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Litigation News | 2022

Understanding the Fiduciary Exception to the Attorney-Client Privilege

Karen L Stevenson


  • The attorney-client privilege in discovery disputes usually involves providing a privilege log that identifies privileged communications without revealing their content.
  • The fiduciary exception to the privilege applies in ERISA cases, preventing employers acting as fiduciaries from asserting privilege against plan beneficiaries regarding plan administration matters.
  • Courts analyze disputed communications to determine if they involve plan interpretatiodministration or the fiduciary's liability defense, often requiring in camera review.
Understanding the Fiduciary Exception to the Attorney-Client Privilege
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When a discovery dispute concerns the attorney-client privilege, it is usually straightforward for the court to resolve. Rule 26(b)(5) requires that if a party withholds information otherwise responsive to discovery by claiming that the information is privileged, the privilege must be expressly asserted, and the document or communications must be described in a manner, without revealing the information itself, that enables other parties to assess the privilege claim. Thus, a party asserting the privilege has typically produced a privilege log that identifies the particular communications, as well as their authors and recipients.

Once the court determines that the challenged communication involves the party’s counsel (whether in-house or retained), that no third party is included whose presence would waive the privilege, and that there is nothing to suggest that the crime-fraud exception applies, the court can readily conclude that attorney-client designation is appropriate, and the party need not disclose the communication. Motion to compel denied, right? Maybe not.

In a lawsuit that alleges violations in the administration of an Employee Retirement Income Security Act (ERISA) benefit plan, the fiduciary exception to the attorney-client privilege makes the discovery analysis more nuanced. Consequently, the resolution of a motion challenging an ERISA fiduciary’s assertion of the privilege may be less assured.

The Fiduciary Exception to the Attorney-Client Privilege

The ERISA statute requires that an employer, as administrator of an ERISA plan, must communicate forthrightly with the plan beneficiaries about the interpretation and administration of the plan. Because of this critical responsibility, a number of courts, including the U.S. Court of Appeals for the Ninth Circuit, recognize a “fiduciary exception” to the attorney-client privilege. The fiduciary exception prevents an employer acting as an ERISA fiduciary from asserting the attorney-client privilege against a plan beneficiary on matters concerning plan administration.

Courts have offered two rationales to support the exception. First, courts reason that the exception is grounded in an ERISA trustee’s statutory duty to disclose to plan beneficiaries all information related to plan administration. Thus, the attorney-client privilege must yield to the competing legal principle established by the ERISA statute itself.

Second, in matters related to plan administration and interpretation in the ERISA context, courts conclude that the plan beneficiary is the client, not the lawyer for the ERISA trustee. In that context, the fiduciary exception is not an “exception” at all, but merely a recognition that in matters of plan administration, an ERISA trustee is not the real “client” and, thus, never had the privilege to begin with. Under either rationale, however, courts also recognize that when an ERISA trustee faces its own liability, whether civil or criminal, then the trustee’s communications with its counsel in support of its own defense is subject to protections of the attorney-client privilege.

How Courts Analyze the Issue

When a plaintiff challenges an employer’s assertion of the attorney-client privilege based on the fiduciary exception, the court must examine the nature of the disputed communications. First, does the lawsuit involve an ERISA plan? Is the employer a plan fiduciary? Are the communications identified on the party’s privilege log? Do the communications involve the employer’s counsel? If so, is privilege waived by inclusion of any third party in the communications? Finally, and most importantly, does the communication in question involve information concerning the interpretation or administration of the ERISA plan? Or does the communication contain advice or discussion pertaining to the fiduciary’s own defense against civil or criminal liability?

This last step in the inquiry is often difficult to determine without in camera review of the document in question. The court may need to examine the contents of the disputed communications. It is not always clear just from a privilege log entry whether a given communication about the plan is for the purpose of conveying information about the plan interpretation or administration to a plan beneficiary, or if instead, the communication is related to the fiduciary’s own potential liability to disgruntled plan beneficiaries or regulators.

A key fact that courts consider is whether, at the time of the communication, the fiduciary and the beneficiary(ies) have become legally adverse. When that is the case, then the employer/fiduciary may indeed shield communications with its counsel that are for the employer’s own defense. In United States v. Mett, the appellate court held that the exception did not apply to require disclosure. The court emphasized that the defendants had already been convicted of improperly withdrawing plan funds to pay for the organization’s operations. The communications at issue related to strategy discussions between the fiduciaries and their defense counsel as opposed to the improper withdrawals and, thus, were shielded by privilege.

Tips for Practitioners

This discovery issue is important, but often overlooked in ERISA cases. Counsel needs to be prepared to effectively challenge or defend the assertion of the fiduciary exception to the attorney-client privilege. For defense counsel, if the client seeks to withhold documents otherwise responsive to discovery requests based on the fiduciary exception, you will first need to confirm that your client was indeed serving as an ERISA fiduciary during the relevant period.

Section 3(21) of the ERISA statute defines a “fiduciary” as anyone who “has any discretionary authority or responsibility in the administration of an ERISA plan,” but only when performing the functions outlined by the statute. If the client qualifies as an ERISA fiduciary, the defendant must identify on a privilege log any documents withheld based on the fiduciary exception to the attorney-client privilege. On the other hand, if the defendant cannot meet the requirements of an ERISA fiduciary, it may be appropriate to assert other privileges or the attorney work-product doctrine, but the fiduciary exception to the attorney-client privilege will not apply. To avoid disclosure, it will be imperative to present evidence that at the time of the challenged communications, the fiduciary itself was subject to personal criminal or civil liability.

For plaintiff’s counsel seeking production of documents withheld based on the fiduciary exception, a motion to compel production of the documents needs to include declarations or deposition testimony to establish that the defendant was acting in its fiduciary capacity in the administration or interpretation of the ERISA plan at the time of the communications and not for its own defense. Ultimately, the court may need to conduct in camera review of the documents to resolve the issue.