A group of 81 Republican lawmakers is calling on the U.S. Supreme Court to side with the National Rifle Association in a lawsuit alleging the New York Department of Financial Services (DFS) has wrongfully pressured financial institutions to sever ties with the gun rights advocacy group.
Background
The case now before the Supreme Court stems from a 2018 lawsuit brought by the NRA.The NRA contends that New York’s DFS holds sweeping licensing, rulemaking, investigative, and enforcement authority, as well as the ability to initiate civil and criminal investigations and civil enforcement actions that can result in significant monetary penalties for targeted entities under its regulatory jurisdiction.
The NRA initiated the lawsuit after Ms. Vullo and the New York DFS fined a pair of companies—Chubb Ltd. and Lockton Companies LLC—more than $8 million over an NRA-oriented affinity insurance plan and secured a consent decree barring the insurers from participating in future NRA-endorsed programs in New York.
The NRA contends the defects in its affinity insurance programs with Chubb and Lockton were similar to defects in other affinity insurance programs not involving the NRA. The gun rights group alleges the DFS “verbally conveyed to Lockton that it was only interested in pursuing” investigations and fines over the NRA affinity insurance program, and that Lockton could remedy defects in other non-NRA affiliated affinity insurance programs once the consent order concerning the NRA affinity policies was entered and publicized.
Following these fines, one of the NRA’s other longtime insurers—AIG—also cut ties with the NRA over what the gun rights advocates argue was a fear that AIG “would be subject to similar reprisals” as those brought against Chubb and Lockton.
Ms. Vullo also sent a letter to all banks and insurers operating in New York in April 2018, titled “Guidance on Risk Management Relating to the NRA and Similar Gun Promotion Organizations,“ in which she alluded to efforts by business firms severing ties with the NRA as an example of those firms ”fulfilling their corporate social responsibility“ and said the DFS ”encourages“ entities falling under the department’s regulatory scope ”to continue evaluating and managing their risks, including reputational risks, that may arise from their dealings with the NRA or similar gun promotion organizations“ and ”to take prompt actions to managing these risks and promote public health and safety.”
The NRA alleged its business partners felt threatened by Ms. Vullo and the DFS’s comments and actions, and a U.S. district court ruled in 2021 that the NRA could proceed with its First Amendment claims against Ms. Vullo and the DFS.
Republicans Allege ‘State-Sanctioned Assault’
In their brief arguing in favor of the NRA’s case, the 81 Republican lawmakers pushed back on the appeals court’s ruling that Ms. Vullo and the DFS had acted in “good faith.”“Vullo and DFS selectively enforced the Empire State’s insurance laws against NRA vendors, interfering with the organization’s access to mission-critical insurance coverage and basic financial services. This campaign singled out the NRA’s financial relationships on account of the organization’s First Amendment-protected advocacy for gun rights, speech Vullo maligned as ‘promot[ing] guns that lead to senseless violence,’” the Republican legal argument reads. “This was not, as the Second Circuit found below, a ‘good faith’ effort to enforce New York’s insurance laws in an evenhanded way, but rather a state-sanctioned assault on disfavored speech in violation of the First Amendment.”
The Republican lawmakers argued that Ms. Vullo and the DFS “used New York’s insurance laws to project power outside the State’s boundaries.”
The lawmakers argued that Ms. Vullo’s April 18 letter to all banks and insurers doing business within New York made no distinction between entities incorporated within the state and those incorporated in other states but simply doing business within New York. The Republican lawmakers argue that Ms. Vullo’s appeal to the business entities to act in accordance with their “social responsibility” could conflict with laws in other states “where corporate law demands directors prioritize shareholder gains” and where the degree to which corporations can promote non-shareholder interests is subject to debate.
“Vullo’s ‘encouragement’ regarding corporate social responsibility placed at least some regulated entities between the Scylla of not being viewed as a good corporate citizen in the world’s financial capital, and the Charybdis of home-state fiduciary duty obligations,” the Republican legal brief states.
Ms. Vullo also insisted her April 2018 guidance letter to banks and insurers regarding the NRA and other gun rights organizations did not cite any New York laws or direct any specific actions from the regulated business entities and did not threaten punitive action by the DFS if the regulated entities did not sever their ties with gun groups.
