts that “the NRA has not plausibly alleged that [she] threatened to interfere with Lloyd’s lawful arrangements with the NRA,” because “all of the affinity programs Lloyd’s provided for the NRA were illegal.” (Emphasis in original.) She also points out that Lockton (the licensed excess-line broker for the NRA) already decided to sever ties with the NRA two days before her alleged meeting with Lloyd’s (the unlicensed excess-line insurer), and under New York law, “Lloyd’s could not lawfully continue its relationship with the NRA either . . . .”

If the Court gets past these threshold issues, Vullo argues that “the NRA’s complaint does not plausibly allege coercion.” Under the Bantam Books factors, she contends that she “did not reference or threaten adverse consequences,” but instead “used quintessential language of encouragement,” except when referring to actual legal violations. She says that “the NRA’s allegations about the supposed Lloyd’s meeting are vague, conclusory, and contradicted by the NRA’s allegations elsewhere.” Moreover, Vullo claims that her “tone and word choice of the industry letters was even-handed and nonthreatening,” and that “[t]he consent orders’ tenor was wholly consistent with their aim.” She asserts that the responses by the regulated entities “are easily explained as responses to the horrific Parkland shooting or the insurers’ own admittedly unlawful conduct,” and not her coercion. And she contends that her own authority can’t make “her otherwise nonthreatening communications coercive,” or else law enforcement officials generally could not express their views on public issues.

Finally, Vullo argues that “[t]he NRA’s arguments would be devastating for government officials at all levels.” In short,

These arguments would eviscerate the protections of prosecutorial immunity and the presumption of regularity; circumvent limits on selective-enforcement suits; inhibit public officials from performing their duties; invite strike suits in response to legitimate law-enforcement actions and government speech; and allow entities to insulate themselves from the consequences of their unlawful conduct by engaging in controversial speech.

The government weighs in to argue that Vullo engaged in impermissibly coercive conduct during her meeting with Lloyd’s. It says that the NRA’s allegation that Vullo “expressed a desire to leverage her authority to financially weaken [the NRA] based on her disagreement with [the NRA’s] views, identified technical regulatory infractions that Lloyd’s might have committed, and then stated that she would be willing to overlook those infractions if Lloyd’s stopped doing business with petitioner . . . [i]f true . . . would establish that [Vullo] violated the First Amendment. The government contends that the lower court erred in saying otherwise, because it failed to connect the Bantam Books factors to the underlying question (“[w]hether the official’s challenged conduct, viewed objectively and in context, conveys a threat of adverse government action”), and failed to take account of Vullo’s reference to adverse consequences at the meeting.

The government urges the Court not to rule on the NRA’s other claims, related to the guidance letters and the consent decrees. The government says that these claims only “raise more difficult questions in a highly unusual factual context.”

SIGNIFICANCE

This case tests how aggressively a government regulator can urge corporations to stop doing business with an advocacy organization before the regulator violates the organization’s right to free speech. And it does so against the backdrop of the horrific Parkland shooting, and in the context of one of the more politically charged issues of our times, firearms.   

On the one hand, the NRA contends that the First Amendment does not permit a regulator, especially one like Vullo, with such vast authority, to use their office and the threat of regulatory enforcement to harm an ideological foe. On the other hand, Vullo says that she should be able to use her leverage to halt illegal relationships; after all, that’s her job. The government, for its part, seeks to split the difference, and urges the Court to rule some of Vullo’s conduct (the alleged Lloyd’s meeting) unconstitutional, while dodging the conduct that raises thornier claims.

Vullo gives the Court several off-ramps—ways to rule without touching the core First Amendment claim. But it’s not at all clear that the Court will take any of them. After all, the Court certified the question presented intentionally and left out qualified immunity, suggesting that at least four justices want to take up the NRA’s free-speech claim.

It’s impossible to take the politics out of this case. I certainly don’t need to remind you that the NRA has its own political bent. But remember that the Court’s ruling, whatever it is, has to work both ways, politically speaking. So in addition to testing the line between persuasion and coercion, look for the justices to test how any proposed rules or theories stack up when the politics are different.

One final point. We’ve seen reports in late 2023 and more recent months about troubles at the NRA—declining membership, internal infighting, and, most recently, the civil judgment against Wayne LaPierre. This case spotlights another problem for the organization: corporations who no longer can or will do business with it (with or without the actions of regulators like Vullo). This case may have something to say about how far regulators can go in urging corporations to disassociate with the NRA in the future. But it may have little effect on corporate decisions already made. If insurers or bankers already decided not to associate with the NRA—either because their actions were illegal, or because they disapprove of the NRA’s message—this case (whatever it says) may not bring them back.