Free Brief (Non Appeal) - District Court of Arizona - Arizona

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SUSAN MARTIN (AZ#014226) DANIEL L. BONNETT (AZ#014127) JENNIFER KROLL (AZ#019859) MARTIN & BONNETT, P.L.L.C. 3300 N. Central Avenue, Suite 1720 Phoenix, Arizona 85012-2517 Telephone: (602) 240-6900 [email protected] [email protected] [email protected] Attorneys for Plaintiffs IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA Barbara Allen, Richard Dippold, Melvin Jones, Donald McCarty, Richard Scates and Walter G. West, individually and on behalf of all others similarly situated, Plaintiffs, vs. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

No. CV04-0424 PHX ROS

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Honeywell Retirement Earnings Plan, Honeywell Secured Benefit Plan, Plan Administrator of Honeywell Retirement Earnings Plan and Plan Administrator of Honeywell Secured Benefit Plan, Defendants.

Plaintiffs Brief Regarding Discovery Dispute On Defendants Claim of Attorney-Client and Work Product Privilege

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Pursuant to the direction of the Court at the June 16, 2006 telephonic conference regarding discovery disputes, Plaintiffs submit this brief in support of their motion to compel Defendants to produce the following documents listed on Defendants privilege logs1 for an in camera inspection and that Defendants thereafter be ordered to turn the documents over to Plaintiffs: I. Documents that were generated in the 1980s and that appear to concern plan administration, including implementation of plan amendments and compliance with ERISA s fiduciary responsibilities or other statutory requirements, which Defendants have withheld on a claim that they do not deal with plan administration but rather merely advise the plan sponsor about proposed amendments: 682, 70-72; II. Documents that concern plan administration and that were generated prior the decision on Plaintiffs administrative appeal in responding to: a) Plaintiffs demands for documents or b) Plaintiffs administrative claims and appeal. These documents

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were generated by a variety of Plan employees, attorneys, Plan actuaries or outside Defendants Amended and Supplemental Logs of Documents Withheld as Privileged are Exhibits 3 and 4 to the Declaration of Azeez Hayne ( Hayne Decl. ), which is Exhibit A to Defendants Opposition to Plaintiffs Motion to Compel Production Of Privileged Documents ( Defs Br. ). (Doc. 225.) Plaintiffs have also prepared a list of the disputed documents on the privilege log in chronological order setting forth for each document which individuals, if any, submitted a declaration supporting Defendants position that the documents are privileged. (Declaration of Jennifer Kroll In Support of Plaintiffs Brief Regarding Discovery Dispute On Defendants Claim of Attorney-Client and Work Product Privilege ( Kroll Decl. ) ¶ 2-3 & Exhibit A thereto.) Defendants claim on their privilege log that Document 68, which was created in 1989, is work product; however, they have never claimed or shown that any litigation was threatened or anticipated in 1989.
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counsel who advised the Plan during the claims and appeals process but are not litigation counsel3 as follows: A. Documents generated after Plaintiffs made a demand for documents in June 2001 but before Plaintiffs submitted claims to the Plan Administrator in July 2002: 63, 64; B. Documents generated after Plaintiffs filed administrative claims in July 2002 but before Defendants responded to those claims in January 2003: 40-62, 121; C. Documents generated after the decision on Plaintiffs administrative claims in January 2003 but before Plaintiffs appealed those claims in July 2003: 21, 24,30-33, 37-39; D. Documents generated after Plaintiffs submitted their administrative appeal in July 2003 but before Defendants decided the appeal in October 2003: 8-18, 117-120;

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E.

Redactions to undated notes prepared by outside counsel Covington & Burling or Marie Gangone, a paralegal at Honeywell: 103, 109, 113-116;

F.

Undated documents analyzing Plaintiffs claims and appeals, draft responses to Plaintiffs claims and appeals and summaries of Plan language: 73-75, 77-

Lawyers in the firm of Covington & Burling generated or received most of the documents Plaintiffs seek and provided advice on matters of Plan administration. (Declaration of Richard Shea, Exh. C to Defs Br. ( Shea Decl. ); ¶ 2; Declaration of John Vine, Exh. E to Defs Br. ( Vine Decl. ) ¶ 2.) Plaintiffs have not sought any documents on Defendants privilege log that were generated by litigation counsel or that post-dated the denial of Plaintiffs administrative appeal or the filing of this lawsuit.
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80, 82-87, 90-91.4 Under the fiduciary exception to the attorney client privilege, the Plans participants and beneficiaries, including Plaintiffs, are the true clients of the attorneys who provide legal advice regarding matters of plan administration, including plan administrative claims and appeals.5 As the Court recognized during the June 16, 2006 conference, an in camera inspection is appropriate. (See Doc. 175, at pp. 9-10.)

