Federal District Court Enjoins DOL From Implementing or Enforcing BICE’s Prohibition on Class Action Waivers Against Thrivent

On November 3, 2017, the United States District Court, District of Minnesota issued a preliminary injunction against the DOL, enjoining the DOL from implementing or enforcing the BICE’s class action waiver prohibition against Thrivent Financial for Lutherans. The Court’s Order in Thrivent Financial for Lutherans v. R. Alexander Acosta, Secretary of Labor and United States Department of Labor, Case No. 16-cv-3289 (D. Minn.), is here.

Under the provisions of the full BICE (if the full BICE ever comes into effect), financial institutions must enter into written contracts with retirement advisers, acknowledging the financial institution’s status as a fiduciary and containing numerous other onerous written obligations and disclosures. Although the Best Interest Contract required by the BICE would be permitted to include individual arbitration agreements, the Best Interest Contract would not be allowed to include a waiver of a customer’s right to file or participate in a class action in Court.

The DOL previously conceded back in July that this prohibition on class action waivers violates the Federal Arbitration Act (the FAA).

Thrivent sued the DOL, asserting that the BICE’s bar on class action waivers violates the FAA and exceeds the DOL’s statutory authority. Thrivent sought: (i) a declaratory judgment that the BICE’s requirement that Best Interest Contracts must permit class actions in court violates the FAA and the Administrative Procedure Act; and (ii) a permanent injunction prohibiting the DOL from enforcing that provision.

On November 3, 2017, the District Court granted Thrivent’s motion for a preliminary injunction. The Court found that, because the DOL has conceded that the prohibition on class action waivers in the BICE violates the FAA, Thrivent had a reasonable likelihood of success on the merits.

After issuing the preliminary injunction, the Court then stayed the case, in light of the DOL’s ongoing reconsideration of the DOL Fiduciary Duty Rule and the BICE.

So, while this specific requirement of the BICE is almost certainly dead, it remains to be seen what portions of the full BICE, if any, will ever come to fruition.

About Julie Firestone

Julie Firestone is a member of Briggs and Morgan's Business Litigation Section and the Financial Markets Group. Julie practices primarily in the following areas: complex commercial disputes and class actions; securities litigation and arbitration; SEC and FINRA regulatory investigation and enforcement; and shareholder and partnership disputes. Julie represents corporations, investment firms, broker-dealers, insurance companies, issuers of securities, registered representatives and insurance agents in class actions, regulatory proceedings and other adversary matters. She also focuses on customer complaints and regulatory compliance, as well as customer disputes in arbitration. Julie’s legal experience includes matters involving securities fraud, breach of contract, common law fraud, RICO, breach of fiduciary duty, suitability, selling away and unauthorized trading.
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