There Is an Exception to Attorney-Client Privilege

The common law of attorney-client privilege is intended to enable clients to speak with their attorneys in trusted confidence about work-related issues.

But, there is an exception to the attorney-client privilege in the Employee Retirement Income Security Act (ERISA). “ERISA fiduciaries cannot assert attorney-client privilege against plan participants,” said Jon T. Coffin, a partner with Johnston, Allison and Hord in Charlotte, North Carolina.

Coffin explained to attendees of the Retirement & Benefits Management Seminar, hosted by the University of South Carolina Darla Moore School of Business, and co-sponsored by PLANSPONSOR, this exception is based on the concept that ERISA requires fiduciaries to act in the best interest of participants, and that the fiduciaries are not the real clients of attorneys, the participants are. Citing a lawsuit decided in the 4th U.S. Circuit Court of Appeals, he said attorney-client privilege only applies to information discussed regarding fiduciaries’ own defense in a violation-of-duties case and information about certain non-fiduciary plan functions.

In Solis v. The Food Employers Labor Relations Association and United Food and Commercial Workers Pension Fund, [No. 10-1687, May 4, 2011], the appellate court found the exception will not apply to a fiduciary’s communications with an attorney regarding her personal defense in an action for breach of fiduciary duty, and communications between ERISA fiduciaries and attorneys regarding non-fiduciary matters, such as adopting, amending or terminating an ERISA plan, are not subject to the fiduciary exception.

Coffin explained the case concerned the pension plan’s investments in a fund partially managed by Bernard Madoff, an investment consultant who has since been convicted of imprisoned for perpetrating a Ponzi scheme. The Department of Labor requested all documents and committee minutes relating to the decisions about the investments, but the plan fiduciaries argued some of the documents were protected by attorney-client privilege. The fund was ordered by a district court to provide the documentation.

Coffin noted there are arguments against the exception to attorney-client privilege for ERISA plans: some argue the exception discourages plan sponsors from seeking attorney help when it could ultimately benefit plan participants, and some argue it violates attorneys’ ethical duty to clients. However, Coffin said, it is hard to get away from the fiduciary exception.

“When you write something, always assume you will be required to share it,” Coffin suggested, adding that plan sponsors may want to have someone with special knowledge write committee minutes. He also suggested plan sponsors make sure they, not their plans, are the named client in service agreements with attorneys.

Coffin warned plan sponsors to make sure what they say is “in confidence,” and do not have certain conversations in the presence of others or copy others in certain emails. A phone call may be better than email, he said, noting that a recorded call can be subpoenaed, but it will not provide the roadmap an email may provide.