Amicus Curiae Brief — National Rifle Association of America, Petitioner v. Maria T. Vullo

Supreme Court briefFeb 22, 2024

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No. 22-842

In the

Supreme Court of the United States

THE NATIONAL RIFLE ASSOCIATION OF AMERICA,

Petitioner,

MARIA T. VULLO, both individually and

in her former official capacity,

Respondent.

_________________________

On Petition For A Writ of Certiorari To The

United States Court of Appeals For The Second Circuit

BRIEF FOR FORMER EXECUTIVE OFFICERS

OF THE NEW YORK STATE DEPARTMENT OF

FINANCIAL SERVICES AS AMICI CURIAE IN

SUPPORT OF RESPONDENT

DANIEL S. ALTER, ESQ.

ABRAMS FENSTERMAN, LLP

Attorneys for Amici Curiae

81 Main Street, Suite 400

White Plains, New York 10601

(914) 607-7010

dalter@abramslaw.com

FEBRUARY 22, 2024

1908

TABLE OF CONTENTS

Page

IDENTITITES AND INTEREST OF AMICI

CURIAE ................................................................... 1

SUMMARY OF ARGUMENT ................................. 3

ARGUMENT

Any First Amendment test for alleged

informal regulatory coercion should

account for practical considerations,

such as the political and financial

strength of a subject regulated entity .......... 6

II.

Petitioner’s allegations of supposedly

coercive conduct by the Superintendent

should not state a First Amendment

claim for relief ............................................. 13

(a) The DFS industry guidance letters were

not unlawfully coercive ............................... 14

(b) The DFS consent orders do not support a

plausible inference of unlawful coercion .... 21

conversations supposedly had between

the Superintendent and Lloyd’s executives

plausibly caused Lloyd’s to discontinue

business with Petitioner .............................. 23

CONCLUSION ...................................................... 27

iii

TABLE OF AUTHORITIES

Page(s)

Cases:

Ashcroft v. Iqbal,

556 U.S. 662 (2009) ............................ 5, 9, 22, 23

Bantam Books v. Sullivan,

372 U.S. 58 (1963) .......................3, 10, 11, 13, 15

Chrysler Corp. v. Brown,

441 U.S. 281 (1979) .......................................... 15

Connick v. Myers,

461 U.S. 138 (1983) ............................................ 9

Denver Area Educ. Telecomms. Consortium, Inc.

v. FCC,

518 U.S. 727 (1996) .......................................... 10

Evans v. United States,

504 U.S. 255 (1992) ............................................ 7

Hartman v. Moore,

547 U.S. 250 (2006) .......................................... 27

Lozman v. City of Riviera Beach, Fla.,

138 S. Ct. 1945 (2018) ...................................... 26

Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle,

429 U.S. 274 (1977) .......................................... 26

Reichle v. Howards,

566 U.S. 658 (2012) .......................................... 26

Schwartfigure v. Hartnett,

83 N.Y.2d 296 (1994) ........................................ 15

Speiser v. Randall,

357 U.S. 513 (1958) ............................................ 5

Tellabs, Inc. v. Makor Issues & Rights, Ltd.,

551 U.S. 308 (2007) .......................................... 14

Waters v. Churchill,

511 U.S. 661 (1994) .......................................... 10

Other:

Claire A. Hill, Marshalling Reputation to

Minimize Problematic Business Conduct,

99 B. U. L. Rev. 1193 (2019) ............................ 18

Brigham Daniels, When Agencies Go Nuclear:

A Game Theoretic Approach to the Biggest

Sticks in an Agency’s Arsenal,

80 Geo. Wash. L. Rev. 442 (2012) ...................... 8

Geoffrey R. Stone, Sex and the First Amendment:

The Long and Winding History of Obscenity

Law,

17 First Amend. L. Rev. 134 (Fall 2019) ......... 11

Kendra Albert, Imagine a Community: Obscenity’s

History and Moderating Speech Online,

25 Yale J.L. & Tech. 59 (Special Issue 2023) .. 11

Guidance Letters and Consent Orders:

Goldman Sachs, No. 20201021 (N.Y.S. Dep’t Fin.

Servs. Oct. 21, 2020),

https://www.dfs.ny.gov/system/files/

documents/2020/10/ea20201021_goldman

_sachs.pdf ......................................................... 20

Independent Insurance Agents & Brokers of

America, Inc. of New York (a/k/a Big I New

York) to Adrienne Harris, Superintendent,

NYDFS (October 2, 2023), New York’s

Impending Insurance Crisis

https;//biginy.org/newsfeed/SiteAssets/Big%201

%20NY%20Memo%20to%20NYDFS_New%20

York%27s%20Impending%20Insurance%20Cris

is_10.2.23.pdf .................................................... 13

Limited Benefits Health Insurance Policies or

Contracts, Ins. Cir. Let. 14 (2018)

https://www.dfs.ny.gov/industry_guidance/circul

ar_letters/cl2018_13 ......................................... 16

National Rifle Association of America, No. 20200003-C (N.Y.S. Dep’t of Fin. Servs. Nov. 13,

2020) (NRA Consent Order),

https://www.dfs.ny.gov/system/files/

documents/2020/11/ea2020118_co_nra_pdf. ... 21

Preauthorization for Substance Use Disorder

Treatment, Ins. Cir. Let. 13 (2018),

September 19, 2018

https://www.dfs.ny.gov/industry_guidance/circul

ar_letters/cl2018_10 ......................................... 16

IDENTITITES AND INTEREST OF AMICI

CURIAE1

Amici are former executive officers of the New

York State Department of Financial Services (DFS).

