Justices question restrictions on Alaska Native corporation shareholders’ free speech

Supreme Court justice Daniel Winfree questions the state’s broad authority to regulate shareholder speech during Wednesday’s oral arguments in a case that tests the limit of free speech in Alaska Native corporation board elections. (Screenshots courtesy of KTOO/Gavel Alaska)
Supreme Court justice Daniel Winfree questions the state’s broad authority to regulate shareholder speech during Wednesday’s oral arguments in a case that tests the limit of free speech in Alaska Native corporation board elections. (Screenshots courtesy of KTOO/Gavel Alaska)

Alaska Supreme Court justices expressed skepticism over the state’s broad power to regulate the speech of Alaska Native corporation shareholders. The case was brought by the American Civil Liberties Union of Alaska to test the limits of the state’s power to regulate free speech in corporate elections.

It all started with a letter to the editor penned in 2017. The author didn’t say who shareholders should vote for. Rather, he urged Sitnasuak Native Corporation shareholders reading the Nome Nugget to avoid casting “discretionary proxies.” That’s the equivalent of handing in an unmarked ballot, that could be filled by the incumbent board of an Alaska Native corporation.

In this instance, the corporation complained to state regulators from the Division of Banking & Securities. The division stepped in and sanctioned the letter writer, Nome shareholder Austin Ahmasuk. He was charged with civil penalties for not filing a disclosure form prior to writing to the newspaper. The state also alleged there were misstatements – but that point remains unresolved and legally irrelevant to the case.

“Alleged misstatements are not at issue here,” the ACLU’s Susan Orlansky told the justices during Wednesday’s oral arguments in Anchorage. “Mr. Ahmasuk was fined and is in front of this court, because he failed to send the letter to the division on the same day that he sent it to the newspaper, because he failed to fill out the disclosure form.”

Alaska Native corporations were created by an act of Congress nearly 50 years ago as part of the Alaska Native Claims Settlement Act. But the federal government left it up to the state to regulate them. That includes elections for board of directors. There are restrictions on public statements by shareholders that could sway voting.

Assistant Attorney General Robert Schmidt says these rules are important to minimize disputes.

“Without division oversight it would be a free-for-all with the only enforcement mechanism being litigation between corporations and shareholders,” he told the court.

He says this oversight role keeps the state financial examiners busy.

“Of all the division’s enforcement areas, banks, financial institutions, securities, the division spends more time on ANCSA solicitation enforcement than any other program area,” he said.

In 2019, the division received 27 complaints to investigate public statements by Alaska Native shareholders. Five of the complaints generated formal enforcement actions — all but one of these involved social media chatter on Facebook.

ACLU of Alaska senior counsel Susan Orlansky delivers opening arguments of an appeal filed on behalf of a Nome man sanctioned by the state over a critical letter to the editor he published in the Nome Nugget in 2017.

Austin Ahmasuk v. Division of Banking and Securities is a test case for these types of actions. The ACLU’s Orlansky argued the division’s requirement for disclosure filings in advance of any statement that could sway elections has over time, become too broad and effectively chills public speech around corporate governance.

“And that gets the division into regulating all sorts of political speech, dissident speech – ‘What’s wrong with this corporation?’ – as well as favorable speech,” she said.

At one point, Justice Daniel Winfree quizzed Schmidt over how broad the state’s authority is over shareholder speech by posing a hypothetical. 

“If you wrote nothing other than, ‘It’s time for everybody to come to the shareholder meeting instead of voting by proxy, don’t execute proxies come to the meeting and vote.’ That’s a violation of law?”

Yes, your honor, the state attorney replied. He quickly clarified that it would require the shareholder to file a disclosure form with the division.

“And if you don’t register it’s a violation of the law?” Winfree pressed.

Yes, replied the attorney.

“Isn’t that a little much?” Winfree asked.

Chief Justice Joel Bolger probed the edges of the ACLU’s argument. He said the state regulations over corporate speech also ensure Native corporations don’t put out false information that could dupe shareholders.

“And so if we do as you say, aren’t we opening a loophole?” Bolger asked Orlansky. “That will be a loophole not only for the weak, but also for the mighty?“

Orlansky replied that Alaska could model its rules after the federal Securities and Exchange Commission which regulates publicly traded corporations, but not ANCSA corporations.

The SEC loosened its restrictions in 1992. It no longer requires shareholders not running for a board seat to pre-file disclosures before making public statements. But it kept the regulations in place for corporations to ensure no misleading or false statements are made.

“And so that I think is part of the answer,” Orlansky said, “is that this may not necessarily need to be a scheme that is even-handed.”

The justices said a written decision would be forthcoming. They didn’t indicate when.