Thrivent Claims DOL’s BIC Arbitration Shift Makes its Case

The Labor Department’s pullback on its support for the Best Interest Contract’s (BIC) condition restricting class-action waivers has revived another fiduciary regulation litigant’s attention.

Last fall Thrivent Financial for Lutherans filed suit in the U.S. District Court for the District of Minnesota, claiming that the requirements of the Best Interest Contract Exemption (the “BICE”) would, “by its terms and in its effect, require Thrivent either to cease conducting certain business that is beneficial to its Members or to abandon its longstanding commitment to resolving Member disputes amicably and through private, one-on-one mediation and arbitration.” Earlier this year, citing President Trump’s Feb. 3, 2017 memorandum to the Secretary of Labor directing the Secretary to “examine the Fiduciary Duty Rule,” Judge Susan Nelson opted to dismiss that request.

But that was before the recent Labor Department filing of a brief in another suit involving the fiduciary regulation — a brief that, while it maintained the Labor Department’s support for the fiduciary regulation and the DOL’s right to impose those new requirements, also commented that the BIC Exemption’s condition restricting class-litigation waivers should be vacated insofar as it applies to arbitration clauses because advisers (and here the “e” reference is appropriate) who wanted to qualify for the BIC would have been blocked from prohibiting class actions. In the brief, the Labor Department referred to this result as “a discriminatory obstacle to arbitration that cannot be harmonized” with the Federal Arbitration Act.

Thrivent’s ‘Surprise’

In a letter to Judge Nelson from counsel representing Thrivent in their litigation against the Labor Department, Mark Johnson notes that, “To Thrivent’s surprise, given DOL’s most recent arguments to this Court, DOL recently filed a brief with the 5th Circuit stating that the United States Government “is no longer defending” the validity of the BIC Exemption’s anti-arbitration condition—the specific condition that is at issue in this case.” Moreover, the filing notes that the DOL told the 5th Circuit that it was “…no longer defending the BIC Exemption’s condition restricting class-litigation waivers insofar as it applies to arbitration agreements,” because the condition is “a discriminatory obstacle to arbitration that cannot be harmonized with the FAA and Concepcion,” going on to note that DOL “acknowledges that the condition should therefore be invalidated and severed from the BIC Exemption.”


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This, Thrivent claims, is “…entirely consistent with Thrivent’s arguments—and fundamentally irreconcilable with DOL’s arguments to this Court as recently as four weeks ago.” Thrivent goes on to claim that the legal position DOL has taken in the 5th Circuit “makes clear that DOL has abandoned the arguments that it previously made to this Court, and DOL thus acknowledges that the legal contentions made in support of its cross-motion for summary judgment and in opposition to Thrivent’s summary judgment motion are not warranted by existing law.”

Thrivent goes on to lay out a side-by-side comparison of the DOL’s stated 5th Circuit position alongside Thrivent’s position, concluding that, as it had previously argued, “…this Court should enter summary judgment and a permanent injunction in Thrivent’s favor. Further, DOL should withdraw its cross-motion for summary judgment (or the Court should deny it) because DOL no longer stands behind the legal arguments asserted therein.”

‘Stay’ Backed?

Thrivent then explains that prior to sending this letter, their counsel spoke with DOL’s counsel regarding their approach to this case in light of the position they have now taken in the 5th Circuit, and that DOL’s counsel “requested that Thrivent agree to an indefinite stay of this litigation.” However, Thrivent notes that any such stay would be “inappropriate” for several reasons, most importantly (per Thrivent) that DOL has abandoned its own legal arguments and announced that it agrees with Thrivent. “DOL’s change of position supports entry of judgment in Thrivent’s favor, not an indefinite stay of this matter,” Thrivent notes, going on to state that “staying this litigation would only prolong Thrivent’s business uncertainty about its compliance obligations, in a manner that would be highly prejudicial to Thrivent.”

While DOL has, in Thrivent’s words, “abandoned its legal defense of the BIC Exemption’s anti-arbitration condition,” that does not, in and of itself, mean that the condition will not otherwise go into effect as scheduled. “Thrivent has expended considerable time and resources in seeking resolution of a matter that is extremely important to Thrivent’s operations and governance structure, and this action remains ripe for adjudication.”

We’ll see what Judge Nelson makes of the argument(s)…

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