State attorneys general from California, Oregon and New York asked the U.S. Court of Appeals for the 5th Circuit late Wednesday to reconsider its May 2 refusal to allow them to intervene after the court vacated the Department of Labor’s fiduciary rule.
“The federal government is no longer pursuing this appeal,” the state AGs wrote in their 24-page filing.
“Given that posture, the exceptional importance of the issues, and the grave harm the states will suffer as a result of the panel opinion — billions of dollars in lost retirement income to their residents and tens of millions of dollars in lost tax revenue — the states respectfully request that the court reconsider its decision.”
If the panel “declines to reconsider its order denying intervention, the states ask that the court direct the clerk to permit the filing of a petition seeking review of that order by the full court.”
AARP along with the state attorneys general filed motions on April 26 to intervene in the 5th Circuit appeals court ruling to vacate the Labor’s fiduciary rule.
The rule is still effective until the the 5th Circuit issues its mandate to vacate the rule, David Kaleda, principal at Groom Law Group, said on May 10 at the Practising Law Institute’s Fiduciary Investment Advice 2018 event in New York.
The court had yet to issue the mandate as of Thursday morning.
“Conceptually, you should be doing what you have been doing” to comply with the Labor Department fiduciary rule that became effective in 2016, Kaleda said.
The three state AGs argued in their Wednesday filing that they meet the four-prong test for intervention.
- The states’ motion was timely as it was filed as soon as it became clear that the Labor Department was unlikely to seek rehearing and that a motion to intervene was necessary; before that time, a motion to intervene would have been improvident.
- The states have demonstrated, through the declarations of economists, and based on Labor’s own economic data, that they will lose more than $58 million in a specific category of state income tax (withdrawals from individual retirement accounts), which is directly attributable to the elimination of the fiduciary rule.
- The panel’s decision vacating the fiduciary rule clearly impairs the states’ interest in protecting those tax revenues.
- The Labor Department, which has taken no position on the motion to intervene, no longer adequately represents the states’ interest — and the law requires only a showing that representation “may” be inadequate.
The U.S. Chamber of Commerce, Financial Services Institute, Financial Services Roundtable, Insured Retirement Institute, and Securities Industry and Financial Markets Association said in a Thursday morning statement that the 5th Circuit “has already denied the States’ motion for leave to intervene, and any request for rehearing is without merit.”
— Related on ThinkAdvisor: