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.
- “California’s Unconstitutional Gender Quotas for Corporate Boards” [Ilya Somin, Stephen Bainbridge, Jerome Woehrle, Ann Althouse]
- Useful tool, or abuse of power? “Leveraging allows regulators to use their gatekeeping authority to secure concessions that they might not be able to achieve otherwise—and to do so quickly and cheaply.” [William Kovacic and David Hyman, Cato Regulation magazine]
- The conflict minerals law fiasco: “between 2010 and 2012, the monthly incidence of battles, looting and violence against civilians strongly increased in the mining areas targeted by Dodd-Frank” [Nik Stoop, Marijke Verpoorten and Peter van der Windt, Washington Post “Monkey Cage”, Dominic Parker, PERC (summarizing two recent studies), my earlier]
- “Return of Bill Lerach: Disbarred attorney consults on case alleging hedge funds mismanaged Kentucky pensions” [ABA Journal]
- “The Politics of Pay: The Unintended Consequences of Regulating Executive Compensation” [Kevin J. Murphy and Michael C. Jensen, Cato Institute Research Briefs in Economic Policy series]
- “Increasingly, our [financial] regulatory structure has been adopting processes that are inconsistent with adherence to the rule of law.” What to do? [Charles Calomiris, Cato Journal]
“It was quite something to hear Republicans sounding like Elizabeth Warren on a trust-busting bender, but it is difficult to take seriously the proposition that what’s at work here is concern about monopoly power, Supreme Court precedents, or anything of the sort: This is about friends and enemies, and Republicans have decided that Silicon Valley is the enemy.” [Kevin Williamson, National Review] “Trump allies propose nationalizing Facebook, Google data” [Jason Tashea, ABA Journal] And see John Hinderaker, PowerLine, on a tape showing Google employees disappointed by the results of the last election (“Break them up under the Sherman Act? Turn them into regulated public utilities, with public employee-level salaries and no stock options? Those are all possibilities.”) Related: Thomas Hazlett, “Making the Fairness Doctrine Great Again,” Reason, March.
Last month we noted that the ACLU had filed a brief on the side of the NRA in its regulatory-retaliation First Amendment suit against New York Gov. Andrew Cuomo. The brief “strikes me as quite sound legally,” writes Eugene Volokh, who quotes and annotates its text. But the action has roused passionate opposition within the organization itself, reports Mark Joseph Stern at Slate. For example, the ACLU’s New York affiliate declined to join the brief and its officials issued a public statement critical of it. Among their arguments: the NRA “has enormous resources and is fully able to present its First Amendment claim.” Others argue that the dispute is at least in part fact-intensive and does not rest entirely on First Amendment issues, since Cuomo had denounced a particular insurance product marketed by the NRA as unlawful — although the governor’s own statements make clear that his call for regulators to squeeze the group’s finances went beyond that, and indeed included a call for them to put the squeeze on groups with advocacy missions similar to the NRA’s. Yet other factions within the ACLU charge that for it to side with the NRA is to advance “white supremacy.” More: Scott Greenfield.
The legal role the ACLU is playing here, it should be noted, is amicus, as distinct from pro bono defense. As Howard Wasserman, writing at PrawfsBlawg, notes:
The resources argument (putting aside whether it has any merit) strikes me as inapposite in this case. The ACLU is not representing the NRA in this case, so any expenditure of ACLU resources does not relieve the NRA of the burden to spend money on its own lawyers to make its own arguments. The benefit of the ACLU’s brief, on which it did expend some of its limited resources, is to the NRA’s legal position, not to its wallet. An argument that the ACLU not only should not represent well-resourced parties* but should not provide amicus support for well-resourced parties seems over-inclusive, tying the merits of a party’s constitutional position to the money in its bank account.
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.
“Dozens of Miami property owners who rent their homes and duplexes to visitors through home-sharing platform Airbnb spent all day at City Hall on Thursday pleading with city officials to buck a legal opinion declaring their business an illegal nuisance. Instead, Miami commissioners reaffirmed that position in a 3-2 vote, threatened to sue Airbnb for promoting clandestine activity, and then told the hosts who placed their names and addresses on the record that they had outed themselves to code compliance.” [Miami Herald, Eric Boehm/Reason]
Here’s a letter to the editor I sent to the Washington Post that they didn’t publish, responding to a piece by their business columnist Steven Pearlstein.
To the editor:
Steven Pearlstein (Dec. 2) writes with apparent approval of the prospect that President Trump will “make an example of a runaway company by sending in the tax auditors or the OSHA inspectors or cancelling a big government contract. It won’t matter that, two years later, these highly publicized retaliations are thrown out by a federal judge somewhere. Most companies …will find a way to conform to the new norm.”
I was reminded of Paul Farhi’s revealing story in the Post last March about Donald Trump’s prolonged, losing libel suit against reporter Timothy O’Brien. Per that report, Trump “said in an interview that he knew he couldn’t win the suit but brought it anyway to make a point. “I spent a couple of bucks on legal fees, and they spent a whole lot more. I did it to make his life miserable, which I’m happy about.”
The knowing use of a flimsy legal case to retaliate or intimidate, to inflict punishments or extract concessions a judge would never have ordered, is no more excusable when aimed at other sorts of businesses and professionals than when aimed at the press and reporters. In both cases it is wrong, it sets a bullying example to others, and it endangers the impartial rule of law.
(cross-posted from Cato at Liberty)
- When government uses regulation to retaliate against someone’s politics, relief shouldn’t depend on whether the harassment would have silenced an ordinary citizen [Ilya Shapiro, Trevor Burrus, and Thomas Berry, Cato]
- More thoughts on the constitutional amendment process [Mike Rappaport, Liberty and Law] To what extent did Antonin Scalia’s thinking on Article V constitutional conventions change over the years? [Josh Blackman on this 1979 AEI roundtable, Paulette Rakestraw and Mead Treadwell/Ricochet] I debated the issue in April in St. Louis [Show-Me Institute] “Conservative groups pushing for a constitutional convention are just six states short of their goal.” [ABA Journal]
- D.C. Circuit panel, Judge Brett Kavanaugh writing, strikes down structure of Consumer Financial Protection Bureau (CFPB) as unconstitutional [Thaya Brook Knight, Ira Stoll back in 2013]
- Sounds like the ACLU’s internal “Civil Liberties Caucus,” as it’s been nicknamed, continues to lose clout within the org [David Meyer Lindenberg, Fault Lines]
- It’s not just Baltimore: unreasonable and unconstitutional police searches are common [Steve Chapman]
- A curious subject of academic wrath: constitutional “extremism” [Scott Greenfield]