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Christoff v. Unum Life Insurance Company of America

United States District Court, D. Minnesota

March 15, 2018

Michael Christoff, Plaintiff,
Unum Life Insurance Company of America, Defendant.

          Mark Nolan, Nolan Thompson & Leighton, counsel for plaintiff

          Terrence Wagener, Messerli & Kramer P.A., counsel for defendant


          Katherine Menendez United States Magistrate Judge

         On February 14, 2018, following an in camera review, the Court found that six documents Unum withheld or redacted contained information protected by the attorney-client privilege. [Order, ECF No. 53.] As indicated, the parties then filed letter briefs to address the issue whether Unum is nevertheless required to provide Mr. Christoff the undisclosed information pursuant to the so-called “fiduciary exception” to the privilege. [Pl.'s Letter, ECF No. 54; Def.'s Letter, ECF No. 55.] Having reviewed these letters and the relevant caselaw, and for the reasons discussed below, the Court concludes that the fiduciary exception is applicable to Unum and the documents at issue fall within that exception.

         I. Background

         For several years, Michael Christoff was an employee of Spencer Stuart, Inc. Spencer Stuart offered its employees, an employee benefit plan. The plan, which is governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq., provided disability benefits to the plan participants including Mr. Christoff. Unum Life Insurance Company of America insured the plan under a group insurance policy. Mr. Christoff participated in the plan and alleges that he became disabled due to severe fibromyalgia in November 2001. Unum paid long term disability benefits to Mr. Christoff for more than fifteen years, but terminated those benefits on November 22, 2016. Mr. Christoff appealed the termination of benefits and Unum upheld its decision on June 15, 2017.

         Between November 22, 2016, when Unum first terminated Mr. Christoff's long-term-disability benefits, and June 15, 2017, when Unum made its final decision resolving Mr. Christoff's appeal, Mr. Christoff's counsel sent Unum several requests for disclosure of information. On the heels of those requests, Unum claims analyst, Stephanie Tuck, sent several communications to Dan Flynn and Oliver Murray, who are in-house counsel for Unum. Ms. Tuck asked Messrs. Flynn and Murray for legal advice about Mr. Christoff's counsel's request.

         During this litigation, Unum produced an Amended Privilege/Redaction Log that identified each of the communications between Ms. Tuck and Unum's in-house counsel. The Log also identified a partial redaction of a March 22, 2017 document that reflects Murray's advice with respect to a request from Mr. Christoff's counsel. Unum asserts that each of these items is protected by the attorney-client privilege, and as noted above, the Court has concluded after an in camera review that they contain confidential communications between an attorney and client for the purpose of procuring legal advice.

         Mr. Christoff now argues that the “fiduciary exception” to the attorney-client privilege applies to each of the communications that Unum is withholding. Because these communications occurred before he submitted his appeal and before Unum made its final decision on that appeal, Mr. Christoff asserts that they are matters of plan administration and the fiduciary exception defeats Unum's claim of privilege.

         Unum contends that the Eighth Circuit Court of Appeals has not adopted the “fiduciary exception” and would be unlikely to apply it to an ERISA insurer like Unum. Unum argues that the Eighth Circuit would “likely follow the well-reasoned decision of Wachtel v. HealthNet, Inc., 482 F.3d 225 (3rd Cir. 2007), exempting insurers like Unum from the fiduciary exception.” [Def.'s Letter at 1.] Alternatively, Unum argues that even if the fiduciary exception were adopted, it would not apply in this case because Unum relationship to Mr. Christoff was already adverse at the time the Ms. Tuck requested legal advice from Unum's in-house counsel.

         II. The “Fiduciary Exception”

         Federal common law governs questions of privilege in cases like this where the Court's jurisdiction is based on a federal question. Fed.R.Evid. 501; Hollins v. Powell, 773 F.2d 191, 196 (8th Cir. 1985). The party claiming the benefit of the attorney-client privilege has the burden of establishing that it applies. Diversified Indus., Inc. v. Meredith, 572 F.2d 596, 609 (8th Cir. 1978). Generally speaking, the attorney-client privilege protects from disclosure confidential communications between a client and his or her attorney made for the purpose of obtaining legal advice or legal services. United States v. Yielding, 657 F.3d 688, 707 (8th Cir. 2011). However, the protection from disclosure of such communications is not absolute.

         Several courts have recognized an exception to the attorney-client privilege where a fiduciary relationship is concerned, such as when a beneficiary of a trust is attempting to obtain otherwise privileged documents from the trustee. See United States v. Jicarilla Apache Nation, 564 U.S. 162, 167 (2011) (“Under [the fiduciary] exception, which courts have applied in the context of common-law trusts, a trustee who obtains legal advice related to the execution of fiduciary obligations is precluded from asserting the attorney-client privilege against the beneficiaries of the trust.”). Generally, the fiduciary exception exists because a trustee has a common law duty to disclose information to the beneficiaries of the trust when the trustee receives legal advice “relating to his administration of the trust.” Wachtel, 482 F.3d at 231. The exception has also been explained by the rationale that a trustee is not the “real client” receiving the advice because the trustee acts as a representative of the beneficiaries' interests. United States v. Mett, 172 F.3d 1058, 1063 (9th Cir. 1999).

