Duncan et al v. Minnesota Life Insurance Company

Filing 47

DECISION AND ENTRY - IT IS THEREFORE ORDERED THAT: Minnesota Life shall produce to Plaintiffs unredacted copies of the document Minnesota Life has Bates stamped MC_000009, MC_000010, and MC_000011. The attorney-client privilege shields the remaining redacted communications identified in the privilege log Minnesota Life produced on 7/11/2018. Signed by Magistrate Judge Sharon L. Ovington on 7/10/19. (kma)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
CHARLIE DUNCAN, Executor of the
Estate of Paul W. McVay, et al.,
Plaintiffs,
vs.
MINNESOTA LIFE INSURANCE
COMPANY,
Defendant.

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Case No. 3:17-cv-00025
District Judge Thomas M. Rose
Magistrate Judge Sharon L. Ovington

DECISION AND ENTRY
This case arose from the fact that Defendant Minnesota Life Insurance Company (an
ERISA plan administrator and fiduciary) denied Plaintiff Janet Freel’s (an ERISA
beneficiary’s) claim for accidental-death benefits under an insurance policy purchased by
her brother.
Previously, after an in-camera review, the Court concluded that the attorney-client
privilege justified Minnesota Life’s decision not to produce certain communications to
Plaintiffs. 1 (Doc. #40). Plaintiffs presently argue—for the first time—that ERISA’s
“fiduciary exception” applies to those communications and requires Minnesota Life to
disclose them.
Plaintiffs start by reasoning that the attorney-client privilege does not apply at all in
ERISA cases such as this because ERISA fiduciaries are charged with administering plans

1

The Court’s previous discussion of the attorney-client privilege is incorporated by reference herein. (Doc.
#42, PageID #s 764-65).