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In seeking to avoid application of the fiduciary exception to the attorney client privilege, Defendants principal argument is that as soon as they received Plaintiffs claims, they decided litigation was inevitable, (Declaration of Harry J.J. O Neill, Exh. B to Defs. Br. ( O Neill Decl. ) ¶ 15), and that therefore consultations with inside and outside counsel should be shielded from disclosure, even though the consultations relate to plan administration. However, in house and outside counsel admit that they were consulted to provide advice on matters of plan administration. (Shea Decl. ¶ 1,2; Vine Decl. ¶ 1,2;

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O Neill Decl. ¶ 4.) The assertion that all advice sought and rendered in the claims process was in anticipation of litigation is not reasonable or consistent with the facts or the law

Although the declarations in support of Defendants opposition to Plaintiffs motion to compel generically state that each of the documents listed in ¶ F above were prepared in anticipation of litigation, based on descriptions in Defendants supporting declarations with respect to those documents, there is only one document (Document 87) that specifically purports to be prepared, in part, with an eye toward litigation but also appears to relate to plan administration. (See Declaration of Frederick G. Sandstrom, Exh. H to Defs. Br. ¶ 11, noting document 87 is a memorandum analyzing the strengths and weaknesses of Plaintiffs claims and potential litigation defenses.)
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See, e.g., United States v. Mett, 178 F. 3d 1058 (9th Cir. 1999).
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regarding the attorney client privilege in ERISA matters. ERISA fund claimants are entitled to disclosure of advice informing the decision of the plan administrator regarding their claims for benefits. Shielding the documents upon which plan administrators rely from disclosure to participants before the plan fiduciaries have rendered a decision on appeal would eviscerate the protections under the fiduciary exception to the attorney client privilege and insulate plan fiduciaries from accountability to those they are charged to protect. Because

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Defendants claims that litigation was inevitable on the matters contained in Plaintiffs administrative claims do not withstand scrutiny, the documents requested by Plaintiffs should be produced. FACTUAL BACKGROUND Contrary to Defendants arguments, the facts show that prior to the decision on the administrative appeal, litigation regarding the underlying claims was never inevitable and that the parties interests did not diverge until Plaintiffs administrative appeal was decided.

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Defendants claims that the parties interests had diverged as soon as a claims letter was submitted ignores, inter alia: 1) Plaintiffs explicit and repeated requests to explore amicable resolution of all claims; 2) Defendants decision to grant one of the claims on appeal; 3) Plaintiffs determination following the appeal to drop several of the claims submitted in the administrative appeal process, and 4) the parties time and effort in exploring settlement. It is hard to fathom why any of the foregoing would have occurred if litigation had been inevitable.

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Before the filing of any claim for benefits, Plaintiffs requested copies of Plan
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documents by letter dated June 21, 2001. (See Exhibit 3 to O Neill Decl.)6 On July 26, 2002, Plaintiffs submitted a claim letter to the Plan Administrator. In an effort to resolve both statutory claims that Plaintiffs were not required to present to the Plan Administrator

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and Plan claims, Plaintiffs wrote: Although we are not required to bring the Retirees legal claims for violations of ERISA to your attention before filing suit, we do so in a good faith effort to resolve these matters amicably, without resort to litigation. Following your review, we request that a mutually convenient meeting be scheduled in an effort to reach an equitable resolution of all issues. (Exh. 9 to O Neill Decl., at p.13 (emphasis added).) Given Plaintiffs explicit request to explore an amicable resolution of all claims without resort to litigation Defendants contention that litigation was somehow inevitable upon the mere presentation of Plaintiffs

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claims is contrary to the facts. The facts demonstrate that Plaintiffs filed suit only after engaging in a lengthy administrative process and lengthy period of settlement exploration. So far were the parties from viewing litigation as inevitable that they twice agreed to toll the running of the statute of limitations for a total of one year three months, in order to allow

