Having been sued for issuing its Compliance Assistance Release on cryptocurrency by cryptocurrency recordkeeping platform provider ForUsAll, the Labor Department is pushing back.
In fairness, ForUsAll describes itself a little differently—as a “modern” 401(k) provider that also offers cryptocurrency services. But their interest in this litigation is—according to the suit they filed challenging the aforementioned Compliance Assistance Release back in June—for what it then labeled a “arbitrary and capricious attempt to restrict the use of cryptocurrency in defined contribution retirement plans….”
That said, the Labor Department’s motion to dismiss the suit—filed in the U.S. District Court for the District of Columbia earlier this week—pushed back on the claims made by ForUsAll on a number of fronts. The Labor Department says the release itself “does not have the force of law nor does it make new law. It instead reminds fiduciaries of their duties under the Employee Retirement Income Security Act of 1974 (ERISA), Pub. L. No. 93-406, 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq., as expressed in the statute and the Supreme Court’s recent decision in Hughes v. Northwestern University, 142 S. Ct. 737 (2022).”
‘Informs’ Action
The motion (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) goes on to note that the Release “informs fiduciaries that the Department has concerns with retirement plans offering investments in cryptocurrency, a novel and volatile asset class, and provides advance notice that the Department expects that it will initiate an investigative program regarding unspecified plans’ offerings of cryptocurrency investment options to plan participants”—but “it does not preclude any plan from offering cryptocurrency investment options or interpret the duty of prudence to prohibit such actions.”
Not only does the Labor Department assert that the ForUsAll plaintiff have mischaracterized the nature of the Release, but that they have failed to assert an injury that would provide them with the standing/rationale to bring suit.
The response begins by noting the loss of business opportunities alleged by ForUsAll in response to the Release. Noting that the complaint “does not assert that the Release itself precludes ForUsAll from engaging in any business transactions or otherwise directly regulates the company,” but rather that the loss of business is a result of “third parties’ decisions,” which it claimed “are the result of unspecified “enforcement threats” on the part of Defendants—not even necessarily the Release.” Positioning that the Labor Department says is “too speculative and attenuated” to support a basis for standing.
The Labor Department goes on to note that in such cases “a plaintiff must ‘adduce facts showing that those choices have been or will be made in such manner as to produce causation,’”—or, said another way, that you have to actually prove a connection between the action and the alleged reaction—with a proof burden higher for “uncertain” or “speculative” links. They fault the alleged “causal connection” here on two fronts; that ForUsAll acknowledges that “other plans” have, in fact, elected to use their platform following the Release, and that “ForUsAll has failed to allege any basis for concluding that the Release was a substantial motivating factor in the third-party plans’ actions giving rise to a causal connection sufficient to establish standing.” The Labor Department notes that the suit attributes a decision to forestall implementation due to alleged “enforcement threats,” rather than the role(s) “plan fiduciaries’ interpretation of the Release, their consideration of their duties following …….
Source: https://www.napa-net.org/news-info/daily-news/dol-pushes-back-cryptocurrency-suit