Opinion
No. 03 Civ. 9945 (KMW) (HBP).
July 1, 2005
MEMORANDUM OPINION AND ORDER
I. Introduction
Plaintiff moves to compel the production of sixteen documents withheld by defendants on the ground of the attorney-client privilege and/or work-product protection. For the reasons set forth below, plaintiff's motion is granted in part and denied in part.
The sixteen documents in issue are assigned the following numbers on defendants' privilege log: 1(a), 1(b), 2(a), 2(b), 2(j), 2(k), 2(l), 2(n), 3, 4, 5, 19, 20, 21, 22 and 24.
II. Facts
A. Facts Underlying Plaintiff's Claims
Plaintiff alleges that defendants breached their fiduciary duties to her in violation of the provisions of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 290 et seq. Specifically, plaintiff, a former employee of Pfizer, Inc. ("Pfizer") with twenty-two years of service at the time of her separation from Pfizer, alleges that in early May, 2003, a Pfizer Retirement Counselor sent plaintiff a letter advising her that she was eligible to retire. The counselor subsequently sent plaintiff a stock option summary sheet indicating that plaintiff's stock options would survive her separation from Pfizer because plaintiff was retirement eligible. Allegedly in reliance on these representations, plaintiff separated from Pfizer effective May 31, 2003, in the belief that she was retiring and that her accrued stock options would remain in effect.
In mid-August 2003, plaintiff received another letter from Pfizer, advising that many of plaintiff's stock options had been canceled and that the balance had to be exercised by September 1, 2003 or they would be forfeited. Plaintiff called Pfizer on August 18, 2003, and Pfizer advised plaintiff that it would look into her complaints. On August 22, 2003 Pfizer wrote to plaintiff, purportedly confirming a telephone conversation of August 21, 2003 and stating that "while [plaintiff] did receive a statement indicating the treatment of stock options at Pfizer if [plaintiff] were retirement eligible, further investigation provided that [plaintiff] did not separate as a retirement but as a termination" (Declaration of Robert D. Kraus, Esq., dated October 13, 2004 ("Kraus Decl."), Ex. E). Pfizer subsequently refused to reinstate plaintiff's options and this action followed.
B. The Discovery Requests in Issue
The present dispute arises out of a document request served by plaintiff on or about February 12, 2004. Defendants served their responses on or about March 22, 2004. Although defendants' March 22 response contained blanket assertions of privilege, defendants did not provide an index of documents withheld on the ground of privilege at that time. Defendants' counsel candidly admitted at oral argument that there was no express agreement extending defendants' time to serve such an index. Defendants' finally provided the index of withheld documents on June 8, 2004.
C. The Documents in Issue
The sixteen documents in issue bear dates from August 18, 2003 through October 20, 2003. The descriptions of the subject matters are extremely brief and are limited to three variants: "[s]tock options; retirement eligibility," "[s]tock plans; PRAP documents," "[s]tock plans; stock options; PRAP documents." All sixteen are claimed to be protected by the attorney-client privilege. Nine of the documents are also claimed to be protected as work product. No information has been provided concerning the circumstances surrounding the preparation of any of the challenged documents.
Defendants assert the work-product doctrine with respect to documents 1(a), 1(b), 2(k), 2(l), 2(n), 19, 21, 22 and 24.
Plaintiff argues that defendants' claim of privilege should be rejected for three reasons: (1) defendants' failure to serve an index of withheld documents in a timely manner operates as a waiver of any privilege that might otherwise exist; (2) the fiduciary exception to the attorney-client precludes defendants from asserting the privilege against plaintiff, and (3) defendants have not established the elements of work-product protection.
III. Analysis
A. Waiver
Plaintiff first argues that defendants waived any claim of privilege they may have had by failing to serve an index of withheld documents in a timely manner.
Fed.R.Civ.P. 26(b)(5) provides:
When a party withholds information otherwise discoverable under these rules by claiming that it is privileged or subject to protection as trial preparation material, the party shall make the claim expressly and shall describe the nature of the documents, communications, or things not produced or disclosed in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the applicability of the privilege or protection.
