What DOL Fiduciary Victory Feels Like: The Texas Court Decision

3. “Plaintiffs argue the “vague” and “ill-defined” best interest standard, along with inconsistent state law enforcement of contracts required under BICE, make those potentially covered by the exemption susceptible to unforeseeable, potentially conflicting and staggering liability from private litigation …. 

(The court disagrees.) The best interest standard is not vague; the standard is explained thoroughly in BICE and is drawn from the duties of loyalty and prudence, which are “deeply rooted in ERISA and the common law of agency and trusts.” … Plaintiffs do not articulate why these concerns did not arise before BICE… Further, Plaintiffs cite why courts’ decisions would be expected to diverge widely when applying common law legal principles of contract law.” (pp. 57, 58)     

4. “Plaintiffs argue BICE is unworkable for proprietary products … 

(The court disagrees.) However, in Section IV of the exemption, the DOL created a check list to provide guidance on how proprietary product providers can satisfy BICE….  It is imprudent to recommend a proprietary product that does not satisfy the “prudence and loyalty standards with respect to the particular customer and in light of the customer’s needs. This requirement is not unclear.”” (p. 59)

5. “Plaintiffs misconstrue the supervisory responsibilities imposed by the rules …

(The court disagrees.) The DOL considered the relevant factors for BICE’s workability, addressed commenter concerns and reasonably justified its conclusions, thereby satisfying the ABA’s requirements.” (pp. 59, 60) 

6. “Plaintiffs make four arguments that the DOL overstated the benefits and underestimated the costs of rulemaking … 

(The court disagrees.) The DOL’ assessment of mutual fund performance was reasonable … Nor did the DOL ignore criticism made during the comment period of its methodology and its estimates of savings for consumers … the DOL specifically requested the industry provide any and all relevant data for IRA investments, but was told the data either did not exist or would be too expensive to collect. The DOL must make do with the available information and may regulate on the basis of available information.”  (pp. 61, 62)  

7. “Plaintiffs argue the DOL did not consider the costs … to comply with BICE.

(The court disagrees.) In fact, the DOL considered compliance costs which were quantified based on the industry’s own estimates. … The Court notes that the DOL, “aimed to err on the side of overestimating compliance costs by assuming wide use of” exemptions, even though that is uncertain.” (pp. 64, 65)