DOL Again Signals Death of Fiduciary Rule’s Arbitration Ban

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

A legal challenge to the fiduciary rule’s anti-arbitration provision will “likely be mooted in the near future,” the Department of Labor told a federal district court ( Thrivent Fin. for Lutherans v. Acosta , D. Minn., No. 0:16-cv-03289-SRN-DTS, letter to judge filed 8/23/17 ).

The statement is the latest indication that the department may be working to undo portions of the Obama-era rule, including the anti-arbitration provision, which is aimed at making it easier for investors to bring class actions against financial advisers. The DOL announced in July that it would no longer defend this provision in court. On Aug. 23, the department opposed an attempt by Thrivent Financial for Lutherans to seek a court order blocking the provision, telling the court it would be better to pause the lawsuit than continue to litigate a “claim regarding a provision that is not currently applicable to Plaintiff and which will likely be mooted in the near future.”

The DOL offered to submit a brief by Sept. 8 on the “mootness” question, which Judge Susan Richard Nelson expressed “particular concern” about during a recent hearing, according to the department. It also hinted that a specific policy against enforcing the anti-arbitration provision could be on the horizon, offering to address in the brief “any developments that would relate to mootness and our pending stay motion—such as a specific non-enforcement policy.”

The fiduciary rule requires financial advisers to act in their client’s best interest when giving retirement investment advice. Although portions of the rule went into effect June 9, the Trump administration has delayed other parts of the rule on several occasions. Earlier this month, the department proposed delaying portions of the rule until July 2019.

Thrivent’s lawsuit stands out from other cases challenging the fiduciary rule because it doesn’t oppose the whole rule—just those parts that limit the use of alternative dispute resolution methods, including arbitration. Last month, Thrivent said the DOL’s decision to stop defending the anti-arbitration provision warranted a court ruling in Thrivent’s favor. On Aug. 10, Nelson held a hearing on the DOL’s request to put the litigation on hold.

The case is pending in the U.S. District Court for the District of Minnesota.

The DOL represents itself. Cozen O’Connor and Greene Espel PLLP represent Thrivent.

To contact the reporter on this story: Jacklyn Wille in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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