IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA. Plaintiff, Defendants.

Transcription

1 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 1 of 30 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA THRIVENT FINANCIAL FOR LUTHERANS, Case No. 0:16-cv SRN-DTS Plaintiff, v. R. ALEXANDER ACOSTA, sued in his official capacity, Secretary, United Sates Department of Labor, and UNITED STATES DEPARTMENT OF LABOR, THRIVENT S RESPONSE TO DEFENDANTS MOTION FOR STAY OF PROCEEDINGS Defendants.

2 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 2 of 30 TABLE OF CONTENTS INTRODUCTION... 1 I. Background... 2 A. Prior Proceedings In This Court... 2 B. Related Federal Court Proceedings... 4 C. Subsequent Regulatory Developments And The Looming Prospect Of Prohibited Transactions... 5 II. Argument... 9 A. Legal Standard... 9 B. DOL Fails To Establish Any Basis For The Requested Stay The Mere Possibility Of Future Regulatory Changes Does Not Support A Stay DOL s Change Of Legal Position Does Not Support A Stay DOL s Proffered Authority Does Not Support A Stay C. The Relevant Factors Weigh Heavily Against A Stay DOL Fails To Assert Any Hardship It Would Suffer In The Absence Of A Stay, As Required, While Concurrently Pursuing A Ruling On The Same Issue In Another Federal Court Thrivent Will Suffer Substantial, Irreparable Harm If The Court Stays Adjudication Of Thrivent s Fully Briefed And Argued Summary Judgment Motion Delaying Adjudication Of Thrivent s Pending Motion For Summary Judgment Would Harm Judicial Efficiency As It Might Require Thrivent To Seek Emergency Relief D. Thrivent s Motion Remains Ripe and Justiciable E. A Nationwide Injunction Is Appropriate And Necessary Relief If The Court Decides Summary Judgment In Thrivent s Favor CONCLUSION i

3 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 3 of 30 Cases TABLE OF AUTHORITIES Austin v. Union Bond & Trust Co., No. 14-cv-706, 2014 WL (D. Or. Dec. 23, 2014) BAE Sys. Land & Armaments L.P. v. Ibis Tek, LLC, 124 F. Supp. 3d 878, 890 (D. Minn. 2015)... 9 City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, No. 09-cv-2668, 2011 WL (D. Minn. Jan. 5, 2011) Clean Air Council v. Pruitt, No , F.3d, 2017 WL (D.C. Cir. July 3, 2017) Daywitt v. Minnesota, No. 14-cv-4526, 2016 WL (D. Minn. May 24, 2016)... 9, 10 Decker v. O Donnell, 661 F.2d 598 (7th Cir. 1980) Flast v. Cohen, 392 U.S. 83 (1968) Frable v. Synchrony Bank, 215 F. Supp. 3d 818, (D. Minn. 2016) Hawaii v. Trump, 859 F.3d 741 (9th Cir. 2017) I.N.S. v. Chadha, 462 U.S. 919 (1983) Intermedics, Inc. v. Cardiac Pacemakers, Inc., No. 95-cv-716, 1998 WL (D. Minn. June 15, 1998) Kindred Nursing Centers Ltd. Partnership v. Clark, 518 U.S., 137 S. Ct (2017)... 2 KK Motors, Inc. v. Brunswick Corp., No. 98-cv-2307, 1999 WL (D. Minn. Feb. 23, 1999) La. Forestry Ass n Inc. v. Sec y U.S. Dep t of Labor, 745 F.3d 653 (3d Cir. 2014) ii

4 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 4 of 30 Nat l Family Planning & Reprod. Health Ass n, Inc. v. Sullivan, 979 F.2d 227 (D.C. Cir. 1992) Nat l Mining Ass n v. U.S. Army Corps of Eng rs, 145 F.3d 1399 (D.C. Cir. 1998) Nat l Wildlife Fed n v. Clark, 577 F. Supp. 825 (D.D.C. 1984) Parrish v. Dayton, 761 F.3d 873 (8th Cir. 2014) Rumble v. Fairview Health Servs., No. 14-cv-2037, 2017 WL (D. Minn. Jan. 30, 2017)... 9 Satcher v. University of Arkansas at Pine Bluff Bd. of Trustees, 558 F.3d 731 (8th Cir. 2009) Shays v. Fed. Election Comm n, 340 F. Supp. 2d 39 (D.D.C. 2004) Spencer v. Kemna, 523 U.S. 1 (1998) Tate v. Minnesota Dep t of Corr., No. 15-cv-3115, 2016 WL (D. Minn. June 27, 2016)... 9, 10 Thomas v. Southwestern Bell Telephone Co., 2016 WL (E.D. Mo. Aug. 8, 2016) at * Tiarnan Rumble v. Fairview Health Servs., No. 14-cv-2037, 2015 WL (D. Minn. July 21, 2015)... 9 United States v. Brainer, 691 F.2d 691 (4th Cir. 1982) United States v. Windsor, 123 S. Ct (2013) VData, LLC v. Aetna, Inc., No. 06-cv-1701, 2006 WL (D. Minn. Nov. 21, 2006) In re Wholesale Grocery Prods. Antitrust Litig., No. 09-md-2090, 2013 WL (D. Minn. Dec. 13, 2013) iii

5 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 5 of 30 Yourman v. Dinkins, No. 91-cv-2197, 1992 WL (S.D.N.Y. Dec. 23, 1992) Statutes 26 U.S.C , 19 Other Authorities 82 Fed. Reg (Apr. 7, 2017) Fed. Reg (July 6, 2017)... 6, 16 iv

