Watchdog Files Amicus Brief Slamming Speech-Stifling Statute in Indiana

FOR IMMEDIATE RELEASE

Contact: Kara Zupkus (224) 456-0257

WASHINGTON, D.C. – Yesterday, the Taxpayers Protection Alliance Foundation (TPAF) filed an amicus brief at the United States Court of Appeals for the Seventh Circuit in the case Institutional Shareholder Services Inc., and Glass, Lewis & Co., LLC v. Todd Rokita, slamming a speech-stifling statute that poses grave First Amendment concerns.

The case centers on Indiana’s House Bill 1273, which imposes special disclosure obligations and legal burdens on proxy advisory services specifically when they issue recommendations or analysis recommending voting against corporate management, without imposing comparable burdens on advice supporting management. Plaintiffs Institutional Shareholder Services Inc. and Glass Lewis separately challenged the law in the U.S. District Court for the Southern District of Indiana, alleging that it violates the First Amendment by engaging in unconstitutional viewpoint discrimination. District Judge Matthew P. Brookman agreed that the First Amendment claim was likely to succeed and granted a preliminary injunction prohibiting the Indiana Attorney General from enforcing the statute. Attorney General Todd Rokita appealed that ruling to the Seventh Circuit.

Ross Marchand, Executive Director of the Taxpayers Protection Alliance Foundation, offered the following statement:

“H.B. 1273 simply cannot be squared with the First Amendment. The law’s language poses serious First Amendment concerns, punishing views against company management while ensnaring advocacy groups for daring to speak out on company proposals or criticize corporate actions. Lawmakers should instead embrace a light-touch approach to investment advice and research, not heavy-handed rules that violate free speech rights.

“A core First Amendment principle is that the government may not favor or disfavor speech because of the point of view expressed. Even when speech is commercial in nature—which proxy advisor recommendations arguably are—regulations that hinge on the viewpoint of speech raise serious constitutional concerns. Even then, the Supreme Court has held that commercial speech ‘may be restricted only in the service of a substantial governmental interest, and only through means that directly advance that interest.’ It’s anyone’s guess how a law only requiring disclosures in the case of recommendations being made against company management is viewpoint neutral or in service of a substantial governmental interest.

“State lawmakers can empower investors to make informed decisions, but not via overly broad rules that pose significant constitutional issues. Markets, not bureaucrats, are the best way to get the most accurate information in the hands of investors.”

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The Taxpayers Protection Alliance Foundation (TPAF) is a non-profit, non-partisan organization dedicated to educating the public through the research, analysis, and dissemination of information on the government’s impact on the economy.