:: Fiduciary Exception Eclipses ERISA Fiduciary’s Claim Of Attorney Client Privilege
As applied by the courts in cases brought under ERISA, the “fiduciary” exception to the attorney-client privilege “comes into play when . . . the administrator for an ERISA plan invokes the attorney-client privilege against the plan beneficiaries.” Lewis v. UNUM Corp. Severance Plan, 203 F.R.D. 615, 619 (D. Kan. 2001). “This fiduciary exception derives from the principle that when an attorney advises a plan fiduciary about the administration of an employee benefit plan, the attorney’s client is not the fiduciary personally but, rather, the trust’s beneficiaries.” Lewis, 203 F.R.D. at 619.
Redd v. Bhd. of Maint. of Way Emples. Div. of the Int’l Bhd. of Teamsters, 2009 U.S. Dist. LEXIS 46288 ( E.D. Mich. June 2, 2009)
This opinion involves consideration of the dimensions of the fiduciary exception to attorney-client and work product privileges. The issue arose in the context of district court review of plaintiffs’ objections to a magistrate judge’s ruling on a motion to compel.
the Magistrate Judge conducted an in camera review on March 16, 2009, and upheld Defendants’ claims of privilege as to the bulk of the documents at issue. Plaintiffs now object to this determination, arguing that Defendants’ claims of privilege are overcome by a so-called “fiduciary” exception that the courts have invoked to compel the production of communications between an ERISA plan administrator and counsel concerning the administration of the plan.
In framing the issue, the district court provided a concise overview of the fiduciary exception. The court noted that the fiduciary exception to the attorney-client privilege “comes into play when . . . the administrator for an ERISA plan invokes the attorney-client privilege against the plan beneficiaries.” (citing, Lewis v. UNUM Corp. Severance Plan, 203 F.R.D. 615, 619 (D. Kan. 2001).
The rationale for the exception is based upon trust law notions.
“This fiduciary exception derives from the principle that when an attorney advises a plan fiduciary about the administration of an employee benefit plan, the attorney’s client is not the fiduciary personally but, rather, the trust’s beneficiaries.” Lewis, 203 F.R.D. at 619. In light of this underlying rationale, the courts have invoked this exception, and ordered the disclosure of attorney-client communications, when a plan administrator seeks the advice of counsel in the “pre-decisional” phase of a benefit determination. See, e.g., Lewis, 203 F.R.D. at 620; Geissal v. Moore Medical Corp., 192 F.R.D. 620, 624-25 (E.D. Mo. 2000); Shields v. UNUM Provident Corp., No. 2:05-CV-744, 2007 U.S. Dist. LEXIS 17836, 2007 WL 764298, at *4-*5 (S.D. Ohio Mar. 9, 2007).
The scope of the exception is marked off based upon the time frame in question. After a decision is final, the rationale no longer supports abrogation of the privilege. Thus,
In contrast, attorney-client communications made after a decision is final, or addressing a challenge to the plan administrator in his or her personal capacity, have been deemed privileged and exempt from disclosure. See, e.g., Geissal, 192 F.R.D. at 625-26. As the Ninth Circuit has explained:
“On the one hand, where an ERISA trustee seeks an attorney’s advice on a matter of plan administration and where the advice clearly does not implicate the trustee in any personal capacity, the trustee cannot invoke the attorney-client privilege against the plan beneficiaries. On the other hand, where a plan fiduciary retains counsel in order to in order to defend herself against the plan beneficiaries . . . , the attorney-client privilege remains intact.”
United States v. Mett, 178 F.3d 1058, 1064 (9th Cir. 1999).
The Scope Of The Requests
The Plaintiffs properly limited their requests to the relevant period, namely, the “pre-decisional” period.
In this case, there evidently is no dispute that the documents sought by Plaintiffs were created in the “pre-decisional” phase of the plan administrator’s decision to recalculate and reduce Plaintiffs’ pension benefits, and prior to this decision becoming final in June of 2007. Plaintiffs further assert — again, apparently without contradiction — that the documents they seek reflect communications between the plan administrator and counsel regarding matters that, in their view, are properly characterized as “plan administration” — namely, the determination that pension benefits had been incorrectly calculated, and the recalculation of the purportedly correct amounts. Finally, Plaintiffs note the absence of any effort to impose personal liability on the plan administrator, such that the advice of counsel could be viewed as offered on behalf of the plan administrator rather than the plan and its beneficiaries.
The Magistrate Judge’ Ruling
The district court found the magistrate judge’s ruling opaque on the rationale underlying the opinion. “Unfortunately, while it is evident that the Magistrate Judge upheld Defendants’ claim of attorney-client privilege, it is less clear from the record why the Magistrate Judge declined to apply the “fiduciary” exception to overcome this assertion of privilege.”
