Annuity Group to Appeal DOL Fiduciary-Rule Court Decision
November 8, 2016 by Melanie Waddell
The National Association for Fixed Annuities said Monday it will appeal the decision by a Washington federal trial judge denying the annuity group’s request to block the U.S. Department of Labor’s fiduciary rule.
U.S. District Judge Randolph Moss denied in his 92-page ruling, released late Friday afternoon, NAFA’s request for a preliminary injunction to stay the rule. Moss simultaneously ruled in favor of the Labor Department on the merits of the rule, which was designed to reduce conflict of interests in the investment-retirement industry.
“We are obviously disappointed by the court’s decision, but we have always assumed this case would get decided by a higher court and we are pleased the issues will get de novo review by the circuit court,” said Chip Anderson, NAFA’s executive director, in a Monday statement.
NAFA said it would seek an expedited review in the U.S. Court of Appeals for the D.C. Circuit. The fiduciary rule’s first compliance date is in April.
Pamela Heinrich, NAFA’s general counsel, said in a Monday interview with ThinkAdvisor that NAFA’s attorneys will likely ask Moss “by the end of this week” for a preliminary injunction pending the appeal. “We can’t go right upstairs” to the appeals court with our motion, Heinrich said. “We may ask for a status conference so that we could get this before [Moss] with the other party [DOL] and move this along. We’re feeling the pull of time.”
Should Moss deny NAFA’s request to stop enforcement pending appeal, “then that opens the door to essentially filing a motion to the D.C. Court of Appeals to request a stay [of Moss’ Friday decision] pending the appeal of the underlying” decision.
Anderson said NAFA “remains optimistic” that the courts “will ultimately find the rule to be an overreach by Labor that is inconsistent with existing tax and financial services laws.”
“NAFA believes the fiduciary rule will disrupt the distribution and availability of fixed annuities and have a particularly adverse impact on the low and middle income consumers who have come to rely on these valuable retirement savings products,” Anderson said.
Labor Secretary Thomas Perez, who has vowed to “vigorously” defend DOL’s rule, stated after Moss’ Friday ruling, that he’s “pleased that the court recognized the comprehensive and thoughtful process we used in crafting this rule.”
Several other suits in Texas, Kansas and Minnesota present related challenges to the fiduciary rule. The ruling from Moss on Friday was the first trial judge decision on the merits of the rule, which was years in the making.
Erin Sweeney, of counsel at Miller & Chevalier and a former Labor Department attorney, said Monday that NAFA’s goal with an expedited appeal is to “get a split in the circuits to get an appeal to the Supreme Court.”
Next up will be Nov. 17 oral arguments in Texas from both the Labor Department and lawyers representing nine plaintiffs in the three lawsuits against DOL’s rule. The complaints have been consolidated. The U.S. Chamber of Commerce, represented by Gibson, Dunn & Crutcher, is a lead plaintiff in the Texas litigation.
Joshua Waldbeser, of counsel with Drinker Biddle & Reath, said Moss’ ruling is “a major victory” for the Labor Department, “and frankly, a pretty one-sided one.”
NAFA “brought a number of substantive and procedural challenges, and its arguments were well thought-out, but the court just wasn’t persuaded,” Waldbeser said.
For instance, one of the procedural challenges NAFA brought in its case against the Labor Department was that “DOL moved fixed indexed annuities from PTE 84-24 over to the best interest contract exemption essentially without warning—that is, without satisfying the public comment requirements,” Waldbeser said.
However, Moss “disagreed” and stated that DOL “did do an adequate job of requesting comments about what types of annuities should be eligible for which exemptions, and even noted that insurance companies weighed in on this issue.”
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