Chamber of Commerce of the United States of America et al v. U.S. Department of Labor et al

RESPONSE

N.D. Tex.June 20, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA, FINANCIAL SERVICES INSTITUTE, INC., FINANCIAL SERVICES ROUNDTABLE, GREATER IRVING-LAS COLINAS CHAMBER OF COMMERCE, HUMBLE AREA CHAMBER OF COMMERCE DBA LAKE HOUSTON AREA CHAMBER OF COMMERCE, INSURED RETIREMENT INSTITUTE, LUBBOCK CHAMBER OF COMMERCE, SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION, and TEXAS ASSOCIATION OF BUSINESS, Plaintiffs, v. THOMAS E. PEREZ, SECRETARY OF LABOR, and UNITED STATES DEPARTMENT OF LABOR, Defendants. Civil Action No. 3:16-cv-1476-M STATEMENT IN RESPONSE TO DEFENDANTS’ UNOPPOSED MOTION TO CONSOLIDATE CASES Plaintiffs do not oppose defendants’ request to consolidate this case with two related cases pending in this district, subject to the parties’ agreement that these three cases will retain their separate identities, allowing each set of plaintiffs to file separate briefs, make separate oral arguments, and independently make other litigation decisions. See Dkt. 37. While the parties will soon submit a joint proposed schedule for prompt summary-judgment briefing and oral Case 3:16-cv-01476-M Document 38 Filed 06/20/16 Page 1 of 5 PageID 249 2 argument following consolidation, see id. at 3 n. 2, plaintiffs write separately to emphasize the importance that the cases move expeditiously to resolution.* These cases concern a set of regulations recently adopted by the U.S. Department of Labor (the “Department”) that would make extensive changes to requirements and practices in the retirement savings marketplace. Affected entities must comply with the Department’s new “Fiduciary Rule” and a large portion of related prohibited transaction exemptions by April 10, 2017, and the remainder by January 1, 2018. See Definition of the Term “Fiduciary”; Conflict of Interest Rule—Retirement Investment Advice, 81 Fed. Reg. 20,946/1, 21,084/2, 21,138/2 (Apr. 8, 2016). Achieving compliance with these deadlines requires affected entities to institute changes now in their systems, practices, and products. Even under the Department’s own accounting of the costs of the Rule (which plaintiffs contend is flawed), those changes will be extensive and cost billions of dollars. See 81 Fed. Reg. at 20,953, Table 1; Regulating Advice Markets, Definition of the Term “Fiduciary” Conflicts of Interest – Retirement Investment Advice, Regulatory Impact Analysis for Final Rule and Exemptions, Dep’t of Labor, 10 (April 2016) (“Regulatory Impact Analysis”). As just one example, the Department has stated that affected entities—which include many of plaintiffs’ members—must develop “comprehensive compliance and supervisory system[s],” revise “policies and procedures and training programs,” account for “insurance increases,” and prepare the disclosures required by the rulemaking and establish mechanisms for distributing those disclosures, among other things. 81 Fed. Reg. at 20,953, Table 1. * Under the proposed schedule that the parties agreed to in conjunction with their agreement regarding consolidation, briefing would be completed on October 7, 2016 and oral argument is requested in mid- to late-October, or at the Court’s earliest convenience thereafter. Case 3:16-cv-01476-M Document 38 Filed 06/20/16 Page 2 of 5 PageID 250 3 Another example of the burdens and costs being incurred now concerns the “independent marking organizations” (“IMOs”) that distribute fixed-indexed annuities. IMOs do not satisfy the Best Interest Contract exemption’s definition of “Financial Institution,” which leaves insurance-only licensed agents who are part of an IMO no viable means of complying