Defendants did not comply with ERISA s disclosure requirements. Plaintiffs repeatedly endeavored to get the Plan Administrator to comply with their disclosure obligations throughout the claims and appeals process. A dispute over documents does not make litigation on the substantive claims more likely. Any other conclusion would provide an incentive for plan administrators to withhold documents so as to invoke the threat of a penalty in order to insulate attorney/client communications regarding plan claims. In any event, it does not appear that any of the documents sought by Plaintiffs on this motion relate to Defendants failure to turn over documents; however, if they do and the Court determines after an in camera inspection that a portion of the documents were prepared in anticipation of litigation regarding the Plan Administrator s liability on Plaintiffs document disclosure claims, then the Court can order that such documents be redacted before being provided to Plaintiffs.
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ample time for the administrative appeal process and settlement exploration. (Declaration of Susan Martin dated June 12, 2006 ( Martin Decl. ), Doc. 167, ¶ 7.) This lawsuit was not brought until March 2004 over one year and nine months from the date Plaintiffs submitted

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their claims to the Plan Administrator and over two years and eight months after requesting documents . By letter dated January 24, 2003, Plaintiffs claims were denied. The January 24, 2003 letter invited Plaintiffs to file a written appeal to the Plan Administrator. (Declaration of Amy Promislo In Support of Defendants Motion to Dismiss Plaintiffs Complaint ( Promislo Decl. ), Doc. 16, Exhibit K.) In advising Plaintiffs of their right to appeal, the Plan Administrator also promised, that it would reexamine all facts to the appeal and make a final

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determination as to whether the denial of benefits is justified under the circumstances. (Id. at HW0000479.)7 Plaintiffs appealed the denied claims by letter dated July 1, 2003. (O Neill Decl. Exh. 15.) In responding to Plaintiffs appeal, Defendants disavowed that the outcome was predetermined asserting to the contrary in their letter dated October 29, 2003 that the appeal was determined after careful review. (Promislo Decl. Exhibit O, at HW0000515.) Also confirming that positions were not hardened prior to the October 2003 appeal decision is the fact that the appeal process substantially altered Defendants position on Plaintiffs claims.

Given that Defendants argued (unsuccessfully) on summary judgment that deference should have been accorded to the Plan Administrator s decision on appeal, (Doc.15 pp. 1415), it makes no sense for them to argue now that the appeal was nothing but a meaningless process because they had already predetermined the outcome.
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Defendants determined to grant one of Plaintiffs claims on appeal. (Promislo Decl. Exhibit O, at HW0000514-15, granting Plaintiffs claims that the failure to take into account investment management fees charged to participants in calculating SBA offsets violated the

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terms of the Plan.)8 That there was no hardening of the parties positions until final denial of the claims on appeal is also confirmed by Plaintiffs conduct. Following the administrative process, Plaintiffs determined not to include in the Complaint several claims they presented to the Plan Administrator. Plaintiffs asserted in the administrative claim process that the specific calculation of the Social Security offset applicable to a one time early retirement incentive violated ERISA. (Promislo Decl. Exh. J, at HW0000461.) This claim was never asserted

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in this lawsuit. Likewise, Plaintiffs asserted during the administrative process, but not in this lawsuit, that the interest projection rates were not reasonable. (Promislo Decl. Exh. I, at HW0000450.) The fact that Plaintiffs were persuaded not to pursue some of the claims that were denied in the administrative appeal process is concrete evidence that this litigation was far from inevitable and that there was no hardening of positions until the claims were decided on appeal. As Defendants point out, the parties also engaged in settlement discussions prior to

Further evidence of the fluidity of the positions throughout the claims process is shown by the fact that Defendants relied on a October 1985 Plan in the original claims denial and following submission of Plaintiffs appeal, produced for the first time a document Defendants claim constituted a February 1984 Plan. (Promislo Decl. Exh. O, at HW0000517 n.11.) If lines were drawn before the original decision was even made, there would have been no need for Defendants to reverse their position regarding which Plan document applied.
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the filing of the lawsuit in order to attempt to resolve the claims.9 (Defs. Br. p. 5.) Two successive tolling agreements suspending the running of the statute of limitations for one year and three months in order to permit adequate time to explore settlement were executed.

