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August 27, 2024 at 01:45 PM
What You Need to Know
- Staying the rule was just the first step in the litigation process, says attorney Brad Campbell.
- The Labor Department could appeal the stay or fight on the merits.
- The decision will likely be made by the next presidential administration.
The decisions by two federal district courts in Texas to stay the Labor Department’s fiduciary rule and its exemptions are “a very significant set of court decisions,” Brad Campbell, partner at Faegre Drinker in Washington, said on the firm’s recent Inside the Beltway webcast.
“But it’s also technically just the first step in a litigation process that is going to be playing out for the next however many months and/or years it takes the courts to play it out,” said Campbell, a former head of Labor’s Employee Benefits Security Administration.
The U.S. District Court for the Northern District of Texas Tyler Division granted in late July the request of the Federation of Americans for Consumer Choice and several independent insurance agents to delay the Sept. 23 implementation of the new fiduciary rule and that of the amended prohibited transaction exemption (PTE) 84-24 on annuities until a further court order.
The U.S. District Court for the Northern District of Texas issued its own stay in late July of the fiduciary rule — known as the Retirement Security Rule — and the prohibited transaction exemptions 2020-02 on rollovers and 84-24 on annuities, as requested by nine insurance trade groups in American Council of Life Insurers, et. al. v. U.S. Department of Labor, et. al., filed on May 21.
With the Sept. 23 partial compliance date, many firms were hitting the “compliance gas pedal,” Campbell stated on the webcast.
In both decisions, the language used “was kind of unusual,” Campbell said. “In these sorts of preliminary motions, you don’t ordinarily see the judge say things, like one of them did, that the parties are virtually certain to prevail on the merits when they granted the stay.”
The stay is in effect through any appeal, according to Campbell.
DOL Appeal
“The courts are already starting to talk to the parties about what comes next. DOL has the right to appeal the stay, if they want to, and try and ask the Fifth Circuit [Court of Appeals] to overturn it,” Campbell said. “Or, they [DOL] can continue and go into the merits litigation.”
