Update on Lawsuits Challenging the U.S. Department of Labor's Fiduciary Rule
As we previously reported, there are five pending lawsuits challenging the U.S. Department of Labor's new fiduciary rule.
Our client alert on the new rule outlines the significance of the rule and the implications of the expanded definition of "fiduciary" for investment advisors and other related service providers.
First, with respect to the litigation pending in the U.S. District Court for the District of Columbia, captioned The National Association for Fixed Annuities v. Thomas E. Perez et al., Case No. 16-cv-1035, briefing is now complete on the NAFA's motion for a preliminary injunction and for summary judgment, as well as the DOL's cross-motion for summary judgment. We published a summary of the parties' arguments. Oral argument on the motions is currently scheduled for August 25, 2016. AARP, the Public Investors Arbitration Bar Association, Better Markets, Inc., Consumer Federation of America, and Americans for Financial Reform have filed amicus curie briefs in support of the DOL and the new rule.
Second, the three lawsuits filed in the U.S. District Court for the Northern District of Texas were consolidated under the caption Chamber of Commerce of the U.S., et al., v. Perez, et al., Case No. 16-cv-1476-M. The Chamber of Commerce and its co-plaintiffs filed their motion for summary judgment on July 18, 2016, arguing that the new rule unlawfully creates a private right of action, that the rule violates the First Amendment as applied to truthful commercial speech, and that the DOL exceeded its statutory authority and acted arbitrarily and capriciously in imposing fiduciary obligations on non-fiduciary speech and disfavoring annuities. They also argued that the rulemaking process was inadequate. It is anticipated that the DOL will file a combined opposition and cross-motion for summary judgment on August 19, 2016. Briefing on the motions is currently scheduled to conclude by October 7, 2016, and oral argument on the motions is currently scheduled for November 17, 2016.
Third, in the lawsuit filed by Market Synergy in the U.S. District Court for the District of Kansas, captioned Market Synergy Group, Inc., v. U.S. Dept. of Labor, et al., Case No. 16-cv-4083, Market Synergy filed a motion for a preliminary injunction postponing implementation of the new rule, arguing that that the DOL failed to adequately consider the impact of its rule on the sale of fixed indexed annuities, and did not provide adequate notice of its decision to allow the sellers of fixed indexed annuities to comply with the rule's best interest contract exemption. The DOL opposed the motion on the ground that Market Synergy failed to show a likelihood of success on the merits given that the administrative process was proper and thorough, and the DOL acted well within its statutory authority. A hearing on the motion for preliminary injunction is scheduled for September 21, 2016. AARP, the Public Investors Arbitration Bar Association, Better Markets, Inc., Consumer Federation of America, and Americans for Financial Reform have sought leave to fileamicus curie briefs in supports of the DOL. Market Synergy filed an opposition to the motions for leave to file amicus briefs and the court has not yet ruled on the issue.