We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,155)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (414)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (800)
  • Wink's Articles (353)
  • Wink's Inside Story (274)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • Thrivent suit against DOL pits ERISA vs. Federal Arbitration Act

    October 19, 2016 by Nick Thornton

    A sixth lawsuit against the Department of Labor, brought by Thrivent Financial for Lutherans, is not trying to block the fiduciary rule.

    In fact, the lawsuit, unlike the other claims against the DOL, does not even challenge the “validity” of the rule, according to Thrivent’s complaint. Thrivent is a non-profit fraternal benefit society that provides financial services and insurance products to 2.5 million Christians across the country.

    All Thrivent is asking the U.S. District Court for the District of Minnesota is for relief from the provision of the rule’s Best Interest Contract Exemption that prohibits class-action waivers in the contracts.

    Thrivent’s suit is similar to the claims being considered in three other circuits in that it is brought under the Administrative Procedures Act, the law that sets guideposts for regulators to protect against statutory overreach.

    But it is unique from the other claims in its narrowness, says Leland Beck, who has spent a good portion of his career litigating and advising on APA issues at the Department of Justice and Department of Homeland Security.

    “This is a deep little case, and a very narrow question raised by Thrivent,” said Beck in an interview. “The APA is the vehicle here—the rule says courts have to strike down rules if an agency exceeds its statutory authority.”

    But Thrivent’s claim goes beyond the parameters of an administrative law, says Beck, and pits the Employee Retirement Income Security Act, which gives DOL its statutory power, against the Federal Arbitration Act, which Congress enacted in 1925 to allow parties to settle contract disputes through arbitration.

    Thrivent prohibits class actions

    As a fraternal benefit society, Thrivent says that its relationship with its clients, who are members of the fraternal society, “differs significantly from the relationships that commercial stock and mutual life insurance companies have with their customers,” according to the complaint.

    All of Thrivent’s assets are owned by its membership, which is largely comprised of investors of “modest means”—more than half of its members have household incomes of less than $75,000, and the median IRA balance is $25,000.

    One way Thrivent is similar to its commercial competition is in how it structures arbitration clauses in contracts with members.

    Over the past two decades, contracts issued by financial services providers have commonly included provisions that customers waive their right to a trial by jury to settle disputes and instead submit to arbitration to settle claims. Often, those arbitration clauses include a waiver prohibiting class-action claims.

    For more than 15 years, Thrivent’s bylaws have required such language in its insurance contracts. Disputes among its members are resolved through mediation, and if necessary, arbitration.

    Thrivent says that its arbitration process—called the Member Dispute Resolution Program—“preserves and strengthens member relations” on the rare occasions when a dispute emerges and maintains the “best interests” of the fraternal membership. The MDRP prohibits members from bringing class-action claims.

    Under the DOL rule’s BIC Exemption, that will change. The rule expressly prohibits class action waivers in the BIC Exemption, which Thrivent, along with the rest of the industry, will need to be able to sell its proprietary products, annuities, and advice on IRA rollovers.

    Between 2011 and 2015, Thrivent members raised more than 5,400 complaints. Almost all—96 percent—were resolved internally. Only 16 went to arbitration, which Thrivent says is proof of its ability to resolve disputes “quickly and amicably.”

    By prohibiting class-action claims, Thrivent says it has avoided “adversarial litigation” that could threaten its core mission. In prohibiting class action waivers, the BIC Exemption would “undermine uniformity among its members,” and allegedly threaten Thrivent’s fraternal mission.

    “The time and expense of class action litigation would convert the fairness, promptness, and efficiency that are the hallmarks of the MDRP into an expensive, lengthy and adversarial process,” Thrivent’s complaint says.

    ERISA v. FAA

    In July, Thrivent approached the DOL, looking for an exemption from the fiduciary rule’s prohibition on class-action waivers, “in an effort to avoid contentious litigation with DOL.” They walked away empty-handed and made the choice to sue.

    Thrivent says its class-action waiver is “entirely consistent with and enforceable under the FAA (Federal Arbitration Act).”

