The U.S. Department of Labor's “Fiduciary Rule” – among many other things – prohibits class waivers from being included “in any contract, instrument, or communication” with respect to IRAs and other ERISA plans. The Chamber of Commerce and others have sued in a Texas federal court to get that ban lifted. The claim is that the ban on class action waivers in arbitration agreements "cannot be reconciled with the Federal Arbitration Act." Here's a portion of the court complaint filed on June 1:
COUNT FIVE: THE FEDERAL ARBITRATION ACT PROHIBITS THE BIC AND PRINCIPAL TRANSACTIONS EXEMPTIONS’ REGULATION OF CLASS ACTION WAIVERS IN ARBITRATION AGREEMENTS
The FAA establishes a federal policy favoring arbitration and requires arbitration agreements to be enforced according to their terms. CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669 (2012). A federal agency lacks authority to override the FAA’s protections of the enforceability of arbitration agreements unless Congress has conferred such authority through a clear “contrary congressional command.” D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 358 (5th Cir. 2013). Nothing in ERISA or the Code contains such an override.
Nonetheless, the Department’s Rule turns long-standing federal pro-arbitration policy on its head and forbids financial institutions and representatives from relying on the BIC exemption and Principal Transactions exemption if they include an arbitration agreement with a class action waiver in their contract with customers. Reliance on the BIC exemption is now essential to receiving common forms of compensation for a range of financial services, because the Department prohibits this compensation outright through the Fiduciary Rule, allowing it only if financial institutions and representatives submit themselves to the BIC and its contractual requirements. Further, reliance on the Principal Transactions exemption is also necessary for any transactions of certain investments out of the financial institution’s own inventory. Thus, financial institutions and representatives have no choice but to comply with the ban on class action waivers in the exemptions.
This prohibition violates the FAA and is arbitrary, capricious, and not in accordance with law. Plaintiffs are therefore entitled to relief pursuant to 5 U.S.C. §§ 702, 706. The entire Rule, BIC exemption, Principal Transactions exemption, and other related PTEs should be declared unlawful, set aside, and enjoined from enforcement, implementation, and being given effect in any manner. These PTEs are integral and non-severable from the Rule, and their vacatur necessarily requires vacatur of the Rule as a whole.