National Rifle Association of America v. Vullo

This amicus brief, submitted by Brian Knight of the Mercatus Center and George Mocsary of the University of Wyoming, supports the petitioner, the National Rifle Association of America, who is arguing that the Second Circuit erred in effectively granting a motion to dismiss to Maria Vullo for actions she took as Superintendent New York Department of Financial Services (NYDFS). The case arises out of allegations Vullo used the NYDFS’ regulatory power, including the issuance of guidance, to try and harm the NRA by cutting off their access to banks and insurance firms. The scholars argue that the court below erroneously concluded that NYDFS’s guidance lacked coercive effect because it did not contain explicit threats or orders.

They contend that the reality of banking and insurance regulation is such that firms often perceive themselves as bound by such guidance, under threat of formal or informal sanctions. The brief emphasizes the opaque and discretionary nature of financial regulation, where non-compliance with guidance can lead to severe consequences for regulated firms, even when such guidance is nominally non-binding.

The brief illustrates through historical examples that financial regulators, like NYDFS, frequently use their expansive, albeit vaguely defined, powers to enforce policies through guidance that indirectly coerces compliance. It asserts that such regulatory practices can stifle lawful business activities and infringe upon constitutional rights. Moreover, the scholars argue that the application of reputational risk by regulators can effectively provide an “economic heckler’s veto,” enabling regulators or powerful economic actors to silence or punish controversial but lawful entities through economic pressure.

In conclusion, the brief calls for a reversal of the Second Circuit’s decision, urging the Supreme Court to recognize the implicit coercive power of regulatory guidance in the banking and insurance sectors, and to delineate the limits of such regulatory actions to prevent the circumvention of legislative processes and infringement of constitutional rights.