They include CELESTE KOELEVELD, ESQ., former

DFS General Counsel; HEATHER MCARN, ESQ.,

former DFS Chief of Staff; MATTHEW L. LEVINE,

ESQ.,

former

DFS

Executive

Deputy

Superintendent for Enforcement; NANCY RUSKIN,

ESQ.,

former

DFS

Executive

Deputy

Superintendent for Financial Frauds & Consumer

Protection; JEAN T. WALSH, ESQ., former DFS

Executive Deputy Superintendent for Banking;

TROY OECHSNER, ESQ. former DFS Acting

Executive Deputy and Deputy Superintendent for

Insurance; MEGAN PRENDERGAST MILLARD, ESQ.,

Former

DFS

Deputy

Superintendent

for

Enforcement; STEPHEN DOODY, ESQ. former DFS

Deputy Superintendent for Insurance, JAMES

REGALBUTO, former DFS Deputy Superintendent

for Insurance; RUTH CORDNER, former DFS Deputy

Superintendent for Banking; ROBERT DONOVAN,

former DFS Deputy Superintendent for Banking &

Capital Markets; and MARK SILVER, ESQ., former

DFS Special Assistant to the Superintendent.

Pursuant to Rule 37, amici affirm that no counsel for

any party authored this brief in whole or in part and that no

individuals other than amici or their counsel contributed

money to fund the brief’s preparation or submission.

Collectively, amici have served DFS and the

people of New York State under multiple

superintendents, supervising the work of the

agency’s insurance, banking, capital markets,

consumer

protection,

investigations

and

enforcement, and legal divisions. They are experts

in departmental operations across the agency’s

regulatory portfolio. And they are well-schooled in

the dynamics of prudential supervision.

Uniquely important here, amici interacted

regularly (if not daily) with numerous financial

service providers licensed by DFS.

They are

intimately familiar with the subtle relationship

between regulators and regulated entities and the

constructive reciprocity often involved in their

dealings. Because it is a collaborative effort, with

important public and private financial interests

always at play and sometimes in tension, the bond

between DFS and its regulated entities must be

flexible within legal boundaries.

As a purely

practical matter, the alternatives are simply not

workable.

Petitioner National Rifle Association of

America (Petitioner) has presented this Court with

a stilted, two-dimensional view of the supervisory

dynamic at play in this case. Amici are deeply

concerned that the Court’s adoption of that view

could result in a First Amendment standard for

“coercion” that would seriously and needlessly

hamstring a regulator’s ability to protect the safety

and soundness of financial institutions. Amici

therefore believe that their first-hand, real-world

experience in overseeing DFS licensees will assist

the Court in deciding this case.

SUMMARY OF ARGUMENT

Invoking this Court’s decision in Bantam

Books v. Sullivan, 372 U.S. 58 (1963), Petitioner

seeks

hold

respondent,

former

DFS

superintendent Maria Vullo (Superintendent),

liable in damages for violating the group’s First

Amendment free speech rights. Petitioner alleges

that the Superintendent tried to retaliate against

the organization for its political advocacy by

“dragooning the private financial entities she

regulated to blacklist the NRA and other gun

promotion groups.” Petitioner’s Brief (Pet. Br.) at

20. Pointing to: (1) two industry guidance letters by

which the Superintendent urged New York State

licensed insurance companies and banks to consider

any business association with Petitioner; (2) consent

orders that DFS entered against state-licensed,

global insurance entities for having conducted

indisputably illegal business with Petitioner; and (3)

instances in which financial service providers

licensed by DFS supposedly ended their business

dealings with Petitioner for fear of governmental

harassment,

Petitioner

argues

that

the

Superintendent coerced New York licensees to “cut

ties with the NRA or else.” Id. at 18.

Or else, what? According to Petitioner, the

Superintendent’s actions carried the implicit threat

of license revocation or multi-million-dollar fines for

regulated entities that did not follow her lead on gun

control. But from a purely practical perspective, the

argument is ludicrous.

Although financial

regulators are generally invested with considerable

authority and discretion, they are institutionally

constrained from pressuring licensees to take

politically or ideologically based actions intended to

affect non-industry related interests.

That

observation is especially accurate when those

licensees are multinational Goliaths in the

insurance and banking sectors.

Petitioner offers this Court a test for

determining whether a government speaker has

crossed the line between permissible persuasion and

unlawful coercion. Under its proposed standard,

government officials exceed that boundary “when

they engage in speech or conduct that a reasonable

recipient would understand as threatening official

retribution.” Pet. Br. at 16 (emphasis added). Amici

are deeply concerned, however, that Petitioner’s

suggested liability trigger is too loose. Not all

recipients are alike, and an indiscriminating

approach to regulated entities that fails to account

for their relative industry positions and strengths

could seriously disrupt the necessary (and rather

ordinary) give and take in a supervisory

relationship.

Doubtless, this case will have a significant

impact on regulatory efficacy because an

unnecessarily lax constitutional claim for coercion

could significantly interfere with the legitimate

missions of numerous government agencies. The

overhanging threat of an implausible yet

nonetheless viable cause of action can only deter

appropriate supervision of financial service

providers. To avoid unwarranted interference with

regulatory oversight, while faithfully protecting free

expression from governmental censorship, this

Court must, once again, use “sensitive tools.”

