The Not-so Absolute Privilege: ERISA and Attorney-client Privilege

Attorney-client privilege exists to protect communications between an attorney and their client from disclosure during any legal proceedings. But when it comes to the world of ERISA law, it’s not always so absolute.

Legally, plan fiduciaries must protect the best interests of all plan beneficiaries. But what happens when a plan fiduciary communicates with an attorney regarding an ERISA-covered retirement plan?

In this case, the so-called “fiduciary exception” to the attorney-client privilege may be relevant. Generally, a person or entity who is acting in the capacity of an ERISA fiduciary cannot assert the attorney-client privilege against plan beneficiaries on matters of plan administration. This means that such communication may be seen by plan participants (the beneficiaries), their attorneys, or even the U.S. Department of Labor.

However, the courts have created exceptions to this “fiduciary exception.” In these circumstances, the attorney-client privilege will apply to protect these communications. Specifically, communications involving the plan’s start-up, amendment or termination aren’t considered fiduciary functions, and are therefore, protected under the privilege. In addition, all communications related to defending fiduciaries in adversarial proceedings would also be covered by the privilege. This may include communications regarding the fiduciary’s personal defense against claims of breach of fiduciary duty.

When ruling whether the attorney-client privilege or the “fiduciary exception” applies in any given situation, the courts will try to conclude whether or not the interests of the fiduciaries and the plan participants have become separated. If so, the communications with an attorney generally would be protected from discovery. To help determine this, courts consider:

  • Whether or not the plan participants have retained an attorney
  • The expectation of litigation
  • Whether the fiduciary and the attorney have discussed potential litigation, and if the fiduciary has paid the attorney out of personal, rather than plan funds

Legal actions involving fiduciaries and the attorney-client privilege can be complicated. Remember, that the attorney-client privilege may not provide a significant protection as you may think.

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