Three States Denied in Their Appeal Seeking to Intervene in Fiduciary Litigation

One week after filing an appeal in an attempt to save the DOL’s ill-fated investment fiduciary guidance (the Department of Labor conflict-of-interest regulations), the states of California, New York, and Oregon are denied that opportunity by the U.S. Fifth Circuit Court of Appeals. This Court had ruled in March 2018 that the Department of Labor’s (DOL’s) fiduciary investment advice guidance for retirement savers went beyond the agency’s authority, and vacated—essentially nullified in its entirety—the DOL’s final regulations and related exemptions. When the DOL failed to appeal this ruling, these states and the American Association of Retired Persons (AARP) filed a motion on April 26 seeking the right to intervene in support of the DOL fiduciary guidance, on the grounds that investors and the states would be harmed by the Appeals Court’s action vacating the guidance.

On May 2, this request by the states and AARP to intervene was denied by the Fifth Circuit Court. Two weeks later, on May 16, the state Attorneys General of California, New York and Oregon (this time absent the participation of AARP) filed an appeal. The states hoped their arguments in support of maintaining the DOL fiduciary guidance would be heard by the full 17-member panel of Fifth Circuit Appeals Court judges, rather than the three-judge panel that had vacated the guidance in March. Instead, the same three-judge panel has now denied both of the state attempts to intervene.

There appear to be no more options for the states in pursuit of maintaining the DOL investment fiduciary guidance, although the Fifth Circuit has yet to issue its official mandate implementing the March 15 decision that would vacate the guidance nationwide. It appears that the only known litigation step that could now be taken would be for the DOL itself to appeal to the U.S. Supreme Court. Given the DOL’s decision not to appeal at the Circuit Court level, most feel there is no reason to believe the agency will do so.

Unwilling to concede defeat, however, on May 17 a group of five Senate Democrats—Patti Murray (WA), Ron Wyden (OR), Elizabeth Warren (MA), Sherrod Brown (OH) and Cory Booker (NJ)—sent a letter to Secretary of Labor Alexander Acosta asking the Secretary and his agency to pursue an appeal to the U.S. Supreme Court. They pointed out that before the Fifth Circuit Court’s March 15 ruling nullifying the DOL investment fiduciary guidance, four other court challenges to the fiduciary guidance had been attempted and all had failed. Only one court—the Fifth Circuit—found that the DOL had exceeded its rulemaking authority in issuing its investment fiduciary guidance.

The senators also cited the statement by Secretary Acosta in 2017 that there was “no principled legal basis” to delay implementing the investment fiduciary guidance. The senators pointedly asked the Secretary to tell them how his agency proposes to protect the interests of retirement savers, absent the DOL’s fiduciary guidance. They have requested a response by June 1.