Attorney-client privilege applies where ERISA trustee seeks legal advice regarding personal liability

Law Reporter, Sep 1999

Attorney-client privilege applies where ERISA trustee seeks legal advice regarding personal liability.

United States v. Mett, _ F.3d _, Nos. 97-10504, 9710505,1999 WL 343730 (9th Cir. June 1,1999).

The Ninth Circuit Court of Appeals held that trustees of pension plans covered by the Employee Retirement Security Income Act of 1974 (ERISA), 29 U.S.C. 1001 et seq., may invoke the attorney-client privilege where the trustees seek legal advice to protect themselves against civil or criminal liability.

Here, two ERISA trustees withdrew money from a business's pension plans and were convicted of embezzlement, among other crimes. The trial court had denied the trustees' motion to suppress, on attorney-client privilege grounds, memoranda from their attorney relating to the potential civil and criminal consequences of the withdrawals.

Reversing the convictions, the Ninth Circuit Court of Appeals noted that under the fiduciary exception to the attorney-client privilege, where ERISA trustees seek an attorney's advice on a matter of plan administration and the advice does not implicate the trustees in any personal capacity, the trustees cannot invoke the attorney-client privilege against the plan beneficiaries. On the other hand, where trustees retain counsel to defend themselves against the plan beneficiaries-or the government acting in their stead-the attorney-client privilege remains intact.

The court rejected the government's argument that the fiduciary exception applies whenever otherwise privileged legal advice relates to fiduciary matters. The court said this view of the fiduciary exception threatens to eliminate the attorney-client privilege for ERISA trustees. Further, the court said, where fiduciaries seek legal advice for their own protection, the core purposes of the attorney-client privilege are implicated and should trump the beneficiaries' right to inspect documents relating to plan administration.

Here, the court found, the advice contained in the memoranda was not prepared for the benefit of the plan or its beneficiaries, nor was it advice regarding administration of the plan. Rather, it was aimed at advising the trustees about their personal civil and criminal exposure in light of the undocumented withdrawals. Thus, the court concluded, the memoranda should have been treated as privileged.

Accordingly, the court remanded. Trustees' Counsel:

Arthur K Wachtel, San Francisco, Cal. Dennis P. Riordan, San Francisco, Cal.

[ Comment: For another case involving the fiduciary exception to the attorney-client privilege, see In re Long Island Lighting Co., Retirement Income Plan, 129 F.3d 268 (2d Cir. 1997), 41 ATLA L. Rep. 45 (Mar. 1998). There, the Second Circuit Court of Appeals held that an employer did not waive the attorney-client privilege by seeking advice as an ERISA fiduciary and non-fiduciary from the same attorney.]