States Strike Out Again in 5th Circuit

By Ted Godbout • May 23, 2018 • 0 Comments
For the second time in as many days, the U.S. Court of Appeals for the 5th Circuit has denied a motion to reconsider its decision denying three states’ motion to intervene in litigation involving the Department of Labor’s fiduciary rule.

In a May 16 filing, the states of California, New York and Oregon asked the 5th Circuit to reconsider its May 2 decision denying the states’ motion to intervene in litigation involving the DOL fiduciary rule.

The states contended that since the federal government “is no longer pursuing this appeal … the exceptional importance of the issues, and the grave harm the States will suffer as a result of the panel opinion — billions of dollars in lost retirement income to their residents and tens of millions of dollars in lost tax revenue — the States respectfully request that the Court reconsider its decision.”

But the May 22 order by the 5th Circuit is short, sweet, and to the point:

“This panel previously denied the States of California, New York, and Oregon’s motion to intervene and file a rehearing en banc. The panel has considered the motion for reconsideration. IT IS ORDERED that the motion is DENIED.

“IT IS FURTHER ORDERED that the alternative motion to permit the filing of a petition for rehearing en banc seeking review of the Court’s Order denying the motion to intervene by the full En Banc Court is DENIED.”

The second part of the order appears to address the states’ request that, should the 5th Circuit again deny their motion to intervene, that the Court direct the Clerk to permit the filing of a petition seeking review of that order by the full Court,” explaining that “the States believe that a petition seeking en banc review of such an order should be permissible, at least under the unusual circumstances of this case.”

To recap, the 5th Circuit on March 15 in a 2-1 decision vacated the fiduciary rule “in toto,” ruling that the Department of Labor lacked authority to promulgate its fiduciary rule.

The states listed above, coincident with a similar move by fiduciary rule proponent AARP, on April 26 filed motions to intervene in the 5th Circuit’s March 15 decision, claiming that they can no longer rely on DOL to adequately represent their interests.

The DOL could still petition the U.S. Supreme Court to rule on the decision, which the agency would have to do by June 13, but that seems increasingly unlikely.

The 5th Circuit is expected to issue a mandate effectuating its March 15 opinion vacating the entire fiduciary rule, the BIC Exemption, the Principal Transactions Exemption and related amendments to existing PTEs, but it has yet to do so.

Meanwhile, five key Senate Democrats on May 17 wrote a letter to Secretary of Labor Alexander Acosta expressing concern over the DOL’s current lack of defense of the fiduciary rule and demanding to know what the DOL plans to do going forward.