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DOL Again Presses for Stay in Thrivent BIC Litigation

The Department of Labor (DOL) continues to fight an attempt by at least one fiduciary rule opponent to pursue its case in court.

In an Oct. 13 filing, the DOL repeated its request that the court grant its July motion to stay proceedings “because it would conserve judicial resources to await completion of the Department’s pending administrative actions, which are likely to address the challenged provision before it becomes applicable to [Thrivent Financial for Lutherans.]

“The Court need not rule on this motion, but instead should grant the Department’s motion to stay the case. If the Court does not stay the case, there is no need for preliminary relief here, where summary judgment has been fully briefed and Plaintiff is concerned about an event that will occur in January 2018 at the earliest, if at all,” they wrote.

Last month Thrivent filed a motion asking that the U.S. District Court for the District of Minnesota issue a preliminary injunction against a clause in the fiduciary regulation’s so-called best-interest contract exemption (BICE) that prohibited financial advisers from requiring their clients to waive their right to bring class-action lawsuits. The DOL had previously said that that it would not defend that portion of the rule in another case challenging the regulation.

Last fall Thrivent Financial for Lutherans filed suit in the U.S. District Court for the District of Minnesota, claiming that the requirements of the BICE would, “by its terms and in its effect, require Thrivent either to cease conducting certain business that is beneficial to its Members or to abandon its longstanding commitment to resolving Member disputes amicably and through private, one-on-one mediation and arbitration.”

‘Irreparable Injury’?

In its most recent filing, the DOL argued again that the plaintiffs cite “no authority suggesting that the burdens it identifies rise to the level of irreparable injury,” since the harms alleged are not “certain and great.” The DOL said that the plaintiffs here have “…not established that it will face substantial compliance costs because it has made clear that it has not yet decided to modify its contracts as contemplated by the challenged provision of the BIC Exemption.” Moreover, they argue that since Thrivent “has identified no specific cost involved in keeping its options open, and previously noted only that it might include a proposed modification of its Bylaws in its December newsletter” — an action that they say “Plaintiff no longer suggests it intends to take” — it is “not significant enough to constitute cognizable harm.”

But the main argument the DOL leans on — as it has in previous filings — is that Thrivent’s “allegations of harm depend on speculation about the likelihood that the January 1, 2018 applicability date will not be extended” — noting that “the very fact that an extension is likely makes these alleged harms uncertain.”

The DOL argues that the court here need not give credence to “Plaintiff’s speculative fears that it would be subject to IRS enforcement, frivolous state law class actions, or violation of its code of ethics certification in its annual statement, in light of the written assurance (in Field Assistance Bulletin 2013) the Department has provided to Plaintiff and the industry that, in the event the applicability date is not extended as proposed, neither the Department nor the IRS will require compliance with the challenged provision in order to take advantage of the BIC Exemption.”

And — if that were not enough, the DOL argued that, even if the court found “some cognizable harm, that harm is unlikely to justify issuance of an injunction when other relief would suffice.”

For its part, Thrivent has previously noted that “DOL has acknowledged in open court that the BIC Exemption is unlawful and that Thrivent’s case is not moot.” Moreover, it said that “DOL’s statements that it does not intend to enforce the anti-arbitration condition of the BIC Exemption, even if credited, do not resolve the real and imminent threat to Thrivent that it must either take steps to comply with the Fiduciary Rule as written, or face the myriad consequences of non-compliance” — since, after all, “The BIC Exemption’s anti-arbitration condition remains on the books as a rule promulgated under the APA, and it impacts Thrivent,” and that the litigation “continues to present a very real controversy, and remains ripe for adjudication by this Court.”