DOL Files to Pause Appeal of Fiduciary Rule

On Tuesday, the Department of Labor filed a motion in the U.S. 5th Circuit Court of Appeals to hold its appeals in two court cases about the DOL’s fiduciary rule, saying the new administration and agency officials need time to onboard and familiarize themselves with the cases.

In the motion, the government noted that the opposing parties, led by the American Council of Life Insurers and the Federation of Americans for Consumer Choice, do not oppose the motion.

Notices of appeal had been filed by the DOL in September 2024 in U.S. District Court for the Northern District of Texas and U.S. District Court for the Eastern District of Texas, Tyler Division, with a full appeal to the U.S. 5th Circuit Court of Appeals pending after two district court rulings stayed the effective date of the fiduciary rule regulation. 

“To allow new DOL officials sufficient time to become familiar with the issues in these cases and determine how they wish to proceed, the government respectfully moves to place these consolidated appeals in abeyance, with status reports due at 60-day intervals,” the agency said.

“In the event this Court denies the motion for an abeyance, all parties jointly request a one-week extension, to and including February 21, 2025, for appellees to file their response briefs,” the filing continued.

History of the Fiduciary Rule Battle

The fiduciary rule, formerly called the Retirement Security Rule, was the DOL’s second attempt in the past decade to bring retirement investment advice, including individual retirement account rollovers and small employer-plan advisement, under fiduciary obligation. The rule had been finalized with a September 23, 2024, start date but hit legal roadblocks from complaints filed by industry firms and member organizations. 

The Northern District of Texas put a national stay on the rule in a July 26, 2024, opinion in American Council of Life Insurers v. DOL. One day prior to that ruling, 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. 

In 2018, the 5th Circuit, which hears appeals from federal courts in Louisiana, Mississippi and Texas, invalidated a DOL fiduciary rule in Chamber of Commerce v. U.S. Department of Labor. The DOL argued that the rule currently being challenged is different, in part because it more clearly addresses when retirement plan rollover advice and annuity sales fall under fiduciary guidance. 

U.S. District Judge Reed C. O’Connor, however, presiding in the Northern District of Texas, wrote in granting the stay that Chamber played a role in his decision. 

“As a whole, Defendants’ arguments [against the lawsuit] are nothing more than an attempt to relitigate  the Chamber decision,” O’Connor wrote. “Because the Fifth Circuit’s Chamber decision unambiguously forecloses all of Defendant’s arguments, the Court need not repeat why those arguments fail here.”