(Rewrites throughout with reaction, case details, context)
WASHINGTON, Aug 2 (Reuters) - Any legal decision on whether the largest U.S. life insurer MetLife Inc should be labeled "too big to fail" will probably come after the Trump administration defines its stance on the designation.
A U.S. appeals court said on Wednesday that a U.S. government appeal of a ruling last year that the label was wrongly applied to MetLife would remain in abeyance until further court order. The label indicates companies that are not banks are still so large and interconnected they could damage the financial system if they fail.
Both parties are to file motions on the case's future by Nov. 17 or within 30 days of Treasury Secretary Steven Mnuchin issuing a report on how the government determines non-bank financial institutions are "systemically important."
The designation, which triggers heightened oversight, is decided by the Financial Stability Oversight Council (FSOC), made up of the country's top regulators.
"This decision provides the current administration time to determine whether any of FSOCs positions in this case should be reconsidered and whether it is appropriate for the government to continue pressing this appeal," said MetLife spokesman Christopher Stern.
Both MetLife and the Justice Department, representing FSOC, had requested an abeyance.
Last year, U.S. District Judge Rosemary Collyer rescinded the label of MetLife. The administration of former President Barack Obama, a Democrat, then appealed. That left only two companies, American International Group and Prudential Inc designated as systemically important.
After taking office, President Donald Trump, a Republican, ordered Mnuchin to review the designations. Many expect Trump will use his findings as reasons to withdraw the appeal.
There is no clear legal path for him to follow because FSOC and the designations are relatively new, both established in 2010.
Since FSOC labeled MetLife with a vote, some posit it should vote on withdrawing the appeal. That could be difficult. Trump appointees such as Securities and Exchange Commission Chair Jay Clayton sit on the council alongside Obama appointees, including Federal Reserve Chair Janet Yellen.
Others contend Trump or Mnuchin can order the Justice Department to withdraw it.
The appeals court also denied a request from advocacy group Better Markets Inc to appoint outside attorneys to represent FSOC.
Justice is "simultaneously representing the president, the treasury secretary, the treasury department and the FSOC in connection with FSOCs designation authority," said Better Markets President Dennis Kelleher, adding that the White House and Treasury "appear to have one view of that authority and FSOC clearly has an opposing view." (Reporting by Lisa Lambert; Editing by Grant McCool)