Brief of Financial and Business Law Scholars as Amici Curiae in NRA v Vullo
Summary of the Argument
The Court should grant the Petition because the court below erred in finding that the lack of explicit binding language or threats from the New York Department of Financial Services in its guidance letters meant that no reasonable regulated firm would consider itself bound by those letters. The reality of banking and insurance regulation is that firms frequently feel that they risk sanction if they do not comply with nominally non-binding guidance. The Court should grant the Petition and review this recurring issue of significant importance.
In its opinion upholding the dismissal of Petitioner’s suit, the Second Circuit opined that because Superintendent Vullo’s statements were “written in an even-handed, nonthreatening tone” and “employed words intended to persuade rather than intimidate,” they did not “intimat[e] that some form of punishment or adverse regulatory action [would] follow the failure to accede to the … request.” The Second Circuit relied on this conclusion to hold that Petitioner’s complaint failed even to “plausibly alleg[e] unconstitutional threats or coercion.”
But the Second Circuit did not appreciate that the unique relationship between financial regulators and their regulated firms tends to make those firms feel bound, on penalty of sanction, by even the most prosaic sounding guidance. Regulated firms have historically faced formal and informal penalties for failure to conform to guidance that was nominally non-binding.
This Court should grant the Petition and reverse.