6 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 6 of 30 INTRODUCTION This is now the third request by the Department of Labor ( DOL ) to stay this case based on the speculative assertion that it may at some point alter or eliminate the anti-arbitration condition in the Best Interest Contract Exemption ( BIC Exemption ). At present, however, the anti-arbitration condition is a component of a regulation adopted by DOL that is currently in effect. It remains scheduled to become applicable as of January 1, DOL s counsel speculates that DOL may well extend that date and that the condition may be altered or eliminated, but DOL s motion is not supported by any declaration from a DOL official providing this Court with a definitive statement as to the anti-arbitration condition s fate. And DOL s own statements to the public have been clear and unequivocal: absent further action from the Department, the transition period ends on January 1, 2018, and full compliance with all of the exemptions conditions is required. DOL s speculative motion is thus no different from its two previous stay requests, which the Court denied because [m]ere speculation about the possibility of administrative action fails to demonstrate the necessity of a stay. Order at 3 (Feb. 21, 2017), ECF No. 44. The only thing that has changed since DOL s last request for a stay is that we are over five months closer to full implementation of the challenged provision. While DOL now concedes that the BIC Exemption violates the Federal Arbitration Act, that concession supports not a stay but rather an outright grant of Thrivent s motion for summary judgment and soon. This dispute is ripe for adjudication; this Court can and should decide it. 1

7 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 7 of 30 DOL identifies no hardship that it would suffer if the Court were to simply grant Thrivent s motion. By contrast, an indefinite stay would disrupt Thrivent s business planning efforts by creating unnecessary delay and uncertainty. And it would undermine judicial economy by requiring the Court essentially to oversee the Department s rulemaking and increasing the likelihood that Thrivent would need to seek emergency injunctive relief if the rule remains unchanged as the date for full implementation approaches. Accordingly, DOL fails entirely to meet the heavy burden required to justify a stay. The Court should deny DOL s motion. I. BACKGROUND A. Prior Proceedings In This Court Thrivent filed a motion for summary judgment on November 4, 2016, challenging the anti-arbitration condition. Pl. s Mot. Summ. J. (Nov. 4, 2016), ECF No. 14. DOL subsequently filed a cross-motion for summary judgment, and the parties motions were fully briefed as of January 17, This Court held a hearing on the cross-motions on March 3, 2017, and the Court took the motions under advisement. Subsequently, the Court entertained supplemental briefing addressing the impact of the Supreme Court s decision in Kindred Nursing Centers Ltd. Partnership v. Clark, 518 U.S., 137 S. Ct (2017). Pl. s Suppl. Memo. (May 26, 2017), ECF No. 50; Defs. Suppl. Memo. (June 7, 2017), ECF No. 53. That briefing was complete as of June 7, As explained in Thrivent s summary judgment motion and supporting papers, Thrivent s Bylaws include a Member Dispute Resolution Program ( MDRP ) by which 2

8 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 8 of 30 Thrivent resolves any disputes with its members through alternative dispute resolution. Pl. s Memo. Summ. J. at 6 8, (Nov. 4, 2016), ECF No. 16. The anti-arbitration condition directly conflicts with Thrivent s MDRP. Id. at 14, Complying with the antiarbitration condition would require Thrivent either (a) to stop marketing and selling certain core financial products in connection with certain transactions, or (b) to modify the successful MDRP in order to avoid engaging in transactions prohibited by the new rules and the related imposition of punitive excise taxes. Id. at On February 15, 2017, DOL filed a letter requesting a stay of proceedings, arguing that a stay was appropriate because, pursuant to a directive of President Trump, DOL was engaged in rulemaking that might act to revise or rescind the challenged provision. DOL s letter at 2 (Feb. 15, 2017), ECF No. 42. DOL noted that the anti-arbitration condition was not scheduled to become applicable until January 1, 2018, and on that basis, argued that [i]t would serve judicial efficiency not to rule on [the] matter because DOL might adopt a new rule in the interim. Id. at 1 2. The Court denied DOL s request, finding that [m]ere speculation about the possibility of administrative action was insufficient grounds for a stay and that nothing in Defendants submission [shows] that a stay is justified. ECF No. 44 at 3. DOL again asked the Court to defer any ruling at the March 3, 2017 hearing on the parties cross-motions for summary judgment. DOL noted that it had recently invited comments on whether to revise or [repeal] the rule making that s at issue here, which DOL argued was a concrete development that supported letting this administrative process play out, and that deferring any ruling would serve judicial economy because 3

9 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 9 of 30 DOL could revis[e] the rule at issue. Kay Decl. Ex. A (Mar. 3, 2017 Hr g Tr.) at 22:7 18. In response, the Court reiterated that it would not defer any ruling and instead made clear that [t]his case will move forward. Id. at 44:7 8. B. Related Federal Court Proceedings As both DOL and Thrivent have previously informed the Court, there are five other lawsuits proceeding in other federal courts that challenge various aspects of the Fiduciary Rule and related exemption rules. Defs Opp n Memo. Summ. J. at (Dec. 2, 2016), ECF No. 24; Pl. s Reply Memo. Summ. J. at 12 n.6 (Dec. 23, 2016), ECF No. 37. Only one of those other cases Chamber of Commerce v. Acosta addresses the enforceability of the BIC Exemption s anti-arbitration condition, and it does so as one small part of a broader challenge to numerous aspects of DOL s new regulations. See id. None of the plaintiffs in the Chamber of Commerce action are financial institutions that, like Thrivent, will be immediately and directly impacted by the applicability of the BIC Exemption s anti-arbitration condition. Rather, that case involves a challenge by a trade association on behalf of its members who may seek to include individual arbitration requirements in the Best Interest Contracts. See Compl , 179, Chamber of Commerce v. Acosta, No. 3:16-cv M (N.D. Tex. June 1, 2016), ECF No. 1. DOL first announced that it had changed its litigation position with respect to the enforceability of the BIC Exemption s anti-arbitration condition in a brief filed with the Court of Appeals for the Fifth Circuit in the Chamber of Commerce action on July 3, 2017 (a corrected brief subsequently was filed on July 17, 2017). See DOL s letter (July 5, 2017), ECF No. 55. While DOL has informed the Fifth Circuit that it is no longer 4

10 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 10 of 30 defending this specific condition, (Decl. of Newton in Support of Defs. Cross-Mot. Summ. J. Ex., Corrected Br. of Appellees at 45 (July 27, 2017), ECF No. 72-1), it has not asked the Fifth Circuit to stay decision with respect to the enforceability of the antiarbitration condition. Rather, it has recommended that the Fifth Circuit strike the antiarbitration condition while keeping the remainder of the Fiduciary Rule intact. See id. at C. Subsequent Regulatory Developments And The Looming Prospect Of Prohibited Transactions More than five months have passed since the Court denied DOL s last request to stay this case. In that time DOL has not rescinded the Fiduciary Rule or related exemptions; rather, DOL pushed forward with partial implementation of the Rule on June 9, Full implementation including the BIC Exemption and its anti-arbitration condition remains on track for January 1, See Final Rule, 82 Fed. Reg (Apr. 7, 2017). 1 DOL has informed the public that [a]bsent further action from the Department, the transition period ends on January 1, 2018, and full compliance with all of the exemptions conditions is required. Kay Decl. Ex. B (Transition Period FAQs (Transition Period) 1 As Secretary of Labor Acosta stated in a May 22, 2017 opinion editorial in the Wall Street Journal, the Fiduciary Rule goes into partial effect on June 9, with full implementation on Jan. 1, 2018 and notwithstanding the suggestion by some that DOL completely delay implementation of the Rule pending public input, DOL found no principled legal basis to delay partial implementation on schedule. Kay Decl. Ex. C at 2 (Alexander Acosta, Opinion, Deregulators Must Follow the Law, So Regulators Will Too, Wall St. J., May 22, 2017, 5

11 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 11 of 30 activities/resource-center/faqs/coi-transition-period-1.pdf at Q1 (emphasis added). Furthermore, DOL has specified that the BIC Exemption s required conditions include executing a contract, and that [t]he contract could require the IRA investor to pursue individual claims through arbitration, but must preserve the investors ability to bring class action claims in court. Id. (emphasis added). As DOL discloses in its memorandum in support of its motion to stay ( Memo ), in the interim DOL has invited even more public comments about whether it should extend the January 1 applicability date. Id. at 3 4. With respect to the substance of the regulations, DOL has also opened up another comment period through its Request for Information Regarding the Fiduciary Rule and Prohibited Transaction Exemptions, 82 Fed. Reg (July 6, 2017). That comment period is scheduled to conclude on August 7, Notwithstanding DOL s requests for more public comments, nothing has changed the fact that by January 1, 2018 Thrivent will need to implement Best Interest Contracts that comply with the rule s anti-arbitration condition in order to use the BIC Exemption and avoid engaging in prohibited transactions. As Thrivent s summary judgment papers explain, the penalties for engaging in prohibited transactions are set forth in the Internal Revenue Code, 26 U.S.C See ECF No. 16 at That provision requires financial institutions to report prohibited transactions through the payment of excise taxes in the amount of 15% of the value of each prohibited transaction; prohibited transactions that are not corrected within the tax year are subject to an additional 100% tax. See id. Moreover, the Department of the Treasury (through the 6

12 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 12 of 30 I.R.S.), not the Department of Labor, is responsible for enforcement with respect to prohibited transactions and payment of excise taxes under the Internal Revenue Code. 2 It is unclear what effect, if any, DOL s abandonment of its litigation position would have on the IRS s imposition of excise taxes, in the event Thrivent engages in transactions prohibited by the Fiduciary Rule. In addition to complying with the anti-arbitration condition of DOL s promulgated rule in order to avoid excise taxes, Thrivent is required to certify as to its compliance with all federal and state laws in multiple other contexts, including for example, filing an Annual Statement with each state insurance department. Declaration of Paul R. Johnston ( Johnston Decl. ) 6. Notwithstanding DOL s unsupported assertion, in its motion to stay, regarding the likelihood it will enforce the anti-arbitration condition, Thrivent will be unable to make such required certifications if the Rule remains in effect and Thrivent chooses not to follow it. Id. 7. On July 14, 2017, DOL announced to this Court that it would no longer defend the validity of the anti-arbitration condition. DOL s letter (July 14, 2017), ECF No. 62. In light of its changed litigation position, DOL has withdrawn its cross-motion for summary judgment and its opposition to Thrivent s motion for summary judgment. Withdrawal of Defs. Cross-Mot. Summ. J. (July 27, 2017), ECF No. 71. Yet it again requests that the Court indefinitely stay proceedings. Mem. in Supp. of Mot. for Stay of Proceedings (July 2 Just as the DOL Motion did not include a declaration from any DOL official with authority to speak definitively with respect to the BIC Exemption s anti-arbitration condition and its enforcement, it included no such declaration from any official from the Treasury Department or Internal Revenue Service. 7

