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ERISA Watch – Shhh! It’s the fiduciary exception to the attorney-client privilege

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Good afternoon, folks!  I’m not sure if Westlaw was down or if the ERISA Gods were paying me a solid knowing I was in Las Vegas this weekend, but there were only a small handful of cases on my alerts for decisions picked up this past week.  So, I’m getting these out a day ahead of schedule.  I’m sure next week’s report will be a doozy.  And in case you’re curious, I didn’t win big in Vegas.  The silver lining is that since I gambled away my retirement savings, I’ll be practicing law for many more years to come.

There were a couple of decisions I want to highlight.  The first is Durand v. Hanover Ins. Grp., Inc., No. 3:07-CV-00130-HBB, 2016 WL 6089739 (W.D. Ky. Oct. 17, 2016), which involved a lengthy discussion on the application of the fiduciary exception to the attorney-client privilege.  The court adopted the majority view in finding that the employer/administrator has the burden of demonstrating counsel’s communications concerned non-administrative/non-fiduciary matters or personal representation in potential or pending litigation.  The court also held that the fiduciary exception applies to work product and the party asserting the privilege bears the burden of demonstrating that disputed documents were prepared in anticipation of litigation.

The other decision, and a case to watch for further developments, is Frommert v. Conkright, No. 00-CV-6311L, 2016 WL 6093998 (W.D.N.Y. Oct. 19, 2016)Frommert was an intensely litigated case, including a trip to the Supremes and a couple trips up to the Second Circuit.  The district court ultimately ordered an equitable remedy for Xerox’s failure to provide adequate notice to Plan participants.  Plaintiffs seek payment of attorneys’ fees based on hourly rates ranging from $250 to $675 per hour.  Defendants argued that any award should be no more than $300 per hour for partners and $200 for associates.  In response, Plaintiffs pointed out that Xerox likely paid rates much higher than those Plaintiffs are seeking.  The court found that knowledge of Defendants’ attorneys’ fees in this litigation is relevant and would be helpful to determining the amount of fees that should be awarded to Plaintiffs’ counsel.  The court gave Defendants the opportunity to provide this information within 15 days, but if Xerox chooses not to provide this information, the court will proceed with the evidence that has been presented thus far, coupled with the court’s own understanding of legal billing rates based on its thirty years’ experience in dealing with such issues.  In legalese, the court said put up or shut up.

Although likely good for this case, it’s not always good for plaintiffs to have a court compare their market rates with the rates charged by the opposing attorneys.  There are a number of reasons why attorneys representing institutional clients will charge below market rates.  The opinion did not suggest that Xerox’s counsel’s rates are ipso facto determinative of what is reasonable, only that they are relevant to the court’s analysis.

Enjoy this week’s light reading!

Below is Kantor & Kantor LLP’s summary of this past week’s notable ERISA decisions.

Attorneys’ Fees

Second Circuit

  • Following lengthy and hard-fought litigation where the plan participants ultimately prevailed and sought attorneys’ fees based on hourly rates ranging from $250 to $675 per hour, finding that knowledge of Defendants’ attorneys’ fees in this litigation is relevant and would be helpful to this court in determining the amount of fees that should be awarded to Plaintiffs’ counsel. The court gives Defendants the opportunity to provide this information within 15 days, but if Xerox chooses not to provide this information, the court will proceed with the evidence that has been presented thus far, coupled with the court’s own understanding of legal billing rates based on its thirty years’ experience in dealing with such issuesFrommert v. Conkright, No. 00-CV-6311L, 2016 WL 6093998 (W.D.N.Y. Oct. 19, 2016) (Judge David G. Larimer).

Third Circuit

  • Following Plaintiffs’ unopposed Motion for Final Approval of Class Action Settlement, granting Plaintiffs’ motion for attorneys’ fees and service awards, including 33% of the settlement amount, or $11,000,000, in addition to $91,055.47 in expenses incurred during litigation and $45,000 for each of the three Class Representatives, for a total service award of $135,000 (equal to 1.2% of the settlement amount). None of the roughly 9,500 class members objected to the Settlement or to the Class counsel’s fee requestDemaria v. Horizon Healthcare Servs., Inc., No. 2:11-CV-07298 (WJM), 2016 WL 6089713 (D.N.J. Oct. 18, 2016) (Judge William J. Martini).