Speiser v. Randall, 357 U.S. 513, 525 (1958).

Under any effective standard crafted with

those tools, the Second Circuit’s decision below

should be affirmed. Petitioner’s allegations of

coercive conduct are factually unsupported, and

their

legal

arguments

bottom

overt

misrepresentations. Indeed, the extent to which

Petitioner distorts the written record betrays the

implausibility of Petitioner’s narrative. Its attempt

to use a universal and valid business concern to

concoct a so-called heckler’s veto, and thereby

transform ordinary industry guidance letters into

alleged regulatory ransom notes, is belied by the

very documents upon which Petitioner relies. And

once those allegations are properly stripped of their

faux-factual veneer, Petitioner cannot “nudge” its

censorship claim “across the line from conceivable to

plausible.” Ashcroft v. Iqbal, 556 U.S. 662, 683

(2009) (cleaned up). It should fail as a matter of law.

ARGUMENT

Any First Amendment test for alleged

informal regulatory coercion should

account for practical considerations,

such as the political and financial

strength of a subject regulated entity.

Petitioner paints a cartoon image of the

Superintendent as “the ‘sheriff of Wall Street,’

overseeing thousands of banks and companies with

trillions of dollars at stake.” Pet. Br. at, 3, 17. One

can just imagine her with a ten-gallon hat, chaps,

and no six shooters at her sides instilling fear and

awe among the regulated town folk. In Petitioner’s

imagined world, “Vullo’s power as Superintendent of

DFS and the value of continuing to operate in good

standing in the nation’s financial capital . . . gave

[her] outsized influence over the banks and insurers

whom she urged to cut ties with the NRA.” Id.

Evidently, that dubious assumption provides the

framework for Petitioner’s entire censorship claim.

“The more power an official has over those she

addresses,” Petitioner contends, “the more likely

that message will be coercive.” Id. at 28.

Although it tries to fall back on

commonsense, the argument is somewhat naïve. As

Justice Thomas has aptly observed,

[a] particular official, to be sure, may

wield power in such a way as to coerce

unlawful [conduct] even in the absence

of any explicit demand or threat. But

it ignores reality to assert that every

public official, in every context,

automatically exerts coercive influence

on others by virtue of his office.

Evans v. United States, 504 U.S. 255, 290 (1992)

(Thomas, J., dissenting (emphasis in original)). By

way of illustration, Justice Thomas made a nuanced

and critical point that certainly applies to power

dynamics affecting regulatory relationships. “If the

chairman of General Motors meets with a local court

clerk,” he wrote, “whatever implicit coercive

pressures exist will surely not emanate from the

clerk.” Id.

Truth be told, a regulator’s ability to leverage

her authority coercively to achieve an illegitimate

aim, i.e., a goal that is beyond her statutory permit,

is far more difficult than Petitioner supposes. See

Pet. Br. at 38 (arguing “[r]egulated banks and

insurance companies are highly attuned to the

numerous ways that a regulator can make life

difficult if they do not heed the official’s will”).

Admittedly, the superintendent would carry

considerably more sway in meetings with insurance

and banking executives than would a “local court

clerk,” but the fundamental lesson still applies.

Regulatory pressure flows both ways.

As one legal scholar has argued, regulated

entities, especially economically and politically

powerful ones, manage supervisory intimidation

through a policy of “mutually assured destruction” –

much like the policy historically employed by global

superpowers to deter nuclear warfare. See Brigham

Daniels, When Agencies Go Nuclear: A Game

Theoretic Approach to the Biggest Sticks in an

Agency’s Arsenal, 80 Geo. Wash. L. Rev. 442, 499

(2012). In that scenario, licensees facing devasting

threats from regulatory agencies may be unable to

respond with “mutual and identical threats,” but

they have their “own sort of recourse to retaliation.”

Id. The retribution unleashed on an agency by a

threatened regulated entity has included hostile

public relations campaigns, which use aggressive

advertising and lobbying strategies to yield toxic

political fall-out. See id. at 500-504. Aware of those

potential consequences, regulators usually think

twice before pressing the button – and properly so.2

The idea of an inherently coercive interplay between

regulators and the entities they supervise, which Petitioner

adopts as the baseline behavioral dynamic, fails to account for

the equally troubling concept of “regulatory capture.” The

notion of regulatory capture “refers to the tendency for

regulators to take the mindset of an interest group either

because of the influence of the interest group or political

interference.” Therese M. Vaughan, The Economic Crisis and

Lessons from (and for) U.S. Insurance Regulation, Journal of

Insurance Regulation (2009), at 7. Because Petitioner’s onedimensional model of regulatory relations ignores that

counterforce, it is inadequate.

A careful agency must

continually navigate between perceived coercion and capture

All this is to say that a First Amendment

claim for regulatory coercion, such as Petitioner’s,

must at least set forth practical and audiencespecific facts to state an actionable violation. In

other words, those allegations must provide a

factual basis from which a court – “draw[ing] on its

judicial experience and common sense” – can infer

that a particular regulated entity reasonably felt

threatened. Iqbal, 556 U.S. at 679. Contrary to

Petitioner’s argument, the legitimacy of a DFS

superintendent’s

important

and

times

contentious work cannot be judged by reading “tea

leaves.” Pet. Br. at 31. That approach is a fail-safe

recipe for abusive litigation and supervisory

disfunction.