with the Rule. See Dkt. 1 ¶ 128. As a result, some of these insurance agents will be pressured to exit the fixed-indexed annuity market, which would disrupt the distribution of fixed-indexed annuities and have adverse effects on the costs and availability of those products for consumers. The Department itself estimated that the start-up cost of compliance for affected industries will be $5 billion. Regulatory Impact Analysis at 10. The Department further acknowledged that “[c]osts are substantially higher in the first year as firms first implement changes.” Id. at 206. Expeditious resolution of these cases on summary judgment would—if plaintiffs’ summary judgment motion is granted—substantially avert these and other burdens on and costs to plaintiffs’ members and American consumers. Plaintiffs respectfully request that the Court consider these factors as it addresses defendants’ motion to consolidate and the parties’ forthcoming joint motion regarding the case schedule. Case 3:16-cv-01476-M Document 38 Filed 06/20/16 Page 3 of 5 PageID 251 4 Respectfully submitted, Dated: June 20, 2016 s/ Eugene Scalia James C. Ho, Texas Bar No. 24052766 Russell H. Falconer, Texas Bar No. 24069695 GIBSON, DUNN & CRUTCHER LLP 2100 McKinney Avenue Suite 110 Dallas, TX 75291 Telephone: (214) 698-3264 Facsimile: (214) 571-2917 jho@gibsondunn.com rfalconer@gibsondunn.com Eugene Scalia* Jason J. Mendro* Paul Blankenstein* Rachel E. Mondl* Gibson, Dunn & Crutcher LLP 1050 Connecticut Avenue, N.W. Washington, D.C. 20036 Telephone: (202) 955-8500 Facsimile: (202) 467-0539 escalia@gibsondunn.com jmendro@gibsondunn.com pblankenstein@gibsondunn.com rmondl@gibsondunn.com Counsel for Plaintiffs Chamber of Commerce of the United States of America, Financial Services Institute, Inc., Financial Services Roundtable, Greater Irving-Las Colinas Chamber of Commerce, Humble Area Chamber of Commerce DBA Lake Houston Area Chamber of Commerce, Insured Retirement Institute, Lubbock Chamber of Commerce, Securities Industry and Financial Markets Association, and Texas Association of Business *Admitted pro hac vice (continued on next page) Case 3:16-cv-01476-M Document 38 Filed 06/20/16 Page 4 of 5 PageID 252 5 Steven P. Lehotsky* U.S. CHAMBER LITIGATION CENTER 1615 H Street, NW Washington, DC 20062 Telephone: (202) 463-5337 Facsimile: (202) 463-5346 slehotsky@uschamber.com Counsel for Plaintiff Chamber of Commerce of the United States of America J. Lee Covington II** INSURED RETIREMENT INSTITUTE 1100 Vermont Avenue, N.W. Washington, DC 20005 Telephone: (202) 469-3000 Facsimile: (202) 469-3030 lcovington@irionline.org Counsel for Plaintiff Insured Retirement Institute David T. Bellaire* Robin Traxler** FINANCIAL SERVICES INSTITUTE, INC. 607 14th Street, N.W. Suite 750 Washington, DC 20005 Telephone: (888) 373-1840 Facsimile: (770) 980-8481 david.bellaire@financialservices.org robin.traxler@financialservices.org Counsel for Plaintiff Financial Services Institute, Inc. Kevin Carroll* Ira D. Hammerman** SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION 1101 New York Avenue, N.W. 8th Floor Washington, DC 20005 Telephone: (202) 962-7300 Facsimile: (202) 962-7305 kcarroll@sifma.org ihammerman@sifma.org Counsel for Plaintiff Securities Industry and Financial Markets Association Kevin Richard Foster* Felicia Smith* FINANCIAL SERVICES ROUNDTABLE 600 13th Street, N.W. Suite 400 Washington, DC 20005 Telephone: (202) 289-4322 Facsimile: (202) 589-2526 richard.foster@FSRoundtable.org felicia.smith@FSRoundtable.org Counsel for Plaintiff Financial Services Roundtable *Admitted pro hac vice **Pro hac vice application submitted Case 3:16-cv-01476-M Document 38 Filed 06/20/16 Page 5 of 5 PageID 253