T he Supreme Court has heard three cases this term on the vexing free-speech question of how hard government can lean on private businesses either to suppress speech the government dislikes, or to prevent private business from suppressing speech the businesses dislike. The first of those three decisions came today, in National Rifle Ass’n v. Vullo, a lawsuit by the NRA against New York state’s efforts to use state power to “debank” pro-gun-rights groups. It was a unanimous rout in the NRA’s favor, with the Court’s opinion written by Justice Sonia Sotomayor and the two concurring justices (Neil Gorsuch and Ketanji Brown Jackson) joining the opinion and writing only to signal ways in which the Court may be more divided in the cases to come.

Woke Capitalism and Debanking

The backdrop to Vullo is a shift in the culture wars over the past decade that has done much to drive the populist realignment of our politics. Before about 2012 and the rising prominence of gay and transgender issues as central to the culture wars, the conventional wisdom on all sides of our politics was that big corporations tended to be friends of the Right on economic issues, but (with a few right-leaning or left-leaning exceptions) mostly timid about engaging in cultural issues.

That underwent a dramatic about-face during the Obama years and especially during the same-sex-marriage fight, as the cultural Left captured the commanding heights of corporate America and began using that position to bundle cultural wokeness with corporate products and services. A good deal of that transformation was not just voluntary but the result of outside pressure campaigns and pervasive government coercion and influence. This had led, in turn, to a revival of republicanism on the right that sees corporations as entrenched quasi-aristocracies, and to demands to wield government to break or at least stop subsidizing corporate power.

One such effort, involving the laws passed by Florida and Texas to limiting the freedom of Big Tech social-media companies to moderate content on their platforms, is at issue in two cases (Moody v. NetChoice, LLC and NetChoice, LLC v. Paxton) that were argued in late February. Another case, Murthy v. Missouri, argued in mid March, raises the mirror-image issue: Murthy challenges the Biden administration’s pervasive pressure campaign to get the social-media platforms to ban or throttle anti-vaccine speech, including by one of Biden’s current election opponents, Robert F. Kennedy Jr.

Vullo, which was argued the same day as Murthy, involves similar issues, and the NRA relied upon the same precedent, Bantam Books, Inc. v. Sullivan (1963), a William Brennan opinion from back in the days when it was the Court’s liberals who wanted to expand the protections for speech. Bantam Books involved a Rhode Island scheme to shield young people from immoral or indecent books that were nonetheless not obscene within the Court’s definition of obscenity — and thus could not legally be banned by the government. In order to restrict the distribution of such borderline content, Rhode Island leaned on the book distributors as a critical bottleneck in book distribution. A state commission designated objectionable books, and informed the distributor that the list of books had been passed on to law enforcement; this was typically followed by a visit to the distributor by the police. While the commission itself had no coercive power, the Court found that this scheme was highly effective at keeping the distributor in line because of the implicit threat from law enforcement. As Brennan wrote then, the commission argued that it “does not regulate or suppress obscenity but simply exhorts booksellers and advises them of their legal rights,” but in reality:

People do not lightly disregard public officers’ thinly veiled threats to institute criminal proceedings against them if they do not come around. . . . The Commission’s notices, phrased virtually as orders, reasonably understood to be such by the distributor, invariably followed up by police visitations, in fact stopped the circulation of the listed publications. . . . It would be naive to credit the State’s assertion that these blacklists are in the nature of mere legal advice, when they plainly serve as instruments of regulation independent of the laws against obscenity. . . .

Herein lies the vice of the system. The Commission’s operation is a form of effective state regulation super-imposed upon the State’s criminal regulation of obscenity and making such regulation largely unnecessary. In thus obviating the need to employ criminal sanctions, the State has at the same time eliminated the safeguards of the criminal process.

Bantam Books, being a Brennan opinion, didn’t even pretend to be an originalist interpretation of the First Amendment, but the Founders would have recognized in it an expression of practical wisdom about the vast and multifaceted ways in which the royal government of their day could dispense both fear and favor in order to strangle dissenting speech.

What happened in Vullo, according to the NRA’s complaint, was that gun-control advocates decided to use the regulatory leverage that New York state enjoys by virtue of its status as a center of national and world finance, and pressure financial institutions to refuse services to the NRA in order to punish its stance on guns nationwide. (This has continued in New York attorney general Letitia James’s effort, with significant success, to use law-enforcement powers against the NRA’s finances in order to advance the gun-control agenda).

