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Scalia, Trump's Pick for DOL Chief, Likely to Abstain From Fiduciary Rulemaking

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Eugene Scalia, President Donald Trump’s pick to be the next Labor secretary, would likely have to recuse himself from crafting a Labor Department fiduciary rule, according to a Friday report by The Wall Street Journal.

Scalia is the lead Gibson, Dunn & Crutcher attorney who argued against Labor’s fiduciary rule before the U.S. Court of Appeals for the 5th Circuit, which vacated the rule last June. He is a son of deceased Supreme Court Justice Antonin Scalia.

The Journal reported Friday that government ethics rules generally prevent officials from participating in issues they were involved in while in the private sector to guard against potential conflicts of interest.

Trump announced via twitter on July 18 that he planned to nominate Scalia to the post, stating that “Gene has led a life of great success in the legal and labor field and is highly respected not only as a lawyer, but as a lawyer with great experience….”

The White House has yet to formally nominate Scalia, however.

Scalia represented nine plaintiffs, including the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Financial Services Institute, in the case brought in a Texas court against Labor’s fiduciary rule.

Scalia told ThinkAdvisor last March that the fiduciary issue “is a matter that ought to be addressed by the SEC.”

Brad Campbell, the former head of Labor’s Employee Benefits Security Administration, told ThinkAdvisor on Friday that traditionally, participation in litigation wouldn’t preclude Scalia from working on a regulation. “Is it possible that has changed, or in this instance they’ve decided that for whatever reason they want to take a different path? That’s possible,” said Campbell, who’s now a partner in Drinker Biddle & Reath’s Washington office.

Labor, however, “could execute a specific recusal” for Scalia to say that while he’s secretary of Labor, he can make decisions on all matters except those relating to the fiduciary issues, which will be referred to the deputy secretary, Campbell explained.

Embattled Labor Secretary Alexander Acosta resigned his post on July 12. Patrick Pizzella, Acosta’s deputy, was appointed to the acting secretary post the same day.

Fred Reish, partner at Drinker Biddle & Reath in Los Angeles, added that “for appearances’ sake alone, [Scalia] should abstain from participation in the development of a new fiduciary regulation and any prohibited exemptions that are similar to those he opposed in court.”

Scalia’s “involvement could suggest continued advocacy for the clients he represented in the private sector or, alternatively, the involvement could be viewed as contrary to the interest of his private-sector clients. Either way, it makes him look conflicted.”

In terms of the legalities, Reish added, “I think it is a fairly close call. His private-sector representation and arguments regarded the vacated fiduciary rule. It is gone, vacated by the 5th Circuit. His work at the DOL would be on a new regulation. There is some separation there.”

Steve Saxon, who specializes in Title 1 of the Employee Retirement Income Security Act at Groom Law Group, added that “Scalia will find plenty to do at DOL even if he can’t work on the Fiduciary Rule revisited. There are a number of important and vital issues to be addressed, e.g., Electronic Disclosure and Missing Participants guidance, that the regulated community have been waiting for.”

Scalia was Labor’s solicitor during the George W. Bush administration, and was a partner in the Washington office of Gibson Dunn. He co-chaired the firm’s Administrative Law and Regulatory Practice Group and is a member of its Labor and Employment Practice Group.

Scalia met with Senate Majority Leader Mitch McConnell, R-Ky., on July 30.

“In Mr. Scalia, President Trump has chosen a veteran public servant, a sharp lawyer, and a consummate professional,”  McConnell said in a statement after the meeting. “His strong legal credentials, considerable expertise on labor and regulatory issues, and prior experience serving at the department will make him an asset to the administration, and to the American people.”

Confirmation hearings for Scalia will be forthcoming from the Senate Health, Education Labor and Pensions (HELP) Committee.

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