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(Martin Decl. ¶ 7.) If positions were hardened and litigation was inevitable then neither party would have entered into these agreements. None of the rationales Defendants advance as support for the proposition that litigation was a certainty are even relevant and certainly do not satisfy Defendants burden to establish privilege. Defendants witnesses refer to: substantial rumors that a Committee had been formed to challenge the SBA offset, ( O Neill Decl. ¶ 10); the fact that Plaintiffs counsel s document requests went far beyond the ordinary information requests the

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Company receives, (id. ¶ 12); the complexity of the asserted claims, (id. ¶ 13-14); the large number of claimants, (id. ¶ 15-16), and the fact that outside counsel was retained, (id. ¶ 17). Not one of these assertions rationally supports the claimed inevitability of litigation or provides a basis to override the fiduciary exception to the attorney client privilege.

As Defendants correctly note, (Defs. Br. p. 13), Plaintiffs have not sought items that appear to be related solely to settlement matters. Although Defendants seek to turn this into a tacit[] admi[ssion], the fact that Plaintiffs did not seek all documents to which they may have been entitled is an exercise of discretion on Plaintiffs part. Plaintiffs signed a confidentiality agreement regarding settlement discussions, and as such, believe certain documents concerning settlement discussions, are probably not relevant or admissible. See Fed. R. Evid. 408; Fed. R. Civ. P. 26(b)(1). However, Plaintiffs may seek discovery of certain of those documents, (namely items 6, 32, 62 and 89 on Defendants privilege logs) if they cannot reasonably obtain the information from other sources. Plaintiffs have advised Defendants of their intention to demand these documents if, after Defendants finally comply with their discovery obligations, Plaintiffs continue to believe they need those documents and that Defendants should be ordered to produce them under Fed. R. Civ. P. 26(b)(3).
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Plaintiffs know of no case regarding the attorney client privilege that refuses to recognize the fiduciary exception because of rumors, based on the number of documents the plaintiffs requested, the complexity of the asserted administrative claims or the number of claimants.

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The mere presence of a group of claimants represented by counsel or the submission of a claim for a large number of persons is irrelevant. Surely, the fiduciary exception to the attorney client privilege cannot hinge on whether a participant has a lawyer or whether a group of plan participants have retained counsel to present their administrative claims. Plaintiffs counsel s thoroughness in demanding documents and following up on requests for documents cannot reasonably be construed to mean that litigation on the substantive claims was inevitable merely because the request was atypical of those Defendants usually receive.

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ERISA requires disclosure of variety of documents that not all participants may be aware they are entitled to request.. Defendants also appear to be arguing that they predetermined the outcome of Plaintiffs claims based on an evaluation of the number of claimants or their calculation of potential financial detriment to the company. While this is an admission sufficient to establish a serious conflict of interest in Defendants handling of the claims and appeal (which is an alternative basis for upholding this Court s de novo standard of review, see Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 969 (9th Cir. 2006) (en banc)), Defendants argument does not defeat the requirement for Defendants to produce the disputed documents. Similarly, Defendants suggestion that Defendants consultation with outside counsel is a touchstone for determining whether documents must be produced pursuant to the attorney client privilege is nonsensical. Every case that involves the fiduciary
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exception to the attorney client privilege involves the presence of attorneys. It should go without saying (although it appears to be the basis of Defendants claim) that the Plan s engagement of counsel is irrelevant to the fiduciary exception. If there were no counsel then

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there could be no assertion of the attorney client privilege. I. DOCUMENTS GENERATED IN THE ADMINISTRATIVE CLAIM AND APPEAL PROCESS MUST BE DISCLOSED The fiduciary exception to the attorney client privilege precludes the assertion of an attorney client privilege with respect to documents that were generated prior to and during the course of Plaintiffs administrative claims and appeal. 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. United States v. Mett, 178 F.3d 1058, 1063 (9th Cir. 1999) (citations omitted). This doctrine exists because [w]hen an attorney advises an ERISA trustee regarding the management of the fund, the ultimate clients of the attorney are as much the beneficiaries of the plan as the trustees. In re Grand Jury Proceedings, 162 F. 3d. 554, 55657 (9th Cir. 1998). See Koch v. Exide Corp., 1989 WL 49515 at *3 (E.D. Pa. 1989)

