Last month a court struck down Los Angeles’s ordinance intended to discourage city contractors from dealing with the National Rifle Association (NRA), ruling it a First Amendment violation intended to chill speech and association. An amusing feature: the bill’s sponsor just couldn’t help grandstanding on Twitter and elsewhere about taking down the NRA, which provided the court with valuable evidence of the city’s intent. Moreover, the gun rights group has been making headway against similar efforts in San Francisco and New York state (led there by Gov. Andrew Cuomo) to target its pocketbook. I explain in a new piece at National Review.
“A better reason to reject the governor’s proposal is that the constitutional guarantee of a free press extends to all people. Professional journalists don’t deserve special treatment, and no self-respecting one wants it.” [David Andreatta, Rochester Democrat & Chronicle]
A federal judge has ruled the National Rifle Association can proceed with its First Amendment suit against New York Gov. Andrew Cuomo over his pressure on regulated banks, insurers to cut ties with gun rights advocacy groups like the NRA. “U.S. District Judge Thomas McAvoy questioned Cuomo’s claim that his messages about the wisdom and propriety of providing financial services to the NRA amount to nothing but legitimate regulatory oversight and protected government speech.” [Jacob Sullum and background, Eugene Volokh] “It is well-established under binding federal appeals court decisions that government officials like Cuomo are not allowed to pressure organizations or businesses to cut off services to someone because of their political stances or expression — even when the government official uses informal pressure as opposed to explicit threats. (See, e.g., Rattner v. Netburn, 930 F.2d 204 (2d Cir. 1991)).” [Hans Bader] Earlier here, here and here (ACLU files amicus brief defending NRA’s rights), etc.
I’ve been critical of the ACLU lately but its amicus-brief defense of the NRA’s First Amendment rights against New York Gov. Andrew Cuomo’s strong-arm use of insurance and bank regulation is vital, timely, and right:
Public officials are, of course, free to criticize groups with which they disagree. But they cannot use their regulatory authority to penalize advocacy groups by threatening companies that do business with those groups. And here the state has admitted, in its own words, that it focused on the NRA and other groups not because of any illegal conduct, but because they engage in “gun promotion” — in other words, because they advocate a lawful activity.
Substitute Planned Parenthood or the Communist Party for the NRA, and the point is clear. If Cuomo can do this to the NRA, then conservative governors could have their financial regulators threaten banks and financial institutions that do business with any other group whose political views the governor opposes. The First Amendment bars state officials from using their regulatory power to penalize groups merely because they promote disapproved ideas.
As we mentioned in a brief earlier item, New York Gov. Andrew Cuomo has “directed the Department of Financial Services to urge insurance companies, New York State-chartered banks, and other financial services companies licensed in New York to review any relationships they may have with the National Rifle Association and other similar organizations. Upon this review, the companies are encouraged to consider whether such ties harm their corporate reputations and jeopardize public safety.” [Cuomo press release] Maria T. Vullo, Superintendent of Financial Services for the state of New York, issued a guidance memorandum. In language not altogether typical of safety-and-soundness financial regulation, Vullo wrote:
While the social backlash against the National Rifle Association (the “NRA”) and similar organizations that promote guns that lead to senseless violence has in the past been strong, the nature and the intensity of the voices now speaking out, including the voices of the passionate, courageous, and articulate young people who have experienced this recent horror first hand, is a strong reminder that such voices can no longer be ignored and that society, as a whole, has a responsibility to act and is no longer willing to stand by and wait and witness more tragedies caused by gun violence, but instead is demanding change now.
Brian Knight writes at FinRegRag:
This request could easily be construed is a thinly veiled threat. While the NYDFS statement does not explicitly say that NY FIs (financial institutions) that may face regulatory sanction for failing to cut ties with the NRA, it doesn’t rule out the possibility either. If the NYDFS had no intention of threatening regulatory sanctions, they could clearly have added language taking the threat of enforcement off of the table. They didn’t, which indicates they want NY FIs to think there is a potential the government will come after them if they don’t end their relationships with groups like the NRA.
These instructions to NY FIs could also be seen as an attempt to suppress political speech that some New York policy makers disagree with. Whatever one thinks of the NRA, it is an organization engaged in legal political speech and advocacy. Cutting off the NRA’s access to financial services could change the political debate by reducing opposition to political efforts to tighten gun laws. The NYDFS release says, “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.” Given that the NRA does not make a product that could pose a direct risk to public safety, this release is clearly referencing the NRA’s political advocacy.
Knight compares the initiative to the Operation Choke Point episode, in which federal regulators steered banks away from dealing with various controversial but lawful lines of business, including some that were politically fraught. But in that episode, at least, the target enterprises were primarily engaged in the sale of goods and services and thus might in principle have faced financial risks related by fraud or unfulfillable obligations to customers.
The NYDFS order appears to be inherently about political speech. After all, there is no allegation that the NRA is committing fraud against its members. Rather, the argument is that the NRA’s positions are so dangerous that they are harmful to the community and pose a risk to the reputation of any FI that works with them. This could fairly be seen as an attempt to restrict the NRA’s ability to operate in the political arena and marketplace of ideals.
