The National Association for Fixed Annuities said Monday that it would appeal the decision by a Washington federal trial judge denying the annuity group’s request to block the 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 DOL’s rule while also ruling in favor of Labor on the merits in upholding its conflict of interest rule.
“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.
(Related: DOL Releases FAQs on Fiduciary Rule)
NAFA said that it would seek an expedited review of Moss’ decision in the D.C. Circuit Court of Appeals given the fiduciary rule’s first compliance date in April – but the annuity group must first get Moss’ approval.
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 appeal his decision to a higher court, “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.
NAFA will ask the appeals court for a “de novo review” of Moss’ decision, which means the appellate court will consider the case without being bound or influenced by the lower court’s decision.
Anderson added that 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 from the lawsuits filed against the 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.”
Erin Sweeney, of Counsel at Miller & Chevalier and a former DOL attorney, said in a Monday interview that NAFA’s goal with an expedited appeal is to “get a split in the circuits to get an appeal to the Supreme Court.”
Regardless whether the review is de novo, Sweeney said, “the party bringing an appeal may file a motion for an expedited appeal under DC Circuit Court Rule 27(f), even if the statute does not require expedited appeal (which ERISA does not). In order to obtain an expedited appeal, the party must ‘demonstrate that the delay will cause irreparable injury.’”
Moss heard oral arguments in the NAFA case on Aug. 25, which was the first hearing in the string of cases against DOL’s rule, while Judge Daniel Crabtree in the District of Kansas heard oral arguments on Sept. 23 in the second case against Labor’s rule brought by the insurer Market Synergy.
During the three-hour long oral arguments, Moss—as his Friday ruling revealed—was not persuaded by NAFA’s arguments, Sweeney said, while Crabtree “appeared sympathetic to Market Synergy’s arguments that independent marketing organizations (IMOs) and independent agents will suffer irreparable harm” unless DOL “is enjoined from enforcing Revised PTE 84-24 with respect to fixed indexed annuities.”
Market Synergy attorney’s argued that Labor failed to prove the current state-based regulation of fixed-indexed annuities is broken, and that the judge should “hit the pause” button on including them in DOL’s rule. Crabtree has not rendered a decision.
Next up will be Nov. 17 oral arguments from both the DOL and lawyers representing nine plaintiffs in the three lawsuits filed in Texas against DOL’s rule—which have been consolidated.
Joshua Waldbeser, of counsel with Drinker Biddle & Reath, said Moss’ ruling is “a major victory” for DOL, “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 Labor 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.”
(Related on ThinkAdvisor: DOL Releases FAQs on Fiduciary Rule)