The recent switch by the Trump administration's Justice Department from opposing to defending bans on class actions in workplace arbitration agreements will have consequences beyond a trio of challenges the U.S. Supreme Court is set to hear this fall.
On June 16, acting solicitor general Jeffrey Wall informed the justices that the Justice Department was reversing its position in a key labor case, National Labor Relations Board v. Murphy Oil, which tests employee arbitration agreements. The government said it would no longer support the NLRB's position that arbitration agreements barring class actions violate federal labor law.
Less than three weeks later, on July 3, the Justice Department relied on that reversal in the high court to justify abandoning its support for a class action provision in the U.S. Labor department's fiduciary rule. On June 2, the Justice Department allowed a deadline to lapse for its appeal of a temporary injunction against a nursing home rule that banned mandatory arbitration agreements.
The two reversals and the lapsed appeal signal a broadening effort by the Trump administration to prohibit or restrict class actions through litigation or regulation.
The Justice Department continues to defend the fiduciary rule, an Obama-era regulation that raised standards for financial advisors giving retirement advice, even as the Labor Department moves to revise provisions in the rule. There's only one part of the rule the Trump Justice Department won't now support in court: a class action provision. In its July 3 filing in the U.S. Court of Appeals for the Fifth Circuit, the Justice Department, represented by Deputy Assistant Attorney General Hashim Mooppan, urged the court to strike down a provision restricting class action waivers in arbitration clauses.
The restriction on class action waivers is a condition on financial advisors who want to qualify for the fiduciary rule's best interest contract exemption, or BICE. If they qualify, those advisors are exempt from certain prohibited transaction provisions in federal retirement laws. The U.S. Chamber of Commerce, a lead plaintiff in the case, has argued the condition violates the Federal Arbitration Act, or FAA. The Justice Department now agrees.
DOL lawyers said in their brief that the BICE's condition restricting class action waivers is "a discriminatory obstacle to arbitration that cannot be harmonized" with the FAA and existing precedent.
The government's flipped position in Murphy Oil "complicates things a lot," said Deepak Gupta of Washington's Gupta/Wessler, who has supported the provisions of the best interest contract exemption on behalf of the American Association of Justice.