Disability Benefit Claims

Third Circuit

  • An “Appointment of Claim Fiduciary” contract where LifeCare, as Plan administrator, appointed Life Insurance as Claim Fiduciary and gave Life Insurance “the authority, in its discretion, to interpret the terms of the Plan, including the Policies; to decide questions of eligibility for coverage or benefits under the Plan; and to make any related findings of fact” constitutes a delegation of discretionary power warranting an arbitrary and capricious standard of review. Life Insurance was not arbitrary and capricious in denying Plaintiff LTD benefits for major depression and anxiety.  Even though SSA found her disabled, SSA did not have Defendant’s peer review report.  Plaintiff does not have a private right of action under Section 503; Defendant’s alleged procedural violations do not entitle Plaintiff to attorneys’ feesGailey v. Life Ins. Co. of N. Am., No. 1:15-CV-564, 2016 WL 6082112 (M.D. Pa. Oct. 17, 2016) (Judge John E. Jones III).

Eleventh Circuit

  • Affirming the district court’s affirmation of Prudential’s decision to deny Plaintiff’s long-term disability benefits claim, where the only support of Plaintiff’s claim of cognitive impairment was “a scribble” in doctor’s notes that read, “Not able to make decisions.” In contrast, each of the two doctors that Prudential consulted concluded that the scribble is unsupported and insufficient to evince cognitive impairment.  Additionally, for four years, Plaintiff successfully performed the same duties without receiving bad performance reviewsRamdeen v. Prudential Insurance Company of America, et al., No. 16-11179, __F.App’x__, 2016 WL 6134819 (11th Cir. Oct. 21, 2016) (Before WILSON, JORDAN, and JULIE CARNES, Circuit Judges).

Discovery

Sixth Circuit

  • For purposes of the fiduciary exception to the attorney-client privilege, adopting the majority view that the employer/administrator has the burden of demonstrating counsel’s communications concerned non-administrative/non-fiduciary matters or personal representation in potential or pending litigation. The fiduciary exception also applies to work product protection and Defendants bear the burden of demonstrating each of the documents at issue were prepared in anticipation of litigation.  Documents that were utilized in the context of preparing a response to the OIG’s request for information and materials which is an act of plan administration are within the scope of the fiduciary exception.  The court granted in part and denied in part Plaintiffs’ motion to compel production of allegedly privileged documents and submission of more complete privilege logsDurand v. Hanover Ins. Grp., Inc., No. 3:07-CV-00130-HBB, 2016 WL 6089739 (W.D. Ky. Oct. 17, 2016) (Magistrate Judge H. Brent Brennenstuhl).

ERISA Preemption

Eighth Circuit

  • Granting Plaintiff’s motion to remand since looking only to the face of the complaint, Plaintiff’s only claim is for violations of the MHRA and there are no allegations that Defendants violated any provision of the collective bargaining agreement, there are no references to the agreement in his complaint, there are no claims that Defendants violated ERISA, and there are no claims for recovery of severance pay under Defendant’s health insurance plan. McBrien v. Ruan Transp. Mgmt. Sys., Inc., No. 16-CV-6058-FJG, 2016 WL 6080818 (W.D. Mo. Oct. 17, 2016) (Judge Fernando J. Gaitan, Jr.).

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Pension Benefit Claims

Second Circuit

  • In this lawsuit for unpaid SERP benefits, the court concluded that state and federal law do not permit YAI to withhold Plaintiff’s SERP benefits simply because YAI and its agents have determined them to be excessive or unreasonable. YAI forfeited its public policy defense argument that New York’s Office for People with Developmental Disabilities (“OPWDD”) concluded that Plaintiff’s SERP benefits were excessive because it did not raise this argument in the partial summary judgment motion.  But, even if YAI did not forfeit this argument, Yai did not produce evidence that OPWDD ever formally found that Plaintiff’s compensation violated NY law.  Plaintiff agreed to a reduction of his SERP benefits in 2008 and that amendment is validLevy v. Young Adult Inst., Inc., No. 13-CV-2861 (JPO)(SN), 2016 WL 6092705 (S.D.N.Y. Oct. 18, 2016) (Judge J. Paul Oetken).

Pleading Issues & Procedure

Fifth Circuit

  • Based on the Fifth Circuit’s reasoning in Musmeci v. Schwegmann Giant Super Markets, Inc., Plaintiff failed to allege sufficient facts that Shell Oil is a proper party defendant because it is the plan administrator. The court dismissed with prejudice Plaintiff’s claims against Shell Oil under 29 U.S.C. § 1001, et seqMcNealy v. Becnel, No. CV 14-2181, 2016 WL 6070073 (E.D. La. Oct. 17, 2016) (Judge Susie Morgan).

Withdrawal Liability & Unpaid Contributions

Fourth Circuit

 

Sixth Circuit

* Please note that these are only case summaries of decisions as they are reported and do not constitute legal advice.  These summaries are not updated to note any subsequent change in status, including whether a decision is reconsidered or vacated.  If you have questions about how the developing law impacts your ERISA benefit claim, contact an experienced ERISA attorney.  Case summaries authored by Michelle L. Roberts, Partner, Kantor & Kantor LLP, 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel:  510-992-6130. 

 

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