As an update to our March 31 post about MetLife shedding its SIFI designation, the court recently released its opinion detailing the reasoning behind its order. The court found two reasons to overturn MetLife’s designation as a systemically important financial institution (SIFI), which the Financial Stability Oversight Council (FSOC) placed on MetLife after finding that “material financial distress” at MetLife could “pose a threat to the financial stability of the United States.”

First, the court said that FSOC acted “arbitrarily and capriciously” by ignoring or abandoning two of its own rules when it designated MetLife. The court found that FSOC ignored one of its rules by “failing to assess MetLife’s vulnerability to material financial distress before addressing the potential effect of that distress.” And, according to the court, FSOC violated another of its rules by “hardly adher[ing] to any standard when it came to assessing MetLife’s threat to U.S. financial stability.” The court concluded that FSOC’s failure to follow each rule was arbitrary and capricious and was enough to rescind MetLife’s SIFI designation.

Second, based on the relevant statutory language and the recent Supreme Court decision in Michigan v. EPA, FSOC was required to consider the costs of MetLife’s SIFI designation. Yet, FSOC purposefully failed to do so. Thus, the designation of MetLife was arbitrary and capricious on this ground as well.

After the district court released its opinion, the government quickly appealed to the U.S. Court of Appeals.