“solely in the interests of the participants and beneficiaries,” 29 U.S.C. § 1104(a)(1), and
because ERISA fiduciaries have broad-disclosure requirements designed to provide
beneficiaries with a full and fair review of decisions to deny benefits.
Minnesota Life relies on the historic strength of the attorney-client privilege,
remembering that it is “‘the oldest of privileges for confidential communication known to
the common law.’” (Doc. #17, PageID #880 (quoting Upjohn Co. v. United States, 449
U.S. 383, 389 (1981)). Minnesota Life urges the Court to consider this and the
attorney-client privilege’s rationales: (1) it promotes full and frank communications
between attorneys and their clients, “thereby promoting the broader public interest in the
administration of justice…” id. (citing Baxter v. C.A. Muer Corp., 941 F.2d 451, 455 (6th
Cir. 1991)); and (2) it provides “‘certainty to litigants that information relayed to one’s
attorney will not be disclosed….’” Id. (quoting In re Columbia/HCA Healthcare Billing
Practices, 293 F.3d 289, 304 (6th Cir. 2002)). With these rationales in force, Minnesota
Life argues that the fiduciary exception to the attorney-client privilege is limited and does
not apply in this case. It finds further efficacy in the generality that “‘hard cases should be
resolved in favor of the privilege, not in favor of disclosure.’” Id. (quoting United States v.
Mett, 178 F.3d 1058, 1064 (9th Cir. 1999)).
As an initial matter, it is tempting to delve into Plaintiff’s somewhat theoretical
argument that the attorney-client privilege does not apply in the first instance in this case.
After all, Plaintiffs are essentially proposing a standalone discovery rule based on fealty to a
statute, while Minnesota Life invokes the attorney-client privilege based on fealty to federal
common law, see Reed v. Baxter, 134 F.3d 351, 355 (6th Cir. 1998) (“Questions of
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privileged are to be determined by federal common law in federal question cases.”). And
there is case law validating each view. See Moss v. Unum Life Ins. Co., 495 F. App’x 583,
595 (6th Cir. 2012) (ERISA case treating the fiduciary exception as an exception to the
attorney-client privilege); see also Mett, 178 F.3d at 1064 (“the fiduciary exception is not an
‘exception’ to the attorney-client privilege at all….”). But, temptation aside, a decision
favoring one approach over the other is unnecessary for two practical reasons. First, the
Court in this case previously applied the attorney-client privilege to the communications at
issue. Consequently, an exception to the privilege would need to apply for Plaintiff to gain
access to those communications. Second, each view leads to the same destination: “On
either rationale…, it is clear that the fiduciary exception has its limits—by agreeing to serve
as a fiduciary, an ERISA trustee is not completely debilitated from enjoying a confidential
attorney-client relationship….” Mett, 178 F.3d at 1063.
How, then, does the fiduciary exception operate?
In the ERISA arena, the fiduciary exception says, “a fiduciary of an ERISA plan
‘must make available to the beneficiary, upon request, any communications with an attorney
that are intended to assist in the administration of the plan.’” Moss, 495 F. App’x at 595
(quoting, in part, Bland v. Fiatallis N. Am., Inc., 401 F.3d 779, 787 (7th Cir. 2005) (other
citation omitted). “This is because ‘[w]hen an attorney advises a plan administrator or other
fiduciary concerning plan administration, the attorney’s clients are the plan beneficiaries for
whom the fiduciary acts, not the plan administrator.’” Id. (quoting, in part, Wildbur v.
ARCO Chem. Co., 974 F.2d 631, 645 (5th Cir. 1992) (other citation omitted). “The
fiduciary exception generally applies only to communications related to plan administration
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and not to communications after a final decision or ‘addressing a challenge to the plan
administrator in his or her personal capacity.’” Id. at 595-96 (citing Redd v. Bhd. of Maint.
of Way Emps. Div. of the Int'l Bhd. of Teamsters, No. 08–11457, 2009 WL 1543325, at *1
(E.D. Mich. June 2, 2009)).
The present case does not involve communications that occurred after Minnesota
Life’s final denial of benefits and does not involve claims against a fiduciary in his or her
personal capacity. This narrows the focus to the communications between Minnesota Life’s
claims-department personnel and its in-house counsel before Minnesota Life reached its
final decision on August 15, 2016. Some of these communications occurred in 2011, at or
near the time of Minnesota Life’s initial decision to deny benefits on April 15, 2011; others
occurred in 2013 at or near the time of Plaintiff’s pending appeal; and the remaining
occurred in 2016 near the date (again, August 15, 2016) Minnesota Life made its final
decision to deny benefits.
Minnesota Life contends that throughout this time period, its in-house counsel
