One last lifeline for states to pick up defense of the fiduciary rule
July 12, 2018 by Nick Thornton
The Labor Department’s fiduciary rule — roundly pronounced as deceased when the U.S. Court of Appeals for the Fifth Circuit issued a June 21 mandate enforcing a decision to vacate the regulation—may yet rise from the dead.
On June 28, Barbara M.G. Lynn, Chief Judge for the U.S. District Court for the Northern District of Texas, issued an order instructing any party seeking “further relief ” to notify the court by July 12.
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Judge Lynn issued a sweeping ruling upholding the fiduciary rule in February 2017. In a split decision, the 5th Circuit overturned her ruling in March of this year.
Judge Lynn’s order does not clarify on what grounds relief may be sought; it only said litigation over the fiduciary rule would be dismissed absent a new request for action.
But a document issued July 2 clarifies the order: A joint status report filed by attorneys for Thrivent Financial for Lutherans and the Labor Department in a Minnesota District Court said parties hoping to intervene to defend the fiduciary rule in the 5th Circuit have until Judge Lynn’s July 12 deadline to request to do so.
In a separate case, Thrivent sued the Labor Department in 2016, challenging the fiduciary rule’s private right of action provision, which prohibits broker-dealers from writing class-action waivers in contracts with IRA investors.
The Minnesota court ultimately issued a temporary injunction of the rule and temporarily stayed the case, pending the outcome of the decision in the 5th Circuit. Both Thrivent and the Labor Department are petitioning the Minnesota court to extend the temporary stay, citing Judge Lynn’s most recent order as reason.
Back in the 5th Circuit, Attorneys General for California, New York, and Oregon were denied motions to intervene to defend the fiduciary rule on May 2. The Labor Department let pass an April deadline to petition the 5th Circuit for a rehearing of the March decision vacating the fiduciary rule.
Attorneys widely regarded the 5th Circuit’s order denying the states intervention as the rule’s death knell.
But the six-week delay of the final mandate from the 5th Circuit — it was slated for a May 7 release — sowed speculation that some jurists in the Appellate Court were sympathetic to the States’ request to rehear the case.
Inquiries to the California, New York, and Oregon Attorneys General offices were not returned before press time.