Rule 26(b) (5) is supplemented by Local Civil Rule 26.2(a) (2) (A) which sets forth the specific information that must be disclosed when documents are withheld on the ground of privilege. Local Civil Rule 26.2(c) commands, inter alia, that when documents sought in a request made pursuant to Fed.R.Civ.P. 34 are withheld on the ground of privilege, the index required by Rule 26.2(a) (2) (A) "shall be furnished in writing at the time of the response to such discovery or disclosure, unless otherwise ordered by the court."
Defendants here served their responses to plaintiff's document request on or about March 22, 2004; there is no dispute that it was not accompanied by an index of documents withheld on the ground of privilege. In the absence of a stipulation extending the time for the production of the index, the unjustified failure to serve a list of documents withheld on the ground of privilege in a timely manner operates as a waiver of any applicable privilege. See, e. g., Bruker v. City of New York, 93 Civ. 3848 (MGC) (HBP), 2002 WL 484843 at *5 (S.D.N.Y. Mar. 29, 2002); A.I.A. Holdings, S.A. v. Lehman Bros., Inc., 97 Civ. 4978 (LMM) (HBP), 2000 WL 1538003 at *3 (S.D.N.Y. Oct. 17, 2000);Jackson v. Edwards, 99 Civ. 0982 (JSR) (HBP), 2000 WL 782947 at *2 (S.D.N.Y. June 16, 2000); Large v. Our Lady of Mercy Med. Ctr., 94 Civ. 5986 (JGK) (THK), 1998 WL 65995 at *4 (S.D.N.Y. Feb. 17, 1998); Hurst v. F.W. Woolworth Co., 95 Civ. 6584 (CSH), 1997 WL 61051 at *6 (S.D.N.Y. Feb. 11, 1997); PKFinans Int'l Corp. v. IBJ Schroeder Leasing Corp., 93 Civ. 5375 (SAS) (HBP), 1996 WL 525862 at *3-*4 (S.D.N.Y. Sept. 17, 1996); see also Sheikan v. Lenox Hill Hosp., 98 Civ. 6468 (WHP), 1999 WL 386714 at *3 (S.D.N.Y. June 11, 1999).
In this case, however, I find that the conduct of counsel gives rise to an implied-in-fact agreement to extend the date for service of indices of documents withheld.
Although defendants did not serve an index with their response to plaintiff's document request, there appears to be no dispute that plaintiff also failed to serve such an index with her document response. Plaintiff served her response to defendants' document request on March 31, 2004. Thereafter, discovery was effectively suspended while the Court resolved a dispute between the parties concerning the appropriateness of a summary judgment motion (see Declaration of Peter J. Engstrom, Esq., dated October 14, 2004 ("Engstrom Decl."), ¶ 15 and Exs. J K). After the Court determined in late May 2004 that a summary judgment motion was inappropriate at that time, defendants served their index of withheld documents on June 8, 2004 while plaintiff served her index on June 25, 2004 — approximately three months after plaintiff served her response to defendants' document request. Although there was discussion between the parties prior to June 2004 concerning the need for each side to provide indices of withheld documents (Engstrom Decl. Exs. D E), there is no evidence that prior to the instant dispute plaintiff ever suggested that defendants were in default or defendants' failure to serve their index sooner operated as a waiver.
Although there can be no serious question that the rules of procedure must be followed, see Mohasco Corp. v. Silver, 447 U.S. 807, 826 (1980) ("[I]n the long run, experience teaches that strict adherence to the procedural requirements specified by the legislature is the best guarantee of evenhanded administration of the law."); accord McNeil v. United States, 508 U.S. 106, 113 (1993); Baldwin County Welcome Ctr. v. Brown, 466 U.S. 147, 152 (1984) (per curiam) ("Procedural requirements . . . are not to be disregarded by courts out of a vague sympathy for particular litigants."), the facts here demonstrate that counsel, by their conduct, impliedly agreed to extend the date for service of indices of withheld documents. Although their conduct is ambiguous as to the length of the extension, I conclude that the due date was no earlier than June 25, 2004 — the date on which plaintiff served her index. Since defendants served their index of withheld documents on June 8, 2004 (Engstrom Decl. Ex. O), I conclude that their index was timely served and there was no waiver of privilege.
