September 08, 2016 Practice Points

Suit Challenges Dept. of Labor Regulations

By Karl Bayer

On June 1, 2016, the Chamber of Commerce of the United States of America, the Securities Industry and Financial Markets Association, the Texas Association of Business, and a number of other organizations filed a lawsuit over the U. S. Department of Labor’s regulations regarding fiduciary conflict of interest rules for retirement plans. One of the counts filed in the in the Northern District of Texas challenges regulation provisions that limit a business’s ability to include a class action waiver in its arbitration agreements. According to the plaintiffs, this restriction violates both the Federal Arbitration Act, 9 U.S.C. § 1 et seq., and the Administrative Procedure Act, 5 U.S.C. § 500 et seq. 

More generally, the thrust of the Complaint is summed up in this paragraph: 

In short, the Department [of Labor] is instituting a deliberately unworkable fiduciary definition, with full knowledge that financial services firms and insurance institutions will have no choice but to seek an exemption from it. The Department is conditioning that exemption on an agreement to adhere to practices that the Department has no authority to require or enforce, and that will therefore be administered instead by the class action bar.

Keywords: alternative dispute resolution, litigation, class action waiver, fiduciary, conflict of interest rules, Department of Labor regulations 

Karl Bayer is the founder of the Karl Bayer Dispute Resolution in Austin, Texas.

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