5th Circuit denies states’ second attempt to defend DOL fiduciary rule

The 5th U.S. Circuit Court of Appeals denied Tuesday another effort by attorneys general from California, New York and Oregon to defend the Labor Department's fiduciary rule.

Last week, the states filed a motion asking the court to reconsider its May 2 decision rejecting their motion to enter a lawsuit against the rule as defendants. As it did in its May 2 decision, the three-judge panel split, 2-1, in deciding not to take another look at the states' motion.

The three judges also ruled unanimously Tuesday to deny the states' alternative motion to permit a rehearing of their effort to intervene by the full 17 judges of the 5th Circuit.

The states were seeking to enter the case to appeal a March 15 split decision by the same three judges to vacate the DOL rule. The majority held that the agency had exceed its authority in promulgating the regulation, which would require brokers to act in the best interests of their clients in retirement accounts.

The March 15 ruling was the first victory by financial industry opponents in a series of suits against the rule. The Department of Justice, on behalf of the DOL, did not file a motion to appeal the March 15 decision before the April 30 deadline.

When it was clear that the Trump administration would drop its defense of the rule, the states, as well as the older-Americans interest group AARP, tried to intervene in the case and get a rehearing of the March 15 decision by the full 5th Circuit. They argued that the rule was lawful and necessary to protect the retirement savings of millions of Americans.

Although the DOJ has until June 13 to appeal to the Supreme Court, it looks likely the DOL fiduciary rule will die in court. The Trump administration had delayed full implementation of the rule while it conducted a reassessment that could have led to major changes in the regulation.

The 5th Circuit has not yet issued the mandate that would put its March 15 decision into effect.

While the DOL rule falters, the Securities and Exchange Commission has released an investment-advice reform proposal that has an Aug. 7 deadline for public comment.