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(fiduciary exception is grounded in long held trust law principles holding that the exception applies because the attorney s client is not the fiduciary personally but rather, the trust s beneficiary. ); In re Unisys Corp. Retiree Medical Benefits ERISA Litig., 1994 U.S. Dist. LEXIS 1344 at *10 (E.D. Pa. 1994). [A] fiduciary owes the obligation to his beneficiaries to go about his duties without obscuring his reasons from the legitimate inquiries of the

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beneficiaries. Valente v. Pepsico, Inc., 68 FRD 361, 370 (D.Del. 1975). See WashingtonBaltimore Newspaper Guild Local 35 v. Washington Star Co., 543 F. Supp. 906 (D.D.C. 1982).

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In In re Grand Jury Proceedings, 162 F. 3d. at 557, the Ninth Circuit followed the reasoning of the court in Riggs Nat. Bank of Washington, D.C. v. Zimmer, 355 A.2d 709, 711(Del.Ch. 1976). Riggs held that a memorandum prepared by a trust s lawyers in anticipation of litigation in an action that did not implicate liability of the trustees personally was prepared for the benefit of the trust participants and had to be disclosed, finding: The trustees here cannot subordinate the fiduciary obligations owed to the beneficiaries to their own private interests under the guise of attorney-client privilege. Id. at 714. In following

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Riggs in an ERISA pension fund case, the Ninth Circuit summarized: Doe, as a trustee of an ERISA pension fund, is a fiduciary required to "discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries." 29 U.S.C. §§ 1104(a)(1). When an attorney advises an ERISA trustee regarding the management of the fund, the ultimate clients of the attorney are as much the beneficiaries of the plan as the trustees. Not surprisingly, federal courts that have considered the issue have uniformly applied Riggs in the ERISA context. See, e.g., In re Long Island Lighting Co., 129 F.3d 268, 271-72 (2d Cir. 1997) ("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"); Wildbur v. ARCO Chemical Co., 974 F.2d 631, 645 (5th Cir. 1992) ("an ERISA fiduciary cannot assert the attorney-client privilege against a plan beneficiary about legal advice dealing with plan administration"); Petz v. Ethan Allen, 113 F.R.D. 494, 497 (D. Conn. 1985)(ERISA fiduciary may not raise attorney-client privilege against beneficiary)...

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162 F. 3d. at 556-57. In Mett, the Ninth Circuit further clarified the scope of the attorney client privilege by holding that advice pertaining to a fiduciary s personal civil and criminal exposure need not be disclosed, as opposed to the documents that are required to be

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disclosed under In re Grand Jury Proceedings, which includes advice prepared for the benefit of the plan or the beneficiaries and advice regarding administration of the plan. Mett, 178 F.3d at 1064. The Ninth Circuit has never sanctioned the rule-swallowing limitations proposed by Defendants that would effectively shield all attorney client communications generated following submission of a claim from disclosure if the claim were sizeable, if the claimants had counsel or if the claimants proposed a non-adversarial resolution of the claims.10 Consistent with the Ninth Circuit, numerous courts have held that absent evidence of a hardening of positions, if the documents relate to plan administration, including claims or appeals, the documents must be disclosed. See Wildbur v. ARCO Chem. Co., 974 F.2d 631,

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645 (5th Cir. 1992) (discovery permitted of internal administrative process before litigation

Defendants argue for a fiduciary exception akin to a Don t ask, Don t tell policy whereby merely acknowledging that ERISA provides an adversarial remedy, (despite disavowing a desire to use it ), would remove all administrative claims from the protections afforded by the fiduciary exception. In fact, ERISA claims regulations require that every claim denial include a statement of the claimant s right to bring a civil action under 502(a) of the Act following an adverse benefit determination on review. 29 C.F.R. § 2560.5031(g)(1)(iv). Under Defendants arguments, once mere mention of litigation is made, even in a sentence saying the claimant is seeking to avoid it, the plan would be out from under any obligation to make disclosure to participants under the fiduciary exception. The fiduciary exception should be grounded on a more reasonable review of the objective circumstances which, in this case, do not support Defendants assertions of a hardening of positions before the decision on the administrative appeal.
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filed); Lewis v. UNUM Corp. Severance Plan, 203 FRD 615, 619-20 (D.Kansas 2001) (legal advice given to benefits committee about claim is within fiduciary exception); Geissal v. Moore Medical Corp., 192 FRD 620, 625 (E.D. Mo. 2000); Coffman v. Metropolitan Life

