In October 2017, the New York Department of Financial Services began to investigate NRA's Carry Guard insurance program, offered through two insurance companies, Chubb and Lockton. The program apparently violated New York law, by providing "(1) liability insurance to gun owners for acts of intentional wrongdoing, and (2) legal services insurance for any costs and expenses incurred in connection with a criminal proceeding resulting from acts of self-defense with a legally possessed firearm." (States have broad authority to decide what risks people can insure against.) DFS also learned that the NRA marketed the Carry Guard program in New York without having the proper insurance marketing license.
The NRA claims, though, that state officials did more than just enforce insurance law, or punish the NRA and the insurers for violations of the insurance law. Rather, the NRA argues, the officials tried to pressure banks and insurers who were subject to New York law (which many major banks and insurers are, since they do business in New York) to stop dealing with the NRA altogether—and that the reason for this was the NRA's politics. Today, U.S. District Court Judge Thomas A. McAvoy allowed the NRA's free speech claims to go forward (though not their other claims). Here's an excerpt from the opinion, NRA v. Cuomo, which I think is quite correct on this point:
"'First Amendment rights may be violated by the chilling effect of governmental action that falls short of a direct prohibition against speech.' As applicable to the allegations in Counts One and Two, "the First Amendment prohibits government officials from encouraging the suppression of speech in a manner which 'can reasonably be interpreted as intimating that some form of punishment or adverse regulatory action will follow the failure to accede to the official's request.'" In determining whether government statements impede upon First Amendment rights, "what matters is the 'distinction between attempts to convince and attempts to coerce.'" The NRA's First Amendment freedom-of-speech claims turn on the allegations that Defendants issued threats to financial institutions and insurers "that DFS … will exercise its extensive regulatory power against those entities that fail to sever ties with the NRA." The First Amendment "require[s] courts to draw fine lines between permissible expressions of personal opinion [by public officials] and implied threats to employ coercive state power to stifle protected speech." On the one hand, public officials are free to promote their views about public welfare, including by using their bully pulpits to "cajole[] and exhort" others to repudiate positions or groups the officials view as pernicious. On the other hand, "oral or written statements made by public officials' could give rise to a valid First Amendment claim where comments of a government official can reasonably be interpreted as intimating that some form of punishment or adverse regulatory action will follow the failure to accede to the official's request." Thus, the critical question here is whether Defendants' statements, including the Guidance Letters and Cuomo Press Release, threatened adverse action against banks and insurers that did not disassociate with the NRA. When a question exists whether government speech contains a threat of future enforcement action, the First Amendment requires the Court to "look through forms to the substance." "While the precise language" of the Cuomo Press Release and Guidance Letters "is certainly important," the Second Circuit has "never held that it is the only relevant factor in determining whether a public official has crossed the line 'between attempts to convince and attempts to coerce.'" Rather, the First Amendment requires the Court to consider all the circumstances, including "the entirety of the defendants' [alleged] words and actions," to determine "whether they could reasonably be interpreted as an implied threat." In making this determination, the Court examines a number of factors, including: (1) the Defendants' regulatory or other decisionmaking authority over the targeted entities, (2) whether the government actors actually exercised regulatory authority over targeted entities, (3) whether the language of the allegedly threatening statements could reasonably be perceived as a threat, and (4) whether any of the targeted entities reacted in a manner evincing the perception of an implicit threat. When Defendants' statements and alleged conduct is examined in its totality, there are sufficient allegations to state plausible freedom-of-speech claims. [DFS Superintendent Maria] Vullo and DFS clearly have regulatory authority over the targeted entities. Supt. Vullo is charged by the New York Financial Services Law with taking all actions that she "believes necessary to … ensure the continued solvency, safety, soundness and prudent conduct of the providers of financial products and services" in the State of New York to "encourage high standards of honesty, transparency, fair business practices and public responsibility." "Reputational risk – the risk that negative publicity regarding an institution's business practices will lead to a loss of revenue or litigation – is just one of the threats to a bank or insurer's safety and soundness on which the Superintendent has previously issued guidance." While it is within Supt. Vullo's province to issue the Guidance Letters, she also has the authority to initiate investigations