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A Better Partnership


Mar 2013
March 12, 2013

CALL ME: Attorney-Client Privilege for Employee Benefit Plans

The phone rarely rings anymore. We love to communicate by e-mail, texting and social networking. In business, e-mail is the norm. Many days, I do nothing but answer e-mail questions about overpayments, loans gone awry, beneficiary battles and so on. E-mail generally works well. The client can carefully articulate the question, in writing, and it comes directly to me. Then, I can take the questions in order and give my clients clear, written answers that they can rely on and have for future reference.

What could be wrong with this picture? Plenty, according to developing case law.

Usually, when employers ask me a question, they are acting as the administrator of a benefit plan. For example, “We overstated a participant’s benefit in her paperwork and have been overpaying her for 25 years. What do we do now?”  When clients ask questions of their attorneys, whether by phone, e-mail or in person, normally the communication is subject to the attorney-client privilege. This means that any exchange between the attorney and the client is protected from disclosure to any third party and the courts. The exchange is confidential.

The administrator of a benefit plan, however, is a fiduciary of the plan and, under ERISA, the fiduciary must operate the plan in the best interest of the participants. Several courts have recently held that the attorney-client privilege should not block participants from learning the content of communications between the plan fiduciary and its attorney.

The reasoning  followsone of two lines:  (1) the benefit of any legal advice runs to the plans’ beneficiaries (the participants), so that anything legal counsel says to the administrator is in effect being said to the participants, or(2) the fiduciary duty to act in the“best interest of the participants”and disclose information relatedto plan administration outweighs the attorney-client privilege. This is called the fiduciary exception to the attorney-client privilege.

The Department of Labor (DOL) also relies on the fiduciary exception during plan audits, arguing that because it “stands in the participants’ shoes,” it is entitled to correspondence, including e-mails, between the administrator and its attorney. Because a DOL audit is much broader than a participant claim, the DOL access to e-mail could provide a detailed road map of all problems tackled by the administrator and how those problems were resolved (or not resolved).

Many attorneys question whether the DOL is entitled to disclosure under the law, since most of the cases address benefit claims rather than DOL audits and allowing theDOL to troll e-mails with attorneys would likely inhibit administrators from seeking legal advice when needed. Fighting the DOL, however, could be an unappealing and expensive undertaking.

Some limits apply to the fiduciary exception. Any legal advice sought in connection with settlor functions, such as plan design and amendments, should continue to be privileged. Also, any legal advice sought by the fiduciary personally to limit his or her liability should continue to be privileged. The latter limit has led some courts to distinguish between advice sought in making a decision and advice sought after the decision was made, such as  defending challenges to the decision. These cases, however, provide little guidance on where the lines should be drawn and whether to apply the same rule in DOL audit situations.

So, what’s the problem with e-mails?  First, e-mails are often written in the heat of the moment and may say things that later turn out to be incorrect or are susceptible to misunderstanding or mischaracterization.  Second, sent e-mails are around forever.  These two problems combine to turn ill-considered e-mails into time bombs.

We suggest the following plan for communications from employers/administrators to their benefits legal counsel:
  • When a problem arises, consider that anything you say may be discoverable by the participants, the DOL and the courts.
  • If anything about the situation could be awkward if it is disclosed, talk with your benefits counsel by telephone to explain the problem before e-mailing and before talking with any outside parties, such as a recordkeeper, trustee or actuary.
    • Although telephone calls likely also fall within the fiduciary exception, physical evidence of the call is less likely to exist and is certainly more difficult to discover and misinterpret or mischaracterize.
    • When you talk to an outside party, the privilege is lost entirely. Your best chance to maintain the privilege is to talk with the attorney first and let the attorney decide whether a third party is needed to facilitate the legal advice. Then the discussions with the third party have a chance to be protected.
  • As part of the call, discuss with legal counsel whether e-mail in this particular case should be avoided.
  • Carefully consider whom you include or copy on any communication.  Again, including someone other than your attorney will destroy the privilege.

NOTICE. Although we would like to hear from you, we cannot represent you until we know that doing so will not create a conflict of interest. Also, we cannot treat unsolicited information as confidential. Accordingly, please do not send us any information about any matter that may involve you until you receive a written statement from us that we represent you.

By clicking the ‘ACCEPT’ button, you agree that we may review any information you transmit to us. You recognize that our review of your information, even if you submitted it in a good faith effort to retain us, and even if you consider it confidential, does not preclude us from representing another client directly adverse to you, even in a matter where that information could and will be used against you.

Please click the ‘ACCEPT’ button if you understand and accept the foregoing statement and wish to proceed.



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