NRA Ruling Gives Companies a Tool to Fight Anti-DEI Pressure

Fortune 100 companies have been caught in a tug-of-war between Republican attorneys general urging them to cease diversity, equity, and inclusion programs and Democratic AGs arguing that those programs are legal and can reduce the risk of discrimination claims.

Those companies were hoping the US Supreme Court would give them valuable legal framework to help them navigate this minefield. It did, but not in the case they thought would be the vehicle to deliver it.

The justices didn’t reach the merits June 26 in Murthy v. Missouri, which concerned whether and when regulators can pressure businesses to adopt specific policies, restrict controversial speech, or discourage associations with disfavored individuals and entities.

They did, however, provide significant guidance about regulators’ ability to pressure private companies a month earlier, in NRA v. Vullo. The ruling reaffirmed the constitutional limits on AGs’ coercion of private entities, providing a powerful tool to push back against politically motivated investigations that threaten their First Amendment rights.

Businesses should leverage the precedent set by NRA v. Vullo to assert their rights when faced with undue pressure while maintaining open lines of communication with AG offices to preempt potential conflicts.

No ‘Informal Censorship’

A unanimous Supreme Court on May 30 found the NRA plausibly alleged that a former New York Department of Financial Services superintendent violated the First Amendment when she pressured banks, insurance companies, and other financial institutions to cut ties with the NRA.

The former official had issued “guidance letters” warning of the “reputational risks” of doing business with the NRA and allegedly made various other private threats about costly investigations and penalties.

The Supreme Court, in its reasoning:

• Reaffirmed the principle from Bantam Books v. Sullivan that government officials can’t engage in “informal censorship” by using threats of legal sanctions or other coercive measures to pressure private parties into suppressing disfavored speech.
• Emphasized that the alleged illegality of some of the NRA’s insurance programs didn’t justify former Superintendent Maria Vullo’s alleged attempts to coerce regulated entities into cutting ties with the NRA for its lawful advocacy activities.
• Rejected Vullo’s argument that her actions targeted only “non-expressive” business relationships, noting that her alleged goal was to suppress the NRA’s speech by attacking its financial resources and partnerships.

Thanks to this decision, companies can now more confidently assert their First Amendment rights when faced with informal threats or coercive measures from AGs.

For instance, if an AG issues “guidance” that implicitly threatens regulatory action unless a company severs ties with a controversial group, the company could cite NRA v. Vullo in its response, arguing that such pressure potentially violates their constitutional rights.

Moreover, regulators now will be less likely to issue such “guidance” in the first place. Companies also might use this precedent proactively, documenting any interactions with AG offices that could be construed as coercive, to build a stronger case if legal action becomes necessary.

Impact of Murthy

The dismissal of Murthy v. Missouri on standing grounds also has important implications for businesses, particularly those in the tech sector.

In that case, five private plaintiffs, along with the attorneys general of Missouri and Louisiana, sued several federal government officials and agencies, accusing them of improperly pressuring social media platforms into censoring posts on topics such as mail-in ballot voter fraud to Covid-19.

In allowing the Biden administration to communicate freely with social media companies, the court held only that both the individual plaintiffs and the states lacked Article III standing to seek an injunction. It left mostly unresolved the question of when government communication with private companies about content moderation crosses the line into unconstitutional coercion.

But the dismissal highlights the challenges businesses face in seeking legal recourse against perceived government overreach. As Murthy reminds us, companies will need to demonstrate not just concrete and particularized injury resulting from government actions to establish standing, but also that the harm can be redressed (or avoided) by a favorable ruling.

This high bar, especially in the digital age, will likely embolden some government officials to be more aggressive with their pressure tactics.

The cases are NRA of Am. v. Vullo, 2024 BL 184300, U.S., 22-842., 5/30/24 and Murthy v. Missouri, 2024 BL 217599, U.S., 23-411., 6/26/24

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Ketan Bhirud and Meghan Stoppel are partners in Cozen O’Connor’s state attorneys general group in Washington, D.C. and Denver, respectively.

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