On this point, the Court was clearly peeved that a transcripts of the hearing on the motion was not provided to the Court. Based upon the transcript of a subsequent hearing, the district court garnered some sense of the rationale which it described as follows:
(i) that Plaintiffs are former employees of the Defendant employer who had already begun to receive pension benefits, so that they and the plan administrator would invariably be in an “adversarial” posture as soon as the plan administrator commenced the inquiry whether these benefit payments were erroneous and should be recalculated; and
(ii) that at least some of the Plaintiffs were not merely plan participants but, while still employed, had played roles in the administration and operation of the plan.
Rejection of Proffered Rationale
The foregoing rationale was found inadequate.
The Magistrate Judge evidently viewed these two factors as strong indicia that the plan administrator’s actions would lead to an “adversarial situation” and ensuing litigation. Yet, as one court has explained in rejecting an appeal to the attorney-client privilege under comparable circumstances:
Defendants argue that none of the legal advice secured by the plan administrator was for the purpose of plan administration but was for the purpose of defending against the disagreement and claims of the disappointed plan beneficiary, [plaintiff] James W. Geissal. The Court disagrees.
For the defendants to prevail on this argument, whenever the administration of a plan involves the denial of a beneficiary’s claim or benefits under a plan, all of the antecedent, pre-decisional legal advice of counsel would be subject to the attorney-client privilege and not available for review by the beneficiaries of the plan, including the disappointed beneficiary. This contradicts the principle that the plan’s administrator or trustee administers the plan in the beneficiaries’ best interests. The prospect of post-decisional litigation against the plan by a disappointed beneficiary can exist whenever the plan denies a claim. Because the denial of claims is as much a part of the administration of a plan as the decision-making which results in no unhappy beneficiary, the prospect of post-decisional litigation against the plan is an insufficient basis for gainsaying the fiduciary exception to the attorney-client privilege.
Geissal, 192 F.R.D. at 625; see also Lewis, 203 F.R.D. at 620.
In short, the prospect of litigation did not outweigh the important goals of the exception. The application privilege would controvert the fiduciary obligations of the plan administrator.
Likewise, in this case, even if the plan administrator viewed it as likely that the recalculation of Plaintiffs’ benefits would result in litigation, and even if the decision to consult with counsel was motivated in part by this likelihood of eventual litigation, this Court finds that this prospect, standing alone, is insufficient to preclude a plan beneficiary’s access to pre-decisional communications between a plan administrator and counsel concerning matters of plan administration.
Note: The opinion suggests that plaintiff’s counsel would be well advised to link a request for discovery to the existence or nature of a conflict of interest:
The Court recognizes that it permitted discovery in this case so that Plaintiffs could explore the plan administrator’s possible conflict of interest. See Metropolitan Life Insurance Co. v. Glenn, 128 S. Ct. 2343, 2346, 171 L. Ed. 2d 299 (2008). Yet, Plaintiffs have not endeavored to explain how the requested materials might tend to shed light on the existence or nature of any such conflict of interest. Similarly, while Plaintiffs posit that Defendants might pursue an “advice of counsel” defense, this Court is not aware of any case law support for the proposition that a plan administrator’s decision to deny benefits is better able to withstand judicial scrutiny if it rests upon an attorney’s reading of the pertinent plan provisions.
Relevance - Following up on the previous point, relevance questions inhere in the decision of whether to apply the fiduciary exception. In this case, the objection was deemed waived:
To be sure, while the materials in question might not be shielded by the attorney-client or work product privileges, the Court harbors considerable doubt as to the relevance of these materials. . . . Nonetheless, Defendants have failed to preserve any objection they might have raised on grounds of relevance, where (i) they evidently objected to Plaintiffs’ discovery requests solely on grounds of privilege, (ii) they made only a single passing reference to relevance, without elaboration or any sort of developed argument, in their response to Plaintiffs’ motion to compel, (see Defendants’ Answer to Motion to Compel, Br. at 7), and (iii) they have not objected to the Magistrate Judge’s determination, at least implicitly, that the requested materials were relevant, as evidenced by the need for an in camera review.
Work Product Note - The exception applies regardless of the type of privilege:
In this case, Defendants have claimed that certain of the documents sought by Plaintiffs are protected by both the attorney-client and work product privileges. Yet, the courts have found that the same “fiduciary” exception may overcome each of these privileges, at least as to materials prepared in the “pre-decisional” phase of a benefit determination. See, e.g., Lewis, 203 F.R.D. at 623; Geissal, 192 F.R.D. at 625. Accordingly, while the discussion in the present order is focused largely on the attorney-client privilege, the Court’s rulings apply with equal force to Defendants’ invocation of the work product privilege.
See also - :: The Fiduciary Exception To Attorney Client Privilege In ERISA Cases
