DOL files to consolidate 3 fiduciary suits
The Department of Labor filed a motion Friday requesting that the three lawsuits pending in the U.S. District Court for the Northern District of Texas challenging DOL’s fiduciary rule be consolidated.
The plaintiffs agreed to consolidation in a Monday response, but insisted that each of the cases be allowed to “retain their separate identities” and move forward “expeditiously.”
DOL stated in its Friday motion that consolidation is appropriate because all three actions “challenge the same agency rulemaking and present substantially the same legal issues,” and that such consolidation would avoid duplicative proceedings.
While both sides support consolidation, a judge must grant it.
Meanwhile, the full House plans to vote Wednesday morning on overriding President Obama’s June 8 veto of H.J. Res. 88, a resolution under the Congressional Review Act that would nullify the DOL’s final conflict of interest rule. The veto override would need a two-thirds vote in both the House and the Senate.
The nine plaintiffs in the first suit, filed June 2 in the Texas district, include the Securities Industry and Financial Markets Association, the Financial Services Institute, the Financial Services Roundtable, the U.S. Chamber of Commerce, the Insured Retirement Institute and four Texas groups, including the Texas Association of Business.
The nine groups are represented by former DOL solicitor Eugene Scalia, who’s now a partner in Gibson, Dunn & Crutcher’s Washington office.
The second suit was filed June 8 by American Council of Life Insurers along with the National Association of Insurance and Financial Advisors, and the third suit was filed on June 9 by the Indexed Annuity Leadership Council.
The plaintiffs emphasized in their Monday brief “the importance that the cases move expeditiously to resolution,” adding that the parties will soon submit a “joint proposed schedule for prompt summary-judgment briefing and oral argument following consolidation.”
Indeed, Scalia said on a June 2 call with reporters that the plaintiffs would ask the court “to proceed quickly,” given that the first deadline to comply with DOL’s rule is April 10, 2017.
The Indexed Annuity Leadership Council, comprising life insurers, filed its lawsuit on June 9.
The plaintiffs’ motion states that in June 14 and 15 conference calls, counsel for the three sets of plaintiffs stated that they supported coordination or consolidation, “subject to the parties’ agreement that these three cases will retain their separate identities, allowing each set of plaintiffs to file separate briefs, make separate oral arguments, and independently make other litigation decisions.”
The plaintiffs note that, as DOL has estimated, “startup cost of compliance for affected industries will be $5 billion,” adding that “achieving compliance” with the April 2017 and subsequent January 2018 deadlines “requires affected entities to institute changes now in their systems, practices and products.”
Burdens and costs being incurred now concern the independent marketing organizations that distribute fixed indexed annuities, the plaintiffs stated, as “IMOs do not satisfy the best interest contract exemption’s definition of ‘financial institution,’ which leaves insurance-only licensed agents who are part of an IMO no viable means of complying with the rule.”
As a result, the plaintiffs argue, “some of these insurance agents will be pressured to exit the fixed indexed annuity market, which would disrupt the distribution of fixed indexed annuities and have adverse effects on the costs and availability of those products for consumers.”
The U.S. District Court for the District of Columbia has set Aug. 25 as the date to hear the recent suit against DOL brought by the National Association for Fixed Annuities. The lawsuit seeks a preliminary injunction to stay the rule.
The insurer Market Synergy filed a complaint in the U.S. District Court for the District of Kansas challenging only the department’s conduct in adopting the revisions to Prohibited Transaction Exemption 84-24, which pertains to what the DOL calls “fixed-rate annuities.” The exemption doesn’t include fixed indexed annuities, which the firm says contradicts revisions the DOL had announced earlier.