No ‘Fiduciary’ Exception for Protected Docs

In plaintiffs’ ERISA suit against an employer who allegedly promised plaintiffs pension credits if they returned to work for the employer after an eight-year stint with the CIA, the Alexandria U.S. District Court denies plaintiffs’ motion to compel production of four documents that contain legal analysis of legal risks relating to the potential liability of defendant concerning the alleged agreement and the retirement income plans’ non-duplication provisions.

Plaintiffs allege defendant breached their contract when it reduced benefits to plaintiffs in violation of the Special Leave of Absence agreement the parties had previously entered. During discovery, employer submitted their privilege log containing 15 documents indicated by defendant as protected by the attorney-client privilege. Plaintiffs moved to compel these and other documents, arguing they were subject to the fiduciary exception to the attorney-client privilege. Under that privilege, 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.

In analyzing whether memoranda prepared by ERISA plan administrators’ attorneys were considered part of “plan administration” and therefore properly under the fiduciary exception, the 9^th Circuit in U.S. v. Mett, 178 F.3d 1058 (9^th Cir. 1999), examined the content and context of the memoranda. The court held that where a fiduciary seeks legal advice for her own protection, the core purposes of the attorney-client privilege are seriously implicated and should trump beneficiaries’ right to disclose under any fiduciary exception to the privilege.

This reading of the fiduciary exception is warranted by public policy. In ERISA cases, the attorney-client privilege encourages a trustee to seek advice about its potential liability.

Here, the first four documents submitted for in camera review contain legal analysis of legal risks relating to the potential liability of defendant concerning the alleged agreement and the retirement income plans’ non-duplication provisions. They constitute legal advice aimed at addressing the liability of the plan’s fiduciaries should they adopt certain changes to the plan. Therefore, defendant was not acting as a fiduciary at the time they sought this advice and the documents are not part of “plan administration.” Instead, the documents are protected by attorney-client privilege and rightly withheld from plaintiffs. The court will issue a second order addressing the later-submitted documents.

Motion to compel denied.

Searls v. Sandia Corp. (Cacheris) No. 1:14cv578, March 24, 2015; USDC at Alexandria, Va. VLW 015-3-168, 5 pp.