Market Synergy Group, Inc. v. United States Department of Labor et al

MOTION for Summary Judgment

D. Kan.December 30, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS MARKET SYNERGY GROUP, INC, Plaintiff, v. UNITED STATES DEPARTMENT OF LABOR, et al., Defendants. ) ) ) ) ) ) ) ) ) ) ) ) Civil Action No. 5:16-cv-04083 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND MEMORANDUM IN SUPPORT THEREOF Pursuant to its authority under the Employee Retirement Income Security Act (“ERISA”), the Department of Labor (“the Department”) engaged in a lengthy notice-and-comment process, determined that conflicts of interest in the market for retirement investment advice are harming investors contrary to ERISA’s purposes, and thus promulgated the Conflict of Interest Rule and accompanying exemptions at issue here to better protect Americans’ retirement security. The Department promulgated those protections only after it solicited feedback from the industry and others and carefully considered that feedback, along with numerous studies and other evidence regarding the market for retirement investment advice. In light of that information, and the varying risks to investors posed by certain conflicted transactions, the rulemaking comports with ERISA’s requirements that the Department grant administrative exemptions only if they serve the interests and protect the rights of retirement investors. Plaintiff’s challenge to these protections in the rulemaking should therefore be rejected. Case 5:16-cv-04083-DDC-KGS Document 67 Filed 12/30/16 Page 1 of 5 2 Plaintiff, Market Synergy Group, Inc., filed its Complaint in this case on June 8, 2016 (ECF No. 1), and thereafter filed a motion for a preliminary injunction on June 17, 2016 (ECF No. 10). In responding to Plaintiff’s motion for a preliminary injunction, Defendants, the United States Department of Labor and Thomas E. Perez, thoroughly addressed the merits of Plaintiff’s claims in briefing, oral argument, and supplemental briefing thereafter. On November 28, 2016, this Court issued a Memorandum and Order (ECF No. 59), denying Plaintiff’s motion for a preliminary injunction, based largely on its conclusion that Plaintiff is not likely to succeed on the merits of any of its claims, see id. at 59, and finding also that Plaintiff had likewise failed to establish the other three requirements for a preliminary injunction. Id. at 25. For the reasons stated in the Court’s Order, as well as those set forth by the Department in its filings and at oral argument in this case, the Department moves for summary judgment on Plaintiff’s Complaint. Mindful of the extensive briefing and argument in this case already provided to the Court, the Department respectfully refers the Court to, and incorporates by reference, its Memorandum in Opposition to Plaintiff’s motion for a preliminary injunction (“Defs.’ Mem.”), as corrected (ECF No. 41-1); its Supplemental Brief Regarding Issues Arising at the Preliminary Injunction Hearing (“Defs.’ Suppl. Br.”) (ECF No. 52); and its September 21, 2016 oral argument for a full statement of the reasons that Plaintiff’s claims should be rejected on their merits. As more thoroughly explained in those memoranda and at argument, the Department is entitled to summary judgment because this case does not present any genuine issue of material fact and because Defendants are entitled to judgment as a matter of law. The Court should decide this case on the basis of the administrative record, relevant portions of which have been filed with the Court. See ECF No. 48; Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 420 Case 5:16-cv-04083-DDC-KGS Document 67 Filed 12/30/16 Page 2 of 5 3 (1971) (judicial review of APA claims based on the “administrative record that was before [the agency] at the time [it] made [its] decision”). The record demonstrates, and the law establishes, that the Department is entitled to summary judgment on each count of Plaintiff’s Complaint: • Count 1: The Department provided adequate notice of its decision to require conflicted transactions involving fixed indexed annuities (“FIAs”) to proceed, if at all, in accordance with the conditions of the Best Interest Contract (“BIC”) Exemption, rather than Prohibited Transaction Exemption (“PTE”) 84-24 as amended, see Order at 27- 40; Defs.’ Mem. at 32-361; Defs.’ Suppl. Br. at 1-2; Hr’g Tr. at 78-96, Sept. 21, 2016; • Count 2: The Department had reasonable bases, and provided a reasoned explanation, for its decision to require conflicted FIA transactions to proceed, if at all, in accordance with the conditions of the BIC Exemption, rather than PTE 84-24 as amended, see Order at 41-51; Defs.’ Mem. at 36-42; Defs.’ Suppl. Br. at 2-3; Hr’g Tr. at 96-115, Sept. 21, 2016; • Count 3: The Department considered the effects of the rulemaking challenged here on the independent agent distribution channel, as well as small businesses and consumers, and concluded that the benefits of the rulemaking greatly outweigh the overall costs, including those costs, see Order at 51-57; Defs.’ Mem. at 42-48; Defs.’ Suppl. Br. at 3- 4; Hr’g Tr. at 115-37, 142-44, Sept. 21, 2016; and 1 In citing their various memoranda, Defendants respectfully refer the Court to the portions of the Administrative Record filed with the Court that are cited therein. Case 5:16-cv-04083-DDC-KGS Document 67 Filed 12/30/16 Page 3 of 5 4 • To the extent Plaintiff’s statutory authority argument has not been waived or abandoned, the Department has shown that it acted well within its statutory authority to grant conditional exemptions, 29 U.S.C. § 1108(a); 29 U.S.C. § 4975(c)(2), when it granted the BIC Exemption and amended PTE 84-24. See Order at 57-59; Defs.’ Mem. at 51-54; Defs.’ Suppl. Br. at 1; Hr’g Tr. at 73-78, Sept. 21, 2016. The Department also opposes Plaintiff’s cross-motion for summary judgment filed this same day. Pursuant to the Court’s December 20, 2016 order, the Department reserves the right to file a short opposition memorandum of no more than five pages on or before January 5, 2017, if it deems it appropriate to respond to any of the arguments in Plaintiff’s cross-motion. Dated: December 30, 2016 Of Counsel: M. PATRICIA SMITH Solicitor of Labor G. WILLIAM SCOTT Associate Solicitor EDWARD D. SIEGER Senior Attorney ELIZABETH HOPKINS Counsel for Appellate and Special Litigation MEGAN HANSEN Attorney for Regulations United States Department of Labor Office of the Solicitor Respectfully submitted, BENJAMIN C. MIZER Principal Deputy Assistant Attorney General TOM BEALL Acting United States Attorney JUDRY L. SUBAR Assistant Director Civil Division, Federal Programs Branch /s/ Galen N. Thorp GALEN N. THORP (VA Bar # 75517) EMILY NEWTON (VA Bar # 80745) Trial Attorneys United States Department of Justice Civil Division, Federal Programs Branch 20 Massachusetts Ave. NW, Room 6140 Washington, D.C. 20530 Tel: (202) 514-4781 / Fax: (202) 616-8460 galen.thorp@usdoj.gov emily.s.newton@usdoj.gov Counsel for Defendants Case 5:16-cv-04083-DDC-KGS Document 67 Filed 12/30/16 Page 4 of 5 5 CERTIFICATE OF SERVICE On December 30, 2016, I electronically submitted the foregoing document with the clerk of court for the U.S. District Court for the District of Kansas, using the electronic case filing system of the court. I hereby certify that I have served the plaintiff electronically or by another manner authorized by Federal Rule of Civil Procedure 5(b)(2). /s/ Emily S. Newton EMILY S. NEWTON Case 5:16-cv-04083-DDC-KGS Document 67 Filed 12/30/16 Page 5 of 5