B. The Attorney-Client Privilege
Plaintiff next contends that the fiduciary exception to the attorney-client privilege precludes defendants from asserting that privilege against plaintiff. Plaintiff does not challenge the sufficiency of defendants' assertion of the attorney-client privilege in any other respect.
The fiduciary exception to the attorney-client privilege prevents ERISA plan fiduciaries from asserting the attorney-client privilege against beneficiaries of the plan with respect to communications with counsel that are otherwise privileged but relate to the administration of the plan.
Under ERISA, an employer may perform both fiduciary functions and non-fiduciary functions. In line with other circuits, we have held that an employer acts as an ERISA fiduciary only in plan management or administration, not in the plan's design or amendment. See Siskind, 47 F.3d at 505; Izzarelli v. Rexene Prods. Co., 24 F.3d 1506, 1524-25 n. 33 (5th Cir. 1994); Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1161 (3d Cir. 1990). The employer's ability to invoke the attorney-client privilege to resist disclosure sought by plan beneficiaries turns on whether or not the communication concerned a matter as to which the employer owed a fiduciary obligation to the beneficiaries.
An ERISA fiduciary has an obligation to provide full and accurate information to the plan beneficiaries regarding the administration of the plan. See Martin v. Valley National Bank, 140 F.R.D. 291, 322 (S.D.N.Y. 1991). As part of this obligation, the ERISA fiduciary must make available to the beneficiary, upon request, any communications with an attorney that are intended to assist in the administration of the plan. Id. (citing George Gleason Bogert George Taylor Bogert, The Law of Trusts and Trustees, § 961 at 11 (rev. 2d ed. 1983)). An ERISA fiduciary cannot use the attorney-client privilege to narrow the fiduciary obligation of disclosure owed to the plan beneficiaries. See Riggs Nat'l Bank v. Zimmer, 355 A.2d 709, 713-14 (Del.Ch. 1976). Thus, 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. This principle is the "fiduciary exception" to the attorney-client privilege.Long Island Lighting Co. v. Becher, 129 F.3d 268, 271-72 (2d Cir. 1997). See also Bertolotti v. Teamsters Local 814 Pension Fund, 95-CV-5261 (FB), 1998 WL 12169 at *3 (E.D.N.Y. Jan. 8, 1998); Helt v. Metro. Dist. Comm'n, 113 F.R.D. 7, 9 (D. Conn. 1986) ("When a fiduciary communicates with its attorneys about a fund it administers for the benefit of others, courts have held that the attorney-client privilege does not operate to conceal from the beneficiaries information about the fund.");Petz v. Ethan Allen, Inc., 113 F.R.D. 494, 497 (D. Conn. 1985) ("When an attorney advises a fiduciary about a matter dealing with the administration of an employees' benefit plan, the attorney's client is not the fiduciary personally but, rather, the trust's beneficiaries."); see generally Edan Selan Epstein, The Attorney-Client Privilege the Work-Product Doctrine 403-11 (4th ed. 2001). The weight of authority holds that the proponent of the fiduciary exception bears the burden of proving its applicability, although there is some authority to the contrary.Compare 24 Charles A. Wright Kenneth W. Graham, Jr., Federal Practice Procedure § 5507 at 571 (1986) ("[T]here is general agreement that the burden of proving the preliminary facts of exceptions to the [attorney-client] privilege is on the opponent of the privilege claim."), with Cobell v. Norton, 212 F.R.D. 24, 27 (D.D.C. 2002) ("[W]here the `fiduciary exception' is at issue, the proponent of the privilege retains the burden to demonstrate the applicability of the privilege.").