How that worked here is that the NRA offered insurance products to members through insurers regulated by the New York Department of Financial Services (DFS), including Lockton, Chubb, and Lloyd’s of London. One of those policies was Carry Guard, a policy to insure specifically against liability for the misuse of a gun. At first, DFS just acted on a gun-control group’s tip to investigate Carry Guard policies on the grounds that they insured things that were not legally insurable — a legitimate use of insurance-regulatory power. But then, after the Parkland shooting in 2018, things changed:

Major business institutions, including DFS-regulated entities, spoke out against the NRA, and some even cut ties with the organization. . . . On February 25, 2018, Lockton’s chairman placed a distraught telephone call to the NRA, in which he privately shared that Lockton would sever all ties with the NRA to avoid “losing its license” to do business in New York. . . . Lockton publicly announced its decision the next day. Following Lockton’s decision, the NRA’s corporate insurance carrier also severed ties with the organization and refused to renew coverage at any price. The NRA contends that Lockton and the corporate insurance carrier took these steps not because of the Parkland shooting but because they feared reprisal from [DFS superintendent] Vullo. [Quotations and citations omitted.]

The pressure then amped up:

Vullo also began to meet with executives at the insurance companies doing business with the NRA. On February 27, Vullo met with senior executives at Lloyd’s. There, speaking on behalf of DFS and then-Governor Andrew Cuomo, Vullo presented their views on gun control and their desire to leverage their powers to combat the availability of firearms, including specifically by weakening the NRA. . . . She also discussed an array of technical regulatory infractions plaguing the affinity insurance marketplace in New York. . . . Vullo told the Lloyd’s executives that DFS was less interested in pursuing these infractions unrelated to any NRA business so long as Lloyd’s ceased providing insurance to gun groups, especially the NRA. [Quotations and citations omitted.]

The DFS anti-gun campaign was also publicly pressed by Vullo and Cuomo in terms that regulated entities could not mistake:

On April 19, 2018, Vullo issued two virtually identical guidance letters on DFS letterhead entitled, “Guidance on Risk Management Relating to the NRA and Similar Gun Promotion Organizations.” . . . (Guidance Letters). Vullo sent one of the letters to insurance companies and the other to financial services institutions. In the letters, Vullo pointed to the “social backlash” against the NRA and other groups “that promote guns that lead to senseless violence” following “several recent horrific shootings, including in Parkland, Florida.” . . . Vullo then cited recent instances of businesses severing their ties with the NRA as examples of companies “fulfilling their corporate social responsibility.” . . .

In the Guidance Letters’ final paragraph, Vullo “encourage[d]” DFS-regulated entities to: (1) “continue evaluating and managing their risks, including reputational risks, that may arise from their dealings with the NRA or similar gun promotion organizations”; (2) “review any relationships they have with the NRA or similar gun promotion organizations”; and (3) “take prompt actions to manage these risks and promote public health and safety.” . . .

The same day that DFS issued the Guidance Letters, Vullo and Governor Cuomo issued a joint press release that echoed many of the letters’ statements. The press release included a quote from Vullo “urging all insurance companies and banks doing business in New York” to join those “that have already discontinued their arrangements with the NRA.” . . . The press release cited Chubb’s decision to stop underwriting Carry Guard as an example to emulate. The next day, Cuomo 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.” [Quotations and citations omitted.]

Specific to the companies, the NRA alleged that Vullo cut a deal with Lloyd’s to drop potential investigations in exchange for Lloyd’s cooperating with Vullo’s anti-gun-group campaign. It also alleges that Vullo then entered into consent decrees that compelled Lockton and Chubb to drop the NRA as a client for insurance to its members, while Lloyd’s cut ties with the NRA.

Freedom from Indirect Government Pressure

All of this proved too much for even the Court’s liberals. As Sotomayor began: “Vullo was free to criticize the NRA and pursue the conceded violations of New York insurance law. She could not wield her power, however, to threaten enforcement actions against DFS-regulated entities in order to punish or suppress the NRA’s gun-promotion advocacy.” And the facts alleged in the complaint showed that Vullo did precisely that. The Court’s opinion drew a line that should be clear in principle, even as it is not always clear in application:

A government official can share her views freely and criticize particular beliefs, and she can do so forcefully in the hopes of persuading others to follow her lead. In doing so, she can rely on the merits and force of her ideas, the strength of her convictions, and her ability to inspire others. What she cannot do, however, is use the power of the State to punish or suppress disfavored expression.

