The nine plaintiffs suing the Labor Department over its fiduciary rule in a Texas court said late Friday that they are appealing Judge Barbara M.G. Lynn’s Feb. 8 decision upholding Labor’s rule.
“We remain confident in the merits and strength of our case and stand by our assertion that the Department of Labor exceeded its authority,” said the plaintiffs, which include the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association, and the Financial Services Institute, in a joint statement announcing the appeal.
Five national co-plaintiffs filed the Feb. 25 appeal in conjunction with the Greater Irving-Las Colinas Chamber of Commerce, Lake Houston Area Chamber of Commerce, Lubbock Chamber of Commerce and Texas Association of Business.
The case will now move to the U.S. Court of Appeals for the Fifth Circuit.
“We have long supported a best interest standard, adopted by the appropriate regulatory authority and across all individual investor accounts, not just retirement,” the groups explained.
“This is a misguided rule that will harm retirement savers and financial services firms that provide needed assistance and options to their clients, including modest savers and small business employees. Further, the ‘private right of action’ mechanism creates unwarranted litigation risk for financial advisors, who will face the threat of meritless class action lawsuits challenging their every move,” they added.
The nine plaintiffs in the Texas case are represented by former Labor Department solicitor Eugene Scalia, who’s a partner in Gibson, Dunn & Crutcher’s Washington office and a son of deceased Supreme Court Justice Antonin Scalia.
It was unclear at press time if Scalia had filed, or plans to file, emergency papers in the Fifth Circuit to try to stop enforcement of the rule before its effective date in April.
In her decision, Judge Lynn of the Northern District of Texas said Congress “gave the DOL broad discretion to use its expertise and to weigh policy concerns when deciding how best to protect retirement investors from conflicted transactions.”
On Feb. 10, several days after Lynn’s decision, Labor filed a notice with the Office of Management and Budget to delay implementation of its fiduciary rule via a Notice of Proposed Rulemaking.
OMB met with several groups last week, including AARP and Better Markets, fueling speculation that its approval of Labor’s plan to delay its fiduciary rule was coming soon.
One source told ThinkAdvisor on Thursday that OMB has requested additional information from Labor regarding its proposal to delay the rule’s April 10 compliance date, which extends OMB’s review into the week of Feb. 26.
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