As the Honorable Douglas F. Eaton, United States Magistrate Judge has noted, the fiduciary exception is not really an exception to the attorney-client privilege. "[T]he fiduciary exception is not an `exception' to the attorney-client privilege at all. Rather, it merely reflects the fact that, at least as to advice regarding plan administration, a trustee is not `the real client' and thus never enjoyed the privilege in the first place."Anderson v. Sotheby's Inc. Severance Plan, N.Y.L.J., May 20, 2005, at 20 (S.D.N.Y. May 20, 2005).
Defendants admit that "a fiduciary must generally provide a beneficiary, upon request, with communications with an attorney pertaining to plan administration" (Defendants' Memorandum of Law in Opposition to Plaintiff's Motion to Compel, dated October 19, 2004 ("Def. Mem."), at 7). Defendants argue, however, that the fiduciary exception is inapplicable in this case because plaintiff is asserting her claim under defendants' non-ERISA Stock and Incentive Plan, that defendants are not fiduciaries under this plan and that the fiduciary exception does not, therefore, apply. This argument is not supported by the facts.
Although plaintiff's claim involves the Pfizer Stock and Incentive Plan (Engstrom Decl. Ex. A), the core issue in this case is plaintiff's eligibility for retirement under the Pfizer Retirement Annuity Plan (Engstrom Decl. Ex. B), which is, without dispute, within the scope of ERISA. Section 6(g) of the Pfizer Stock and Incentive Plan provides:
Termination of Option: The option, to the extent not exercised, shall terminate upon its expiration as set forth in Section 6(d) hereof, its surrender as set forth in Section 11(c) hereof, or upon breach by the optionee of any provision of the option, or when the optionee ceases to be an employee for any reason including retirement, whichever event shall first occur; however, if the option so provides, the Committee in its discretion may permit the optionee to exercise the option for reasons of hardship up to twelve months after termination, assuming that the option was otherwise exercisable; further except that, subject to Section 6(d) hereof (i) the optionee, if his employment is terminated as a result of a disability, and provided the option was exercisable at the time of termination of employment, may elect to exercise the option, subject to Section 6(e) hereof, within twelve months after the date of termination, (ii) in the event of his death while an employee, the option shall terminate as provided in Section 6(e) hereof, and (iii) notwithstanding subsections (ii) and (iii) above, if the option so provides, in the event that the optionee has retired or is eligible for retirement under Sections 4a, b or d of the Company's Retirement Annuity Plan, or as the same may be amended from time to time, or under any pension or retirement plan maintained by the Company or any of its subsidiaries, the optionee . . . may elect to exercise the option at any time until such option expires by its terms. . . .
(Engstrom Decl. Ex. A at Pfizer-00157). Subparagraph (iii) of the foregoing grants employees who retire under the terms of the Retirement Annuity Plan the right to exercise their options at any time up to the options' expiration date; the options would otherwise terminate upon the employee's separation from Pfizer. Thus, one of the most crucial issues in this case is whether plaintiff was eligible to retire under the Retirement Annuity Plan; the resolution of that issue will determine her rights under the Pfizer Stock and Incentive Plan.
The pivotal role of the Retirement Annuity Plan to resolution of the parties' dispute is further demonstrated by defendants' own documents. On August 22, 2003, defendants wrote to plaintiff, stating:
Regarding your separation status with Pfizer Inc, at the time of your termination from Pfizer on May 31, 2003 you did not meet the retirement eligibility criteria under the Pfizer Retirement Annuity Plan (PRAP) which requires that a participant have attained age 55 and 10 years service, meet the Rule of 90 (age plus service equals 90) or have attained age 65.
With regard to your stock options, while you did receive a statement indicating the treatment of stock options at Pfizer if you were retirement eligible, further investigation provided that you did not separate as a retirement but as a termination. Under the Pfizer stock plans for an employee who terminates their Pfizer service, options granted prior to 1997 lapse upon termination. For options granted in 1997 and later, exercisable options at termination remain exercisable for a period of up to 3 months from the termination date and those options not currently exercisable lapse at termination. . . .
Please be aware that we must in all instances consistently apply the provisions of each plan in order to protect the integrity of each plan and treat all participants in a similar manner. . . .
