Thrivent Financial Wins Battle Over Labor Dept. Arbitration Ban

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By Carmen Castro-Pagan

Thrivent Financial for Lutherans convinced a federal judge in Minnesota to temporarily stop the Labor Department from enforcing the fiduciary rule’s anti-arbitration provision against the nonprofit financial entity.

Thrivent showed the threat of irreparable harm to its business model, both now and in the future, was sufficient to have its request for a preliminary injunction granted, Judge Susan Richard Nelson held Nov. 3 ( Thrivent Fin. for Lutherans v. Acosta , 2017 BL 396118, D. Minn., No. 0:16-cv-03289-SRN-DTS, order granting preliminary injunction 11/3/17 ).

The decision in favor of Thrivent, a nonprofit organization that last year sued the DOL over the fiduciary rule’s arbitration ban, comes days after the department sent a final rule that would delay for 18 months key parts of the Obama-era regulation to the White House’s Office of Management and Budget for review. The anti-arbitration provision, which seeks to restrict financial advisers from requiring retirement savers to waive their right to class litigation, is part of the rule’s best-interest-contract exemption, which would be included in the delay.

Despite the DOL’s current efforts to push back the applicability date of the fiduciary rule’s best-interest-contract exemption—which is currently set for Jan. 1, 2018—its own guidance shows that regulated entities like Thrivent may incur undue expenses to comply with its conditions and requirements, Nelson said.

The exemption allows financial advisers to use certain compensation arrangements that might otherwise be forbidden as long as they put their client’s best interest first. Under the exemption, Thrivent would be required to abandon its longstanding practice of resolving disputes through alternative methods and allow investors to sue it in court.

The “current state of regulatory limbo threatens Thrivent” with harm that can’t be remedied monetarily, Nelson said. To comply with the anti-arbitration condition’s applicability date, Thrivent would have to take actions now that involve changes to its business model, and undertaking such changes may irreparably disadvantage Thrivent against its competitors, Nelson said.

Nelson’s ruling means that Thrivent won’t be considered out of compliance with the fiduciary rule’s best-interest-contract exemption as a result of maintaining its alternative dispute resolution program.

Thrivent is pleased with the ruling, a company spokeswoman told Bloomberg Law Nov. 6 via email. It will allow Thrivent to continue to operate its Member Dispute Resolution Program without violating the DOL’s fiduciary rule, she said.

Thrivent supports the overall goal of the fiduciary rule, but it pursued this action to protect and preserve its unique governance processes, which serve the best interests of its members, Brad Hewitt, Thrivent’s chief executive officer, told Bloomberg Law Nov. 6 via email.

The decision is the latest development in a dispute that started a year ago when Thrivent accused the agency of exceeding its statutory authority by attempting, with its new fiduciary rule, to force all disputes into federal court rather than allowing for alternative dispute resolution methods.

Earlier this year, the DOL changed positions and announced that it would no longer defend the rule’s anti-arbitration condition because it was at odds with federal law. The DOL later removed documents it once filed in court in the Thrivent case to support the anti-arbitration condition and asked the court to temporarily halt the proceedings.

Nelson granted this DOL request. Halting the case will allow the administrative process to fully develop, possibly resolving the dispute in a more economic and efficient way, Nelson said.

The department didn’t immediately respond to Bloomberg Law’s request for comment.

Cozen O’Connor and Greene Espel PLLP represent Thrivent. The Department of Justice’s Federal Programs Branch Civil Division represents the DOL.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at

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

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