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Ins. Co., 204 FRD 296, 299 (S.D. W.Va. 2001). For the same reasons, no work product privilege applies to documents generated before the denial of Plaintiffs administrative appeal. In Geissal, 192 F.R.D. at 625, the court rejected the identical argument advanced by Defendants here, ruling that the documents reflecting pre-decisional legal advice were not work product: 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. Id; See Lewis, 203 FRD at 620, 623; Coffman, 204 FRD at 299 (it appears attorney was consulted in the context of the claims review process itself ).11 Defendants do not appear to be arguing that the documents do not relate to plan administration. Rather, they argue that because interests had already diverged, they could refuse to turn over documents that clearly relate to plan administration. Defendants

Anderson v. Suburban Teamsters of N. Ill. Pension Fund Board of Trustees, 2006 WL 17434685 (D.Ariz. 2006) is inapposite because the trustees had evidenced a disagreement even before they responded to the pro se plaintiff s claim. No such showing has been made here. In contrast, in Loewy v. Motorola, the magistrate followed Geissel and Lewis, affirming the obligation to turn over pre decisional legal advice regarding whether to deny a claim for benefits and finding that a letter generated during the administrative process was part of the claims process and should be disclosed. (Hayne Decl. Exh. 6, at pp. 7-8, 9.)
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determination that litigation was inevitable before they ever considered Plaintiffs claims and appeal, (see O Neill Decl. ¶ 15), would violate their obligations as fiduciaries and is directly contrary to ERISA s mandate to provide a full and fair review. 29 U.S.C. § 1133.

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Defendants could not possibly know whether plan interests diverged with those of the plaintiffs until they analyzed and made a determination on the claim and appeal. As fiduciaries, Defendants had a statutory obligation to act: solely in the interest of the participants and beneficiaries and-(A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; ...(D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III of this chapter. 29 U.S.C. § 1104. Plaintiffs represented a substantial number of Plan participants who had a right to evenhanded treatment by the Plan. Accordingly, documents generated prior to the decision on the administrative appeal should be disclosed. See Wachtel v. Guardian Life Ins. Co., 2006 WL 1320031, at *9 (D.N.J. 2006) ( Thus where the fiduciary and beneficiary's interests are aligned, even in part, the fiduciary exception applies, but where their interests

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are not aligned, the fiduciary is entitled to protection of its communications under the liability exception. ). Defendants had no authority to predetermine a claim they had never considered. While a fiduciary has a duty to protect the plan's assets against spurious claims, it also has a duty to see that those entitled to benefits receive them. It must consider the interests of

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deserving beneficiaries as it would its own. Gaither v. Aetna Life Ins. Co.,394 F.3d 792, 807 -08 (10th Cir. 2004). Defendants have a duty to act in the exclusive interest of the beneficiaries by honest dealings with all of them. Restatement (Second) of Trusts § 183 (duty

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to deal impartially with two or more beneficiaries of a trust); Morse v. Stanley,732 F.2d 1139, 1145 (2d Cir. 1984) (the trustee must deal evenhandly among [all beneficiaries]... ). It does not advance the legitimate interests of any beneficiaries to deny benefits that are owed to other beneficiaries under the terms of the Plan and ERISA. Bogert & Bogert, Law of Trusts and Trustees § 543, at 218-219 (duty of loyalty requires trustee to deal fairly and honestly with beneficiaries); 2A Scott & Fratcher, Law of Trusts § 170, pp. 311-312 (same)). Defendants do not meet their burden to show that any of the requested documents fail to relate to plan administration. See Everett v. USAir Group, Inc., 165 F.R.D. 1, 4 -5 (D.D.C.1995) (Court granted motion to compel because plan administrator did not demonstrate that there are attorney-client communications ... that relate solely to its

