Searls et al v. Sandia Corporation et al

Filing 71

MEMORANDUM OPINION. Signed by Magistrate Judge Theresa Carroll Buchanan on 3/24/15. (gwalk, )

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division

NANCY SEARLS AND CRAIG SEARLS,
Plaintiffs,
v.
SANDIA CORPORATION,
Defendant.

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Civ. No. 1:14cv578

MEMORANDUM OPINION
THIS MATTER comes before the Court on Plaintiff’s Motion to
Compel Production of Certain Documents and for In Camera Review
(Dkt. 60).

After oral argument on March 20, 2015, the

undersigned took this matter under advisement.

After an in

camera review of all documents at issue, the undersigned finds
that they are privileged attorney-client material, and that they
are therefore not discoverable.

For the following reasons, the

Motion to Compel (Dkt. 60) is hereby DENIED with regards to
Documents 1, 5, 8, and 13.
BACKGROUND
The plaintiffs brought suit against their former employer,
defendant Sandia, under the Employee Retirement Income Security
Act (ERISA).

Their Complaint (Dkt. 1) alleges that defendant

breached their contract when it reduced benefits to plaintiffs

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in violation of the Special Leave of Absence agreement (SLOA)
the parties had previously entered.

During the discovery

process, Sandia submitted their privilege log containing fifteen
documents indicated by Sandia as protected by the attorneyclient privilege.

(Dkt. 59-1.)

Plaintiffs filed their motion

to compel these and other documents, arguing that they were
subject to the fiduciary exception to the attorney-client
privilege.

The Court has now reviewed the first four documents

submitted for in camera review, Documents 1, 5, 8 and 13.
ANALYSIS
The attorney-client privilege is “the oldest of the
privileges for confidential communications known to the common
law.”

Upjohn Co. v. United States, 449 U.S. 383, 389 (1981).

However, this well-established privilege is not absolute.

The

Fourth Circuit has adopted the reasoning of other circuits in
finding that a “fiduciary exception to attorney-client privilege
extends to communications between an ERISA trustee and a plan
attorney regarding plan administration.”

Solis v. Food

Employers Labor Relations Ass’n, 644 F.3d 221, 228 (4th Cir.
2011).

That is, “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.”

Id. at 227 (quoting United States v.
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Mett, 178 F.3d 1058 (9th Cir. 1999)).
The Fourth Circuit has also recognized that the fiduciary
exception is “not without limits.”

Solis, 644 F.3d at 228.

The

exception does not apply to communications between ERISA
fiduciaries and plan attorneys regarding a fiduciary’s “personal
defense in an action for breach of fiduciary duty” or
communications “regarding non-fiduciary matters, such as
adopting, amending, or terminating an ERISA plan.”

Id. at 228

(citing Mett, 178 F.3d at 1064, and Bland v. Fiatallis N. Am.
Inc., 401 F.3d 779, 78-88 (7th Cir. 2005)).
In analyzing whether memoranda prepared by ERISA plan
administrators’ attorneys were considered part of “plan
administration” and therefore properly under the fiduciary
exception, the 9th Circuit examined the content and context of
the memoranda.

Mett, 178 F.3d at 1064.

The Court concluded

that the memoranda were “plainly defensive . . . and aimed at
advising the trustees ‘how far they were in peril’.”
(internal citations omitted).

Id.

Because the memoranda were

advising defendants of their “personal civil and criminal
exposure”, the advice was “not prepared for the benefit of the
plan or the beneficiaries, nor was it advice regarding
administration of the plan.”

Id.

Essentially, “where a

fiduciary seeks legal advice for her own protection, the core
purposes of the attorney-client privilege are seriously
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implicated and should trump” beneficiaries’ right to disclosure
under any fiduciary exception to the privilege.

Id. at 1065.

A

California District Court summarized Mett as “endorsing a test
that focuses on the intended recipient of the advice and the
purpose for which it is sought.”

Fischel v. Equitable Life

Assurance, 191 F.R.D. 606, 609 (N.D. Cal. 2000).
This reading of the fiduciary exception is warranted by
public policy.

In ERISA cases, the attorney-client privilege

“encourages a trustee to seek advice about its potential
liability.”

Fischel, 191 F.R.D. at 609.

If trustees are afraid

to seek legal advice, a plan might be “designed, amended or
administered in a legal vacuum” which would ultimately harm
beneficiaries in this complex area of law.

Id.; see also Mett,

178 F.3d at 1065.
The first four documents submitted for in camera review
(Documents 1, 5, 8, and 13) contain legal analysis of legal
risks relating to the potential liability of defendant
concerning the SLOA and Retirement Income Plans’ non-duplication
provisions.

They constitute legal advice aimed at addressing

the liability of the plan’s fiduciaries should they adopt
certain changes to the plan.

Therefore, the defendant was not

acting as a fiduciary at the time they sought this advice, and
the documents are not part of “plan administration.”

Instead,

the documents are protected by the attorney-client privilege and
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rightly withheld from plaintiffs.

The Court will issue a second

Order addressing the later-submitted documents.

/s/
THERESA CARROLL BUCHANAN
UNITED STATES MAGISTRATE JUDGE
March 24_, 2015
Alexandria, Virginia

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