The Supreme Court Addresses When State Regulators Move From Advocacy Of Their Positions to Censorship

The First Amendment is a bulwark against censorship efforts by federal, state and local governments. What is sometimes lost is that state governments, the federal government and government officials also have First Amendment rights. Every state government, for example, has an obligation to announce its policies and to publicly defend those policies, which includes criticizing many different positions and viewpoints. Further, like other citizens, state officials have the right to hold their own personal opinions and to express those opinions. A state employee does not lose his or her First Amendment rights just because they work for the government.

While state employees have First Amendment rights, state officials and employees can wield significant power, which can be used to restrain the First Amendment rights of others. A recent Supreme Court case addressed a situation in which the State of New York and the head of a powerful regulatory agency allegedly made threats to insurance companies doing business with the National Rifle Association (“NRA”) that the Supreme Court held may have violated the NRA’s First Amendment Rights. In a unanimous decision, the Supreme Court reversed a decision by a federal appellate court that held the NRA had not properly alleged a First Amendment violation: National Rifle Association v. Vullo.

State governments cannot pass laws that target and punish individuals for expressing certain viewpoints. Such laws violate the First Amendment rights of the targeted individuals or groups. Nor can a government official use otherwise neutral law to target certain individuals or groups for punitive enforcement actions because of their viewpoints. While these represent blatant examples of censorship, there are more subtle forms of censorship that are also illegal.

In Vullo, the defendant did not try to censor the NRA directly. Vullo was the head of New York’s Department of Financial Servies (“DFS”) and could not directly regulate the NRA, because the NRA is not a financial services company subject to her agency’s jurisdiction. Instead, Ms. Vullo targeted insurance companies (which she does regulate) that did business with the NRA in order to disrupt the NRA’s access to insurance products and thereby limit the NRA’s advocacy.

An agency like DFS can impose tremendous costs on the companies it regulates, harm their reputations or even prevent them from doing business in New York. With this power, government officials do not always need to directly target a group whose viewpoints they abhor. The head of DFS can put significant pressure on critical businesses like insurance companies and banks to stop dealing with an organization or an individual that pursues political and social objectives with which the state official strongly disagrees. While state officials may sometimes have legitimate reasons to tell one organization that it cannot do certain types of business with a different organization, this power is usually extremely limited and cannot be based on the target’s viewpoints or advocacy efforts.

In Canada, for example, when many truckers protested Canada’s Covid restrictions, the Canadian government responded by ordering banks to freeze the accounts of many of protesting truckers. Canadians do not have rights equivalent to the First Amendment right Americans enjoy with respect to freedom of speech and association. The Canadian government was able to punish protesting truckers by denying them access to critical financial institutions. Threatening financial institutions in order to injure political rivals or those with disfavored viewpoints is not a theoretical problem.

Many of New York’s top officials, including Vullo, are strong supporters of gun control efforts. The NRA is probably the largest gun rights organization in the United States and engages in lobbying efforts and litigation to protect Second Amendment rights. Suffice it to say, the NRA is not looked upon favorably by many New York State government officials. Under our constitutional system, those New York State officials have a First Amendment right to criticize the NRA and to oppose its policies. In Vullo, the NRA alleged that Vullo violated the NRA’s First Amendment rights when she allegedly put pressure on various insurance companies and financial institutions to stop doing business with the NRA because of the NRA’s positions on gun control issues.

The NRA alleged that it offered an insurance product to its members called Carry Guard. Carry Guard “covered personal-injury and criminal-defense costs related to licensed firearm use”, and “insured New York residents for intentional, reckless, and criminally negligent acts with a firearm that injured or killed another person.’” A gun control organization sent a tip to the NY District Attorney’s office that the Carry Guard program violated New York law. The District Attorney’s office forwarded the tip to the Department of Financial Services that regulates insurance companies, and the DFS launched an investigation. The investigation “revealed at least two kinds of violations of New York law: that Carry Guard insured intentional criminal acts, and the NRA promoted Carry Guard without an insurance product license.”

While the investigation was ongoing, the mass shooting in Parkland, Florida, occurred. This event reignited the debate on gun control. Given the NRA’s role as the primary gun rights organization, the NRA became a key target for gun control groups and for individuals demanding stricter gun control.

The NRA, however, is not an insurance company, and the actual insurers and underwriters that made Carry Guard possible included the following companies: Lockton, Chubb and Lloyds. These insurance companies are subject to regulation by the DFS, which can initiate civil enforcement actions and “can refer potential criminal violations to the State’s attorney general for prosecution.” Insurance companies and other financial institutions that are regulated by DFS have strong incentives to comply with instructions or demands from DFS.

