Thrivent, DOL Both Win in Fiduciary Rule Case

Unlikely as it would seem, both Thrivent Financial for Lutherans and the Department of Labor (DOL) could be considered winners when a U.S. District Court judge on November 3, 2017, granted an injunction against a key aspect of the DOL’s investment fiduciary guidance.

Thrivent Suit

Thrivent filed suit in 2016 against the DOL in U.S. District Court for the District of Minnesota, contending that a provision of the DOL fiduciary guidance Best Interest Contract (BIC) exemption would unfairly penalize the organization. That provision was intended to prevent financial organizations from contractually binding clients to give up their right to participate in class legal actions to settle grievances.

District Court Ruling

District Judge Susan Nelson granted the injunction against enforcement of that element of the fiduciary guidance on the grounds that it could harm Thrivent, and therefore, should not be enforced without further litigation. That litigation may, in fact, not go forward, since the DOL under the leadership of President Trump’s appointee, Alexander Acosta, had already indicated in its own guidance that the agency does not intend to enforce the provision that prompted Thrivent’s lawsuit.

Furthermore, the DOL formally asked the court not to issue a final ruling, and instead to issue a “stay” order, halting the case’s progress. As a result, concurrent with the injunction granted to Thrivent, Judge Nelson also granted the DOL’s request for a stay of the proceedings.

Key to understanding this apparent contradiction is the fact that the final fiduciary rule and accompanying prohibited transaction exemptions—prominent among them being the BIC exemption—were drafted under the administration of President Obama, whose DOL leadership advocated for tougher investment fiduciary standards. Since the election of President Trump, new DOL leadership has advocated for delayed and relaxed enforcement of the final fiduciary regulations and exemptions.

Many believe that some of the strongest provisions in the guidance package may eventually be altered or withdrawn. Unless Thrivent or the DOL determines that final settlement of the case is in its best interest—Thrivent perhaps anticipating a different DOL philosophy under a future administration—it appears unlikely that the case will be resumed.