DOL Fiduciary Rule – Conjunction “Injunction,” What’s Your Function? 

Breakdown of Injunction 

 Federal Judge Reed C. O’Connor’s decision also highlights some positive news for the litigation process. The court had to meet a high standard to grant the stay. 

1. Merit: Finseca and our partners had to demonstrate a substantial likelihood of success on the case’s merits. Judge O’Connor indicated a high likelihood of success because he viewed the new fiduciary rule as almost identical to the one vacated by the 5th Circuit Court of Appeals in 2018. This assessment bodes well for the litigation, especially since Judge O’Connor granted the stay and will preside over and rule on the case rather than a jury.
2. Irreparable Harm: The requirement that immediate and irreparable injury, loss, or damage will result. The judge pointed out that the DOL also concluded that the new rule cost would be almost half a billion dollars in the first year and $2.5 billion afterward. The DOL did not provide substantive evidence of cost analysis and will seek to focus its arguments exclusively on the merits.
3. Hardship: Balancing the harm if the injunction is granted or denied. Judge O’Connor indicated that allowing an agency to proceed with an unlawful regulation is not in the public’s interest. Since it took eight years to create a new rule, maintaining the status quo is unlikely to cause public disservice. 

Injunction: What’s your Function? 

As a result of the stay order, the DOL’s fiduciary rules are now on hold until the litigation and any appeals are completed. The September 23 effective date is no longer applicable. 

With the new fiduciary rule on hold, the five-part test from the 1975 regulation is now applicable in determining fiduciary status. In 2020, the DOL expanded its interpretation of the rule, but a Florida court subsequently parsed it back a bit. Another ongoing litigation in Texas seeks to challenge the entirety of DOL’s 2020 expansion of the five-part test, a pending decision.