assisted in preparing for anticipated litigation, rather than helping to process Ms. Freel’s
benefits claim or helping to decide whether to grant or deny her claim. It finds that none of
its redacted communications involved the administration of the plan. (Doc. #42, PageID
#882).
Plaintiffs contend:
[Minnesota Life] employees have testified the company’s legal department
plays a critical role in the administration of the plan. Claims specialists rely
on the advice of its attorneys to determine whether a claimant is entitled to
benefits under the terms of the plan. [Minnesota Life] is bound to provide
Plaintiffs a full and fair review of the denial of their claim, and the ability to
review the reasoning of those who played a role in the denial is vital to that
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process. By lending their opinion to claim decisions, members of the
[Minnesota Life] legal department took part in plan administration, thus acting
for the sole benefit of Plaintiffs. Therefore, to the extent that [Minnesota
Life’s] communications with counsel involved plan management, the
attorney-client privilege does not apply to those communications and
[Minnesota Life] must disclose them.
(Doc. # 41, PageID #s 771-72).
“To determine whether the plan administrator was seeking legal advice in connection
with plan administration and thus in his or her capacity as a fiduciary, courts generally look
to whether the interests of the fiduciary and the beneficiary had diverged at the time the
communication occurred.” Kushner v. Nationwide Mutual Insurance Company, 2:17cv715,
2018 WL 3454685, at *3 (S.D. Ohio 2018) (Vascura, M.J.) (citing, as examples, Moss, 495
F. App’x at 595-96; Allen v. Honeywell Ret. Earnings Plan, 698 F. Supp. 2d 1197, 1202 (D.
Ariz. 2010)). “‘[W]hen the interests of the ERISA plan fiduciary and the plan beneficiaries
have diverged sufficiently such that the fiduciary seeking legal advice is no longer acting
directly in the interests of the beneficiaries but in its own interests to defend itself against
the plan beneficiaries, then the attorney-client privilege remains intact.’” Kushner, 2018
WL 3454685, at *3 (quoting Tatum v. R.J. Reynolds Tobacco Co., 247 F.R.D. 488, 497
(M.D.N.C. 2008)).
That said, “a sufficiently adversarial relationship may arise before the
final decision denying benefits.” Christoff v. Unum Life Ins. Co. of Am., No.
0:17-cv-03512, 2018 WL 1327112, at *6-9 (N.D. Minn. Mar. 15, 2018). In
addition to the timing of the communications, “[o]ther factors to be considered
include evidence that: 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.” Klein v. Northwestern Mut.
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Life Ins. Co., 806 F. Supp. 2d 1120, 1132-33 (S.D. Cal. 2011) (citing Allen,
698 F. Supp. 2d at 1203).
Kushner, 2018 WL 3454685, at *3. Yet, “the mere prospect of potential litigation over a
claims decision is insufficient to defeat the fiduciary exception….” Id. The reasoning that
supports this principle is grounded in the fiduciary duties ERISA imposes:
If the Court finds ... that the pre-decisional legal advice was secured for the
purpose of defending against the disagreement and claims of [a plaintiff] in
prospective post-decisional litigation against the plan, then it follows that
whenever the administration of a plan involves the denial of a beneficiary’s
claim for benefits under a plan, all of the pre-decisional legal advice of
counsel would be subject to the attorney-client privilege and not available for
review by the beneficiaries of the plan, including the disappointed beneficiary.
This contradicts the principle that the Plan’s Administrator administers the
plan in the beneficiaries’ best interests. Because denying benefits to a
beneficiary is as much a part of the administration of a plan as conferring
benefits to a beneficiary, the prospect of post-decisional litigation against the
plan is an insufficient basis for gainsaying the fiduciary exception to the
attorney-client privilege.
Kushner, 2018 WL 3454685, at *4 (quoting Lewis v. UNUM Corp. Severance Plan, 203
F.R.D. 615, 620 (D. Kan. 2001) and citing Geissal v. Moore Med. Corp., 192 F.R.D. 620,
625 (E.D. Mo. 2000) (same)).
Returning to the present situation, before Minnesota Life initially denied Plaintiff
Freel’s claim for benefits on April 15, 2011, a physician employed by Minnesota Life
reviewed Mr. McVay’s (the deceased’s) medical records and concluded that a number of
factors contributed to his death. See Doc. #42, PageID #878 (and citations therein). The
redacted communications that occurred on March 22, 2011, and on April 7, 13, and 15, 2011
concerned matters of plan administration—specifically, whether to grant or deny benefits.
This is so even though in-house counsel provided his legal opinion because the relationship
between the fiduciary, Minnesota Life, and Ms. Freel was not sufficiently adversarial to
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negate the fiduciary exception. At this point, Ms. Freel had not retained counsel (or