13 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 13 of 30 27, 2017), ECF No. 78. In the alternative, DOL has suggested that the Court grant Thrivent s motion for summary judgment narrowly, by vacating the anti-arbitration condition as applied to arbitration agreements entered into by Thrivent []. ECF No. 71 at 2. In the absence of an injunction from this Court or a completed rule change by DOL removing the anti-arbitration condition, however, Thrivent must take significant steps to maintain regulatory compliance and avoid engaging in prohibited transactions as of the January 1, 2018 applicability date. To accomplish that, Thrivent must provide certain existing members with notice of the Best Interest Contract terms by no later than December 1, Johnston Decl. 4; accord ECF No. 16 at Moreover, Thrivent would likely need to amend its MDRP Bylaw in order to use the Best Interest Contract to avoid engaging in prohibited transactions. Johnston Decl. 5. Under Thrivent s Bylaws and applicable state law, Thrivent must provide notice of Bylaw amendments to its members through publication in the Society s official publication, Thrivent Magazine, which is published quarterly. Id. If Thrivent amends its MDRP Bylaw, it would seek to notify its members of such amendment in the December issue of Thrivent Magazine, so that members would be informed of the amended Bylaw prior to the January 1, 2018 applicability date. If absolutely necessary, Thrivent could provide its printer with material for an expedited special insert to the magazine s December issue related to a Bylaw amendment by October 31, Id. But including a special insert on an expedited basis would require Thrivent to remove from the December issue other currently-planned inserts that address unrelated business matters, and would thus harm Thrivent s regular 8

14 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 14 of 30 operations of its business and member relations. Id. For Thrivent to provide notice of an amendment to its Bylaws in the ordinary course, the final deadline to include such an update in the December issue is September 15, Id. II. ARGUMENT A. Legal Standard The party seeking a stay must, as a threshold matter, demonstrate that it will suffer a specific hardship or inequity if he or she is required to go forward. Daywitt v. Minnesota, No. 14-cv-4526, 2016 WL , at *5 (D. Minn. May 24, 2016) (quoting Jones v. Clinton, 72 F.3d 1354, 1364 (8th Cir. 1996)); accord Tate v. Minnesota Dep t of Corr., No. 15-cv-3115, 2016 WL , at *6 (D. Minn. June 27, 2016) (same); Tiarnan Rumble v. Fairview Health Servs., No. 14-cv-2037, 2015 WL , at *1 (D. Minn. July 21, 2015) (same). The moving party s burden is a heavy one, and must overcome a presumption [that] favors the party opposing a stay. Daywitt, 2016 WL , at *5; accord BAE Sys. Land & Armaments L.P. v. Ibis Tek, LLC, 124 F. Supp. 3d 878, 890 (D. Minn. 2015) ( [A] stay is the exception and not the rule. ) (quotation marks and citation omitted). Only after the party requesting a stay makes the requisite showing of specific hardship or inequity do courts consider other factors, including the conservation of judicial resources and the parties resources, maintaining control of the court s docket, providing for the just determination of cases, and hardship or inequity to the party opposing the stay. Rumble v. Fairview Health Servs., No. 14-cv-2037, 2017 WL , at *2 (D. Minn. Jan. 30, 2017) (quotation marks and citation omitted). 9

15 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 15 of 30 Furthermore, [b]ecause a stay has the potential to damage the party opposing the stay, a district court s discretionary power to stay proceedings should be exercised in moderation. Tate, 2016 WL , at *6. B. DOL Fails To Establish Any Basis For The Requested Stay As a threshold matter, DOL fails to assert that it would suffer any hardship or inequity in the absence of a stay. That alone is grounds to deny DOL s motion. E.g., Daywitt, 2016 WL , at * 5 (denying motion to stay where defendants failed to address any specific hardship or inequity that they will suffer absent a stay, or how Plaintiffs would not be prejudiced by a stay ). Nor could DOL plausibly make such a showing. Thrivent s motion for summary judgment is fully briefed and remains ripe for adjudication, and resolving the motion on the merits in no way burdens DOL or impacts its rulemaking ability. Furthermore, DOL fails to articulate any basis for the Court to stay adjudication of Thrivent s motion for summary judgment. DOL suggests that a stay is warranted because of (1) the possibility of future regulatory changes (a contention that this Court has already rejected), and (2) DOL s change to its litigation position. Neither proffered basis has merit. 1. The Mere Possibility Of Future Regulatory Changes Does Not Support A Stay DOL s stay request is striking to the extent it is premised entirely on the possibility that some future regulatory action may moot this case at some undetermined date. DOL s third request for a stay simply rehashes the same argument that the Court 10

16 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 16 of 30 previously considered and twice rejected as insufficient grounds to warrant a stay namely, the speculative possibility that DOL might adopt a regulation that amends the anti-arbitration condition. That this remains speculative is apparent from assertions throughout DOL s Memo. See ECF No. 78 at 2 (asserting that it is likely that Thrivent never will be [ ] subject to the challenged provision ); id. at 3 (DOL may well extend the January 2018 applicability date of the anti-arbitration condition); id. at 4 (there is a realistic prospect that [DOL] could promulgate a final rule impacting enforcement of the anti-arbitration condition) (emphasis added). DOL s repeat of its prior stay request should be rejected out of hand. Indeed, DOL made the exact same arguments to this Court back in February, and yet the January 1 applicability date remains in place. See ECF No. 42 at 2 (asserting that [i]t would serve judicial efficiency not to rule on a matter that may no longer be at issue depending on the outcome of the administrative review ). In its Memo, DOL makes the same cavalier suggestion it has made for nearly six months: Although Thrivent is impacted by the current regulations and must prepare its business operations accordingly, Thrivent should just wait to see what happens because the challenged regulations might change at some unspecified future time. This flies in the face of DOL s statements to the public, where it has made clear that absent further regulatory action the BIC Exemption will go into effect on January 1, 2018, including the condition requiring that the contract must preserve the investors ability to bring class action claims in court. See Kay Decl. Ex. B (Transition Period FAQs, supra) at Q1. 11