The more tailored analysis that amici suggest

fits comfortably within our First Amendment

tradition. It is “grounded in our long-standing

recognition that the First Amendment’s primary

aim is the full protection of speech upon issues of

public concern, as well as the practical realities

involved in the administration of a government

office.” Connick v. Myers, 461 U.S. 138, 154 (1983).

And in keeping with those goals, the Court has

instructed that legal standards governing speech

must have “the flexibility necessary to allow

government to respond to very serious practical

by managing “a political process whereby political actors seek

to allocate the powers of the state for their own benefit.”

Kenneth J. Meir, The Politics of Insurance Regulation, 58

Journal of Risk and Insurance 700, 700 (1991).

problems without sacrificing the free exchange of

ideas the First Amendment is designed to protect.”

Denver Area Educ. Telecomms. Consortium, Inc. v.

FCC, 518 U.S. 727, 740 (1996) (plurality).

Each day, the DFS superintendent must

grapple with the rough and tumble of the New York

financial markets.

She supervises numerous

muscular, mega-licensees in the financial services

sector – such as Chubb, Lloyd’s of London, AIG,

MetLife, and Lockton – whose driving profit motive

is antithetical to the reflexive regulatory

capitulation that Petitioner ascribes to those firms.

She also supervises more modest industry

participants that are often less assertive than the

larger firms. Those are practical distinctions with

practical consequences that – within perfectly legal

bounds – shape regulatory relationships.

Keeping such key differences in mind, a

superintendent must have latitude to interact with

each regulated entity, in context, “without fear that

these differences will lead to liability.” Waters v.

Churchill, 511 U.S. 661, 677 (1994) (plurality). Her

effectiveness as a law-abiding regulator depends on

it. If, instead, a third party could too easily

challenge administrative consent orders as

unconstitutionally coercive because they supposedly

target the third party’s unrelated political views, no

regulator could do her job.

A suitably pragmatic standard for this case is

rooted in Bantam Books, itself. There, the Court

concluded that notices issued by a state morals

commission to a large book distributor warning

against the latter’s dissemination of claimed

indecent materials (followed by police spot checks on

the distributor’s response) “was reasonably

understood . . . by the distributor” to be a “thinly

veiled threat[]” of criminal prosecution. 372 U.S. at

68 (emphasis added). Notably, the distributor was

“sophisticated” and a “substantial business

concern[].” Id. at 79 & n.3 (Harlan, J., dissenting).

And, thus, this Court’s inquiry fundamentally

turned on the distributor’s relative susceptibility to

the commission’s not-so-subtle intimidation.

The facts in Bantam Books were clear and

unequivocal. The commission’s actions were plainly

coercive, even to “sophisticated” and “substantial

business concerns,” Bantam Books, 372 U.S. at 79 &

n.3

(Harlan,

J.,

dissenting),

and

the

contemporaneous history wholly supports that

conclusion, see id. at 67 n.8 (listing numerous cases

nationwide involving “[t]hreats of prosecution or

license revocation, or listings or notifications of

supposedly obscene or objectionable publications or

motion pictures, on the part of chiefs of police or

prosecutors”). In the 1950s, “any depiction of sex in

books, movies, or magazines was tightly

constrained.” Geoffrey R. Stone, Sex and the First

Amendment: The Long and Winding History of

Obscenity Law, 17 First Amend. L. Rev. 134, 143

(Fall 2019); see also Kendra Albert, Imagine a

Community: Obscenity’s History and Moderating

Speech Online, 25 Yale J.L. & Tech. 59, 62 (Special

Issue 2023) (“In the 1950s, state level censorship

varied wildly, with a film censored in Kansas for its

inclusion of language like the word ‘virgin.’”).

Consequently, even seasoned publishers had every

reason to take the commission’s aggressive demands

very seriously.

Today, global insurers and their brokers are

not so skittish. In addition to having tremendous

resources with which to push back against an

overreaching regulator,3 those companies are secure

in knowing that, except in situations involving the

most serious violations of law and/or substantial

danger to public welfare, it would be wildly

irresponsible for a DFS superintendent to revoke

their New York business licenses. And even in those

extreme circumstances, a superintendent can only

For example, in 2023, Lockton – one of the world’s

largest insurance brokers – reported more than $3B in

revenue, see Lockton Companies, available at https://global.

lockton.com/us/en/news-insights/private-owners hip-long-term

startegy-drivesdouble-digit-growth-for-lockton, and insurer

Chubb Ltd. reported more than $225B in assets and $57.5B in

gross premiums. See Chubb Insurance, available at http:// abo

ut.chubb.com/#:⁓:text=Chubb%20has%2 0more%20%than %2

0%24225,A%2B%2B%20from%20A.M.%20Best.

In 2022,

Lloyds of London reported assets exceeding $50B and $59B in

gross premiums, see Lloyd’s of London 2022 Annual Report,

available at https://www.lloyds.com/ about_lloyds/investorrelations/financial-performance/ financi al-results/full-yearresults-2022, and MetLife Inc. and American International

Group, Inc. reported assets exceeding $600B and $500B,

respectively, see Reinsurance News, available at https://www.r

einsurancene.ws/worlds-largest-insurance-companies/.

revoke a license or impose large fines if a licensee

has violated a specific law and has received a due

process hearing. Moreover, prevailing industry

conditions are reportedly such that “[t]he exit of one

or even multiple national carriers with a large book

of business [in New York] would be highly

disruptive, and there is a serious question if

business could be absorbed by other carriers in the

market.”4 With that procedural and practical

knowledge squarely in mind, any reasonable DFS

licensee

would

have

understood

the

Superintendent’s claimed conduct here as far less

troubling than the conclusion drawn by the

distributor in Bantam Books.

