Gibson Dunn, the law firm that successfully argued to vacate the Labor Department’s fiduciary rule before the U.S. Court of Appeals for the 5th Circuit, says the 2-to-1 decision in favor of industry opponents of the rule applies “nationwide.”
Citing the Administrative Procedure Act, the law that governs federal agency rule making, and Black’s Law Dictionary, attorneys for the firm said the ruling has the effect of the removing the fiduciary rule from the books.
“Under the APA, ‘vacatur’ is a remedy by which courts ‘set aside agency action’ that is arbitrary and capricious or otherwise outside of the agency’s statutory authority,” wrote attorneys for Gibson Dunn, including Eugene Scalia, in a client update.
The consequence of the 5th Circuit’s decision is to delete the fiduciary rule. “Because the effect of vacatur is, in essence, to remove a regulation from the books, its effect is nationwide,” wrote Mr. Scalia and a team of Gibson Dunn attorneys.
Since the decision was released last week, some attorneys in press reports have speculated that the fiduciary rule is still in effect. Other reports have suggested the decision may only impact investment and insurance providers and distributions within states under the 5th Circuit’s jurisdiction.
But the impact of the decision is not as ambiguous as some reports claim, according to Gibson Dunn.
By May 7, when the 5th Circuit is scheduled to issue a final order under the Federal Rules of Appellate Procedure, the fiduciary rule will effectively be erased from the Federal Register, “without geographical limitation,” the attorneys say.
No circuit split
Gibson Dunn’s client update also sets out to clarify the existence of a so-called circuit split over the fiduciary rule.
Days before the 5th Circuit released its ruling, the 10th Circuit Court of Appeals issued a more narrow ruling upholding the fiduciary rule’s treatment of fixed indexed annuities.
But the 10th Circuit decision did not address the larger question of the Labor Department’s authority to write the fiduciary rule as it did.