17 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 17 of 30 This Court has already recognized that [m]ere speculation about the possibility of administrative action is insufficient to demonstrate that a stay is justified. Feb. 21, 2017 Order at 3. This is a principle that has been routinely recognized in this Court and others. See, e.g., City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, No. 09-cv- 2668, 2011 WL , at *6 (D. Minn. Jan. 5, 2011) (denying stay request based on possible action by the National Indian Gaming Commission ( NIGC ) where proponent of stay provided only the rawest of speculation as to when the NIGC might conclude its internal review, what the results of that review might be, and what, if any, further administrative or legal action the NIGC might possibly take based upon the results of its review ), R&R adopted, 2011 WL (D. Minn. Feb. 22, 2011); Austin v. Union Bond & Trust Co., No. 14-cv-706, 2014 WL , at *15 (D. Or. Dec. 23, 2014) (Defendants requested a stay based on an application to DOL for an exemption that would moot plaintiff s claim. The court described defendants subsequent decision to withdraw the request as recogni[zing] reality because any prediction of whether and when the DOL will grant the request is speculative at best. ). 3 Under the circumstances, 3 See also Shays v. Fed. Election Comm n, 340 F. Supp. 2d 39, (D.D.C. 2004) (explaining that the Federal Election Commission may issue draft or proposed rules, solicit comments on its proposed rules from the public, and hold open hearings discussing these comments and the new draft rules without mooting an appeal challenging a prior version of the regulation); Yourman v. Dinkins, No. 91-cv-2197, 1992 WL , at *1 (S.D.N.Y. Dec. 23, 1992) (denying defendants request to stay proceedings in anticipation of possible future congressional action that might moot part or all of the controversy ); Nat l Wildlife Fed n v. Clark, 577 F. Supp. 825, 827 (D.D.C. 1984) ( The possibility that the [House Interior and Insular Affairs] Committee may rescind the [challenged] Resolution or that Congress may pass a new law which could moot the controversy is necessarily speculative. ) 12

18 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 18 of 30 DOL counsel s conjecture regarding the probability that DOL will not enforce the promulgated regulation, but will instead alter it or adopt a new one, is not grounds for a stay. 2. DOL s Change Of Legal Position Does Not Support A Stay Nor is DOL s newfound agreement with Thrivent s legal position grounds for a stay. Rather, it is a further indication that Thrivent has taken the correct position all along, such that the Court should grant Thrivent the injunction requested in Thrivent s summary judgment motion. The anti-arbitration condition is still scheduled to go into effect on January 1, 2018, regardless of DOL s current litigation position that it will not defend the anti-arbitration condition in court. [A]n agency issuing a legislative rule is itself bound by the rule until that rule is amended or revoked. Nat l Family Planning & Reprod. Health Ass n, Inc. v. Sullivan, 979 F.2d 227, 234 (D.C. Cir. 1992). In order to reconsider a regulation, an agency must comply with the Administrative Procedure Act (APA), including its requirements for notice and comment. Clean Air Council v. Pruitt, No , F.3d, 2017 WL , at *4 (D.C. Cir. July 3, 2017) (rejecting argument that EPA has inherent authority to issue a brief stay of a final rule... while it reconsiders it without complying with the APA, and collecting cases). As a result, DOL s litigation decision not to defend the anti-arbitration condition has no legal effect on its applicability. Indeed, even here, DOL recognizes that its change in its litigation position does not dictate future regulatory changes but simply sheds light on the likelihood (or not) that the exemptions ultimately available to Plaintiff would include the challenged provision. Memo at 4. This type of speculation is not sufficient grounds for a 13

19 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 19 of 30 stay. Thus, if the status quo is maintained, it is uncontroverted that Thrivent will be required to comply with the anti-arbitration condition, or otherwise it will be engaging in prohibited transactions as of January 1. Doing so would mean that Thrivent would not be in compliance with federal law as a general matter, and it would subject Thrivent to excise taxes enforced by the Department of Treasury, and not DOL. Notwithstanding DOL counsel s best guess as to what regulatory action DOL might take in the future, Thrivent is required to comply with the regulations that DOL has already promulgated. DOL is thus wrong to assert that Thrivent is not currently, and likely never will be, subject to the challenged provision. Memo at 2. Rather, Thrivent is currently subject to the anti-arbitration condition and is accordingly preparing to comply with it when it becomes applicable on January 1. See Section I.C., supra. 3. DOL s Proffered Authority Does Not Support A Stay The case law cited by DOL provides no support for a stay under the circumstances here. VData, LLC v. Aetna, Inc., No. 06-cv-1701, 2006 WL (D. Minn. Nov. 21, 2006), for example, involved a request to stay litigation pending reexamination by the Patent and Trademark Office. But in that unique setting, [c]ourts have adopted a liberal policy in favor of granting motions to stay proceedings pending the outcome of reexamination proceedings due to the USPTO s expertise in deciding issues of patentability. Id. at *4 (emphasis added); see also Intermedics, Inc. v. Cardiac Pacemakers, Inc., No. 95-cv-716, 1998 WL , at *2 3 (D. Minn. June 15, 1998). The remaining cases DOL relies upon involve requests to stay litigation until the 14

