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State Roundup: Update on Legal Action the DOL Fiduciary Rule

NAFA has been engaged in the fight against the Department of Labor’s fiduciary rule for the past several years. In that regard, we have met with representatives of the Department on numerous occasions, in both the past and current Administration’s iteration of the agency, we have worked with many representatives in Congress, supporting and promoting legislative initiatives as well as Congressional messaging to the White House and to the Department, we have initiated several NAFA member-driven grassroots letter writing campaigns, and we have continued to press NAFA’s litigation against the rule, a lawsuit that we initially filed in June 2016.

Our message, through all of these efforts, has been clear: The fixed annuity industry is uniquely harmed by this rule.

In addition to NAFA’s lawsuit, three other lawsuits were filed to challenge the Department’s promulgation of the rule. Here is a brief summary (as of this writing) of the current status of each of those proceedings.

I. NAFA v. DOL

NAFA’s lawsuit against the Department of Labor (Case No. 16-5345) is currently in appeal before the U.S. Court of Appeals in the District of Columbia Circuit. Having lost at the district court level (in the U.S. District Court for the District of Columbia), NAFA filed an emergency motion for injunction pending appeal on November 29, 2016. This was ultimately denied. Later, given the Department’s decision to delay the original April 10, 2017 applicability date, NAFA sought, and was granted, an extension of the appellate briefing schedule: now, NAFA’s opening appeal brief is due on August 15th, with the government’s response brief due September 15th and NAFA’s final reply brief due September 29th.

NAFA should know the composition of the judicial panel that will decide the case sometime in January 2018 – in any case, 30 days before the scheduled oral argument. We might expect oral arguments in February 2018, with an opinion issued in April or May of 2018.

II. Chamber of Commerce et al. v. DOL

The case brought against the Department by the three consolidated plaintiffs’ groups (led by the U.S. Chamber of Commerce, the ACLI, and the IALC and joined by numerous other industry trade associations and some of their local affiliates) is also in appeal (Case No. 17-10238), but in the U.S. Court of Appeals for the 5th Circuit (located in New Orleans). This action was originally brought in the U.S. District Court for the Northern District of Texas. This case, too, lost at the district court level and also was denied in its request for an injunction pending appeal.
The appellants’ brief (the Chamber at al.) was filed on May 2, 2016, and the government filed its response brief on July 3rd. The reply brief is due July 13th, and oral arguments have been scheduled for Monday, July 31st. (The composition of the judicial panel that will hear oral arguments and render judgment will be announced on July 24th, one week head of the calendared hearing.) Based upon the average time that opinions follow oral arguments in the Fifth Circuit, we might expect a panel decision by mid/late September 2017.

The July 3rd filing on behalf of the government was the first legal brief argued by the Trump Administration in any of the lawsuits, and industry observers were very interested what tenor and tack the new administration might take in defending the rule. Disappointingly, the brief vigorously defended the rule, with one exception: the government is seeking vacatur of the Best Interest Contract Exemption condition that prohibits class action waivers under arbitration agreements. The government stated that it had adopted this position in light of a recent opinion issued by the U.S. Acting Solicitor General. The government’s decision to no longer defend this aspect of the BIC exemption has direct implications on the Thrivent Financial case against the DOL, which is discussed below.

III. MSG v. DOL

The MSG case, which was originally brought in the U.S. District Court – District of Kansas, is now in appeal in the U.S. Court of Appeals for the 10th Circuit (located in Denver, CO). The case (No. 17-03038) is on a similar schedule as is NAFA’s but just a couple weeks ahead: the MSG initial brief is due on July 24, 2017, with the government’s brief due on August 23rd, and the appellants’ reply brief due September 6th. As with the Fifth Circuit. The panel composition assignments will be disclosed one week prior to oral argument. The date for the oral argument has not been placed on the Court calendar, but the hearing is likely to occur in early 2018, with a decision rendered in March or April of 2018.

IV. Thrivent Financial v. DOL

Unlike the other three cases, the Thrivent Financial case is still at the district court level, in the U.S. District Court – District of Minnesota (Case No. 16-cv-03289). The Thrivent case is also distinguished from the other three lawsuits in that Thrivent did not challenge the rule in general but only argued that the rule’s prohibition against class action waivers was contrary to the Federal Arbitration Act.

In light of the July 3rd brief of the government in the Fifth Circuit, in which the DOL is no longer defending the condition of the BIC that would prohibit class action waivers in arbitration agreements, both Thrivent and the Department filed supplemental notices with the Minnesota District Court on July 5th regarding the effect of this new position on the Thrivent litigation. Thrivent seeks immediate summary judgment in its favor, and the Department indicated that it will propose a method of resolution to the case within the next couple of weeks – before the end of July.

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