According to the NRA’s allegations, Vullo had a meeting with Lloyds’ executives concerning Carry Guard and other insurance affinity products that Lloyds offered through its syndicates. The NRA alleged that Vullo presented to Lloyds’ executives her and Governor Cuomo’s “views on gun control and their desire to leverage their power to combat the availability of firearms, including specifically the weakening of the NRA.” Statements like this from a top regulator to executives of a company that the regulator has considerable power over, is by itself troubling. Vullo allegedly went further and then told Lloyds’ executives that DFS had found a number of technical violations committed by Lloyds, but “’that DFS was less interested in pursing the[se] infractions’ unrelated to any NRA business ‘so long as Lloyd’s ceased providing insurance to gun groups, especially the NRA.’” Vullo also allegedly told Lloyds that Lloyds “could avoid liability for infractions relating to other, similarly situated insurance policies, so long as it aided DFS’s campaign against gun groups.” Vullo and Lloyds then struck a deal that Lloyds would “’ instruct its syndicates to cease underwriting firearm-related policies and would scale back its NRA-related business,’ and ‘in exchange, DFS would focus its forthcoming affinity-insurance enforcement action solely on those syndicates which served the NRA, and ignore other syndicates writing similar policies.’”

Vullo did not stop with her alleged quid-pro-quo deal with Lloyds. Vullo allegedly caused two Guidance Letters to get issued on DFS letterhead that continued the campaign against the NRA by targeting insurance companies and financial services companies doing business with the NRA. The Guidance Letters essentially warned insurance companies and financial services companies that they could suffer “reputational harm” if they did business with the NRA. The Guidance Letters stated that the companies regulated by DFS should “review any relationships they have with the NRA or similar gun promotion organizations,” and “take prompt actions to manage these risks and promote public health and safety.” The Supreme Court did not address whether the Guidance Letters by themselves could represent enough coercion to support a First Amendment claim. The problem Vullo faced was that the Guidance Letters took place within the context of the threats made to Lloyds and Lloyds’ subsequent termination of its relationship with the NRA. Whether guidance letters like the ones issued by Vullo could support a First Amendment claim is an issue that remains open.

The same day the Guidance Letters were issued, Vullo and Governor Cuomo also issued a press release “urg[ing] all insurance companies and banks doing business in New York” to join those “that have already discontinued their arrangements with the NRA.” The following day, Governor Cuomo posted a tweet in which he called the NRA an extremist organization and urged “companies in New York State to revisit any ties they have to the NRA and consider their reputations and responsibility to the public.”

The NRA alleged that Vullo’s actions resulted in Lloyds and Lockton severing their ties with the NRA. This included regular corporate insurance products that had no connection to the Carry Guard insurance.

The Supreme Court’s analysis starts with the statement that Vullo could not use her power as head of DFS to “threaten enforcement actions against DFS-regulated entitles in order to punish or suppress the NRA’s gun-promotion advocacy.” While Vullo has a right to express her opinions on gun control and the NRA’s positions with respect to the Second Amendment, she did not have the right, as a top regulator, to threaten or coerce companies she regulates to stop doing business with the NRA because she wanted to weaken the NRA’s advocacy efforts. The Supreme Court Justices unanimously agreed that Vullo’s actions, as alleged by the NRA, plausibly crossed the line into unlawful coercion.

One important factor that drove the Supreme Court’s decision was Vullo’s regulatory and enforcement power over the entities she allegedly coerced into cutting ties with the NRA. The Supreme Court stated that “the greater and more direct the government official’s authority, the less likely a person will feel free to disregard a directive from the official.” If Vullo had worked for New York Department of Motor Vehicles, for example, it seems highly unlikely that she could have disrupted the NRA’s relationships with its insurers, regardless of the vehemence of her denunciations of the NRA. Vullo’s position meant that regulated insurance companies could easily view her comments as threats with actual teeth.

With respect to the alleged quid-pro-quo with Lloyds, Vullo argued that she had discretion with respect to her prosecutorial decisions and could lawfully limit the scope of DFS’s prosecution of Lloyds. The Supreme Court made short work of this argument by pointing out that the “Constitution does not distinguish between ‘comply or I’ll prosecute’ and ‘comply and I’ll look the other way.’” The critical point for the Court was that Vullo was basing her prosecutorial discretion on the NRA’s viewpoints, which is impermissible under the First Amendment.

The Supreme Court also stressed that courts need to evaluate facts, in this type of case, in their entirety. Looking at the meeting with Lloyds separately from the Guidance Letters and the tweet by Governor Cuomo can give a misleading impression of the message sent to insurance companies. Taken together, the communications show a multi-pronged effort to pressure insurance companies to stop doing business with the NRA in order to limit its advocacy for gun rights. A multi-pronged effort by groups or individuals who have no regulatory power over insurance companies to try and convince them to sever their ties with the NRA probably would not have implicated the NRA’s First Amendment rights. An individual or regulatory agency that can inflict serious harm on a company that refuses to follow its directions or “strong” suggestions can, however, cross the line from advocacy to unlawful coercion.

If you believe that your organization or business is being targeted by government officials due to your political or social viewpoints, it is important to seek legal counsel and understand your rights under the First Amendment. As demonstrated by the Vullo case, government officials cannot use their regulatory power as a means of suppressing free speech and stifling advocacy efforts. The Supreme Court’s decision in this case serves as a reminder of the importance of protecting freedom of speech, even when faced with powerful regulatory agencies. At The Law Offices of George M. Sanders, P.C., we are committed to defending the First Amendment rights of our clients and helping them navigate complex legal issues related to free speech and government regulation. Contact us today for a consultation to discuss your case and learn how we can help protect your constitutional rights.