and civil enforcement actions against regulated entities, as well as the power to refer matters to the attorney general for criminal enforcement. The authority to institute enforcement proceedings is one factor supporting a plausible contention that the Guidance Letters are part of an attempt to convey implied threats of coercive action against regulated entities doing business with the NRA. Further, the government actor need not have direct power to take adverse action over a targeted entity for comments to constitute a threat, provided the government actor has the power to direct or encourage others to take such action. Based on Gov. Cuomo's press release wherein he indicates he is directing DFS to issue the Guidance Letters, it is a reasonable inference that he has the power to direct DFS take other official action, including the commencement of enforcement investigations against regulated institutions. Thus, there is a reasonable basis to conclude that he has the power to effectuate regulatory action against entities doing business with the NRA. DFS actually exercised regulatory authority over Chubb and Lockton, two regulated entities that fall within the same scope of DFS's authority as the entities addressed in the Guidance Letters and Cuomo Press Release. But this fact, by itself, does not help Plaintiff's claims because Chubb and Lockton admitted violations of New York insurance laws. There are also no allegations that DFS exercised regulatory authority over entities other than Chubb and Lockton. Nevertheless, the Amended Complaint asserts that, during the course of the DFS investigations into Chubb and Lockton, "DFS communicated to banks and insurers … that they would face regulatory action if they failed to terminate their relationships with the NRA, … indicating that any business relationship whatsoever with the NRA would invite adverse action." This is a powerful factual allegation linking the recommendations in the Guidance Letters and Cuomo Press Release that regulated entities consider (and possibly end) their associations with the NRA, and the enforcement actions carried out by DFS against Chubb and Lockton. At this stage of the litigation, the Court must accept this factual allegation as true. Further, the NRA notes that the Chubb and Lockton Consent Orders, which imposed several million dollars in monetary penalties and permanently prohibited those entities from participating in any NRA-endorsed insurance program in New York State, were announced just two weeks after the Cuomo Press Release and Guidance Letters were issued. Viewing the allegations in the light most favorable to the NRA, and drawing reasonable inferences in its favor, the temporal proximity between the Cuomo Press Release, the Guidance Letters, and the Consent Orders plausibly suggests that the timing was intended to reinforce the message that insurers and financial institutions that do not sever ties with the NRA will be subject to retaliatory action by the state. The backroom exhortations combined with the timing of the publically announced Consent Orders provides strong support for Plaintiff's claims. The Court must also assess whether the language of the Cuomo Press Release and the Guidance Letters could reasonably be perceived as a threat. In the Cuomo Press Release, insurance companies and financial institutions are "urged" to "consider reputational risk that may arise from their dealings with the NRA or similar gun promotion organizations," "take prompt actions to manag[e] these risks," and "join the companies that have already discontinued their arrangements with the NRA." The Guidance Letters contain similar language, "encourag[ing] regulated institutions to review any relationships they have with the NRA or similar gun promotion organizations, and to take prompt actions to managing these risks and promote public health and safety." While neither the Guidance Letters nor the Cuomo Press Release specifically directs or even requests that insurance companies and financial institutions sever ties with the NRA, a plausible inference exists that a veiled threat is being conveyed. Viewed in the light most favorable to the NRA, and given DFS's mandate—"effective state regulation of the insurance industry" and the "elimination of fraud, criminal abuse and unethical conduct by, and with respect to, banking, insurance and other financial services institutions"—the Cuomo Press Release and the Guidance Letters, when read objectively and in the context of DFS's regulatory enforcement actions against Chubb and Lockton and the backroom exhortations, could reasonably be interpreted as threats of retaliatory enforcement against regulated institutions that do not sever ties with the NRA. Finally, targeted entities' reactions to the perception of an implicit threat is a factor the Court should consider. Defendants argue that no individual company was singled out or coerced as a result of Defendants' public statements, but such specific targeting is not required in order to make out a First Amendment claim in these circumstances. The Amended Complaint includes numerous allegations regarding the perception of a threat by New York insurers and financial institutions, and its impact on the NRA's ability to procure insurance and banking services from target entities. [Footnote: The NRA alleges that: during DFS's investigation into Lockton, Lockton's chair "confided [to the NRA] that Lockton would need to 'drop' the NRA—entirely—for