## Facts

- The Department of Labor (DOL) issued a 2016 regulation redefining who qualifies as an “investment advice” fiduciary for retirement advice under ERISA and the Internal Revenue Code.
- The rule expanded fiduciary status to cover many brokers, insurance agents, and others who make recommendations to retirement investors, including in IRA transactions.
- DOL also adopted and amended prohibited transaction exemptions, including the Best Interest Contract Exemption (BICE), allowing conflicted compensation if firms satisfied conditions such as written “best interest” commitments, disclosures, and other contractual terms.
- Trade associations representing segments of the financial services industry sued, arguing the rule and exemptions exceeded DOL’s statutory authority and violated the Administrative Procedure Act (APA).
- The U.S. District Court for the Northern District of Texas granted summary judgment for DOL and upheld the rule.
- The challengers appealed to the U.S. Court of Appeals for the Fifth Circuit.

## Issues

1. Whether DOL’s expanded definition of “investment advice” fiduciary was authorized by ERISA and the Internal Revenue Code.
2. Whether the fiduciary rule was entitled to Chevron deference.
3. Whether the fiduciary rule and related exemptions, including BICE, were arbitrary and capricious under the APA.
4. Whether DOL’s exemptive authority permitted conditioning relief from prohibited-transaction rules on contract-based obligations affecting private litigation and liability.

## Decision

- The Fifth Circuit reversed the district court.
- The court vacated the 2016 fiduciary rule and its associated exemptions in full and remanded with instructions to enter judgment for the challengers.
- The court held DOL exceeded its statutory authority under ERISA and the Internal Revenue Code by expanding “fiduciary” beyond its statutory and common-law meaning.
- The court held the rule and exemptions were not entitled to Chevron deference and were arbitrary and capricious under the APA.
- A dissent would have upheld the rule as a reasonable interpretation entitled to deference.

## Legal Principles

- ERISA’s fiduciary concept is tied to discretionary authority or a relationship of trust and confidence; ordinary arm’s-length sales activity is not transformed into fiduciary conduct merely because it involves investment products.
- An agency may not use interpretive rulemaking to effectively rewrite core statutory terms; where statutory text and structure foreclose the agency’s interpretation, Chevron deference does not apply.
- APA review requires reasoned decisionmaking; a rule may be set aside where the agency’s approach is unreasonable in light of statutory limits and the agency’s asserted rationales do not justify the regulatory structure adopted.
- DOL’s prohibited-transaction exemptive authority does not extend to imposing conditions that function as a new, contract-driven regulatory and enforcement regime governing private rights and liabilities, particularly for IRA transactions outside ERISA’s usual enforcement framework.

## Conclusion

The Fifth Circuit set aside DOL’s 2016 fiduciary rule and related exemptions, concluding the agency lacked statutory authority to impose ERISA-style fiduciary obligations on a broad range of retirement sales and advice activity and that the rulemaking failed APA requirements for lawful, reasoned regulation within statutory bounds.


Chamber of Com. of the U.S. v. U.S. Dep’t of Lab., 885 F.3d 360 (5th Cir. 2018)