On November 28, 2016, Judge Crabtree in the U.S. District Court for the District of Kansas ruled in favor of the U.S. Department of Labor and denied the motion for a preliminary injunction filed by the Market Synergy Group, Inc., challenging implementation of the Department’s conflict of interest rule and related exemptions.  Mkt. Synergy Grp., Inc. v. United States Dep’t of Labor, No. 16-CV-4083-DDC-KGS, 2016 WL 6948061 (D. Kan. Nov. 28, 2016).  The court held that Market Synergy was not likely to prove that:

  1. The Department provided insufficient notice that it would remove fixed indexed annuities (“FIAs”) from the scope of PTE 84-24 because the language of the proposed rulemaking provided the requisite notice and, even if it did not, it amounted to harmless error because commenters made the same comments Market Synergy makes in this action.
  2. The Department arbitrarily treated FIAs differently from all other fixed annuities because the Department provided a reasoned explanation for its decision to move FIAs from the scope of PTE 84-24 to better protect retirement investors.
  3. The Department failed to consider the detrimental effects of its actions on independent insurance agent distribution channels.  To the contrary, the Court found that the Department demonstrated its recognition of the effects that the final rule would have on the industry, but concluded that the need to protect consumers from conflicted investment advice outweighed those concerns.
  4. The Department exceeded its statutory authority by seeking to manipulate the financial product market instead of regulating fiduciary conduct because Congress had authorized the Department to grant exemptions, and it was therefore entitled to great deference.

The Court also noted that even if plaintiff had carried its burden to demonstrate its likely success on the merits, it had not satisfied any of the other requirements for a preliminary injunction: irreparable harm, balance of harms, and public interest.

This victory comes on the heels of the Department’s win in the District Court for the District of Columbia where the court also denied a challenge to the Department’s conflict of interest rule and related exemptions. See Nat’l Ass’n for Fixed Annuities v. Perez, No. CV 16-1035 (RDM), 2016 WL 6573480 (D.D.C. Nov. 4, 2016) (see our blog post here).  The rule and related exemptions also are facing challenges in the Northern District of Texas and District of Minnesota (see our blog post here).

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Photo of Russell Hirschhorn Russell Hirschhorn

Russell L. Hirschhorn, co-head of the ERISA Litigation Group, represents plan fiduciaries, trustees, sponsors and service providers on the full range of ERISA and state law benefit and fiduciary issues. From single plaintiff litigation and arbitration to complex class action litigation, he provides…

Russell L. Hirschhorn, co-head of the ERISA Litigation Group, represents plan fiduciaries, trustees, sponsors and service providers on the full range of ERISA and state law benefit and fiduciary issues. From single plaintiff litigation and arbitration to complex class action litigation, he provides practical guidance, develops unique litigation defense strategies and, when appropriate, mediates successful resolutions.

Russell represents clients across a wide array of publicly-held, multi-national companies and privately owned companies across a multitude of industries including, banking, finance and investments, pharmaceuticals, retail products and construction, to name just a few. In addition, he also counsels benefit plan clients on a host of compliance and federal and state government agency enforcement matters, including complex and lengthy investigations and audits by the U.S. Departments of Justice and Labor.

Russell is management co-chair of the American Bar Association Employee Benefits Committee as well as management co-chair of the Trial Institutes Committee of the American Bar Association’s Labor and Employment Law. He also writes on cutting-edge ERISA litigation issues, serving as a contributing author and a past chapter editor to Employee Benefits Law (BNA Third Edition).

Deeply dedicated to pro bono work, Russell was a principal drafter of several amicus briefs for the Innocence Project, a legal non-profit committed to exonerating wrongly convicted people. Russell has been recognized on several occasions for his commitment to pro bono work including by President George W. Bush in receiving the U.S. President’s Volunteer Service Award.

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