fear of 'losing [our] license' to do business in New York"; a week after the Chubb and Lockton consent decrees were entered, Lloyd's of London "announced … that it would 'terminate all insurance offered, marketed, endorsed, or otherwise made available' through the NRA in light of the DFS Investigation"; the NRA's corporate insurance carrier "severed mutually beneficial business arrangements with the NRA because it learned of Defendants' threats directed at Lockton, and feared it would be subject to similar reprisals"; the "NRA has encountered serious difficulties obtaining [replacement] corporate insurance coverage" because "nearly every carrier has indicated that it fears transacting with the NRA specifically in light of DFS's actions against Lockton and Chubb"; "[m]ultiple banks withdrew their bids in the NRA's RFP process following the issuance of the April 2018 Letters, based on concerns that any involvement with the NRA—even providing the organization with basic depository services—would expose them to regulatory reprisals"; and "one community banker from Upstate New York told American Banker magazine that in light of the apparent 'politically motivated' nature of the DFS guidance, '[i]t's hard to know what the rules are' or whom to do business with, because bankers must attempt to anticipate 'who is going to come into disfavor with the New York State DFS' or other regulators."] These allegations sufficiently support the contention that New York insurers and financial institutions took specific actions in response to their perceptions of a threat. The allegations in the Amended Complaint are sufficient to create a plausible inference that the Guidance Letters and Cuomo Press Release, when read together and in the context of the alleged backroom exhortations and the public announcements of the Consent Orders, constituted implicit threats of adverse action against financial institutions and insurers that did not disassociate from the NRA. Contrary to Defendants' argument, actual chilled speech is not necessary to make out a plausible First Amendment claim. "Chilled speech is not the sine qua non of a First Amendment claim. A plaintiff has standing if he can show either that his speech has been adversely affected by the government retaliation or that he has suffered some other concrete harm. Various non-speech harms are sufficient to give a plaintiff standing." The NRA's allegations of significant interference with its business relationships and the damages caused by Defendants' actions are sufficient to establish a First Amendment injury…. The Amended Complaint contains sufficient allegations plausibly supporting the conclusion that Defendants' actions were taken in an effort to suppress the NRA's gun promotion advocacy. Moreover, the NRA's allegations that Defendants' enforcement actions against Lockton and Chubb impeded the NRA's ability to enter contracts for lawful affinity insurance plans, but did not take similar action against other membership organizations that did not engage in gun promotion advocacy, provides a plausible basis to conclude that Defendants sought to impose a content-based restriction on NRA-affiliated businesses based on viewpoint animus that serves no substantial government interest. In the end, the allegations of direct and implied threats to insurers and financial institutions because of these entities' links with the NRA, and the allegations of resulting harm to the NRA's operations, are sufficient to make out plausible First Amendment freedom-of-speech claims. While the NRA may not be able to establish the factual predicates for these claims, it has presented sufficient allegations to allow them to go forward….
Here are the details on some of the New York officials' actions, as reported by the court:
[a.] Cuomo Press Release On April 19, 2018, Gov. Cuomo issued a press release indicating that he was directing DFS to communicate with insurance companies and financial institutions licensed or doing business in New York and urge them to review their relationships with the NRA and similar gun promotion organizations, and consider whether such relationships "harm their corporate reputations and jeopardize public safety." Gov. Cuomo is quoted as stating: "New York may have the strongest gun laws in the country, but we must push further to ensure that gun safety is a top priority for every individual, company, and organization that does business across the state. 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 who often look to them for guidance and support. This is not just a matter of reputation, it is a matter of public safety, and working together, we can put an end to gun violence in New York once and for all." The press release states that "DFS is encouraging regulated entities to consider reputational risk and promote corporate responsibility in an effort to encourage strong markets and protect consumers." Then, following a statement that "[a] number of businesses have ended relationships with the NRA following the Parkland, Florida school shooting in order to realign their company's values," [DFS Superintendent Maria] Vullo is quoted as stating: "Corporations are demonstrating that business can lead the way and bring about the kind of positive social change needed to minimize the chance that we will witness more of these senseless tragedies. 