Parties Move to Combine Fiduciary Litigation in Texas

By Nevin Adams • June 21, 2016 • 0 Comments
The three lawsuits filed against the Department of Labor’s (DOL) fiduciary regulation in the Northern District of Texas could be coming together.

The DOL has filed an “unopposed motion to consolidate cases” with the court, arguing that:

  • all three actions challenge the same agency rulemaking and present substantially the same legal issues; and

  • consolidation will promote the just and efficient conduct of the litigation, avoiding duplicative proceedings.

Case for Consolidation

That would bring together suits by the American Council of Life Insurers, the National Association of Insurance and Financial Advisors (NAIFA) and six NAIFA chapters in Texas, the Indexed Annuity Leadership Council (IALC), and several providers of these insurance products, in the U.S. District Court for the Northern District of Texas, and the first lawsuit filed, that by the:

  • Chamber of Commerce of the United States of America;

  • Financial Services Institute, Inc.;

  • Financial Services Roundtable;

  • Greater Irving-Las Colinas Chamber of Commerce;

  • Humble Area Chamber of Commerce DBA;

  • Lake Houston Area Chamber of Commerce;

  • Insured Retirement Institute;

  • Lubbock Chamber of Commerce;

  • Securities Industry and Financial Markets Association; and

  • Texas Association of Business.

The DOL acknowledges that all cases are pending in the same judicial district against it, challenging the same final rulemaking; that “the issues of law and fact are almost entirely common;” that all three complaints allege substantially the same violations of the APA and First Amendment, including that the fiduciary regulation “impermissibly broadens the definition of fiduciary investment advice under ERISA and the Internal Revenue Code;” that the new Best Interest Contract (BIC) Exemption is arbitrary and capricious; that the DOL failed to provide sufficient notice and comment for certain items; and that the fiduciary regulation and exemptions “unconstitutionally burden commercial speech in violation of the First Amendment.”

Two Differences

The petition cites as the primary difference in the three lawsuits the fact that the chamber action, but not the other two suits:

1. challenges the principal transactions exemption on grounds similar to the challenges to the BIC Exemption; and
2. raises a claim under the Federal Arbitration Act regarding a clause in both exemptions prohibiting class action waivers.

The filing notes that, in telephonic conferences on June 14 and 15, 2016, counsel for the three sets of plaintiffs stated that they support coordination or consolidation, provided that the separate identity of the actions is preserved to allow separate briefs, oral argument, and other litigation activities.

If the court grants the request for consolidation, the parties have also reached agreement on a briefing schedule for summary judgment:

  • plaintiffs’ summary judgment motions would be due July 18, 2016;

  • defendants’ combined opposition and cross-motion would be due Aug. 19, 2016;

  • plaintiffs’ replies and oppositions to the cross-motion would be due Sept. 16, 2016;

  • defendant’s cross-reply would be due Oct. 7, 2016; and

  • oral argument is proposed to be held in mid- to late October, or at the court’s earliest convenience thereafter.

But would that October hearing lead to a “trick” or “treat”?