Your communications with your attorney are not privileged.  Wow, that is a scary thought, isn't it?

Courts have carved out a very broad exception to the attorney-client privilege in the context of fiduciary litigation. When an attorney advises a fiduciary about the administration of a benefit plan, courts have found that the attorney's client is actually the beneficiaries of the plan and not the fiduciary personally.

So courts have consistently held that the attorney-client privilege should not be used as a shield against the parties who the fiduciaries are obligated to serve. Consequently, the 4th Circuit recently confirmed (in Solis v. Food Employers Labor Relations Ass'n) that the attorney-client privilege does not extend to communications between a plan fiduciary and legal counsel related to plan administration.

The fiduciary exception in ERISA litigation is not without limit. The fiduciary exception applies only when the person receiving legal advice acted in a fiduciary capacity pursuant to ERISA at the time the communication was made. So in general terms, the fiduciary exception should apply only if the legal advice at issue concerns the administration or interpretation of an employee benefit plan. The exception should not apply, for instance, to communications concerning a decision to amend or terminate an employee benefit plan because these are settlor functions and an employer does not act as an ERISA fiduciary in these cases. A plan sponsor owes no fiduciary duty to plan participants and beneficiaries when making a decision to amend or terminate an employee benefit plan. The duty is owed once the decision is made and how the decision is implemented.

But how do you make those distinctions at litigation time? Is the corporate counsel who also helps with the plan going to get caught up in the privilege issue? Who can determine what communications are and are not related to administration as opposed to settlor functions? What if your business attorney advises about 401(k) administration?  Can he still defend a claim for breach of fiduciary duty?

The answers to these questions can be complex the deeper you go, but a simple start would be to consider having separate employee benefits counsel, someone who specifically limits representation to the benefit plan issues and their administration.  Maybe it is from the same law firm, or from a different law firm, but you should be thinking about this issue BEFORE having to defend a claim. If you have counsel that limits their advice to fiduciary matters, you can at least know that in a breach of fiduciary duty suit, their communications would not be privileged. You can base your communications on that "known" factor.

So instead of wondering, why not consider designating a specific attorney as benefits counsel. That way you can segregate their knowledge and their advice based on an expectation that those communications could be discovered. I hate to say it, but the less they know about your other business operations, the less likely it is that what they do know could some day be at issues. At least you would be in control of the information flow, and that ultimately can strengthen the privilege.

Keith R. McMurdy can be reached at or 212-878-7919

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