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The insurance provider said that it is not eligible for designation as a Systemically Important Financial Institution because it is not primarily a financial company, and even if it were, FSOC wrongly used the firm's size alone to subject it to heightened regulation.
June 18 -
As the first legal briefs are filed in MetLife's challenge to FSOC's decision to designate the life insurance giant as systemically risky, the interagency council and outsiders are pointing to the high bar the company has to clear to convince the court to overturn the decision.
June 2
WASHINGTON MetLife is asking a federal court to force the Financial Stability Oversight Council to hand over documents that the agency says are protected by confidentiality agreements, saying those agreements cannot shield discovery if they are the basis of a systemic designation.
In a motion filed in federal district court on Monday, MetLife said that it is being denied access to hundreds of pages of documents related to FSOC's December decision to name the firm as a systemically important financial institution, which MetLife is challenging in its suit.
In a May legal filing, FSOC Deputy Assistant Secretary Patrick Pinschmidt said that it was withholding certain documents because they contain information about companies other than MetLife that are privileged and were given to FSOC under an agreement that they would not be divulged to any other party. But MetLife said that the court is not bound to honor those agreements, especially if they form the basis of a legal designation to which the firm must adhere.
"FSOC cannot restrict access to the administrative record by entering into side agreements in which it promises confidentiality to third parties -- and certainly cannot sacrifice a designated company's right to meaningful judicial review of the agency's designation determination for so slender a reason as the facilitation of 'uninhibited discussions,'" MetLife said.
MetLife said that FSOC has, both during the designation process and the discovery process of its lawsuit, repeatedly denied requests to view the entire administrative record related to its designation. Initially, MetLife said, nearly 2,000 pages of documents were redacted in full or in part a decision that the court partially resolved with a protective order that limited access to many hundreds of pages of documents so long as they were only accessible to MetLife's outside counsel.
Even still, MetLife said that it still does not have access to roughly 500 pages of redacted documents concerning deliberations between the council and two state insurance regulators who do not agree to the terms of the protective order. MetLife said that the protective order will ensure that the firm will receive no competitive advantage through the discovery, and it cannot be reasonably denied access to documents that are relevant to its designation.
"Fundamental principles of administrative law and basic concepts of fairness guarantee MetLife the right to review and respond to the record that FSOC considered when designating the company," MetLife said. "The state regulators' reported concerns about the confidentiality of the withheld materials are fully addressed by the existing Protective Order, which contains extensive safeguards that will ensure that the materials remain non-public and are used only for litigation purposes."
Meanwhile, the American Council of Life Insurers and the U.S. Chamber of Commerce both filed amicus briefs on June 26 supporting MetLife in its challenge to FSOC's SIFI designation.
ACLI is a major life insurance trade association whose members include American International Group and Prudential the two other insurance companies that have been named as SIFIs since FSOC was created in 2010. Prudential and AIG have not challenged their designations and have not commented publicly on the case, but an AIG executive said earlier this year that he did not think MetLife would prevail in its suit.
ACLI said in its brief that it supports MetLife's suit, saying the flaws in the designation process are "not unique to the Council's designation of MetLife, but instead have infected the Council's prior designations of life insurance companies."
The Chamber of Commerce, meanwhile, said that Dodd-Frank explicitly requires FSOC to conduct an analysis of whether a firm is vulnerable to runs or other financial stress before it can be considered systemically risky an analysis that FSOC merely assumed. The chamber said that, even if the statute were ambiguous on what constituted an analysis, it would still have to begin with an assertion of vulnerability based on something.
"FSOC must find a realistic, rather than speculative, threat to the financial system before it may select a particular nonbank financial company for SIFI designation," the Chamber said. "In other words, the statute requires a reality-based, rather than a speculation-based, threshold before FSOC may select a particular nonbank financial company potential for SIFI designation."