The guidance memorandum might thus accomplish by indirection what it would be plainly improper for the state to attempt directly:
There is no law that says a FI (financial institution) cannot do business with a gun rights group and such a law would almost assuredly be unconstitutional. However if the regulator declares that such an affiliation poses a reputational risk to the FI (that the regulator, not the market, determined existed), it has leverage to force the FI to comply.
The NRA has filed a suit against the governor and New York officials saying the program amounts to “coercion” aimed at depriving the association and its constituents of First Amendment rights. More: Scott Greenfield.
Meanwhile, in other news of regulatory retaliation — see also our tag on that — U.S. President Donald Trump reportedly urged the U.S. Postal Service to double its rates for handling packages shipped by Amazon.com, linked in his mind through founder Jeff Bezos with his journalistic nemesis the Washington Post. Postmaster General Megan Brennan is said to have “resisted Trump’s suggestion in private conversations in 2017 and 2018, telling him that package delivery rates are set by contract and reviewed by an independent commission” and that the Postal Service does not get a bad deal from its arrangements with Amazon and other e-commerce firms. [Reuters]
- Using regulation to stomp political adversaries endangers rule of law: Gov. Cuomo directs New York financial regulators to pressure banks, insurers to break ties with National Rifle Association (NRA) [J.D. Tuccille, Reason]
- My opinion piece on New Jersey governor’s scheme for a state bank has now escaped its WSJ paywall; WSJ readers respond [letters] And Sen. Kirsten Gillibrand [D-N.Y.] has now introduced a plan to get the federal government into retail banking via the post office [Daniel Marans, Huffington Post, quoting Gillibrand’s interesting claim that “Literally the only person who is going to be against this is somebody who wants to protect payday lender profits.”] More: Nick Zaiac on postal banking;
- “From Kelo to Starr: Not Merely an Unlawful Taking but an Illegal Exaction” [Philip Hamburger on federal government’s acquisition of a dominant equity stake in AIG]
- Court’s opinion on consumer debt contract formed in New York specifying Delaware law undermines “valid-when-made” doctrine that promotes liquidity of secondary debt market [Diego Zuluaga, Cato]
- “Some blockchains, as currently designed, are incompatible with” the European Union’s General Data Protection Regulation [Olga Kharif, Bloomberg via Tyler Cowen]
- And if you’re interested in the legal constraints holding back the extension of banking services to the cannabis industry, tune in to a Cato conference on that subject May 10.
- U.S. Department of Education and Title IX: “The Office for Civil Rights Is Still Out of Control” [KC Johnson]
- Mobility penalty: “The residency requirement in Cuomo’s free tuition plan makes a bad idea worse” [Beth Akers]
- Loyalty oaths? Many colleges now require diversity statements for hiring and promotion [George Leef] Public college expels nursing student for breach of professional ethics code that includes ideological commitments, Supreme Court should review [Ilya Shapiro and David McDonald/Cato, Eugene Volokh on petition for certiorari in Keefe v. Adams]
- Maryland lawmakers move to bar colleges from asking applicants about criminal records [WYPR; Michael Dresser, Baltimore Sun]
- “Colleges and the First Amendment” [video, Federalist Society panel with Michael McConnell, Philip Hamburger, et al.] Eugene Volokh presentation on free speech on campus Reason video, etc.
- “Torch the miscreant, resanctify the community.” Laura Kipnis attends a Title IX trial [Chronicle of Higher Education, (from her forthcoming book); more at Reason]
- SEC in-house administrative law judges are unconstitutional, rules 10th Circuit, creating circuit split [ABA Journal, Jonathan Adler]
- “Dear Sen. Warren: If we care to share our policy views, we’ll let you know. Otherwise MYOB. Signed – 33 firms” [Elizabeth Warren letter demanding to know what financial firms think of delay in Labor Department fiduciary rule, coverage WSJ/MarketWatch]
- New York Gov. Andrew Cuomo’s grab for more regulatory power over financial institutions would erode due process protections [New York Post quoting Mark Calabria]
- “Supreme Court Probes Whether Miami Can Sue Banks Over Foreclosure Crisis” [Daniel Fisher, earlier on Bank of America v. Miami here, etc.] Arnold Kling’s prescriptions for getting the government out of the mortgage market;
- Mini-symposium on the personal benefit standard for insider trading in the recent Supreme Court case of Salman v. U.S. [Bainbridge]
- India’s devastating crackdown on cash [Cato Daily Podcast with Jim Dorn and Caleb Brown]
- Forget about event permits unless you hire union? Feds arrest Boston mayor’s tourism aide on extortion charges [Connor Wolf/Daily Caller, Boston Herald, indictment, WCVB (auto-plays)]
- Georgia to feds: franchise law is state law, and you’re not free to tear up its terms to favor unions [International Franchise Association, Connor Wolf/Daily Caller]
- Unique California farm-labor law binds growers to “contracts” they never signed. Is that even constitutional? [Ilya Shapiro, Cato] Upstate farmers furious over Gov. Cuomo’s move to unionize farm labor in New York [City and State]
- NLRB strikes down innocuous handbook provision expecting employees to maintain “positive” workplace environment [Jon Hyman] “Is it time for a new NLRB rule on handbook policies?” [same]
- “Funding Ideology, Not Research, at University of California ‘Labor Institutes'” [Steven Greenhut, Reason]
- NLRB Philadelphia regional director, criticized over role in pro-union fund, suspended for 30 days [Law360, Labor Union Report]