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nonfiduciary activities or to the formation, amendment or termination of the pension plan. Nor has it demonstrated that any such documents that may exist are wholly unrelated to plan administration and have not been used in connection with defendants' role as plan administrator. With respect to work product, the burden is on Defendants to demonstrate

that the information and documents were in fact prepared in anticipation of such litigation and not for the benefit of the plan beneficiaries. ) (emphasis added). The fact that Defendants have designated the same documents, (see, e.g., Shea Decl. ¶ 20), as both

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providing advice to the Plan on Plaintiffs claims and as purportedly made in anticipation of litigation, makes them discoverable.12 The outside attorneys at Covington & Burling admit that they were retained by long term client Honeywell to provide advice and assistance to the Plan Administrator in drafting responses to Retirees administrative claims. (Shea Decl. ¶ 2.) They also assert that part of the reason they were retained was to to provide advice to Honeywell regarding its potential liability to former Garrett Employees who participated in the Garrett Retirement Plan or its successors and held a Secured Benefit Account, (Shea Decl. ¶ 1), and that Honeywell paid the legal bills. (Id. ¶ 4.) The disclosure and intermingling of communications between persons acting on behalf of the Plan with loyalties owed to Plan participants and those acting on behalf of the company constitutes waives any privilege. ERISA s claims regulations, which provide for broad disclosure, also provide support

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for giving serious weight to the fiduciary exception doctrine. The regulations require full disclosure of all documents submitted, considered, or generated in the course of making the

For the same reasons, documents prepared by or sent to the Plan s regular actuaries, Hewitt Associates, should be produced for an in camera inspection. Hewitt actuary Kurt Denlinger states that Hewitt provides actuarial services for Honeywell [s] ...domestic pension plans. Mr. Denlinger then claims in his declaration that Hewitt was also hired in 2002 to assist Honeywell to evaluate its potential liability...., (Declaration of Kurt Denlinger, Exh. D to Defs. Brief ¶ 2.) It is not clear what hat Mr. Denlinger and Hewitt actuaries were using and the use of the Plan s regular actuary strongly suggests that the documents were prepared in the course of plan administration including Plaintiffs claims and appeal. Therefore, documents sent to or from Mr. Denlinger, which include documents numbered 13, 38, 39, 46, 57, 62 and 119, should be submitted to the Court for an in camera inspection.
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benefit determination... See 29 C.F.R. § 2560.503-1 (m)(8). The Court s in camera review will assist the inquiry. If the documents relate to plan administration including Plaintiffs claims and appeal, they should be discoverable.

4 5 6 7 8 II. DOCUMENTS NUMBERED 68, 70, 71 AND 72 RELATE TO MATTERS OF PLAN ADMINISTRATION AND SHOULD BE DISCLOSED

Defendants also refused to produce additional documents unrelated to any litigation, including documents 68, 70-72. (Hayne Decl. Exh. 3, at pp. 13-14). These documents

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should be disclosed. See Mett, 178 F.3d at 1064. Documents in which counsel has reviewed and commented on . . . the plan s compliance with its statutory obligations are not privileged because they assist the fiduciaries with fulfilling their obligations. Fischel v. Equitable Life Assurance, 191 FRD 606 (N.D. Cal. 2000). In Fischel, the District Court granted Plaintiffs motion to compel the production of internal documents in which inside counsel reviewed and commented on the structure and design of the plan, including the plan s compliance with its statutory obligations under the Internal Revenue Code. Id. at 609-

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610. Documents 71 and 72 should be submitted for an in camera inspection to see if the contents of the memoranda, and the wide scope of the distribution of those documents,

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including to Plan actuaries, affected Plan administration or were purely confined to settlor functions divorced from Plan administration. Documents 68 and 70, which were drafted on July 18, 1989 and February 10, 1984 after Defendants have contended the Plan amendments in this case were purportedly adopted,
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should be disclosed. (Defendants Statement of Facts in Opposition to Plaintiffs Motion for Summary Judgment, Doc. 32, at p. 11 ¶ 23.) Documents 68 and 70 appear to be documents that comment on plan design and implementation, matters directly relevant to plan

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administration. Defendants argue that these documents are privileged because they are documents regarding plan design and potential plan amendments (p. 16). However, Defendants offer no support for this contention by declaration. Documents prepared after a plan amendment certainly cannot be protected by a settlor function or plan design limitation on the fiduciary exception. Once an amendment has been adopted, fiduciary duties to implement the amendment and administer its terms attach. The responsibility of deciding whether plan amendments have been duly adopted and are consistent with ERISA s mandates involves the exercise of fiduciary responsibilities. Curtiss-Wright v. Schoonejongen, 514 U.S. 73, 1104(a)(1)(D)). 82 (1995) (citing 29 U.S.C. §

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III.

