A Minnesota judge sided with plaintiffs in a lawsuit to stop the Department of Labor fiduciary rule, but also granted a stay.
In a Nov. 2 decision, Judge Susan Richard Nelson granted a preliminary injunction to Thrivent Financial, accepting plaintiff's claims of irreparable harm if the class-action provisions contained in the DOL rule are permitted to become law.
Nelson also sided with the DOL in granting a stay requested by regulators. The department is close to publishing an 18-month delay of the second phase of the fiduciary rule, which includes the class-action component found within the Best Interest Contract Exemption. The delay would push the applicability date to July 1, 2019.
Regulators have hinted to the court that the issues Thrivent is challenging might be resolved during the delay period. Legal experts say they expect the class-action portion to be excised from the rule by the Trump DOL.
"Notwithstanding DOL’s current efforts to extend the BIC Exemption’s applicability date,
its own guidance recognizes that regulated entities such as Thrivent 'may incur undue
expense to comply with conditions or requirements that [DOL] ultimately determines to
revise or repeal,'" the Nelson opinion reads.
Filed in September 2016, Thrivent’s 29-page lawsuit claimed the DOL rule will render its dispute resolution mechanism obsolete. Thrivent’s mechanism prohibits class actions.
“Nothing in ERISA gives DOL authority to preclude financial institutions and their clients from entering into and enforcing arbitration agreements that include class action waivers,” Thrivent's complaint reads.
The fiduciary rule took effect in part on June 9. It requires advisors and agents to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected] Follow him on Twitter @INNJohnH.