Fortune 100 companies have been caught in a tug-of-war between Republican attorneys general urging them to cease diversity, equity, and inclusion (DEI) 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 offer valuable legal frameworks to navigate this controversial issue. Interestingly, the guidance came through a case different than anticipated. The justices did not reach the merits in Murthy v. Missouri, which addressed whether regulators can pressure businesses to adopt specific policies, restrict controversial speech, or discourage associations with disfavored individuals and entities. Instead, the court offered significant clarity a month earlier in NRA v. Vullo.
The unanimous ruling on May 30 affirmed constitutional limits on attorneys general’s coercion of private entities, providing a formidable tool for companies to push back against politically motivated investigations threatening their First Amendment rights. In this case, the Supreme Court found that the National Rifle Association (NRA) plausibly alleged that a former New York Department of Financial Services superintendent violated the First Amendment by pressuring financial institutions to cut ties with the NRA through “guidance letters” and private threats of costly investigations.
Key takeaways from the ruling include:
- Reaffirming the principle from Bantam Books v. Sullivan that government officials cannot engage in “informal censorship” by using threats of legal sanctions or other coercive measures to suppress disfavored speech.
- Emphasizing that the alleged illegality of some of the NRA’s insurance programs did not justify attempts to coerce regulated entities into severing ties with the NRA for its lawful advocacy activities.
- Rejecting the argument that the actions targeted only “non-expressive” business relationships, noting that the goal was to suppress the NRA’s speech by attacking its financial resources and partnerships.
Thanks to this decision, companies can assert their First Amendment rights more confidently when faced with informal threats or coercive measures from attorneys general. For example, if an AG issues “guidance” threatening regulatory action unless a company severs ties with a controversial group, the company could cite NRA v. Vullo in its defense, arguing that such pressure potentially infringes their constitutional rights. Companies could also use this precedent proactively, documenting interactions with AG offices that might be construed as coercive to build stronger cases if legal action becomes necessary.
The implications extend to the tech sector, particularly in light of the dismissal of Murthy v. Missouri on standing grounds. This case involved plaintiffs accusing federal officials of improperly pressuring social media platforms into censoring posts on controversial topics. While the court allowed the Biden administration to communicate with social media companies, it held that the plaintiffs lacked Article III standing, leaving unresolved the question of when government communication crosses into unconstitutional coercion.
The cases highlight the high bar for businesses seeking legal recourse against government overreach, emphasizing the need for concrete and particularized injury resulting from government actions to establish standing. This challenge, especially in the digital age, might embolden some government officials to be more aggressive in their pressure tactics.
For more details, the cases discussed are NRA 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 analysis highlights key legal strategies that businesses can adopt in response to political pressures while safeguarding their DEI initiatives and First Amendment rights.