An Expert Q&A with Andrew Oringer of Dechert LLP discussing the Fifth Circuit decision in Chamber of Commerce of the United States of America v. U.S. Department of Labor in which the Court vacated the Department of Labor's (DOL) regulation regarding fiduciary investment advice.
On March 16, 2018, the Fifth Circuit in Chamber of Commerce of the United States of America v. U.S. Department of Labor, the US Court of Appeals for the Fifth Circuit held that the US Department of Labor's (DOL) expansion of the scope of the final fiduciary investment advice regulation (the fiduciary rule) to include a broker-dealer and insurance agents both conflicts with the plain text of ERISA and violates the Administrative Procedure Act (APA) ( (5th Cir. Mar. 15, 2018)). The Fifth Circuit vacated the fiduciary rule.
Can you tell us a little about the background of Chamber of Commerce v. DOL?
A number of trade groups challenged the fiduciary rule as being inconsistent with ERISA and generally invalid. They lost at the district court level, as had all other plaintiffs challenging the rule until now. "He who laughs last laughs best," however, and this case could well signal that the rule is turning the corner towards a death knell.
What happens next with the case?
The DOL has already said it won't enforce the rule now. But that may not be overly significant. Private litigants still have potential claims. I would also note that the DOL never had any enforcement authority with respect to individual retirement accounts (IRAs), anyway. It seems to me that of far greater significance is whether the DOL will concede the result in this case. In that event, the question is going to be whether (ding dong) the rule is simply dead - as indeed some are saying. That is something that is going to have to be reviewed and considered.
How does this decision compare with other recent decisions?
This is a decision on the merits, and is a wholesale rebuke of the fiduciary rule. It is the polar opposite of everything we've seen up until now. However, the other cases didn't necessarily deal with totally identical issues. For example, in Market Synergy Group, Inc. v. U.S. Department of Labor, the US Court of Appeals for the Tenth Circuit upheld the DOL decision to exclude fixed indexed annuities from prohibited transaction exemption (PTE) 84-24 and place them in the Best Interest Contract Exemption (BICE) ( (10th Cir. Mar. 13, 2018)).
What should fiduciary investment advisors and practitioners do now?
It's probably a little too early to do anything right now. There needs to be awareness, and a readiness to readjust and change. There should be greatly increased clarity over the next several weeks. But make no mistake - regardless of what ensues, this decision is critically significant.
What are the chances the Supreme Court agrees to rule on the fiduciary rule?
The first question there is - what will the DOL do? If the DOL seeks certiorari, it's unclear, as always, what the Court might do. There is not a completely clear split in the circuits right now, as the issues dealt with in the other cases (for example, Market Synergy Group, Inc. v. U.S. Department of Labor) aren't necessarily identical.
Where does the rule stand if the DOL chooses not to contest the decision?
This might be the most important question of all. It appears as though a decision to let the ruling stand may be the end of the rule. The thinking is that the Fifth Circuit case vacates the rule as a matter of federal law, and, if that decision is allowed to go final, game over. The decision runs against the United States and so as a practical matter it really may be only the United States that can appeal. I suppose that someone could try to compel the United States to appeal, but there's arguably just no basis whatsoever for that here.
While the DOL might consider supporting an appeal to bolster its general rulemaking authority, I would think that, particularly in light of the Presidential Memorandum, the DOL could just as easily express the view that it believes it had proper authority, but that it will not use scarce government resources to continue to pursue a regulation that it now believes is not best for the country and that has now been so roundly discredited by an appellate tribunal. If the decision is allowed to stand, it is starting to appear that the rule would simply be off the books, leaving no basis for future claims (whether private or governmental) under the rule. For example, there would be no possibility of future disagreement in another circuit regarding the rule, because there would be no rule about which to disagree. That would be a striking ending to what had appeared to be a never-ending story.