20 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 20 of 30 resolution of related appeals that would necessarily impact the proceedings, not the mere possibility of future regulatory action. E.g., Frable v. Synchrony Bank, 215 F. Supp. 3d 818, (D. Minn. 2016) (granting stay where pending appeal would resolve the meaning of a statutory term directly at issue, and thus both parties could incur unnecessary litigation fees and expenses if a stay is not granted ); In re Wholesale Grocery Prods. Antitrust Litig., No. 09-md-2090, 2013 WL , at *1 2 (D. Minn. Dec. 13, 2013) (granting stay where identical claims that were part of the same consolidated multi-district litigation were already under advisement in the Eight Circuit); KK Motors, Inc. v. Brunswick Corp., No. 98-cv-2307, 1999 WL , at *2 (D. Minn. Feb. 23, 1999) (granting stay where plaintiffs claim for relief depends largely, if not entirely, upon the Court of Appeals affirmance of related litigation). 4 None of these cases support a stay in the present context. DOL requests that the Court stay the proceedings indefinitely, and that the parties jointly file a status report every 60 days to keep the Court informed. Memo at 5. Far from supporting judicial economy, this only further highlights the distinction between situations where courts might grant a stay, and situations such as here where they do not. DOL does not, and cannot, even provide certainty with respect to when (much less how) it may resolve the conflict between the promulgated anti-arbitration condition and DOL s 4 In its Memo, DOL quotes KK Motors for the proposition that the bench in this District ha[s] not been hesitant to stay proceedings upon a proper showing of cause. DOL Mot. at 5. However, the entirety of the quote DOL cites is as follows: Although we have not been hesitant to stay proceedings upon a proper showing of cause, a stay is the exception, and not the rule. KK Motors, Inc. at * 2 (emphasis added). 15

21 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 21 of 30 present position with respect to it. When DOL again requested a stay of these proceedings on March 3, 2017, its counsel explained that DOL had invited comments regarding the rule, that the comment period closes in mid-april, and that this concrete development underscores that letting this administrative process play out could serve judicial economy. Kay Decl. Ex. A at 22:7 12. No resolution resulted from the comments received during that process. DOL then opened up another comment period through its Request for Information Regarding the Fiduciary Rule and Prohibited Transaction Exemptions, 82 Fed. Reg (July 6, 2017); that comment period is scheduled to conclude on August 7, As with the prior period for comment, DOL cannot and does not (in its motion or any supporting declaration) make any representation with respect to the timing, much less the substance, of what may follow the end of the new comment period, be it a resolution of the issue, a delay in the DOL Rule s implementation, or, perhaps, another comment period. The type of indefinite stay DOL requests, where issues are ripe for adjudication, is unsupported by the case law DOL relies upon and anathema to judicial economy. C. The Relevant Factors Weigh Heavily Against A Stay Any stay would cause significant harm to Thrivent s business, unnecessarily delay resolution of Thrivent s fully-briefed motion for summary judgment, and undermine judicial efficiency. In contrast, DOL would not be adversely impacted, let alone suffer any hardship, if Thrivent s motion was resolved on the merits it would remain free to consider whether to adopt a new regulation (or not). Accordingly, a stay is not warranted. 16

22 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 22 of DOL Fails To Assert Any Hardship It Would Suffer In The Absence Of A Stay, As Required, While Concurrently Pursuing A Ruling On The Same Issue In Another Federal Court As explained in Section II.B, supra, DOL s failure to assert that it would suffer any hardship or inequity in the absence of a stay is, by itself, grounds to deny DOL s motion. Tellingly, DOL has not requested that the U.S. Court of Appeals for the Fifth Circuit stay a decision in the related case of Chamber of Commerce v. Acosta, Case No In that case, DOL acknowledges that the anti-arbitration condition is a discriminatory obstacle to arbitration that cannot be harmonized with the FAA and Concepcion, and as a result requests that the Fifth Circuit invalidate and sever the antiarbitration condition from the BIC Exemption. ECF No at Clearly, there is no need for a stay in this action when DOL is inviting another court to rule on the very same provision at issue. 2. Thrivent Will Suffer Substantial, Irreparable Harm If The Court Stays Adjudication Of Thrivent s Fully Briefed And Argued Summary Judgment Motion In contrast, Thrivent will suffer substantial harm if the proceedings are stayed. As Thrivent has previously explained in a declaration from its General Counsel in support of its summary judgment motion, complying with the Fiduciary Rule requires Thrivent to dramatically reshape the way Thrivent [can] market and sell its financial products. Decl. of Johnston Mot. Summ. J. (Nov. 4, 2016), ECF No Implementing the BIC Exemption would require Thrivent to amend its Bylaws, alter its MDRP, and fundamentally alter Thrivent s relationship with its nearly 2.5 million members nationwide. See id. 4, Such dramatic changes to Thrivent s existing business 17

23 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 23 of 30 require extensive planning, including preparation to implement the new Best Interest Contracts with members this cannot take place at DOL s whim. Thrivent must undertake substantial effort to make these changes well in advance of January 1, 2018 in order to ensure that any new contracts are compliant beginning on that date, and truthfully certify compliance with all applicable federal laws. See Johnston Decl A ruling on the merits of Thrivent s motion one way or the other would provide clarity and allow Thrivent to plan its business accordingly. A stay, on the other hand, would only create delay and exacerbate uncertainty, which adversely impacts Thrivent s business, constitutes a potentially grievous hardship for purposes of business planning[,] and places [Thrivent] in a very real dilemma. La. Forestry Ass n Inc. v. Sec y U.S. Dep t of Labor, 745 F.3d 653, 680 n.10 (3d Cir. 2014) (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 153 (1967)). Thus, DOL s unsupported suggestion that Thrivent will not be injured by waiting for the administrative process to be completed, (Memo at 4) is plainly incorrect. Keeping Thrivent s business planning efforts in limbo, simply because DOL might adopt a new regulation, directly harms Thrivent. Perplexingly, DOL appears to suggest that Thrivent could conceivably choose not to restrict its arbitration agreements as contemplated by the [anti-arbitration condition], given DOL s purported nonenforcement (which, again, is not substantiated by official action by DOL, or even a declaration in support of its motion from DOL or the Treasury Department charged with enforcement), and because the challenged exemption condition [does not] lend itself to private enforcement. Memo at 3. This assertion cannot 18

