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5th Circuit Decision: A Win for Fiduciary Rule’s Foes — or Ultimately a Loss?

The 5th Circuit’s ruling in Chamber of Commerce v. U.S. Dept. of Labor vacating the Department of Labor’s (DOL) fiduciary rule was a win for opponents of the rule — at the very least in the states in that circuit. But a recent analysis suggests that in the long run, opponents who took that particular dispute to court may be their own undoing.

In “The Irony of the 5th Circuit Decision (and the Response it Generated),” a piece appearing in BenefitsPro, Christopher Carosa argues that the March 15 ruling carried surprises for more parties than one may imagine at first blush.

The first surprise, Carosa says, is for supporters of the rule. “Those who created the rule felt it was clothed in impenetrable armor,” he writes. But, he notes, “no case is fool proof” and that all it takes to obtain a ruling opposite from what one may wish is for a case concerning what one supports to be heard by a court that is not sympathetic; however, he suggests, the 5th Circuit is “no more or less political than any other.”

The bigger surprise is that it may end up resulting in something more constricting than the DOL rule, Carosa suggests.

The 5th Circuit, Carosa argues, now has “greased the path” for a broader fiduciary standard to be put in place that is “unencumbered by the noose of regulation.” While advocates of the rule “debated whether it was better to accept half a loaf instead of a full loaf,” he says, “opponents, emboldened by the concessions they received, decided to take back that half a loaf they lost.”

The 5th Circuit gave them back that half, Carosa says, adding that “the delicious irony is, as a result, the opponents of the fiduciary standard lost.” Not only that, “by opposing the DOL’s fiduciary rule,” he says, the rule’s foes have “allowed the proponents of the fiduciary standard to return to the drawing board.”

“May the best fiduciary win,” Carosa writes.