(Reuters) - The odds are infinitesimal that the attorneys general of New York, California and Oregon will succeed in reinstating the Obama Labor Department’s rule requiring retirement investment advisers to put the interests of their clients ahead of their own. But they may have had another good reason for filing a last-ditch motion this week, asking the 5th U.S. Circuit Court of Appeals to reconsider a May 2 order denying the AGs’ motion to intervene in the litigation.
The 5th Circuit has already decided the case, a challenge by the U.S. Chamber of Commerce and many other business groups to the so-called fiduciary rule. In March, a divided three-judge panel struck down the rule, holding that the Labor Department exceeded its regulatory authority (885 F.3d 360). The AGs of New York, California and Oregon were not involved in the appeal. But days before the deadline for the Labor Department to petition for a rehearing at the 5th Circuit, AGs Eric Schneiderman, Xavier Becerra and Ellen Rosenblum moved to intervene, arguing that they needed to step in to protect retirement investors because the Trump administration appeared to be abandoning the case.
The business groups that won the 5th Circuit panel ruling, represented by a galaxy of law firms including Gibson Dunn & Crutcher, Wilmer Cutler Pickering Hale & Dorr and Thompson Coe Cousins & Irons filed a compelling opposition brief. They argued that the AGs didn’t have standing because their lost taxes theory was too speculative, that the AGs broke procedural rules because they didn’t flag their motion as an emergency filing and, most substantively, that the states had been on notice since the beginning of the Trump presidency that the new administration wasn’t committed to the fiduciary rule. The business groups urged the 5th Circuit panel not to allow the AGs to flout the rules on the pretext of developments they had every reason to anticipate.
Judges Edith Jones and Edith Clement – the judges who had ruled to strike down the fiduciary rule – denied the AGs’ motion. (The per curiam order said that Chief Judge Carl Stewart, who had dissented from the majority decision to vacate the rule, “disagrees with the denial” of the intervention motion.)
In this week’s motion for reconsideration of their rejected intervention attempt, the AGs said it is now certain that the Trump Labor Department is done litigating the appeal. “Given that posture, the exceptional importance of the issues, and the grave harm the states will suffer as a result of the panel opinion — billions of dollars in lost retirement income to their residents and tens of millions of dollars in lost tax revenue — the states respectfully request that the court reconsider its decision,” the filing said. The states also asked that if the panel won’t reconsider, the judges allow the states to ask the en banc 5th Circuit to review the motion to intervene.
That request shows what an extreme long shot the AGs’ reconsideration motion is. After the panel denied their original motion to intervene, the states tried to move for en banc review of the panel order. It turns out that the 5th Circuit’s e-filing system won’t even accept an en banc petition requesting review of an order denying a motion to intervene – the circuit considers intervention motions administrative matters that are not subject to en banc review.
The states managed to dig up one example of a case in which the 5th Circuit granted en banc review of a decision after a three-judge panel initially refused to allow a party to intervene to pursue an en banc petition. (The en banc decision, in 1985’s Baker v. Wade, 769 F.2d 289, held that an anti-gay Texas law was constitutional.) But the states conceded in a footnote that under the Federal Rules of Appellate Procedure, a would-be intervenor is not a party entitled to en banc review.
And even if the states somehow pull off an upset win to allow en banc consideration of their intervention motion, they’ll have to continue to defy the odds to win the case. According to the business groups’ opposition, the 5th Circuit accepts en banc review of just 1 percent of its cases, so it’s extremely unlikely the court would agree to rehear the underlying appeal on the merits of the fiduciary rule even if the AGs were permitted to intervene and seek en banc review. Then the states would have to win the en banc appeal at the 5th Circuit. That alone would not restore the fiduciary duty rule, since parallel challenges are also being litigated elsewhere.
So why did New York, California and Oregon file this week’s extremely unlikely reconsideration motion? It’s become convention, of course, for state AGs from opposing political parties to lead challenges to executive branch policies they don’t like, but the motion also sends a message that Democratic AGs are not easing up after the abrupt May 8 resignation of New York AG Eric Schneiderman.
Schneiderman’s name was on the original motion to intervene but the motion for reconsideration is signed by New York’s acting AG, Barbara Underwood. Immediately after Schneiderman’s resignation, which followed a “New Yorker” report on claims of physical violence by four women who alleged they’d been involved in intimate relationships with him, Democratic state AGs said they would continue aggressively to challenge the Trump administration. California’s Becerra was one of the AGs who quickly put out statements asserting the coalition of Democratic AGs would not be weakened by Schneiderman’s resignation.
In that context, the AGs’ reconsideration motion isn’t quixotic. It’s strategic. The AGs will probably not win the right to intervene at the 5th Circuit. If they do, it’s a testament to their legal creativity - and even if they lose, they’ve shown they’re still in the fight.