Limits of Fiduciary Exception to Attorney-Client Privilege

Thanks to Haynes & Boone’s Practical Benefits Lawyer Blog for bringing a new case from the Southern District of Texas to my attention.  The case discusses the fiduciary exception to attorney-client privilege: Tolbert v. RBC Capital Markets (2012 WL 1067629 (S.D. Tex)). The court states, “As stated by Plaintiff, the fiduciary exception provides that an ERISA fiduciary cannot asset attorney-client privilege against a plan beneficiary about legal advice regarding plan administration. Wildbur v. ARCO Chemical Co., 974 F.2d 631, 645 (5th Cir. 1992).” The rationale is that the attorney’s true clients are the plan participants and beneficiaries for whom the fiduciary acts, and not the plan administrator. This, of course, explains why the question, “Who is the client?” is such a perennial favorite when ERISA lawyers seek ethics CLE credit. The court continues, “Thus, the exception applies only to legal advice conveyed to a person acting in a fiduciary capacity to the plan beneficiaries and which is intended to assist in the administration of the ERISA plan.”

The court goes on to note that top hat plans are exempt from the fiduciary requirements of ERISA and for this reason the fiduciary exception to attorney-client privilege does not apply. The court cites Reliable Home Health Care, Inc. v. Union Cent. Ins. Co., 295 F.3d 505, 512-513 (5th Cir. 2002) for the proposition that fiduciary exception “has no bearing” with respect to top hat plans. This is an incredibly useful proposition!

Further, the design and amendment of plans is a settlor function rather than a fiduciary function, and the fiduciary exception does not apply to advice received regarding plan design rather than plan administration. For this the court cites those perennial favorites Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (1999) and Lockheed Corp. v. Spink, 517 U.S. 882 (1996). I find this portion of the decision simultaneously comforting and disturbing because design and administration are often intertwined. For example, how often does a plan amendment cause a client to read the plan document and find that the document and the administration have diverged in some small way? Or perhaps in the course of drafting a new document to reflect a plan design change, I find that the old document includes some language I have never seen elsewhere and that raises some concerns about either administration or legal compliance. The line between administration and design seldom seems as clean as to me as it apparently does to Judge Ellison in this opinion.