Appeal Filed in Fiduciary Litigation

By Nevin Adams • February 28, 2017 • 0 Comments
Those challenging the Department of Labor’s (DOL) fiduciary regulation in court haven’t had much success to date — but now one set of litigants is taking that decision to a higher court.

The co-plaintiffs in that case — the U.S. Chamber of Commerce, Financial Services Institute, Financial Services Roundtable, Insured Retirement Institute, and Securities Industry and Financial Markets Association have filed an appeal to the U.S. Court of Appeals for the 5th Circuit. The plaintiffs in this case (actually three cases combined due to the commonality of the issues raised) had asserted that a recent DOL proposed exemption designed to ease compliance for some fixed-indexed annuities providers demonstrated that the advice rule would “upend” the distribution system and proved it was an example of “regulatory overreach.”

Their suit, filed in the Northern District of Texas, was rebuffed by Judge Barbara M.G. Lynn earlier this month — the same day that the Department of Justice had asked the court to hold off making its decision, citing President Trump’s Feb. 3 administrative memorandum directing the DOL to reevaluate the likely impact of the rule, noting that “it would not serve judicial economy to issue a ruling at this point.”

(Co-plaintiffs) issued the following statement on their notice of appeal to the U.S. Court of Appeals for the 5th Circuit, which was filed today:

“We remain confident in the merits and strength of our case and stand by our assertion that the Department of Labor exceeded its authority. We have long supported a best interest standard, adopted by the appropriate regulatory authority and across all individual investor accounts, not just retirement. This is a misguided rule that will harm retirement savers and financial services firms that provide needed assistance and options to their clients, including modest savers and small business employees. Further the ‘private right of action’ mechanism creates unwarranted litigation risk for financial advisors, who will face the threat of meritless class action lawsuits challenging their every move.”

The five national co-plaintiffs filed the appeal in conjunction with the Greater Irving-Las Colinas Chamber of Commerce, Lake Houston Area Chamber of Commerce, Lubbock Chamber of Commerce and Texas Association of Business.

The DOL had already prevailed in rulings in the U.S. District Court for the District of Kansas and the U.S. District Court for the District of Columbia. The DOL has filed for a stay in a suit pending federal court in a case involving the fiduciary regulation pending in the U.S. District Court for the District of Minnesota.




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