informed Minnesota Life she had hired counsel) to represent her in support of her initial
claim, and she had not provided any indication to Minnesota Life that a plan to litigate a
possible denial of benefits was in the works. Additionally, Minnesota Life relied on a
physician’s opinion that it believed supported the denial of benefits, and the claims file did
not yet contain a contrary physician opinion. The fiduciary exception therefore requires
Minnesota Life to provide Plaintiffs with unredacted copies of the pages Bates stamped
MC_000009 and MC_000010.
Soon after Minnesota Life informed Ms. Freel of its initial decision to deny benefits,
her counsel notified Minnesota Life that he represented Plaintiffs. He also asked Minnesota
Life to send certain claim-related records to him. See Doc. #21, PageID #594. Minnesota
Life’s internal communications on May 19 and 23, 2011 concerned its response to counsel’s
records request and the release of those records to Plaintiffs’ counsel. This situation—
Plaintiffs had now retained counsel and their counsel had requested certain claim-related
records—involved ordinary matters of ERISA claim administration. Without more,
litigation at this time remained merely a remote possibility.
Minnesota Life maintains, quoting Shields v. Unum Provident Corp., 2007 WL
764298, at *5 (S.D. Ohio 2007) (King, M.J.), “‘when an administrator is required to justify
or to defend against a beneficiary’s claims made because of an act of plan administration,
the administrator does not act directly in the interests of the disappointed beneficiary but in
his own interests or in the interests of the rest of the beneficiaries.’” (Doc. #42, PageID
#881) (quoting Shields, 2007 WL 764298, at *5 (citations omitted)). This does not assist
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Minnesota Life as to the communications in March, April, and May 2011 because the
parties’ relationship had not become adversarial during this time. A named beneficiary
interacting with an ERISA fiduciary, who represented the best interests of the beneficiaries.
This is seen in counsel’s records request itself and Minnesota Life’s internal
communications in April and May 2011—which, again, involved an ordinary matters of
ERISA claim administration. The fiduciary exception therefore requires Minnesota Life to
provide Plaintiffs with unredacted copies of the page Bates stamped MC_000011.
It is necessary to briefly pause here because Defendants also rely on the attorney
work-product doctrine to shield the redactions of the March, April, and May 2011
communications. Yet the fiduciary exception also applies to the work-product doctrine. See
Kushner, 2018 WL 3454685, at *5 (and cases cited therein). Because there was no more
than a mere possibility of future litigation during this time period, the fiduciary exception
applies, and the work-product doctrine does not apply to the redacted communications Bates
stamped MC_000009, MC_000010, MC_000011.
Things changed somewhat dramatically on or around June 10, 2011. On that date,
Plaintiffs’ counsel notified Minnesota Life that Plaintiffs were appealing the initial denial of
benefits. Id. at 612. This nudged the situation a bit closer to raising more than a mere
possibility of future litigation. And Plaintiffs did more: Their counsel wrote that there was
“no basis for a denial of accidental death and dismemberment benefits ….” Id. at 612.
Counsel also provided Minnesota Life with a copy of a letter written by Dr. Chamberlain,
Mr. McVay’s treating physician. Dr. Chamberlain opined that Mr. McVay died from an
intracranial hemorrhage after a fall rather than from other causes, including the cause of
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death (thrombocytopenia) Minnesota Life identified in their initial denial decision. Id. at
614. In support of this, Dr. Chamberlain explained that Ms. Freel’s brother’s thrombocytopenia was “asymptomatic.” Id.
Once Minnesota Life received counsel’s strongly worded, evidence-based letter
along with Dr. Chamberlain’s opinion letter, Minnesota Life faced more than a mere
possibility of future litigation if it continued to deny benefits. Its relationship with Plaintiffs
had become adversarial, with Minnesota Life knowing—almost to a certainty—that
litigation would occur if it continued to deny benefits after June 10, 2011. As a result, the
fiduciary exception does not apply to Minnesota Life’s redacted communications after June
10, 2011. The attorney-client privilege protects these communications from disclosure.
IT IS THEREFORE ORDERED THAT:
Minnesota Life shall produce to Plaintiffs unredacted copies of the document
Minnesota Life has Bates stamped MC_000009, MC_000010, and MC_000011. The
attorney-client privilege shields the remaining redacted communications identified in the
privilege log Minnesota Life produced on 7/11/2018.

July 10, 2019

s/Sharon L. Ovington
Sharon L. Ovington
United States Magistrate Judge

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