A recordkeeper that has sued the Labor Department based on its comments regarding cryptocurrency in defined contribution plans has told a federal judge it’s fine with dismissing its suit—if the court will hold the agency to its previous statements.
Basically, the ForUsAll plaintiffs—a 401(k) recordkeeper that also offers cryptocurrency services[1] — who filed suit back in June against the Labor Department for its “arbitrary and capricious attempt to restrict the use of cryptocurrency in defined contribution retirement plans…,” are now arguing that the Labor Department, in seeking to dismiss the suit has made a number of statements designed to diminish the severity/impact of the March 2022 compliance assistance release — statements that it shouldn’t be allowed to ignore in its enforcement actions going forward.
"Defendants' reply memorandum[2] in support of their motion to dismiss … makes at least five key concessions, which provide the court with the opportunity to resolve this case right now, simply by ordering that defendants are bound by these concessions and dismissing the case," the motion reads. “It would be manifestly unjust to allow Defendants to make representations to the Court to secure dismissal of this lawsuit without being bound by those representations,” the ForUsAll plaintiffs argue in in their motion.
‘Material Representations’
Specifically, the plaintiffs here cite those “material representations” from the Labor Department’s own motion to dismiss the suit as being its own statements that:
(a) the Compliance Assistance Release is “not binding,”
(b) the Department of Labor will not “predicate[]” “any enforcement action...on the Release,”
(c) that “[A]llowing investments in cryptocurrency [does not] violate[] a fiduciary duty” and “Plan fiduciaries are free to offer cryptocurrency investment vehicles that comply with their obligations, including the duty of prudence...,”
(d) that “there is no heightened standard of care beyond ‘the ordinary duty of prudence’ applicable to decisions to include cryptocurrency, and
(e) that the Department of Labor has not ‘imposed’ an ‘obligation’ to ‘monitor’ ‘cryptocurrency investment options in brokerage windows.’”
Condition ‘Null?’
However, the motion states that “in the event that the attached Proposed Order is not entered in substantially identical form,” For Us All “does not consent to the dismissal of this case and, in the alternative, moves to strike Defendants’ Reply insofar as it takes positions for which they refuse to be bound, and impermissibly raises new arguments[3] or relies on material outside the pleadings.”
What This Means
The ForUsAll argument is that the Labor Department has basically said in their motion to dismiss the suit that there’s no “there” here—that the compliance assistance release has no legal binding effect, and that it creates no fiduciary review obligations beyond what was already in existence for cryptocurrency as an investment. To agree to a dismissal of the suit—to agree to walk away from this— they want the court to first make that “official”—or they are asking for permission to refile an updated response.
Stay tuned.
Footnotes
[1] And just in case you’ve forgotten, in its initial suit For Us All claimed that “approximately one-third of the plans ForUsAll has discussed the matter with have indicated that, despite their interest in including cryptocurrency, they do not intend to proceed at this time in light of Defendants’ enforcement threats.”
[2] ForUsAll Inc. v. U.S. Department of Labor et al., case number 1:22-cv-01551, in the U.S. District Court for the District of Columbia.
[3] They list several arguments “impermissibly” raised in the Labor Department’s response, that they would want to respond to including “Relying on EBSA’s Enforcement Manual to argue that the ‘investigative program’ described in the Release is ‘a routine EBSA practice’ and ‘nothing out of the ordinary,’ [a]rguing that ‘cryptocurrency’s recent market performance’ affects redressability,” and “Insinuating that multiple reporters inaccurately ‘paraphrase[d] or interpret[ed]’ statements given by Department of Labor officials in interviews,” among others.
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