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 these risks and promote public health and safety." [b.] Guidance Letters Also on April 19, 2018, Supt. Vullo issued "Guidance[s] on Risk Management Relating to the NRA and Similar Gun Promotion Organizations" ("Guidance Letters"), which encouraged financial institutions and insurance companies to consider their relationships with the NRA. The Guidance Letter to all insurers doing business in New York is prefaced with reference to gun violence tragedies occurring at Marjory Stoneman Douglas High School, Columbine High School, Sandy Hook, Pulse night club, and the Las Vegas music festival, and indicates that there is a social backlash against the NRA and similar organizations "that promote guns that lead to senseless violence" and that "[o]ur insurers are, and have been, vital to the communities they serve for generations and are guided by their commitment to corporate social responsibility, including public safety and health." This Guidance Letter further indicates: "Insurers' engagement in communities they serve is closely tied to the business they do with their clients and customers and its impact on such communities. Often insurers report to their stakeholders that their performance is based on both their strategic business vision as well as on a commitment to society as a whole. There is a fair amount of precedent in the business world where firms have implemented measures in areas such as the environment, caring for the sick, and civil rights in fulfilling their corporate social responsibility. The recent actions of a number of financial institutions that severed their ties with the NRA after the AR-15 style rifle killed 17 people in the school in Parkland, Florida is an example of such a precedent. "The tragic devastation caused by gun violence that we have regrettably been increasingly witnessing is a public safety and health issue that should no longer be tolerated by the public and there will undoubtedly be increasing public backlash against the NRA and like organizations. "Our insurers are key players in maintaining and improving public health and safety in the communities they serve. They are also in the business of managing risks, including their own reputational risks, by making risk management decisions on a regular basis regarding if and how they will do business with certain sectors or entities. In light of the above, and subject to compliance with applicable laws, the Department encourages its insurers 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 Department encourages regulated institutions to review any relationships they have with the NRA or similar gun promotion organizations, and to take prompt actions to managing these risks and promote public health and safety." The Guidance Letter to the chief executive officers of all New York state chartered or licensed financial institutions contains nearly identical language. [c.] Gov. Cuomo's Tweet On April 20, 2018, Gov. Cuomo publicly 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." [d.] Consent Orders In early May 2018, DFS entered consent orders with Chubb and Lockton related to its investigation …. In the Consent Orders, Lockton and Chubb admitted to various violations of the New York Insurance Law. Lockton agreed to, [among other things], pay a monetary fine of $7,000,000; take specific actions to remedy ongoing violations of the New York Insurance Law; not participate in the future in any Carry Guard or similar programs that violate the New York Insurance Law; and not "enter into any agreement or program with the NRA to underwrite or participate in any affinity-type insurance program involving any line of insurance to be issued or delivered in New York State or to anyone known to Lockton to be a New York State resident." The Lockton Consent Order expressly allowed Lockton to assist the NRA in procuring insurance for the NRA's own corporate operations. [The Chubb order was similar, but imposed a fine of $1,300,000, and apparently barred Chubb from working with NRA to provide insurance policies anywhere, not just in New York.-EV] … Shortly after the Consent Orders were made public, Lloyd's announced that it would terminate all affinity insurance programs associated with the NRA, citing the DFS investigations. The NRA alleges that it also encountered "serious difficulties" replacing its corporate insurance carrier, and that "nearly every" potential replacement carrier "has indicated that it fears transacting with the NRA specifically in light of DFS's actions against Lockton and Chubb." The NRA further alleges that following the Guidance Letters, "multiple banks" withdrew their bids in the NRA's Request for Proposal ("RFP") process7 "based on concerns that any involvement with the NRA … would expose them to regulatory reprisals." Plaintiff contends: "Defendants' campaign is achieving its intended chilling effect on banks throughout DFS's jurisdiction. Speaking 'on the condition of anonymity,' one community banker from Upstate New York told American Banker magazine that in light of the apparent 'politically motivated' nature of the DFS guidance, '[i]t's hard to know what the rules are' or whom to do business with, because bankers must attempt to anticipate 'who is going to come into disfavor with the New York State DFS' or other regulators. Other industry sources told American Banker that, 'such regulatory guidelines are frustratingly vague, and can effectively compel institutions to cease catering to legal businesses.'" …
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