Judge with a history of striking down federal rules will hear DOL lawsuit

A lawsuit filed by nine industry trade associations against the latest Department of Labor fiduciary rule will be heard by a Texas judge with a reputation for vacating federal rules.

Several powerful trade groups – including the American Council of Life Insurers and the National Association of Insurance and Financial Advisors – filed the lawsuit Friday in the U.S. District Court for the Northern District of Texas, which is within the jurisdiction of the Fifth Circuit Court of Appeals.

The Fifth Circuit overturned the Obama administration's fiduciary rule in 2018. Plaintiffs are asking the court for a preliminary injunction, which would freeze the rule until the case is litigated.

Otherwise, the DOL’s Retirement Security Rule, which would extend fiduciary duty to most sales of annuities and other financial products, is scheduled to begin taking effect Sept. 23.

Judge Reed C. O’Connor is assigned to hear the case. He ordered both parties to file “an agreed-upon briefing schedule” no later than June 3.

O’Connor made headlines in 2018 when he struck down the Affordable Care Act in a ruling panned by both conservatives and liberals. The judge ruled that when Congress reduced the ACA's penalty for not having health insurance to $0, the rest of the law became effectively unconstitutional.

That ruling was reversed on appeal.

Similar rulings

Nominated to the federal bench by President George W. Bush in 2007, O’Connor has long been active in the conservative Federalist Society. Additional relevant rulings include:

In 2015, O'Connor held that a portion of the federal Gun Control Act of 1968 was unconstitutional. This ruling was also reversed on appeal.

In 2016, O'Connor granted a preliminary injunction against enforcement of Section 1557 of the Affordable Care Act (prohibiting sex discrimination in federally funded health programs) as a likely violation of the Religious Freedom Restoration Act.

In 2018, O'Connor ruled that the Indian Child Welfare Act was unconstitutional. The Fifth Circuit reversed O'Connor's ruling on appeal, and the reversal was upheld by the Supreme Court.

In 2021, O'Connor ruled that the First Amendment and the Religious Freedom Restoration Act provide religious employers an exemption from Title VII of the Civil Rights Act's ban on discrimination "on the basis of...sex."

In 2022, O'Connor issued a preliminary injunction blocking the Pentagon from enforcing a COVID-19 vaccine requirement for Navy Seals. O'Connor said the U.S. government had "no license" to abrogate the freedoms of the Navy SEALs. The preliminary injunction was partially stayed by the Supreme Court.

A second Texas lawsuit

The Federation of Americans for Consumer Choice, joined by several independent insurance agents, filed the first lawsuit against the DOL rule in the Eastern District of Texas. FACC is also asking for an injunction.

That case is being heard by Judge Jeremy D. Kernodle, a Trump appointee with a staunch limited-government conservative background.

DOL rule opponents argue that the department exceeds its authority granted by Congress and runs afoul of precedent set by the Fifth Circuit in its 2018 decision to overturning the Obama-era fiduciary rule.

InsuranceNewsNet Senior Editor John Hilton 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.

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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.