(Kraus Decl. Ex. E). The foregoing demonstrates that it was defendants' conclusion that plaintiff was not "retirement eligible" under the terms of the Pfizer Retirement Annuity Plan that, in defendants' own view, resulted in the termination of plaintiff's options, not the independent provisions of the Pfizer Stock and Incentive Plan. Stated differently, the issue to be resolved in this case is the propriety of defendants' decision that plaintiff was not "retirement eligible" under the Pfizer Retirement Annuity Plan; there does not appear to be any issue requiring the interpretation of the Pfizer Stock and Incentive Plan.
Thus, to the extent that defendants argue that the fiduciary exception does not apply because plaintiff is asserting a claim under a non-ERISA stock option plan, their argument fails.
As a fall back, defendants argue that the fiduciary exception does not apply to communications relating to: (1) litigation; (2) potential liability or (3) actions to protect the rest of the plan's participants (Def. Mem. at 9-12). These arguments also fail.
First, as noted above, the description of each of the documents in issue provided in defendants' index is limited to one of the following three alternatives: "[s]tock options; retirement eligibility," "[s]tock plans; PRAP documents," "[s]tock plans; stock options; PRAP documents." None of these descriptions suggest that the communications relate to litigation and none of defendants' submissions in response to the pending motion supplement the descriptions in the index. Thus, even if I were to assume, without deciding, that defendants' theory were correct, the record does not establish the facts to support the theory.
There can be no serious question that "`the burden is on a party claiming the protection of a privilege to establish those facts that are the essential elements of the privileged relationship.'" von Bulow v. von Bulow, 811 F.2d 136, 144 (2d Cir. 1987), quoting In re Grand Jury Subpoena Dated Jan. 4, 1984, 750 F.2d 223, 224 (2d Cir. 1984); Bowne of New York City, Inc. v. AmBase Corp., 150 F.R.D. 465, 470 (S.D.N.Y. 1993) (collecting cases). Thus, the absence of evidence concerning the nature of the documents constitutes a failure of the defendants to meet their burden of proof.
To the extent defendants argue that the fiduciary exception does not apply to communications regarding matters of potential liability or an ERISA plan's efforts to preserve assets by resisting claims for benefits, defendants' arguments come close to swallowing the fiduciary exception whole because the denial of claims for benefits under a plan is as much a matter of plan administration as is the granting of benefits. Taken to its extreme, defendants' arguments would shield almost all of a plan administrator's communications with an attorney that relate to or result in a denial of benefits, and it is only where benefits are denied that an issue concerning the privilege will arise. As noted in Geissal v. Moore Medical Corp., 192 F.R.D. 620, 625 (E.D. Mo. 2000):
For the defendants to prevail . . . whenever the administration of a plan involves the denial of a beneficiary's claim or benefits under a plan, all of the antecedent, pre-decisional legal advice of counsel would be subject to the attorney-client privilege and not available for review by the beneficiaries of the plan, including the disappointed beneficiary. This contradicts the principle that the plan's administrator or trustee administers the plan in the beneficiaries' best interests. The prospect of post-decisional litigation against the plan by a disappointed beneficiary can exist whenever the plan denies a claim. Because the denial of claims is as much a part of the administration of a plan as the decision-making which results in no unhappy beneficiary, the prospect of post-decisional litigation against the plan is an insufficient basis for gainsaying the fiduciary exception to the attorney-client privilege.Accord Lewis v. UNUM Corp. Severance Plan, 203 F.R.D. 615, 620 (D. Kan. 2001).
Nevertheless, it has been noted that "a trustee is obviously entitled to counsel once an adversarial situation has arisen questioning or challenging plan decisions that have been made." Edan Selan Epstein, The Attorney-Client Privilege the Work-Product Doctrine 406 (4th ed. 2001).
