Supreme Court Declines To Apply Fiduciary Exception To Attorney-Client Privilege: What Implications For ERISA Plans?

Lower-court cases have generally ruled that ERISA fiduciaries' communications with legal counsel may be subject to disclosure to plan beneficiaries under the "fiduciary exception" to the attorney-client privilege. In United States v. Jicarilla Apache Nation, 131 S. Ct. 2313 (U.S. 2011), the U.S. Supreme Court considered the "fiduciary exception" for the first time in a non-ERISA setting and found that the United States, as trustee of tribal property, was entitled to confidential communications with its legal counsel despite its fiduciary status. The Supreme Court's rejection of the "fiduciary exception" in this context has raised hope that ERISA fiduciaries may be entitled to greater confidentiality in obtaining legal advice regarding plan administration.

The Fiduciary Exception

In Jicarilla, the Supreme Court reiterated that the attorney-client privilege is intended to encourage clients to seek, and attorneys to give, full and frank legal counsel. The Court recognized that many lower courts have applied a "fiduciary exception" to the attorney-client privilege and precluded a fiduciary from asserting the privilege against beneficiaries of the trust or ERISA plan where the fiduciary has sought legal advice with regard to administration of the trust or ERISA plan.

This fiduciary exception has been based on two principles. First, the "real client" is the beneficiary, not the fiduciary. Second, the fiduciary has a duty of full disclosure to the beneficiary.

Solis v. Food Employers Labor Relations Ass'n , 644 F.3d 221 (4th Cir. 2011) (decided before the Supreme Court's decision in Jicarilla) relied on both these reasons in ruling that the fiduciary exception entitled the U.S. Department of Labor to obtain privileged communications between ERISA multiemployer plans and their legal counsel. The case may be explained in part because the multiemployer plans evidently failed to provide a proper privilege log to support the claim of attorney-client privilege and work product. However the court of appeals used exceptionally broad language in finding that the government could obtain privileged attorney-client documents.

The fiduciary exception generally does not apply to attorney-client communications regarding settlor functions, such as adopting, amending or terminating an ERISA plan. Likewise, the fiduciary exception usually does not apply to an ERISA fiduciary's communications with counsel regarding the fiduciary's personal defense against a breach...