Discovery of a Plan’s Attorney-Client Communications in ERISA Benefit Disputes

Employees in Chicago who initiate lawsuits over denied benefits under ERISA § 502(a) rarely know about the procedural aspects of litigation, such as discovery. Discovery is the means by which parties exchange information about the case during litigation. But there is a privilege for attorney-client communications, meaning ordinarily those are not discoverable. ERISA benefits disputes have a rare exception to that rule called the fiduciary exception, whereby communications between a plan fiduciary and its attorneys regarding administration of the plan cannot be withheld from the plan participants, as the plan participants are the true “client” of those communications. But a recent case teaches that principle has some limitations for what are called “top hat” plans. A “top hat” plan is a plan that is offered to a select group of employees and provides deferred compensation.

In Kramer v. American Electric Power Executive Severance Plan, No. 2:21-cv-5501, 2023 WL 2925117 (S.D. Ohio Apr. 13, 2023), Kramer filed a lawsuit under ERISA § 502(a) challenging the denial of severance benefits. In discovery, the plan provided a privilege log containing 340 documents it withheld from production on the basis of attorney-client privilege. Kramer argued the plan had to produce these documents under the fiduciary exception to attorney-client privilege. The plan, on the other hand, contended because the severance plan at issue was a top hat plan, it was exempt from ERISA’s fiduciary obligations, so none of the communications occurred in a fiduciary capacity.

The United States District Court for the Southern District of Ohio agreed with the plan, and denied discovery of the privileged documents. The court analyzed whether the severance plan at issue was a “top hat” plan. It easily determined the plan was designed to provide benefits to a select group of employees, as less than 1% of the workforce participated, and all participants were highly compensated. Next, the court analyzed whether the severance plan provides “deferred compensation.” The plan argued a broad meaning of deferred compensation, whereby severance benefits are deferred income for past work. Kramer argued deferred compensation requires a salary deferral, like in a 401(k) plan. The court agreed with the plan and took a broad view of deferred compensation, holding the plan was a “top hat” plan. As a result, ERISA’s fiduciary protections did not apply and Kramer was not entitled to discovery of the attorney-client privileged documents.

If your long-term disability or other ERISA claim has been denied or terminated, contact an experienced ERISA lawyer today.