    The heart of its claim is that the BIC Exemption’s prohibition on class-action waivers is unenforceable under the FAA. In prohibiting class-action waivers, Thrivent alleges DOL exceeded its statutory authority.

    “Nothing in ERISA gives DOL authority to preclude financial institutions and their clients from entering into and enforcing arbitration agreements that include class-action waivers,” Thrivent said in its suit.

    That argument has merit, says Leland Beck. What’s more, the DOL may recognize as much.

    Thrivent’s claim points to a “severability clause” the DOL wrote into the BIC Exemption.

    In basic terms, that clause of the rule says that if a court found the prohibition on class-action waivers to be an invalid extension of DOL’s authority, then a court could sever the class-action provision while keeping the rest of the rule, and the BIC Exemption, intact.

    “DOL has expressly stated in the BIC Exemption that the pre-dispute arbitration prohibition clause could be severed from the rest of the rule,” explained Beck.

     “That leaves room for DOL to adopt the rest of the BIC Exemption without that clause.  It was a smart move by DOL because their authority to bar FAA arbitration under ERISA is far from clear,” he said.

    “I think DOL recognized there was a conflict between ERISA, under the rule’s BIC Exemption, and the FAA,” said Beck. “They saw this coming and understand the conflict is a big problem. Courts owe DOL no deference in interpreting the FAA.”

    SCOTUS’ faith in FAA

    Last December, the Supreme Court addressed the enforceability of arbitration clauses, and class-action waivers, under the Federal Arbitration Act.

    “FAA says arbitration clauses are enforceable—period,” said Beck. “That has been taken to heart by business. Arbitration clauses are common in banking, investment, credit card, and other business-generated contracts.”

    They are also controversial. In DIRECTV Inc., v. Imburgia, the Supreme Court upheld the enforceability of a class-action waiver under the FAA in a 6-3 decision.

    In her dissent, Justice Ruth Bader Ginsberg was highly critical of the latitude the Supreme Court has given business interests in including class-action waivers under the FAA, which she said has resulted “in the deprivation of consumers’ rights” and “insulated powerful economic interests from liability” for violating consumer protection laws.

    “A lot of people are very unhappy with arbitration clauses because they believe they give businesses the upper hand over consumers,” explained Beck. “The single claim arbitration clause eliminates a class-action option that many see as the only way to effectively make a claim against a large business.”

    In prohibiting class-action waivers, the DOL was in lockstep with wider Obama administration policy, says Beck.

    The Consumer Financial Protection Bureau, created under the Dodd-Frank Wall Street Reform Act of 2010, has proposed a rule that would eliminate banks and credit card companies from writing class-action waivers into contracts with consumers.

    “The administration is trying to stop class-action waivers beyond the DOL rule,” explained Beck. “This is an administration level policy—to protect class actions and the ability to sue in federal court.”

    New question for the courts

    While the Supreme Court has consistently ruled in favor of the enforceability of class-action waivers under the FAA, Beck says the core issue raised in Thrivent’s claim creates a new question for courts to reconcile: how the FAA and other regulatory statutes, like ERISA, fit together.

    “That is the tough part of this issue,” he said. “DOL is saying that it can adopt regulations that bar FAA arbitration. The answer is far from clear and likely to depend on the explicit language of ERISA. Courts generally defer to an agency’s interpretation of its regulatory statute. But no agency gets deference to interpret the FAA, the APA, or any other general statute.”

    Beck thinks Thrivent’s claim is strong, putting the firm in a good position, “which is not easy to achieve when you sue the U.S. government.” He gives DOL’s prohibition on class-action waivers a 30 to 40 percent chance of surviving.

    But a victory for Thrivent may not apply to other retirement product providers, noted Beck.

    “Thrivent requested an injunction and injunctions must be narrowly tailored,” he said. “A court may well grant an injunction applicable only to Thrivent’s claim, and not the whole industry.”

    Originally Posted at BenefitsPro on October 10, 2016 by Nick Thornton.

    Categories: Industry Articles
    currency