The five lawsuits to block the Department of Labor’s fiduciary rule continued to move forward in July in separate venues, but the Department of Justice strongly defended the rule in a Washington, D.C., federal district court challenging the suit filed by the National Association for Fixed Annuities, or NAFA.
A hearing in NAFA’s case is scheduled for Aug. 25; a hearing in the same court over the suit against the rule brought by insurer Market Synergy has been pushed back to Sept. 21.
NAFA’s lawsuit seeks a preliminary injunction to stay the fiduciary rule, which is scheduled to become effective April 2017. NAFA’s suit alleges the DOL rule is invalid on grounds that the agency exceeded its authority to regulate IRAs and that it improperly categorizes insurance agents as fiduciaries.
DOJ said in its papers filed in the NAFA case that as the market for retirement investment advice has evolved in the last four decades, it has become rife with conflicts of interest costing clients billions of dollars.
“Based on the extensive public comments and evidence garnered during that process, the department determined that such conflicts of interest are widespread and could cost investors in individual retirement accounts (in one segment of the market alone) between $95 billion and $189 billion over the next 10 years,” wrote the Justice Department lawyers.
Meanwhile, the Texas judge overseeing the three lawsuits filed in that state against the DOL’s fiduciary rule has set a Nov. 17 date to hear oral arguments from both sides.
District Judge Barbara M.G. Lynn agreed June 27 to allow the three lawsuits against DOL’s rule that are pending in the state to be consolidated, and both parties filed a motion asking that the judge render a decision in the case as soon as October.
In her July 7 order, Lynn said oral arguments would take place on Nov. 17. In a June 21 order, Lynn stated that the three actions are based on “common issues of law and fact” and allowed for each case to retain its “separate identity” with separate oral arguments and allowing each to make further litigation decisions.
The Three Texas Suits
The nine plaintiffs in the first suit, filed June 2 in the Texas district, are SIFMA, the Financial Services Institute (FSI), the Financial Services Roundtable, the U.S. Chamber of Commerce, the Insured Retirement Institute (IRI) and four Texas groups. The groups are represented by former DOL solicitor Eugene Scalia (the son of the late Supreme Court Justice Antonin Scalia) who’s a partner in Gibson, Dunn & Crutcher’s Washington office.
The second suit was filed June 8 by the American Council of Life Insurers (ACLI) along with the National Association of Insurance and Financial Advisors (NAIFA), and the third suit was filed on June 9 by the Indexed Annuity Leadership Council.
The plaintiffs argue, among other things, that there’s insufficient time for their members to comply with DOL’s rule by the April 2017 deadline.
Meanwhile, Timothy Hauser, COO for DOL’s Employee Benefits Security Administration, stated at a mid-July IMCA conference in Washington that DOL plans to “push out” Q&A guidance “fairly shortly” to address questions about compliance with Labor’s fiduciary rule.
— Read Does DOL Fiduciary Rule Create a New Right to Sue? on ThinkAdvisor.