United States District Court, N.D. California
DISCOVERY ORDER Re: Dkt. Nos. 116, 117
S. Hixson United States Magistrate Judge
parties submitted a joint discovery letter brief on July 23,
2019, requesting in camera review of certain documents in
Microchip and Wilson Sonsini's privilege logs. ECF No.
In an order dated July 3, 2019, the Court directed the
parties to “meet and confer to identify a
representative sample of approximately ten to fifteen e-mails
for the Court's in camera review.” ECF No.
115. In a joint letter brief dated July 26, 2019, the parties
identified twelve emails that would be submitted for in
camera review. ECF No. 117. On August 2, 2019, Defendants
submitted the emails to the Court.
main issue is whether these otherwise attorney-client
privileged emails come within the fiduciary exception to the
privilege. “[T]he attorney-client privilege is,
perhaps, the most sacred of all legally recognized
privileges.” United States v. Mett, 178 F.3d
1058, 1062 (9th Cir. 1999) (citations and quotation marks
omitted). “The privilege is intended to encourage full
and frank communication between attorneys and their clients.
In the words of the Supreme Court, ‘[t]he privilege
recognizes that sound legal advice or advocacy serves public
ends and that such advice or advocacy depends upon the
lawyer's being fully informed by the client.'”
Id. (quoting Upjohn v. United States, 449
U.S. 383, 389 (1981)).
Ninth Circuit, however, has joined a number of other courts
in recognizing a ‘fiduciary exception' to the
attorney-client privilege.” Id. “As
applied in the ERISA context, the fiduciary exception
provides that ‘an employer acting in the capacity of
ERISA fiduciary is disabled from asserting the
attorney-client privilege against plan beneficiaries on
matters of plan administration.'” Id. at
1063 (quoting Becher v. Long Island Lighting Co.,
129 F.3d 268, 272 (2d Cir. 1997)). Technically, “the
fiduciary exception is not an ‘exception' to the
attorney-client privilege at all.” Id. Rather,
“as to advice regarding plan administration, a trustee
is not ‘the real client'” - the beneficiaries
are - “and thus never enjoyed the privilege in the
first place.” Id.; see also Stephen v.
Unum Life Ins. Co. of America, 697 F.3d 917, 931 (9th
“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.
“Thus, the case authorities mark out two ends of a
spectrum.” Id. at 1064. “On the one
hand, 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.
“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.” “There
is no binding precedent in this circuit delineating precisely
when the interests of a Plan fiduciary and its beneficiary
become sufficiently adverse that the fiduciary exception no
longer applies.” Stephan, 697 F.3d at 933.
“Courts that have considered the issue, however, have
repeatedly rejected the argument that the prospect of
post-decisional litigation is enough to overcome the
fiduciary exception.” Id. (citations and
quotation marks omitted). In Stephan, the Ninth
Circuit decided that “[t]he context of the
documents” is the deciding factor. Id. If the
“goal” of the “communications”
relates to “the determination” of benefits, that
is “a matter of plan administration, ” and the
fiduciary exception applies. Id. By contrast,
“preparation for litigation” does not trigger the
the Ninth Circuit has rejected the notion that the fiduciary
exception is “expansive” and reaches
“otherwise privileged legal advice” that merely
“‘relates to' fiduciary matters.”
Mett, 178 F.3d at 1064. The Court explained that
“[t]his expansive view of the fiduciary exception . . .
must be rejected for at least four reasons.”
Id. at 1065. “First, this view of the
fiduciary exception threatens to swallow the entirety of the
attorney-client privilege for ERISA trustees.”
Id. “Second, the expansive view unmoors the
fiduciary exception from its justifying rationales.”
Id. “Third, and most importantly, where
attorney-client privilege is concerned, hard cases should be
resolved in favor of the privilege, not in favor of
disclosure.” Id. “Finally, from a policy
perspective, an uncertain attorney-client privilege will
likely result in ERISA trustees shying away from legal advice
regarding the performance of their duties.”
Court turns, then, to the emails. WSGR Priv. Log Item Nos.
180 and 187 are not 100% on either end of the spectrum. But
reading these emails fairly and in context, it cannot be said
that the goal of these communications was to interpret the
plan or make a determination of an entitlement to benefits.
At most, if the fiduciary exception were expansive, there
might be an argument that these emails are “related
to” plan administration. On the other hand, the subject
line makes them look like preparation for litigation.
Priv. Log Item Nos. 59, 130, 131, 150 and 152 and Microchip
Priv. Log Item Nos. 309 and 310 are likewise not perfectly at
either end of the spectrum. They don't seem to be
preparation for litigation. But they're also not advice
about benefits owed or not owed or plan interpretation. These
documents are best categorized as being “related
to” plan administration, which the Ninth Circuit has
rejected as being sufficient to apply the fiduciary
we come to Microchip Priv. Log Item Nos. 272, 273 and 274.
The bulk of the discussion in these emails is preparation for
litigation. There is one paragraph in each of these emails,
however, that includes plan interpretation. Nonetheless, the
Court finds that the fiduciary exception does not apply, for
two reasons. First, the plan interpretation is in the context
of preparation for litigation, not in the context of advising
on plan administration.
and more importantly, Microchip was not a fiduciary when it
received those emails. The emails are dated March 11, 2016,
which is before the acquisition closed on April 4, 2016. As
Judge Gilliam explained, “Plaintiffs fail to allege
facts showing that Microchip exercised or had discretionary
authority or responsibility in the administration of the plan
prior to the merger . . .” ECF No. 54 at 13
(emphasis original, citation and quotation marks omitted).
Recall that the theory behind the fiduciary exception is that
when an attorney advises a fiduciary about how to administer
a plan, the real client is the beneficiary.
Mett, 178 F.3d at 1063. Before Microchip closed the
acquisition, the real client being advised was simply
Microchip probably remembered the advice it received in March
when it then became a fiduciary in April. But that's not
a sufficient basis to apply the fiduciary exception. As
noted, there isn't a good argument that before the
acquisition closed, the real client receiving legal advice
was anyone other than Microchip. In March, at the time it
received these emails, Microchip didn't owe fiduciary
responsibilities to the plan beneficiaries. Surely the
existence or non-existence of the attorney-client privilege
has to be determined by the facts and circumstances existing
as of the time of the communications, or legal advice will be
chilled by uncertainty. As the Ninth Circuit explained in
Mett, exceptions to the attorney-client privilege
need to be kept limited and clear. Allowing the fiduciary
exception to reach back in time to communications that were
made before an entity became a fiduciary threatens too much
uncertainty. It would cast a pall on due diligence review in
corporate acquisitions, among other problems.
for the foregoing reasons, the Court finds that all twelve
emails at issue are attorney-client privileged, and the
fiduciary exception does not apply to any of them.