DEFENDANTS ALSO FAIL TO MEET THEIR BURDEN TO ESTABLISH THAT DOCUMENTS DISTRIBUTED TO OR FROM NON-LAWYERS ARE PRIVILEGED Defendants, have also failed to meet their burden of establishing privilege for

documents 13, 57, 70, 90, 91 and 119. It is Defendants burden to establish that documents were kept confidential and meet the requirements of work product protection. Work product protection does not apply to communications between non-lawyers, unless at least one of them is working under the direct supervision of an attorney in anticipation of litigation. Hoptowit

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v. Ray, 682 F.2d 1237, 1262 (9th Cir. 1982) (district court did not abuse discretion in deciding report was not attorney client privileged or work product where report was written by nonlawyers, was completed in July 1979 prior to the initiation of this lawsuit, was not done with

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the apparent purpose of preparing for litigation, and was eventually made public. ). See United States v. Ackert, 169 F.3d 136, 139-40 (2d Cir. 1999) (finding insufficient basis for concluding attorney client privilege applied to communications with accountant). See also Edna S. Epstein, The Attorney-Client Privilege and the Work Product Doctrine 134-43, 14751 (4th ed. 2000). Here, Defendants fail to show any reason Kurt Denlinger was sent documents 13, (discussed in O Neill Decl. ¶ 25); 57, (O Neill Decl. ¶ 23; Vine Decl. ¶ 7) and 119, (Gangone Decl. ¶ 14). Accordingly these documents should be disclosed because Defendants have not met their burden to establish the documents are privileged or work product. Defendants have also failed to establish that document 70 and 90-91 meet the requirements of the attorney client privilege.13 For a corporation to establish that the attorneyclient privilege applies, the corporation must show that the communications at issue are between corporate employees and counsel, made at the direction of corporate superiors in order to secure legal advice. United States v. Chen, 99 F.3d 1495, 1502 (9th Cir. 1996)

In good faith discussions with Defendants, Plaintiffs had challenged Defendants failure to disclose more documents on Defendants privilege log. Defendants never provided enough information to establish the privilege to Plaintiffs until they filed their brief; accordingly, Plaintiffs have withdrawn some of their objections to Defendants failure to disclose certain documents on the grounds that Defendants have not established the privilege.
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(citing Upjohn Co. v. United States, 449 U.S. 383, 390-94 (1981)). Here, no such showing has been made with respect to document 70, which was distributed to several individuals, and documents 90 and 91. Although Richard Shea maintains in his declaration that the document

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was kept confidential at Covington & Burling, no such demonstration is made by Defendants with respect to documents 90 and 91. CONCLUSION For the foregoing reasons, Plaintiffs respectfully request that Defendants be ordered to produce documents for an in camera inspection and that Defendants thereafter be ordered to produce such documents that are subject to the fiduciary exception to the attorney client privilege: 8-18; 21, 24, 30-33; 37-64; 68; 70-75; 77-80, 82-87; 90-91, 103, 109, 113-116; 117-21. Respectfully submitted this 18th day of September, 2006. MARTIN & BONNETT, P.L.L.C. By: s/Susan Martin Susan Martin Daniel L. Bonnett Jennifer L. Kroll 3300 North Central Avenue, Suite 1720 Phoenix, AZ 85012-2517 (602) 240-6900 Attorneys for Plaintiffs

CERTIFICATE OF SERVICE

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I hereby certify that on September 18, 2006, I electronically transmitted the attached document to the Clerk s Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the Following CM/ECF registrants: David B. Rosenbaum Dawn L. Dauphine Osborn Maledon, P.A. 2929 North Central Ave., Suite 2100 Phoenix, AZ 85012-2794 and : Michael Banks William Delaney John G. Ferreira. Azeez Hayne. Morgan Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103 Amy Covert Proskauer Rose LLP One Newark Center, 18th Floor Newark , NJ 07102-5211

Attorneys for the Defendants

s.J. Kroll

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