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Insight Center: Publications

Fifth Circuit Vacates Fiduciary Rule, Creating Circuit Split; Headed to Supreme Court?

Client Alert

Authors: John M. Ford, John P. Falco, Rebecca Alperin and Theodore D. Edwards

Fifth Circuit Vacates Fiduciary Rule, Creating Circuit Split; Headed to Supreme Court?

On March 15, in Chamber of Commerce v. U.S. Department of Labor, No. 17-10238 (5th Cir. March 15, 2018), the Fifth Circuit Court of Appeals struck down the Department of Labor’s (DOL’s) fiduciary rule in a 2-1 decision. The majority vacated the rule after finding that the DOL exceeded its legal authority by expanding the definition of “investment advice fiduciary” beyond the meaning that Congress plainly intended. When the intent of Congress is clear, “that is the end of the matter[.]” Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842 (1984). (Read our analysis of the fiduciary rule here.)

The Chief Judge of the Fifth Circuit, Judge Carl E. Stewart, authored a sharp dissent. The Chief Judge faulted the panel majority for ignoring changes in the retirement investment product marketplace over the past 40 years and for relying on common law trust principles to determine whether the statutory text was clear.

The Fifth Circuit’s decision comes on the heels of a unanimous decision from the Tenth Circuit upholding the rule on March 13, albeit on different grounds. Mkt. Synergy Group v. U.S. Dep’t of Labor, No. 17-3038 (10th Cir. March 13, 2018). The differing decisions mean that the fiduciary rule will be enforced in the Tenth Circuit and not enforced in the Fifth Circuit. In light of this potential for disparate enforceability, the Supreme Court may take up the matter and settle the dispute.

Pepper Points

  • The Fifth Circuit struck down the Department of Labor’s fiduciary rule

  • The Fifth Circuit’s decision creates a circuit split with the Tenth Circuit

  • Circuit split paves the way for possible Supreme Court review

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