Sender v. Franklin Resources Inc

Filing 212

ORDER Overruling 194 Plaintiff's Objection to the February 18, 2016 Order. Signed by Judge Edward M. Chen on 3/30/2016. (emclc1, COURT STAFF) (Filed on 3/30/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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Plaintiff,

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ORDER OVERRULING PLAINTIFF'S
OBJECTION TO THE FEBRUARY 18,
2016 ORDER

v.

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FRANKLIN RESOURCES INC,

Docket No. 194

Defendant.

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For the Northern District of California

United States District Court

Case No. 11-cv-03828-EMC

JOHN SENDER,

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I.

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INTRODUCTION

On March 3, 2016, Plaintiff John Sender filed a Rule 72(a) objection to Judge Kim’s

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February 18, 2016 order granting in part and denying in part Plaintiff’s motion to compel the

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production of documents withheld by Defendant Franklin Resources, Inc. on the ground of

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attorney-client privilege. 1 Docket No. 194 (Mot.). The parties’ dispute concerned whether

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Defendant was required to produce the documents under the fiduciary exception to the Employee

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Retirement Income Security Act of 1974 (ERISA). See Docket No. 188 (Ord.) at 1. This Court

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ordered supplemental briefing on Plaintiff’s objections, as well as copies of the disputed

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documents. Docket No. 198. Having considered the parties’ briefing and performed an in camera

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review, the Court OVERRULES Plaintiff’s objection to Judge Kim’s February 18, 2016 order.
II.

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Under Federal Rule of Civil Procedure 72(a), a district judge “may modify or set aside any

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DISCUSSION

part of [a magistrate judge’s] order that is clearly erroneous or is contrary to law.” Clear error

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Judge Kim sustained the attorney-client privilege as to fifteen of the nineteen sets of
communications at issue; the four remaining sets of communications (6, 15, 17, and 18) are not at
issue in Plaintiff’s objection. See Mot. at 4.

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exists when this Court is “‘left with the definite and firm conviction that a mistake has been

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convicted.’” Titus v. Humboldt Cnty. Fair Ass’n, Case No. C 14-01043 SBA, 2015 U.S. Dist.

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LEXIS 162517, at *3 (N.D. Cal. Dec. 1, 2015).
At issue here is the application of the fiduciary exception to the attorney-client privilege.

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of ERISA fiduciary is disabled from asserting the attorney-client privilege against plan

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beneficiaries on matters of plan administration.” Stephan v. Unum Life Ins. Co. of Am., 697 F.3d

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917, 931 (9th Cir. 2012). In the Ninth Circuit, “the fiduciary exception is not really an exception

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at all.” Id. Rather, because the fiduciary is only a representative for the beneficiaries of the trust,

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“it is not the fiduciary but rather the plan beneficiary that is the real client.” Id. Thus, “[a]ttorney-

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client privilege is maintained; there is only a different understanding of the identity of the client.”

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For the Northern District of California

In the context of ERISA, “the fiduciary exception provides that an employer acting in the capacity

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United States District Court

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Id.

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While ERISA has a broad disclosure requirement, “[t]he fiduciary exception has its limits--

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by agreeing to serve as a fiduciary, an ERISA trustee is not completely debilitated from enjoying a

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confidential attorney-client relationship.” Id. at 932. In confronting this tension, the Ninth Circuit

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has found that:

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where an ERISA trustee seeks an attorney’s advice on a matter of
plan administration and where the advice clearly does not implicate
the trustee in any personal capacity, the trustee cannot invoke the
attorney-client privilege against the plan beneficiaries. On the other
hand, where a plan fiduciary retains counsel in order to defend
herself against the plan beneficiaries (or the government acting in
their stead), the attorney-client privilege remains intact.

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United States v. Mett, 178 F.3d 1058, 1064 (9th Cir. 1999). Thus, “while the fiduciary exception

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does apply to advice on matters of plan administration, the attorney-client privilege reasserts itself

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as to any advice that a fiduciary obtains in an effort to protect herself from civil or criminal

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liability.” Id. at 1066.

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Here, Plaintiff argues that the withheld documents must relate to plan administration

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because the documents were considered in deciding whether to deny Plaintiff’s claim for benefits. 2

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Mot. at 7. Plaintiff appears to argue for a per se rule, where any documents created during the

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period of administrative review must be disclosed per the fiduciary exception “[b]ecause Franklin

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was dutibound to act as Plaintiff’s fiduciary during the period of the administrative review[; thus,]

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any actions it took to evaluate its own potential liability to Plaintiff were entirely voluntarily and

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not in response to any act or communication of Plaintiff, or any threat of imminent legal peril.”

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Mot. at 5. However, no such per se rule exists; as Judge Kim correctly pointed out, the fiduciary

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exception requires “an evaluation of the content of the communication -- whether the

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communication involves administration of the claim or the potential liability of the trustee.” Ord.

examined individually because ‘the nature of the particular attorney-client communication’ is

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For the Northern District of California

at 3. Several district courts have thus found that Mett requires that “each communication be

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United States District Court

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dispositive.” Klein v. Northwestern Mut. Life Ins. Co., 806 F. Supp. 2d 1120, 1133 (S.D. Cal.

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2011); see also Wit v. United Behavioral Health, Case No. 14-cv-02346-JCS, 2016 U.S. Dist.

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LEXIS 7242, at *16 (N.D. Cal. Jan. 21, 2016) (explaining the importance of the “actual content of

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the memoranda” and that “the nature of the particular attorney-client communication . . . is

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dispositive”). In Klein, the district court found that while “whether the communication was before

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or after the final benefits determination is a strong indicator of whether the exception will apply,”

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other facts had to be considered, including:

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1) the threat of litigation was more than a remote possibility; 2) the
interests of the beneficiary and ERISA fiduciary had diverged
significantly; 3) the documents or communications were not
necessary to or relied upon in the administrative claim process; and
4) the documents relate to a settlor function (i.e., amendment of the
plan) and were not considered in evaluating the claim at issue.

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Klein, 806 F. Supp. 2d at 1133 (citing Mett, 178 F.3d at 1065).
Here, Judge Kim conducted an in camera review of nineteen sets of documents, sustaining

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the attorney-client privilege as to fifteen of these communications. Mot. at 4. With respect to

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Plaintiff also argues that the liability exception cannot apply because there was an insufficient
divergence of interests; however, Judge Kim did not rely on the liability exception. As discussed
below, Judge Kim found that the communications at issue “d[id] not involve the administration of
the plan,” which was why the fiduciary exception was inapplicable. Ord. at 4.
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Communication 1, Judge Kim determined that the communications concerned the “applicability of

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a specific legal defense and thus, the Defendant’s potential liability. It does not involve the

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administration of the plan.” Ord. at 4. The remaining challenged Communications (2, 3, 4, 5, 7,

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8, 9, 10, 11, 12, 13, 14, 16, and 19) are each derived from Communication 1 or Communication 5

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(which itself concerns Communication 1). See id. at 4-8.

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Having conducted an in camera review, the Court finds no clear error with Judge Kim’s

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determination. The communications concern a specific legal defense, and are completely

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unrelated to the factual validity of Plaintiff’s benefit claims, whether to grant or deny the claim, or

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any other aspect of plan administration. See id. at 4.

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For the Northern District of California

United States District Court

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Accordingly, Plaintiffs’ motion for relief from Judge Kim’s order of February 18, 2016 is
hereby denied.
This order disposes of Docket No. 194.

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IT IS SO ORDERED.

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Dated: March 30, 2016
______________________________________
EDWARD M. CHEN
United States District Judge

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