Judge Approves DOL’s Motion to Pause Fiduciary Rule Litigation

A federal judge for the U.S. Fifth Circuit Court of Appeals granted a motion filed by the Department of Labor to delay its appeals in two court cases about the department’s 2024 Retirement Security Rule—also known as the fiduciary rule.

Judge Catharina Haynes granted the DOL’s unopposed motion to stay proceedings in the cases to allow new DOL officials sufficient time to become familiar with the issues in these cases and determine how they wish to proceed.

The court granted a 60-day abeyance in the case between the Federation of Americans for Consumer Choice, Inc. et al. v. U.S. Department of Labor and Acting Secretary Vincent Micone.

The DOL sought the stay in a filing on February 11.

The fiduciary rule was previously finalized by the department and scheduled to take effect September 23, 2024, but hit legal roadblocks in the form of complaints filed by industry firms and member organizations.

The U.S. District Court for Northern District of Texas put a national stay on the rule in a July 26, 2024 opinion in the case, American Council of Life Insurers v. DOL. One day prior to that ruling, the federal court in the Eastern District of Texas had also granted a stay for the plaintiffs in a separate case, Federation of Americans for Consumer Choice Inc. et al. v. DOL et al. 

Both lawsuits sought to block the rule, which required “trusted investment advice providers” and financial institutions working with them to operate as fiduciaries in most cases when advising on retirement plan design, annuity sales and individual retirement account rollovers.

Plaintiffs have argued in both suits that the DOL’s rule exceeded its authority under federal law, is “arbitrary and capricious” and had the “same legal defects” as the rule attempted in 2016, which was eventually struck down by the Fifth Circuit Court of Appeals.

The DOL has since argued that the rule currently being challenged is different from the one blocked 2016, in part because it more clearly addresses when retirement plan rollover advice and annuity sales fall under fiduciary guidance.

While Micone is listed as a defendant on the case filed by the Federation of Americans for Consumer Choice, President Donald Trump’s nominee for Secretary of Labor, Lori Chavez-DeRemer, awaits Senate confirmation. The Senate Committee on Health, Education, Labor and Pensions last week held a confirmation hearing on her nomination.