24 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 24 of 30 be taken seriously. Thrivent is required to comply with all applicable federal and state laws, and Thrivent routinely certifies its compliance with such requirements in regulatory filings. Johnston Decl. 6. It strains credulity to suggest that Thrivent should rely on statements made by DOL s counsel as a basis to decide not to comply with the BIC Exemption s requirements and still certify that it is in compliance with federal law particularly where DOL s statements to the public make clear that as of January 1, 2018, Best Interest Contracts must allow customers to pursue judicial class actions. See Kay Decl. Ex. B (Transition Period FAQs, supra) at Q1. Furthermore, failing to abide by the anti-arbitration condition would mean that Thrivent was engaged in prohibited transactions, subjecting Thrivent to excise taxes enforced by the Internal Revenue Service. See 26 U.S.C. 4975(a) (b). Presumably DOL is not actually suggesting that Thrivent is free to ignore its obligations under the Internal Revenue Code as enforced by the Department of the Treasury. It is far from clear how Thrivent can rely on speculative and non-definitive assertions by DOL s counsel in the course of litigation as a basis for determining its compliance with federal tax laws. 3. Delaying Adjudication Of Thrivent s Pending Motion For Summary Judgment Would Harm Judicial Efficiency As It Might Require Thrivent To Seek Emergency Relief DOL is also mistaken with respect to the burden issuing a stay might place upon the Court, as a stay would harm judicial efficiency. First and most obviously, requiring the Court to check in with the parties every sixty days to find out whether the DOL has changed the rule in a way that resolves the issues in Thrivent s motion is contrary to judicial efficiency. And depending upon the outcome of DOL s latest round of public 19

25 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 25 of 30 comment, the litigation may then need to move forward. More importantly, as DOL has acknowledged, Thrivent must be in full compliance with all of the [BIC Exemption s] conditions, including the anti-arbitration condition, on January 1, 2018, in order to avoid engaging in prohibited transactions. See Kay Decl. Ex. B (Transition Period FAQs, supra) at Q1. In order to use the BIC Exemption, Thrivent must provide affected existing members with 30 days advance notice of the Best Interest Contract terms, which means that notice must be sent to those members no later than December 1, AR133. Thrivent therefore has less than four months to prepare to implement the BIC Exemption before it must provide its affected members with notice. The practical reality of delivering such notice through Thrivent Magazine, as required by Thrivent s bylaws, means Thrivent needs to take significant steps in the coming weeks to ensure compliance come January See Section I.C., supra. Given the looming deadlines, if the Court were to stay this case and permit DOL to file a status report every 60 days, (Memo at 5) it is highly likely that Thrivent would need to seek emergency relief to prevent implementation of the BIC Exemption s antiarbitration condition. By contrast, if the Court addresses Thrivent s submitted and pending summary judgment motion in the relatively near term, then it would minimize the probability of any emergency hearing. The interests of judicial economy plainly weigh against the requested stay of the proceedings. D. Thrivent s Motion Remains Ripe and Justiciable DOL further suggests that a stay might avoid potentially complex questions about 20

26 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 26 of 30 the right of a non-governmental party to champion a rule that the issuing agency is no longer defending. Memo at 4. But Thrivent s motion has been fully briefed in an adversarial setting, including briefing by amici curiae AARP, et al. ( Amici ) in support of the validity of the anti-arbitration condition. See Mot. of AARP Amici (Dec. 9, 2016), ECF No. 28. All that remains is for the Court to render its decision. The ripeness inquiry requires examination of both the fitness of the issues for judicial decision that is, safeguard[ing] against judicial review of hypothetical or speculative disagreements; and the hardship to the parties of withholding court consideration that is, whether delayed review inflicts significant practical harm on the plaintiffs. Parrish v. Dayton, 761 F.3d 873, 875 (8th Cir. 2014) (brackets, internal quotation marks, and citations omitted). Relatedly, a case becomes moot when it no longer present[s] a case or controversy under Article III. Spencer v. Kemna, 523 U.S. 1, 7 (1998). Because of the case or controversy requirement, federal courts will not entertain friendly suits, or those which are feigned or collusive in nature. Flast v. Cohen, 392 U.S. 83, 100 (1968) (citations omitted). Here, Thrivent s harm is not speculative Thrivent must comply with the antiarbitration condition by January 1, 2018, or it will be engaging in prohibited transactions subject to excise taxes. 5 Moreover, Thrivent s motion was fully briefed in an adversarial proceeding, and DOL s belated change of position regarding the anti-arbitration 5 In addition, as explained in Sections II.C.2. 3., supra, Thrivent must undertake a substantial effort well in advance of January 1, 2018 in order to ensure compliance with the rule, and would thus be harmed by DOL s requested stay, which would force Thrivent to remain in limbo with respect to knowledge of what is required of it. 21