One court has suggested that a beneficiary's interest in disclosure of communications concerning plan administration and the administrator's competing interest in seeking legal advice in confidence to defend against claims can be reconciled by examining the purpose for which legal advice was sought.Henry v. Champlain Enters., Inc., 212 F.R.D. 73, 86 (N.D.N.Y. 2003). Others have inquired concerning whether the communications occurred before or after the decision to deny benefits. Geissal v. Moore Med. Corp., supra, 192 F.R.D. at 625-26; Edan Selan Epstein, The Attorney-Client Privilege the Work-Product Doctrine 405 (4th ed. 2001).
I conclude that both of these approaches have merit and were there evidence in the record that would support their application, I would be inclined to apply them. The problem is that neither defendants' index nor their submissions in response to this motion suggest that the communications were made to defend against plaintiff's claim nor do they delineate when defendants determined that plaintiff's separation from Pfizer was a termination and not a resignation. Given the lack of information provided by defendants, I conclude that the date of defendants' decision to deny plaintiff retirement status must be deemed to be August 21, 2003, the date of the telephone conversation allegedly memorialized in defendants' letter dated August 22, 2003 (Kraus Decl. Ex. E). Thus, I conclude that all of the challenged documents that were created before August 21, 2003 fall within the fiduciary exception to the attorney-client privilege and must be produced. The only challenged documents in this category are 1(a) and 1(b); the balance of the documents in issue were created on or after August 21, 2003 and need not, therefore be produced.
Defendants would have been better served if counsel had incorporated in the index the information required by Fed.R.Civ.P. 26(b) (5), namely a description of the nature of the documents sufficient to enable an adverse party to assess the applicability of the privilege or protection, and crafted descriptions that provide no useful information. See Golden Trade, S.r.L. v. Lee Apparel Co., 90 Civ. 6291 (JMC), 1992 WL 367070 at *5 (S.D.N.Y. Nov. 20, 1992) (An index of documents withheld on the ground of privilege must, "as to each document, . . . set forth specific facts that, if credited, would suffice to establish each element of the privilege or immunity that is claimed."); Willemijn Houdstermaatschaapij BV v. Apollo Computer Inc., 707 F. Supp. 1429, 1439 (D. Del. 1989) ("[A] party asserting work product protection must `identify the withheld documents with sufficient particularity that the opposing counsel can intelligently argue that the privilege ought not to apply.'"), quoting Petz v. Ethan Allen, Inc., 113 F.R.D. 494, 497 (D. Conn. 1985).
Document 1(b) was created on an unknown date in August, 2003. Since defendants bear the burden of demonstrating the existence of the attorney-client privilege, the ambiguity must be construed against them.
C. Work-Product Protection
Defendants' claim of work-product protection can be quickly dispatched.
"[T]hree conditions must be met to earn work product protection. The material must (1) be a document or a tangible thing, (2) that was prepared in anticipation of litigation, and (3) was prepared by or for a party, or by or for his representative." In Re Grand Jury Subpoenas Dated December 18, 1981 January 4, 1982, 561 F. Supp. 1247, 1257 (E.D.N.Y. 1982) (McLaughlin, J.).Accord Weinhold v. Witte Heavy Lift, Inc., 90 Civ. 2096 (PKL), 1994 WL 132392 at *2 (S.D.N.Y. Apr. 11, 1994); 2 Michael C. Silberberg Edward M. Spiro, Civil Practice in the Southern District of New York, § 15.4 at 15-14-15-15 (2d ed. 2004). There can be no dispute that defendants bear the burden of establishing the elements of the work-product protection. In re Grand Jury Subpoena Dated December 19, 1978, 599 F.2d 504, 510 (2d Cir. 1979).
In this case, defendants have provided no evidence whatsoever concerning the circumstances leading to the creation of the challenged documents. Thus, they have not sustained their burden of proof and their claim of work product must therefore fail. However, since none of the challenged documents are being withheld solely on the ground of work-product protection, this conclusion does not result in the production of any additional documents.
IV. Conclusion
Accordingly, for all the foregoing reasons, plaintiff's motion to compel is granted to the extent of ordering defendants to produce documents 1(a) and 1(b) within ten (10) days of the date of this Order. In all other respects, plaintiff's motion to compel is denied.
SO ORDERED.