Plan fiduciaries should be aware that communications with benefit plan attorneys may not be privileged. The Department of Labor (DOL) recently investigated the management of two multiemployer funds in connection with a $10.1 million loss of Employee Retirement Income Security Act of 1974 (ERISA) plan assets resulting from investments in entities related to Bernard Madoff. In 2009, the DOL issued two subpoenas requesting documents relating to the administration of the funds. The administrators of the funds provided documents partially responsive to the subpoenas but redacted portions of some documents and wholly withheld other portions, claiming they were protected by attorney-client and work product privileges. The DOL filed a petition in federal district court to obtain compliance with the subpoenas. Upon briefing and a hearing, the district court granted the DOL’s petition. On appeal, the Fourth Circuit Court of Appeals affirmed the district court’s order granting the DOL’s petition to enforce the subpoenas. In affirming the district court’s decision, the Fourth Circuit joined four other circuit courts, including the Second Circuit of New York, in concluding that the fiduciary exception to the attorney client privilege applied under ERISA.
Rooted in the common law of trusts, the fiduciary exception is based on the rationale that the benefit of any legal advice obtained by a trustee regarding matters of trust administration is for the benefit of the beneficiaries. Consequently, courts have generally found that the attorney-client privilege generally may not be used to insulate the fiduciaries from the parties (i.e., the beneficiaries) who the fiduciaries are obligated to serve. In this particular instance, the Fourth Circuit held that the fiduciary exception to attorney-client privilege “extends to communications between an ERISA trustee and a plan attorney regarding plan administration.” The Fourth Circuit also concluded that “application of the fiduciary exception to the attorney-client privilege in the context of a subpoena issued by the secretary of labor under ERISA does not require a showing of good cause; instead, its application turns on the context and content of the individual communications at issue.” (Solis v. The Food Employers Labor Relations Association, 4th Cir. 2011)