27 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 27 of 30 condition does not somehow render this a friendly or collusive suit. The relevant issues in Thrivent s motion for summary judgment have been fully aired by both parties, as well as Amici. Only after substantial time, effort, and resources were expended by both parties, Amici, and the Court, to ensure a full, fair, and complete hearing of all issues related to Thrivent s motion for summary judgment did DOL acknowledge that Thrivent has been correct all along. While DOL s subsequent change in its position supports the propriety of Thrivent s position, it in no way renders the earlier proceedings insufficiently adversarial to merit adjudication. Curiously, DOL also warns that intervenors might even attempt to prosecute an appeal if Plaintiff s summary judgment motion is granted. Memo at 4. It is true that appellate courts sometimes allow an amicus to advocate arguments that the government has abandoned. See, e.g., United States v. Brainer, 691 F.2d 691, 693 (4th Cir. 1982); accord United States v. Windsor, 123 S. Ct. 2675, 2687 (2013) (finding that adversarial presentation of the issues is assured by the participation of amici curiae prepared to defend... the constitutionality of the legislative act, despite the government no longer defending the constitutionality of the challenged statute); see also I.N.S. v. Chadha, 462 U.S. 919, 940 n.12 (1983) (Even where the government largely agree[s] with the opposing party on the merits of the controversy, there is sufficient adverseness and an adequate basis for jurisdiction in the fact that the government intended to enforce the challenged law against that party. ). But the possibility of such intervention in appellate proceedings only means that this Court s decision might be subject to contested proceedings in appellate court. That by no means warrants a stay. 22

28 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 28 of 30 E. A Nationwide Injunction Is Appropriate And Necessary Relief If The Court Decides Summary Judgment In Thrivent s Favor As an alternative to its request to stay these proceedings indefinitely, DOL, in its concurrently filed withdrawal of its cross motion for summary judgment and revised response to Thrivent s motion for summary judgment states that it would not oppose this Court s granting summary judgment to Plaintiff vacating [the anti-arbitration condition] as applied to arbitration agreements entered into by Thrivent Financial. ECF No. 71 at 2. 6 While Thrivent agrees that the Court should grant summary judgment in Thrivent s favor, Thrivent has requested a nationwide injunction against enforcement of the antiarbitration condition. That is the proper remedy here. As an initial matter, to the extent DOL believes the relief Thrivent requested in its summary judgment motion was inappropriate, the time for DOL to raise that concern was in its opposition to that motion. DOL did not do so, and it has thus waived its arguments with respect to Thrivent s requested relief should the Court decide summary judgment in Thrivent s favor. Cf. Satcher v. University of Arkansas at Pine Bluff Bd. of Trustees, 558 F.3d 731, 735 (8th Cir. 2009) (holding that a failure to oppose a basis for summary judgment constitutes waiver of that argument. ); Thomas v. Southwestern Bell Telephone Co., 2016 WL (E.D. Mo. Aug. 8, 2016) at *2 (rejecting plaintiff s attempts to raise new arguments in her [Federal Rule of Civil Procedure 59(e) motion that] could 6 Due to the interrelatedness of issues, Thrivent responds in this brief to issues raised in both of DOL s memorandum in support of its motion for a stay (ECF No. 78), and in its withdrawal of its cross motion for summary judgment and revised response to Thrivent s motion for summary judgment (ECF No. 71). 23

29 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 29 of 30 have been raised when the Court was deciding Defendant s Motion for Summary Judgment. ) More importantly, DOL provides no legal support for the propriety of the narrow resolution it proposes, by which the Court would vacate the improper and extra-legal anti-arbitration condition only as to Thrivent. Indeed, other courts addressing this issue have determined that proceeding as DOL suggests may be procedurally problematic. As the D.C. Circuit stated in Harmon v. Thornburgh, [w]hen a reviewing court determines that agency regulations are unlawful, the ordinary result is that the rules are vacated not that their application to the individual petitioners is proscribed. 878 F.2d 484, 495 n. 21 (D.C. Cir. 1989); accord Nat l Mining Ass n v. U.S. Army Corps of Eng rs, 145 F.3d 1399, 1409 (D.C. Cir. 1998) (brackets, internal quotation marks, and citations omitted); Hawaii v. Trump, 859 F.3d 741, 788 (9th Cir. 2017) (brackets, internal quotation marks, and citations omitted). Through its motion for summary judgment, Thrivent is entitled to certainty, one way or the other, with respect to whether it must comply with the anti-arbitration condition. If the Court determines that the anti-arbitration condition is improper (as Thrivent has argued and as DOL now concedes), then the appropriate remedy is a permanent nationwide injunction against enforcement of the anti-arbitration condition. See, e.g., Decker v. O Donnell, 661 F.2d 598, (7th Cir. 1980) (determining that a nationwide injunction was appropriate in the case of facial challenge to legality of agency regulation); Nat l Mining Ass n, 145 F.3d at (holding that a nationwide injunction is appropriate where an agency rule of broad applicability is determined to be 24

30 CASE 0:16-cv SRN-DTS Document 84 Filed 08/07/17 Page 30 of 30 invalid even where a single plaintiff has challenged the legality of the rule). Any narrower, Thrivent-specific remedy would differentiate Thrivent from other regulated financial institutions in a manner that makes no sense in the context of a determination that a broadly applicable federal rule is invalid. CONCLUSION For the foregoing reasons, the Court should deny DOL s motion to stay proceedings, and resolve Thrivent s motion for summary judgment. Respectfully submitted, Dated: August 7, 2017 GREENE ESPEL PLLP s/ Mark L. Johnson Mark L. Johnson, Reg. No Christopher L. Schmitter, Reg. No S. Ninth Street, Suite 2200 Minneapolis, MN mjohnson@greeneespel.com cschmitter@greeneespel.com (612) and - COZEN O CONNOR Andrew B. Kay (pro hac vice) th Street, NW Washington, DC akay@cozen.com (202) Attorneys for Thrivent Financial for Lutherans 25