Three states trying to save the Labor Department's fiduciary rule are appealing a decision by a federal court to deny their attempt to intervene in the case.
California, New York and Oregon filed a motion late Wednesday in the 5th U.S. Circuit Court of Appeals seeking a rehearing of a May 2 ruling by a three-judge panel that rejected a request to enter the case as defendants.
The states, along with the older-Americans interest group AARP, are seeking to intervene in a lawsuit against the DOL rule brought by financial industry opponents of the measure. The would-be defenders of the regulation want to join the case in order to get a rehearing before the full 5th Circuit of a March 15 split decision that vacated the DOL regulation.
The Department of Justice, acting on behalf of the DOL, failed to appeal the 5th Circuit decision to strike down the rule on April 30, the deadline for filing the motion.
"The federal government is no longer pursuing this appeal," the states wrote in their motion Wednesday. "Given that posture, the exceptional importance of the issues, and the grave harm the states will suffer as a result of the panel opinion — billions of dollars in lost retirement income to their residents and tens of millions of dollars in lost tax revenue — the states respectfully request that the court reconsider the decision."
The 5th Circuit was supposed to issue a mandate by May 7 making its March 15 decision effective. It has not yet done so. In the meantime, the DOL released a temporary enforcement policy regarding the partially implemented fiduciary rule, which requires brokers to act in the best interests of their clients in retirement accounts.
On March 15, the 5th Circuit struck down the rule, arguing that the DOL exceeded its statutory authority in promulgating the regulation.
Meanwhile, the Securities and Exchange Commission released its own investment-advice-reform package on April 17.