Here’s What Labor Dept. Might Do Next With the
By Carmen Castro-Pagan and Madison Alder | March 27, 2018
12:15PM ET | Bloomberg BNA
Law) -- Ten days after an appeals court in New Orleans vacated an
Obama-era consumer protection rule on retirement savings, the Labor
Department, industry groups, and attorneys can’t seem to make sense of
what will happen next.
National Association for Fixed Annuities and the DOL on March 23 dropped a challenge that was pending in an appeals court in
Washington, after the industry group agreed with the decision by the U.S. Court of Appeals for the
Fifth Circuit vacating the fiduciary rule.
would the DOL agree to drop the challenge in the D.C. Circuit? Does it
mean the DOL won’t seek review of the Fifth Circuit ruling? What will
happen now to the fiduciary rule? Among the many questions about the
Fifth Circuit ruling is this: What will the DOL do next?
financial sector and investors are eager to know how the DOL will move
forward with the rule. Major companies already have invested millions of
dollars to adhere to the stricter standards set up by the rule. The
stakes are high and the deadlines are fast approaching.
department has a strict deadline to seek review of the Fifth Circuit
decision. If it doesn’t meet the April 30 deadline, the Fifth Circuit’s
mandate will go into effect May 7 and the fiduciary rule would dissolve.
The DOL also has until June 13 to ask the U.S. Supreme Court to hear its
appeal of the decision.
Labor Department referred questions to the Department of Justice, which
declined Bloomberg Law’s request for comment on the D.C. Circuit case and
whether it would appeal the Fifth Circuit decision.
D.C. Review Matters
Labor Department’s decision to drop its appeal in the D.C. Circuit likely
was because that court’s judges lean liberal and it has a more prominent
stance on rulings involving agency regulatory authority, Paul Secunda, a
Marquette University law professor who specializes in labor and
employment law, told Bloomberg Law. The DOL might have agreed to drop the
case last week because it was concerned the D.C. Circuit might uphold the
rule, Secunda added.
this month, the Tenth
Circuit issued a decision
upholding the rule, finding that the DOL gave sufficient notice of the
proposed rule change and that it acted reasonably in treating fixed
indexed annuities differently than other fixed annuities. The case would
be ready for Supreme Court review because of the apparent split in the
circuit court rulings.
the Tenth Circuit decision involved a narrower issue about the fiduciary
rule, while the Fifth Circuit’s decision was about the entire rule, so
the rulings might not have been truly split. “The DOL doesn’t want
another ruling on the fiduciary rule,” Secunda said.
action in voluntarily dismissing the appeal was anticipated, employee
benefits attorney Marcia S. Wagner of the Wagner Law Group told Bloomberg
Law. If NAFA appealed, it ran the risk of a clear split between the Fifth
Circuit and the D.C. Circuit, and its view is that the Fifth Circuit
decision would vacate the fiduciary rule nationwide, Wagner said.
most, DOL’s agreement to join the voluntary dismissal of the NAFA case
might indicate the agency has limited its options to requesting a review
by a full panel of the Fifth Circuit or accepting the Fifth Circuit
decision, Wagner said. It is also possible department attorneys believe
the decision by the Tenth Circuit creates enough of a circuit split to
allow the Supreme Court to hear the case, Wagner added.
Walsh, an employment attorney with Groom Law Group, echoed Secunda,
telling Bloomberg Law the D.C. Circuit case was essential in creating a
circuit split. The DOL has a few options now, including appealing the
case to the full Fifth Circuit, asking the Supreme Court for review, or
letting the Fifth Circuit’s decision be, Walsh said.
appeal dates will be helpful indications of what the DOL is planning to
do, he said. Even if the DOL tries to change the dates procedurally, it
would indicate the agency is working on something related to an appeal.
DOL might have reason to appeal the Fifth Circuit decision in an effort
to protect its future regulatory authority, Walsh said. But political
pressure might sway the DOL to let the Fifth Circuit ruling stand. “The
current political staff might decide they want to move on to different
initiatives,” Walsh said.
DOL Seek Review?
agree that the DOL’s consent to drop the appeal in the D.C. Circuit
doesn’t give a clear indication on how it will move forward.
don’t think the DOL’s move to drop the appeal in the D.C. Circuit means
that it won’t challenge the Fifth Circuit decision,” Erin M. Sweeney, an
attorney at Miller & Chevalier in Washington, told Bloomberg Law.
the DOL announced it won’t enforce the fiduciary rule, Sweeney said the
Fifth Circuit ruling only applies to states within that
jurisdiction—Mississippi, Louisiana, and Texas. If the DOL doesn’t
challenge the Fifth Circuit ruling, other proponents of the fiduciary
rule, such as AARP, will be willing to jump in and defend the litigation,
she added. The DOL is unlikely to allow other groups to take over the
litigation for them, Sweeney said.
don’t believe that the decision of the DOL to join in the voluntary
dismissal of the NAFA case has any necessary implications for the action
that the agency decision will ultimately take with respect to responding
to the Fifth Circuit decision vacating the fiduciary rule,” Sweeney said.
DOL won’t seek review of the Fifth Circuit ruling because the agency
agrees with the outcome, Secunda said.
would be easier for the DOL to let the Fifth Circuit ruling stand, Peter
Gulia, a fiduciary guidance counsel, told Bloomberg Law. The DOL could
say that “it wouldn’t be an efficient use of the government’s resources
to seek a rehearing or review of a court decision that, even if
incorrect, recognizes weaknesses” in the rule. Even if the rule
dissolves, consumers can get fiduciary rule-like protection without
relying on public law, Gulia said. “Just don’t consider a recommendation
from some one who hasn’t pledged legally enforceable standards of loyalty
would speculate that the parties may well realize at this point that the
Fifth Circuit decision may well be the end game for the fiduciary rule,
either way,” Andrew L. Oringer, an attorney at Dechert LLP in New York,
told Bloomberg Law.
the agency chooses not to contest the Fifth Circuit decision and the
decision then becomes final, it could be the end of the rule, regardless
of activity in other courts, Oringer said. If the DOL goes forward with
appeals, the resulting decisions may well subsume claims being made in
the D.C. Circuit.