II.

Petitioner’s allegations of supposedly

coercive

conduct

the

Superintendent should not state a

First Amendment claim for relief.

Relying on: (1) two industry guidance letters

(one to DFS regulated insurance entities and the

other to DFS regulated banking entities) that urged

licensees to evaluate their business associations

with Petitioner after the Marjorie Stone Douglas

Highschool shootings in Parkland, Florida; (2)

Memorandum from Independent Insurance Agents &

Brokers of America, Inc. of New York (a/k/a Big I New York) to

Adrienne Harris, Superintendent, NYDFS (October 2, 2023),

New York’s Impending Insurance Crisis, available at:

https;//biginy.org/newsfeed/SiteAssets/Big%201%20NY%20M

emo%20to%20NYDFS_New%20York%27s%20Impending%20

Insurance% 20Crisis_10.2.23.pdf.

statements that the Superintendent allegedly made

to Lloyd’s executives regarding her views on gun

control and her antipathy for the “pro-gun” lobby;

and (3) consent orders that DFS entered into with

Lockton, Chubb, and Lloyd’s in which those

companies were fined for serious violations of New

York insurance law, Petitioner mounted a First

Amendment censorship-by-coercion attack against

the Superintendent. See Pet. Br. at 32-35. But as

the Second Circuit held, the Superintendent’s

alleged actions were not coercive to a reasonable,

industry-leading insurance broker or underwriter.

Pet. App. at 5. In reviewing that conclusion, this

Court “must consider the complaint in its entirety,

as well as other sources courts examine when ruling

on Rule 12(b)(6) motions to dismiss, in particular

documents incorporated into the complaint by

reference, and matters of which a court may take

judicial notice.” Tellabs, Inc. v. Makor Issues &

Rights, Ltd., 551 U.S. 308, 322 (2007). Those

informational sources clearly show that Petitioner’s

allegations of coercion are fatally implausible.

(a)The DFS industry guidance letters

were not unlawfully coercive.

On April 19, 2017, in the wake of the Marjorie

Stone

Douglas

Highschool

massacre,

the

Superintendent issued guidance letters to DFSregulated insurance and banking entities

“encourage[ing] its [regulated entities] to continue

evaluating and managing their risks, including

reputational risks, that may arise from their

dealings with the NRA or similar gun promotion

organizations.” Pet. App. 248, 251. The guidance

letters further “encourage[d] regulated institutions

to review any relationships they have with the NRA

or similar gun promotion organizations, and take

prompt actions to manag[e] these risks and promote

public health and safety.” Id. The Second Circuit

correctly concluded that the agency’s statements

“cannot reasonably be construed as being

threatening or coercive[,]” as they were “written in

an even-handed, nonthreatening tone and employed

words intended to persuade rather than intimidate.”

Pet. App. at 27, 29. They contained no prescriptive

directives, no mention of legal obligations, and no

suggestion of adverse consequences. They are

nothing like the in terrorem notices involved in

Bantam Books. See 372 U.S. at 62 n.5.

Equally important, and directly contrary to

Petitioner’s misleading suggestion, those guidance

letters provide no legal basis for a DFS regulatory

enforcement action against any licensee. See Pet.

Br. at 30 (suggesting that licensee’s disregard of

guidance letter could result in “a range of punitive

measures, including direct enforcement actions, the

appointment of third-party monitors, millions of

dollars in fines, and criminal referrals”). They do

not even purport to embody an enforceable “rule”

under New York State administrative law, much

less qualify as one. See Schwartfigure v. Hartnett,

83 N.Y.2d 296, 301-02 (1994); accord Chrysler Corp.

v. Brown, 441 U.S. 281, 301-02 (1979) (discussing

APA requirements for administrative action to have

force and effect of law). Any sophisticated financial

services provider knows that DFS guidance letters

cannot give rise to enforcement actions.5

DFS guidance letters regularly and expressly state

that agency enforcement action is predicated on distinct

violations of statutes or regulations. Any industry warning to

obey governing law “or else” is unambiguous. See, e.g.,

Regulation of Association Health Plans, Ins. Cir. Let. No. 10

(2018), July 27, 2018 (“The AHP Rule does not preempt, in

whole or in part, New York law or DFS’s regulation of health

insurance. DFS will continue to enforce State requirements

vigorously and to the fullest extent of State law to protect the

integrity of New York’s health insurance markets and the

consumer protections of New York law. DFS is prepared to

undertake all additional enforcement actions necessary to

protect New Yorkers from the AHP Rule.”), available at

https://www.dfs.ny.gov/industry_guidance/circular_letters /cl

2018_10; Preauthorization for Substance Use Disorder

Treatment, Ins. Cir. Let. 13 (2018), September 19, 2018

(“Additionally, the Department will monitor compliance with

all SUD treatment coverage requirements, including during

market conduct exams. The Department will take action

against an issuer for any failure to adhere to all statutory and

regulatory requirements for SUD treatment coverage.”),

available at https://www.dfs.ny.gov/industry_guidance /circula

r_letters/cl2018_13; Limited Benefits Health Insurance

Policies or Contracts, Ins. Cir. Let. 14 (2018) (“The Department

will continue to fully enforce State requirements vigorously to

ensure that limited benefits health insurance policies or

contracts are not offered within New York unless they comply

with all statutory and regulatory requirements for

comprehensive health insurance coverage. If an issuer has

issued such a policy or contract in violation of New York law,

the Department expects the issuer to provide coverage in

accordance

with

New

York

law.”),

available

https://www.dfs.ny.gov/industry_guidance/circular_letters/cl2

018_14.

