Plaintiffs Urge Fifth Circuit to Reject AARP/States Rehearing Request as Appeal Deadline Expires
The deadline has now passed for the Department of Labor to request a rehearing by the Fifth Circuit Court of Appeals in the case that vacated the fiduciary rule in a 2-to-1 split decision. Absent such a request, the Fifth Circuit's decision is set to take effect on May 7 and the rule that seeks to prevent conflicted retirement investment advice would dissolve.
The deadline has now passed for the Department of Labor to request a rehearing by the Fifth Circuit Court of Appeals in the case that vacated the fiduciary rule in a 2-to-1 split decision. Absent such a request, the Fifth Circuit’s decision is set to take effect on May 7 and the rule that seeks to prevent conflicted retirement investment advice would dissolve.
However, late last week – within days of the deadline, the AARP and state attorneys general of California, New York, and Oregon stepped in and filed separate motions with the court requesting permission to intervene as a defendant for a rehearing en banc, meaning that the full 17-judge court would rehear the matter if granted. The AARP is also asking to extend the deadline to file a rehearing request until May 14th.
Plaintiffs in the case, which include the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association, the Financial Services Institute, and others, are now urging the court to reject the moves.
“[The AARP and AGs] have had ample opportunity to intervene in the multiple cases challenging the so-called “fiduciary rule” in district courts around the country, in appeals in two other circuits courts, and in this appeal, which was decided by this court more than a month ago,” said the plaintiffs’ attorneys. “And they have been on notice for more than a year that the government, under presidential direction, was reevaluating its approach to the fiduciary rule.”
The AARP argues that the Fifth Circuit decision “conflicts with Supreme Court precedent and creates an irreconcilable intra-circuit split.”
“DOL found widespread practices of advisors giving conflicted advice, steering clients to risky, costly, or otherwise inappropriate investments not serving their clients’ best interests for their retirement needs,” said AARP in their motion. “Conflicted advice to IRA holders, alone, could cost $17 billion annually, or as much as $404 billion over the next 20 years. Because the panel’s decision jeopardizes those Americans’ retirement security, it presents an issue of exceptional importance. For these reasons, this case warrants en banc consideration.”
En banc review is generally used for unusually complex cases or those considered of exceptional public importance.
The fiduciary rule, proposed under the Obama Administration, seeks to eliminate conflicts of interest as it pertains to retirement investment advice and broadens the definition of “fiduciary” under the Employee Retirement Income Security Act of 1974. The rule is currently under review as directed by President Trump, and enforcement was delayed for 18-months until July 1, 2019.
To date, three federal district courts and the Tenth Circuit Court of Appeals have upheld the DOL’s fiduciary rule. The Securities and Exchange Commission is currently seeking public comment for its own proposed best interest advice rules.