The Court found that the conduct of Vullo and DFS fell squarely within the rule of Bantam Books that “a government official cannot do indirectly what she is barred from doing directly: A government official cannot coerce a private party to punish or suppress disfavored speech on her behalf.” A First Amendment complaint alleging indirect coercion “must plausibly allege conduct that, viewed in context, could be reasonably understood to convey a threat of adverse government action in order to punish or suppress the plaintiff ’s speech.”

The lower courts (including the Fifth Circuit in Murthy) have applied a four-factor test to decide when such threats cross the line. The Court endorsed that test, which it described as “a useful, though nonexhaustive, guide,” and Gorsuch’s short concurrence focused entirely on the need to avoid applying that test mechanically in ways that ignore the whole formed by the sum of individual parts — foreshadowing what will likely be a major debate in Murthy, where the challengers emphasize the multi-front nature of the pressure placed by the White House, agencies, and Congress on Facebook and its peers. The Court chided the Second Circuit for failing to connect separate dots:

The Second Circuit could only [separate “permissible government speech” from “legitimate enforcement action”] by taking the allegations in isolation and failing to draw reasonable inferences in the NRA’s favor [as required at the pleading stage]. . . . For example, the Second Circuit failed to analyze the Guidance Letters and press release against the backdrop of other allegations in the complaint, including the Lloyd’s meeting…the complaint alleges that Vullo made a not-so-subtle, sanctions-backed threat to Lloyd’s to cut all business ties with the NRA and other gun-promotion groups, although there was no sign that other gun groups also had unlawful insurance policies. [Quotations and citations omitted.]

One important factor is the power of the government officials at issue: “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.” While the Court talked about formal powers, just as important is the scope of discretion and the availability of process-as-punishment, both of which are among the most terrifying weapons of regulators such as the DFS. And in a phrase with particular significance for Murthy, the Court noted the particular danger of private pressure on corporations, noting that the ballot box can restrain some government abuses, but, “Where, as here, a government official makes coercive threats in a private meeting behind closed doors, the ‘ballot box’ is an especially poor check on that official’s authority.”

The Court rejected Vullo’s argument that the First Amendment doesn’t apply when the targeted citizens actually broke the law: Who can’t be found to have broken some law by a motivated regulator or prosecutor? “Although Vullo can pursue violations of state insurance law, she cannot do so in order to punish or suppress the NRA’s protected expression. So, the contention that the NRA and the insurers violated New York law does not excuse Vullo from allegedly employing coercive threats to stifle gun-promotion advocacy.” The Court, however, cautioned: “Nothing in this case gives advocacy groups like the NRA a right to absolute immunity from government investigation or a right to disregard state or federal laws.” [Quotations and citations omitted.]

It also rejected the claim that the business relationships between the insurers and the NRA were not speech: Vullo’s “actions were aimed at punishing or suppressing speech.” The Court endorsed a lower court’s analogy to “killing a person by cutting off his oxygen supply rather than by shooting him”:

So too here. One can reasonably infer from the complaint that Vullo coerced DFS-regulated entities to cut their ties with the NRA in order to stifle the NRA’s gun-promotion advocacy and advance her views on gun control. . . . Vullo knew, after all, that the NRA relied on insurance and financing to disseminate its message. [Quotations and citations omitted.]

Jackson’s concurrence argued that this kind of case — in which the government targeted the speaker indirectly, rather than throttling distribution of the speech itself — should be considered under a distinct framework, perhaps more properly analogized to the Court’s First Amendment retaliation cases.

For all of that, the NRA isn’t entirely in the clear here. The Court left for the Second Circuit on remand to determine whether Vullo was entitled to qualified immunity. And — setting up what may be a major dividing line in Murthy — the Court repeatedly emphasized the lenient test for pleading a case in a complaint, as compared with proving one by evidence. Murthy, unlike Vullo, came to the Court on the basis of a voluminous evidentiary record, the interpretation of which is hotly contested. Stay tuned for that one. But for now, this decision is worthy of celebration as a blow to the government pressure on business to lean in to woke capital and shut out cultural conservatives.