Petitioner tries to compensate for that

inconvenient truth by making bald and wildly

untrue assertions. Restating the Superintendent’s

reference to “reputational risk” over and over like

some kind of sorcerer’s incantation, Petitioner

summons a “heckler’s veto” out of thin air. Pet. Br.

at 19. Petitioner then insists, repeatedly, that DFSregulated “[f]irms are obligated to consider

‘reputational risk,’ and failure to do so adequately

can and has resulted in multi-million-dollar fines.”

Id. at 18 (emphasis added); see also id. at 33

(“reference to ‘reputational risk,’ in particular,

would not be lost on recipients, since failure to

consider such risk can lead to multi-million-dollar

fines”); 40 (“Guidance Letters’ invocation of banks

and insurers’ legal obligation to consider

‘reputational risk’ did constitute a distinct threat, as

failure to adequately manage reputational risk can

lead to massive fines” (emphasis in original)). Based

on that premise, Petitioner argues that, if tolerated,

the agency’s concern for “‘reputational risk’ would

give government regulator’s free reign to selectively

target unpopular speech, effectively letting

regulators invoke a heckler’s veto over any

viewpoint controversial enough to generate ‘public

backlash.’” Id. at 43.6

To be sure, ‘reputational risk is neither an alien nor

disabling concept to the insurance industry. It has become a

quantifiable source of revenue. “Reputational risk insurance,

a burgeoning field, does precisely that: insurers and companies

agree on a price at which the insurer is willing to sell, and the

It is an interesting theory as told, but the

argument is devoid of factual support. Indeed, it is

entirely fabricated. Petitioner finds this supposed

reputational boogie man lurking in only two DFS

consent orders that fined only two banks. Both

those consent orders were issued, however, over a

year after the Superintendent left her position at

DFS. Thus, neither one evidences her decried

heavy-handedness.

Those consent orders also involved egregious

violations of anti-money laundering rules – legal

breaches that contributed to the success of multibillion-dollar frauds and resulted in the banks

providing critical services to international criminal

enterprises. See Pet. Br. 3-4. They were expressly

grounded in specific statutory and regulatory

requirements, which give them teeth. As any DFS

licensee would immediately take note, the

Superintendent’s guidance letters here were

toothless because there are no specific statutory or

regulatory rules regarding regulatory risk.

Nevertheless, Petitioner first describes a

$150 million fine that DFS imposed on Deutsche

Bank as a “penalty . . . for offering financial services

to child trafficker Jeffrey Epstein, citing, inter alia,

the bank’s failure to consider the ‘reputational risk’

company is willing to buy, insurance against reputational

harms.” Claire A. Hill, Marshalling Reputation to Minimize

Problematic Business Conduct, 99 B. U. L. Rev. 1193, 1210-11

(2019).

of such transactions.” Pet. Br. at 3. But, in that

“inter alia,” Petitioner strategically hides some very

critical facts. For example, Petitioner says nothing

about the extremely serious anti-money laundering

violations that Deutsche Bank committed in dealing

with high-risk Lebanese and Estonian banks. Both

those dangerous banking relationships were

included in the $150 million fine, but they were

completely distinct from Deutsche Bank’s Jeffrey

Epstein debacle.7

And regarding the bank’s

Epstein-related violations, the only mention of

reputational risk in the consent order is in reference

to the actions of Deutsche Bank’s own reputational

risk committee.8

DFS was unambiguous about the reason for

taking regulatory action against Deutsche Bank.

The consent order definitively explains that the

bank’s “fundamental failure was that, although [it]

properly classified Mr. Epstein as high-risk, [it]

failed to scrutinize the activity in his accounts for

the kinds of activity that were obviously implicated

by Mr. Epstein’s past.”9 By failing to perform those

See generally Consent Order, Deutsche Bank AG, No.

20200706 (N.Y.S. Dep’t of Fin. Servs. July 6, 2020),

https://www.dfs.ny.gov/system/files/documents/2020/07/ea202

00706_deutsche_bank_consent_order.pdf. (Deutsche Consent

Order).

Deutsche Bank Consent Order, ¶¶ 22-23, 29.

Deutsche Bank Consent Order, ¶ 56.

legally required duties, Deutsche Bank did not

detect the payments used for Epstein’s ongoing child

trafficking. DFS did not cite reputational risk to

justify Deutsche Bank’s fine.

Second, Petitioner similarly invokes a DFS

consent order entered against Goldman Sachs,

Group, Inc. in October 2020, which fined the bank

$150 million “for, among other things, failing to

consider reputational risk from bonds it offered to a

Malaysian company that was paying large bribes to

the then-President of Malaysia.” Pet. Br. at 4

(emphasis added).10 Facts don’t hide any better in

English than they do in Latin. Despite Petitioner’s

spin, DFS actually determined that Goldman Sachs

had failed “to provide adequate due diligence and

committee review services” for multi-billion-dollar

transactions, thereby conducting business “in an

unsafe and unsound manner.”11 The agency also

found that the bank failed to report employee

criminal misconduct.12 DFS made crystal clear that,

although those serious regulatory violations

exposed Goldman Sachs “to undue financial and

Petitioner erroneously states that Goldman Sachs was

fined $54.75 million. The amount of the fine was $150 million.

