Now that the Labor Department has put the final touches on the fiduciary rule, it’s on to the courts.
And the first lawyer to lob a challenge before a judge is almost certain to be Washington’s Eugene Scalia, the 52-year-old son of recently deceased Supreme Court Justice Antonin Scalia.
Last year in a comment letter on the proposal, the younger Scalia, a partner at the law firm of Gibson, Dunn & Crutcher, attacked the draft version of the fiduciary rule as “legally flawed,” calling the DOL’s interpretation of a fiduciary obligation overbroad and impermissible.” He also claimed the agency lacks the authority to establish new standards and a regulatory and enforcement program for broker-dealers.
“Wall Street is certain to charge Scalia with the duty of destroying the rule or peeling back its effectiveness,” said attorney Andrew Stoltmann, a member of the board of directors for the Public Investor Arbitration Bar Association. “The securities industry will bankroll a legal attack with a ferocity rarely seen in the civilized world.”
Damon Silvers, the director of policy and special counsel for the AFL-CIO, pointed to the stakes involved in the rule. He alluded to the president’s Council of Economic Advisers, which says conflicted advice takes $17 billion out of the hands of workers every year and puts it into the pockets of the investment industry.
Such money “can pay for some very expensive lawyers,” said Silvers, who is also a member of the Securities and Exchange Commission’s Investor Advisory Committee.
Scalia is selling himself to Wall Street as the primary legal battering ram to kill financial reform, according to Dodd-Frank advocates.
“He’s been pretty much involved in all the major challenges,” said Marcus Stanley, the policy director for Americans for Financial Reform.
Among Scalia’s successful challenges: He took the lead attorney role that led a federal district court judge in late March to void MetLife’s designation by the Financial Stability Oversight Council as a “systemically important financial institution” (in other words, as “too big to fail.”) That decision, claim some commentators, has the potential to unravel Dodd-Frank completely.
Scalia has also won victories overturning the Securities and Exchange Commission’s rules for proxy access allowing shareholders of companies to more easily kick out corporate board members.
In the labor sphere, Scalia boasts in his online biography that he successfully challenged a court decision that would have certified the largest class in an Americans with Disabilities Act class action suit ever filed.