         A number of circuit courts have applied the fiduciary exception to ERISA fiduciaries. Bland v. Fiatallis N. Am., Inc., 401 F.3d 779, 787-88 (7th Cir. 2005); Mett, 172 F.3d at 1062; Becher v. Long Island Lighting Co., 129 F.3d 268, 272 (2d Cir. 1997); Wilbur v. ARCO Chemical Co., 974 F.2d 631, 645 (5th Cir. 1992). “[I]n the ERISA context, the fiduciary exception provides than an employer acting in the capacity of ERISA fiduciary is disabled from asserting the attorney-client privilege against plan beneficiaries on matter of plan administration.” Mett, 178 F.3d at 1063; Krueger v. Ameriprise Fin., Inc., LLC, No. 11-cv-2781 (SRN/JSM), 2014 WL 12597432, at *11 (D. Minn. May 7, 2014) (same). However, even when the exception is recognized, it does not defeat the attorney-client privilege where the fiduciary communicates with its attorneys “on non-fiduciary matters.” Smith v. Jefferson Pilot Fin. Ins. Co., 245 F.R.D. 45, 48 (D. Mass. 2007). For example, an ERISA fiduciary that obtains legal advice to defend itself against plan beneficiary claims can maintain the confidentiality of otherwise privileged communications.[1] See Id. (citing Mett, 178 F.3d at 1064).

         Drawing the line between matters of plan administration (which are not protected from disclosure) and communications involving legal advice on non-fiduciary matters (which remain protected) requires “a fact-specific inquiry, examining both the content and context of the specific communication.” Smith, 245 F.R.D. at 48 (internal quotations omitted). A “key question” is often “whether the communication was made before or after the final decision to deny benefits.” Id. (internal quotations omitted). This demarcation makes sense as courts attempt to discern whether the interests of the fiduciary withholding the information and those of beneficiary seeking its production have diverged and a threat of litigation has arisen such that the fiduciary is justified in obtaining confidential advice from counsel for its own protection. See Cottillion v. United Refining Co., 279 F.R.D. 290, 301 (W.D. Pa. 2011); Allen v. Honeywell Retirement Earnings Plan, 698 F.Supp.2d 1197, 1201 (D. Ariz. 2010) (“The interests of plan participants and plan administrators undoubtedly diverge sufficiently upon the final denial of an administrative claim or upon the initiation of litigation.”).

         However, a sufficiently adversarial relationship may arise before the final decision denying benefits. See Olsen v. Standard Ins. Co., No. 13-cv-576 (SRN/TNL), Doc. No. 33 at 6 (D. Minn. Oct. 17, 2013) (Order denying motion to compel). In Olsen, for example, United States Magistrate Judge Tony N. Leung found that the fiduciary exception did not require disclosure of a plan administrator's communications with its attorneys that occurred after the plaintiff's counsel sent a letter in response to the administrator's initial unfavorable benefits determination. Id. at 7. In light of the particular language used in the plaintiff's counsel's letter, Judge Leung found it reasonable to conclude that there was a sufficient threat of future litigation that an adversarial relationship had developed. Id.

         The Eighth Circuit has not officially held that the fiduciary exception to the attorney-client privilege applies in ERISA cases or to insurers who act as ERISA fiduciaries. However, in Carr v. Anheuser-Busch Cos., Inc., 495 Fed. App'x 757, 767-68 (8th Cir. 2012), the court upheld a district court's ruling that an ERISA plan administrator could not be compelled to produce emails between the plan administrator and its in-house counsel.[2] The Eighth Circuit held that the district court did not abuse its discretion where it determined that the fiduciary exception only applied to one of the communications the plaintiff tried to compel. Id. at 768 (citing Mett, 178 F.3d at 1064). The other three emails remained protected by the attorney-client privilege because the plaintiff's “interest had become sufficiently adverse to that of the plan administrator's interest because the final decision to deny benefits had effectively been made.” Id.

         To summarize, a fiduciary exception to the attorney-client privilege is widely accepted in federal courts. The exception has also been fairly consistently applied in the ERISA context. Courts applying the exception in ERISA cases attempt to differentiate between situations in which an ERISA fiduciary obtains legal advice about matters of plan administration, which must be disclosed, and those where the fiduciary seeks advice for non-fiduciary matters, which remain privileged. The focus in that inquiry is often the point at which an adversarial relationship between fiduciary and beneficiary materialized such that the fiduciary is justified in seeking legal advice for its own benefit. Finally, although the exception has not been expressly adopted by the ...

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