See Consnet Order at ¶ 32, Goldman Sachs, No. 20201021

(N.Y.S. Dep’t Fin. Servs. Oct. 21, 2020), https://www.dfs.ny.

gov/system/files/documents /2020/10/ea20201021_goldman_sa

chs.pdf. (Goldman Sachs Consent Order).

Goldman Sachs Consent Order, ¶ 30.

Goldman Sachs Consent Order, ¶ 31.

reputational risk,” reputational exposure was not

the actionable harm.

There is no heckler to be found anywhere in

either the Deutsche Bank or Goldman Sachs

consent order. Petitioner thus failed plausibly to

allege that reputational risk has ever served as a

pretext for censorship or would be reasonably

viewed as such by a DFS regulated entity.13

(b) The DFS consent orders do not

support a plausible inference of

unlawful coercion.

It is a fact that Petitioner, Lockton, Chubb,

and Lloyd’s all broke the law. Petitioner was

conducting insurance business in New York without

a license, the type of liability coverage that

Petitioner marketed in conjunction with Lockton,

Chubb, and Lloyd’s was plainly illegal under New

York law, and Lockton violated New York’s rules for

offering insurance coverage in the excess lines

market. Each of those parties (including Petitioner)

admitted their illegal conduct and voluntarily paid

fines. See Pet. App. at 252-320; see also National

Rifle Association of America, No. 2020-0003-C

(N.Y.S. Dep’t of Fin. Servs. Nov. 13, 2020) (NRA

Petitioner essentially concedes that point by changing

tack at the end of its brief and ultimately acknowledging that

the fines imposed on Deutsche Bank and Goldman Sachs by

DFS stemmed directly from their serious violations of banking

law. See Pet. Br. at 44.

Consent Order), https://www.dfs.ny.gov/system/

files/documents/2020/11/ea2020118_co_nra_pdf.

Yet, Petitioner tries unpersuasively to use

those same consent orders as evidence of third-party

coercion.

“Just two weeks after issuing the

Guidance Letters,” Petitioner argues, the

Superintendent “rolled out punitive measures

against two of the NRA’s three principal affinity

insurance providers, Lockton and Chubb[,]” and

then Lloyd’s consent order “followed shortly

thereafter.” Pet. Br. at 35. According to Petitioner,

those

“consent

orders

drove

home

[the

Superintendent’s] capacity to inflict regulatory pain

on institutions that failed to heed her demands.” Id.

(footnote omitted).

That’s an odd twist. Regulated entities

generally see consent orders for what they are, i.e.,

a negotiated admission of liability and calculation of

penalty. Here, as in other cases, the DFS consent

orders merely communicate the essence of

deterrence – that the superintendent can “inflict

regulatory pain on institutions” that break the law.

“As between that obvious alternative explanation

. . . and the purposeful, invidious” coercion that

Petitioner asks this Court to infer, coercion “is not a

plausible conclusion.” Iqbal, 556 U.S. at 682

(cleaned up).14

As this Court has observed, simply because alleged

conduct may be “consistent” with an unlawful scheme, the

scheme nevertheless may be implausible when the actions

conversations

supposedly

had

between the Superintendent and

Lloyd’s executives plausibly caused

Lloyd’s to discontinue business with

Petitioner.

Finally, Petitioner tries to round out its

censorship

claim

alleging

that

the

Superintendent met with Lloyd’s executives in

February 2018 and supposedly “presented her views

on gun control and her desire to leverage her powers

to combat the availability of firearms, including

specifically by weaking the NRA.” Pet. Br. at 7

(cleaned up). Petitioner then makes a causal leap,

insisting that those claimed conversations resulted

in Lloyd’s “cutting all ties with the NRA.” Id. at 18.

Neither the facts as alleged nor the law permit that

implausible inference, however.

Something critical happened between the

Superintendent’s alleged conversations with Lloyd’s

in February 2018 and Lloyd’s business

disassociation with Petitioner on May 9, 2018 – DFS

entered a consent order against Lockton on May 2,

2018, requiring the broker to terminate its illegal

insurance business with Petitioner. See Pet. App. at

221, 224, 252, 269-72, Joint App. at 19. Because

Lockton was selling illegal insurance products in

New York in partnership with Lloyd’s, Lockton’s

are “more likely explained by[] lawful” behavior. Iqbal, 556

U.S. at 680.

business discontinuance with Petitioner necessarily

terminated Lloyd’s business with Petitioner. See id.

at 271 ¶ 46 (requiring Lockton “to fully cooperate”

with Lloyd’s “to effect any cancellation” of the illegal

insurance products underwritten by Lloyd’s).15

Similarly, when Lockton settled with DFS, the same

fate befell Chubb’s underwriting relationship with

Petitioner. See id. Notably, both Chubb and Lloyd’s

later executed consent orders with DFS admitting

their own violations of New York insurance law in

underwriting

Petitioner’s

illegal

insurance

products. See id. at 280-320. And even Petitioner

signed a consent order with DFS in which it

admitted serious violations of New York insurance

law and agreed to pay a $2.5 million fine.16

Petitioner tries to bolster its censorship

argument

incessantly

accusing

the

Superintendent of regulatory overkill. Again and

again, Petitioner makes the claim that the DFS

Business between Lloyd’s and Petitioner effectively

ended months before the Superintendent supposedly spoke

with Lloyd’s executives in February 2018. In November 2017,

Lockton voluntarily suspended selling Petitioner’s insurance

product after DFS started its regulatory investigation. See

Pet. App. at 98. Again, once Lockton suspended sales, Lloyd’s

business relationship with Petitioner was necessarily severed.

