United States District Court, N.D. California
ORDER REGARDING JOINT DISCOVERY LETTER Re: Dkt. No.
A. Westmore, United States Magistrate Judge
March 6, 2019, the parties filed a joint discovery letter
regarding Defendants’ discovery log, in which
Plaintiffs sought the production of thirty-three documents.
(Discovery Letter, Dkt. No. 262.) On May 1, 2019, the Court
ordered the parties to file supplemental briefing as to
whether revisions to guidelines are subject to the fiduciary
exception. (Dkt. No. 282 at 1.) The Court also ordered
Defendants to produce certain documents for in camera review.
(Id., Dkt. No. 299.) Defendants filed their
supplemental brief on May 8, 2019, and Plaintiffs filed their
supplemental brief on May 15, 2019. (Defs.’ Supp.
Brief, Dkt. No. 284; Plfs.’ Supp. Brief, Dkt. No. 293.)
Having reviewed the parties’ briefing, the relevant
legal authority, and the in camera documents, the Court
GRANTS IN PART and DENIES IN PART Plaintiffs’ request
to require the production of the challenged documents.
Documents Regarding Fee Changes and Guidelines
context of Employee Retirement Income Security Act
(“ERISA”) cases, the fiduciary exception to
attorney-client privilege “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.”
United States v. Mett, 178 F.3d 1058, 1063 (9th Cir.
1999). The fiduciary exception does not apply to legal
“advice that a fiduciary obtains in an effort to
protect herself from civil or criminal liability.”
Id. at 1066. The fiduciary exception also does not
apply to settlor functions, such as the adoption,
modification, or termination of an employee benefit plan.
See Ronches v. Dickerson Empl. Benefits, No. CV
09-4279 MMM (PJWx), 2009 WL 10669571, at *11 (C.D. Cal. Oct.
30, 2009); Bins v. Exxon Co. U.S.A., 220 F.3d 1042,
1047 (9th Cir. 2000) (internal quotation omitted) (“It
is well established that a company does not act in a
fiduciary capacity when deciding to amend or terminate a
welfare benefits plan.”).
the majority of documents at issue concern fee changes and
revisions to documents, including the investment guidelines
and STIF Guidelines. The parties dispute whether such changes
and revisions fall within the fiduciary exception. Defendants
argue that the fiduciary exception does not apply because
“a plan administrator is not an ERISA fiduciary when
negotiating the terms of its services with plan
trustees.” (Defs.’ Supp. Brief at 1.) Relying on
Santomenno v. Transamerica Life Insurance Co.,
Defendants contend that because “revisions became
operative only upon client approval, BlackRock did not have
fiduciary control over the contents of (or proposed changes
to) these guidelines.” (Id. at 2.) Plaintiffs,
in turn, argue that at the time such amendments were made,
Defendants “already owed a fiduciary duty to the
investing plans.” (Plfs.’ Supp. Brief at 4.)
motion to dismiss, Defendants raised similar arguments
regarding whether Defendant BlackRock Institutional Trust
Company, N.A. (“BTC”) was acting as a fiduciary
when “negotiating the terms of its appointment as
securities lending agent” for the collective trust
investments (“CTIs”). (Dkt. No. 181 at 16
(capitalization omitted). Defendants relied on
Santomenno to argue that “BTC simply does not
act as a fiduciary in negotiating the fees under which it
will provide services . . . to ERISA plans.”
(Id. at 17.)
denying Defendants’ motion to dismiss, the presiding
judge found that BTC was “correct that it was not a
fiduciary when it negotiated its appointment and
compensation.” (Order re Mot. to Dismiss at 21, Dkt.
No. 340.) The presiding judge, however, found there was a
distinct inquiry as to “whether BTC was a fiduciary and
breached its duties when it collected its compensation . . .
.” (Id.) Specifically, the presiding judge
explained that Plaintiffs were “alleg[ing] that BTC
acted as a fiduciary in this regard, because it had
discretionary control over disposition of its fees, which
purportedly came from the Plan assets in the BTC-sponsored
CTIs.” (Id.) To the extent Defendants argued
that BTC’s compensation terms were calculated pursuant
to a non-discretionary formula, the presiding judge further
explained that the documents incorporated by reference did
not support that claim. (Id. at 22.) Thus, the
presiding judge concluded that Plaintiffs had
“sufficiently allege[d] that BTC had control and
discretion in setting its compensation, and that such
compensation came out of the Plan’s funds . . .
found by the presiding judge, there is a factual dispute as
to whether BTC had control and discretion in setting its
compensation, and thus whether BTC breached its duties as a
fiduciary. Further, the documents at issue concern changes
and revisions to fees and investment guidelines, which would
presumably occur after BTC was appointed as the
securities lending agent – in contrast to
Santomenno, which concerned “the determination
of fees . . . before the actual administration of
the Plan.” (Order re Mot. to Dismiss at 20-21
(explaining Santomenno, 883 F.3d at 838).) Thus, the
changes and revisions go more towards the collection of
compensation, including BTC’s discretionary control
over disposition of the fees. Accordingly, the Court finds
that the documents are discoverable under the fiduciary
exception, and GRANTS Plaintiffs’ request to compel the
production of privilege log entries 89, 91, 280, 305, 346,
351, 380, 382, 422, 436, 454, 518, 535, and 536.
Other Fiduciary Exception Documents
also seek other documents that they believe do not fall
within the fiduciary exception. (Discovery Letter at 2, 4.)
The Court rules on these documents as follows:
Court DENIES production of privilege log entry 285. Per the
privilege log, this e-mail concerns discussions with in-house
counsel about a 401(k) lawsuit. Thus, the e-mail appears to
concern civil liability, and would not fall within the
Court DENIES production of privilege log entry 343. The
privilege log states this email concerns settlor functions in
connection with an audit. Thus, the e-mail would not fall
within the fiduciary exception.
Court GRANTS production of privilege log entry 350. The
e-mail concerns a response to client questions about retained
income in a particular closed-end fund. Having conducted an
in camera review, the document does not concern
legal liability or any plan terms. Thus, the e-mail falls
within the fiduciary exception.
Court GRANTS production of privilege log entries 385, 401,
405, 450, and 451. The redacted portion of the document does
not appear to contain legal advice, even if the underlying
data (which was ...