WASHINGTON (CN) – A federal judge on Wednesday struck down a decision designating MetLife too big to fail, allowing the life-insurance company to escape a label it has been fighting more than a year.
Though the opinion from U.S. District Judge Rosemary Collyer remains under seal, the judgment allows the company to slough off a 2014 designation it saw as an unnecessary and arbitrary burden that violated the spirit of rules enacted under the Dodd-Frank Act.
MetLife sued in January 2015 after the Financial Stability Oversight Council (FSOC) slapped it with the title of a systematically important financial institution. An arm of the U.S. Treasury Department created under Dodd-Frank, the council evaluates if a financial company’s failure would significantly impact the economy.
The failure of a company with the systematically important financial institution designation would severely damage the economy, and companies with the tag are therefore subject to greater supervision by the Federal Reserve.
In last year’s complaint, MetLife said the oversight council relied on “unsupported guesswork and unreasonable conjectures” to deem it too big to fail, and noted the council’s only voting member with insurance industry expertise dissented from the designation.
“Among other things, the final designation subjects MetLife to heightened regulatory oversight and the imposition of enhanced prudential standards by the board,” MetLife claimed in the lawsuit. “Those regulatory requirements are likely to result in substantial costs for MetLife and to adversely affect its competitive position in the market.”
In addition, the council relied on standards meant to govern the banking rather than the insurance industry and under which any large financial company could be deemed too big to fail, MetLife claimed.
The company claimed the FSOC made “numerous critical errors” in determining its designation, including not properly weighing the state regulatory regime that oversees MetLife’s business, fixating on MetLife’s size, relying on “vague standards,” and denying the insurance giant access to data and materials the council used to make its decision.
“That conclusion was arbitrary and capricious, conflicts with the Council’s statutory obligations under the Dodd-Frank Act and the rules and guidance that the Council promulgated for designating nonbank financial companies, and was reached through a procedure that denied MetLife its due process rights and violated the constitutional separation of powers,” the company claimed in the 79-page complaint.
MetLife and the FSOC have until April 6 to meet and file notice of whether any parts of Collyer’s opinion should remain under seal, according to an unsealed order filed Wednesday in Washington, D.C., Federal Court.
If either party thinks parts should remain secret, it must submit a redline comparison to the judge by the April 6 deadline, Collyer wrote.
MetLife, who is represented by Eugene Scalia, the son of late U.S. Supreme Court Justice Antonin Scalia, claimed the ruling as a victory for the company in a statement Wednesday.
“Today’s ruling validates MetLife’s decision to seek judicial review of our SIFI designation. From the beginning, MetLife has said that its business model does not pose a threat to the financial stability of the United States. This decision is a win for MetLife’s customers, employees and shareholders,” the insurance giant said.
The Treasury Department did not respond to a voicemail requesting comment on the order Wednesday afternoon.
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