That outcome had nothing to do with any alleged coercion (the

DFS guidance letters, the Superintendent’s alleged

discussions with Lloyd’s, and the DFS consent orders), as,

according to the complaint, none of it had even occurred yet.

See generally NRA Consent Order.

consent orders with Lockton, Chubb, and Lloyd’s all

barred those “three long-time NRA insurance

partners . . . from entering into even entirely lawful

commercial relationships with the NRA ever again.”

Pet. Br. at 1; see also id. at 11, 15, 19, 35, 37, 41, 46.

It bears repeating that the frequency with which

something is said does not necessarily establish its

truth.

Here, Petitioner’s argument is demonstrably

false. The DFS consent orders bar Lockton, Chubb,

and Lloyd’s from underwriting or participating in

any insurance program with the NRA, see Pet. App.

at 270 ¶ 43 (Lockton); 289 ¶ 22 (Chubb); 306 ¶ 20

(Lloyd’s) because the NRA is not licensed to conduct

insurance business in New York, see id. at 267 ¶ 34

(explaining Lockton violated New York insurance

law by compensating NRA for premiums collected

by NRA without a license); see also NRA Consent

Order ¶ 26 (NRA’s admission of violating New York

law

conducting

unlicensed

insurance).

Petitioner’s own DFS consent order explodes any

argument that DFS-regulated entities have been

banned “in perpetuity” from doing business with

Petitioner.

Pet. Br. at 11.

That agreement

specifically provides that, beginning in 2025, the

NRA may participate “in any activity involving the

marketing or solicitation of New York Insurance

Policies” provided that “it must first apply for and

obtain an insurance producer license from the

Department.” NRA Consent Order ¶ 30 (emphasis

added).

Those facts make it impossible to allege

plausibly that the Superintendent’s claimed

discussions with Lloyd’s were part of some

blacklisting scheme that caused Lloyd’s to end its

business dealings with Petitioner. Lloyd’s ended its

relationship with Petitioner because their business

was illegal and DFS properly shut it down. That

conclusion would have been clear to all reasonable

DFS licensees. And given the timeline of events

alleged in the complaint, that is the only reasonable

inference to draw.

The substantive law may be another obstacle

to Petitioner’s claim. In the First Amendment

context, “this Court has found it necessary to

formulate a test for causation which distinguishes

between a result caused by a constitutional violation

and one not so caused.” Mt. Healthy City Sch. Dist.

Bd. of Educ. v. Doyle, 429 U.S. 274, 286 (1977).

Although that test continues to evolve as applied in

different contexts, see, e.g., Lozman v. City of Riviera

Beach, Fla., 138 S. Ct. 1945, 1953-54 (2018) (rule

defining “scope of First Amendment protections

when speech is made in connection with, or

contemporaneously to, criminal activity . . . must

await a different case”), this Court has been mindful

of the “tenuous causal connection between the

defendant’s alleged animus and the plaintiff’s

injury,” Reichle v. Howards, 566 U.S. 658, 668

(2012) (discussing First Amendment retaliatory

arrest claims).

Here, the Superintendent allegedly tried to

blacklist Petitioner with Lloyd’s because of

Petitioner’s pro-gun advocacy, but Lloyd’s

indisputably terminated its relationship with

Petitioner for legitimate regulatory reasons. In

Hartman v. Moore, 547 U.S. 250 (2006), this Court

held that to state an actionable First Amendment

claim for retaliatory prosecution, i.e., a prosecution

in retaliation for the defendant’s protected speech,

the “absence of probable cause [for the prosecution]

. . . must be pleaded and proven.” Id. 265-66

(emphasis added). The Court reasoned that “the

complexity of causation” involved in such a claim

“should be addressed specifically in defining [its]

elements.” Id. at 265. By analogy, the Lockton

consent order is the “probable cause” that snuffs out

Petitioner’s censorship claim because it negates the

necessary causal element. Id. at 265.

CONCLUSION

The First Amendment stops the government

from suppressing unpopular views, regardless of

whether officials try to gag the speaker or

intimidate the audience. But especially in the field

of financial regulation, where crucial matters of

public and private interest often collide, any claim

of implicit coercion must be assessed in context. To

protect consumers of financial products, the

integrity and stability of competing market sectors,

and valid political agendas, regulators frequently

must give their licensees some tough advice.

Whether such interactions cross the constitutional

line from persuasion to coercion should depend on

the nature of an agency’s statements and the

relative strength and sophistication of the regulated

party.

A lower threshold could, practically

speaking, too often leave regulators with a Hobson’s

choice: stay quiet or be sued.

below.

The Court should affirm the judgment

Respectfully submitted,

DANIEL S. ALTER*

ABRAMS FENSTERMAN LLP

81 Main Street, Suite 400

White Plains, NY 10601

(914) 607-7010

dalter@abramslaw.com

Counsel for Amici Curiae

Former Executive Officers of the

New York State Department of

Financial Services

*Counsel of Record

Dated: February 22, 2024

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.