Contributor: George H. Friedman (George@SecArbAlert.com)
(ed: By reading how courts and arbitrators value, view and utilize testifying experts or decide issues experts encounter on a regular basis, one can better serve the factfinder, more effectively help the client, and more likely avoid a bad experience. For selected court decisions, we draw again from the Securities Arbitration Alert (SAA), and other resources. Note that all 2021-2024 back issues of the Alert can be downloaded free of charge here.)
We reported in SAA 2024-19 (May 16) that the Department of Labor’s (“DOL”) final fiduciary rule had been published and that it goes into effect September 23. The Final Rule – 89 FR 32122 – was published April 24. Says the summary: “The Department of Labor (Department) is adopting a final rule defining when a person renders ‘investment advice for a fee or other compensation, direct or indirect’ with respect to any moneys or other property of an employee benefit plan, for purposes of the definition of a ‘fiduciary’ in the Employee Retirement Income Security Act of 1974 (Title I of ERISA or the Act). The final rule also applies for purposes of Title II of ERISA to the definition of a fiduciary of a plan defined in Internal Revenue Code (Code), including an individual retirement account or other plan identified in the Code.”
Congressional Repeal Effort
As further reported in SAA 2024-21 (May 30), on May 15 Senators Ted Budd (R-NC); Bill Cassidy (R-LA); Joe Manchin (I-WV), and Roger Marshall (R-KS) introduced H.J. Res. 142, a Joint Disapproval and Nullification Resolution under the Congressional Review Act, (“CRA”), 5 USC §§ 801 et seq., which allows that body to legislatively nullify any regulation within 60 legislative/session days of its publication. Under the CRA, a substantially similar reg cannot be reintroduced without the express permission of Congress. We later reported that on July 10 the House Education and Workforce Committee passed the measure by a 23-18 vote, advancing it for possible consideration by the full House.
Federal Court Stays
We further reported that a suit had been filed challenging the rule. That case is Federation of Americans for Consumer Choice, Inc. v. Department of Labor, No. 6:24-cv-00163 (E.D. Tex. May 2, 2024). The Court on July 25 stayed implementation, holding: “The Court grants Plaintiffs’ motion. As explained below, Plaintiffs are likely to succeed on the merits of their claim because the 2024 Fiduciary Rule conflicts with ERISA in several ways, including by treating as fiduciaries those who engage in onetime recommendations to roll over assets from an ERISA plan to an IRA. DOL’s related amendments to Prohibited Transaction Exemption 84-24 are also unreasonable and arbitrary and capricious.”
The same outcome was observed the next day in American Council of Life Insurers v. DOL, No. 4:24-cv-00482-O (N.D. Tex. Jul. 26, 2024), where the Court held: “Plaintiffs are virtually certain to succeed on the merits. To show a substantial likelihood of success on the merits, Plaintiffs need not show they are entitled to summary judgment on their claim, but must instead present a prima facie case…. Not only is the Rule likely unlawful, it [is] also likely to cause irreparable harm to Plaintiffs…. Without immediate relief, Plaintiffs will likely suffer concrete and irreparable injury. In fact, DOL does not even dispute that Plaintiffs have demonstrated irreparable injury.”
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