Free Response - District Court of Arizona - Arizona

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David B. Rosenbaum, Atty. No. 009819 Dawn L. Dauphine, Atty. No. 010833 OSBORN MALEDON, P.A. 2929 North Central Avenue, Suite 2100 Phoenix, AZ 85012-2794 Telephone: (602) 640-9000 [email protected] [email protected] Michael L. Banks, Pro Hac Vice William J. Delany, Pro Hac Vice Azeez Hayne, Pro Hac Vice MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 Telephone: (215) 963-5000 [email protected] [email protected] [email protected] Attorneys for Defendants IN THE UNITED STATES DISTRICT COURT 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. Honeywell Retirement Earnings Plan, Honeywell Secured Benefit Plan, Plan Administrator of Honeywell Retirement Earnings Plan, and Plan Administrator of Honeywell Secured Benefit Plan, Defendants. No. CV04-0424 PHX ROS

DEFENDANTS' OPPOSITION TO PLAINTIFFS' MOTION TO COMPEL PRODUCTION OF PRIVILEGED DOCUMENTS

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I.

INTRODUCTION In 1983, the Garrett Retirement Plan was merged into the Signal Retirement Plan.

In the years following the merger, the Company received a large volume of complaints regarding the SBA offset. Indeed, in 1995, several hundred participants argued vociferously that the SBA offset was a "takeaway" of their benefits. At the same time, the Company learned that "a group" was forming to sue over the SBA offset. Later, in June 2001, Susan Martin, Esq. began submitting broad requests for information seeking documents concerning the merger of the Garrett and Signal Retirement Plans. Then, in October 2001, Honeywell discovered that a group of retirees had hired an attorney and began soliciting donations to challenge the SBA and Social Security offsets. These facts led Honeywell to believe that litigation with retirees over the offsets was likely and imminent. In 2002, the Company concluded that such litigation was inevitable when Ms. Martin submitted an administrative claim on behalf of "several hundred" retirees and "others similarly situated" ("Retirees") alleging "numerous ERISA and plan violations" and offering to "resolve these matters amicably without resort to litigation." Shortly after receiving this letter, Honeywell retained outside counsel to provide confidential legal advice to the Company regarding its potential liability from, and to prepare for, litigation with Ms. Martin's clients. Incredibly, Plaintiffs now seek production of virtually all of these communications. Despite the conspicuous involvement of at least nine lawyers in the communications, and the obvious threat of litigation which drove the creation of the documents, Plaintiffs argue that many of these documents are not protected by the attorney-client privilege and that none constitute work product. The evidence, however, establishes that the challenged documents are all privileged. Plaintiffs also argue that any "documents generated prior to denial of Plaintiffs' administrative appeal" fall within the "fiduciary exception" to the attorney-client privilege and are discoverable. (Doc. # 171 at 3.) The so called "fiduciary exception" is a narrow

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exception to the attorney client privilege that is based on the legal fiction that, in seeking advice regarding plan administration, an ERISA fiduciary is really seeking legal advice for the participants' benefit rather than his or her own. In this case, however, this legal fiction is untenable and the fiduciary exception does not apply. First, Honeywell was not acting in a fiduciary capacity, and therefore, advice to Honeywell does not fall within the fiduciary exception at all. Even if it did, moreover, that advice was clearly not rendered for participants' benefit. On the contrary, Honeywell requested advice precisely to assess its exposure from, and to prepare for, potential litigation with Retirees. Second, the legal advice provided to the Plan Administrator was requested at a time when Retirees' interests had clearly diverged from the Plan Administrator's interests. In fact, Retirees' administrative claim letter alleged violations that can only be brought against a plan administrator in its personal capacity. Thus, the Plan Administrator clearly did not request legal advice for Retirees' benefit, but rather for his own personal protection. Under these circumstances, the fiduciary exception does not apply to the challenged communications. Defendants, therefore, respectfully request that the Court deny Plaintiffs' motion to compel.
II.

FACTUAL BACKGROUND
A.

Plaintiffs' Challenges To Defendants' Privilege Logs

In discovery, Plaintiffs requested production of "all documents and communications . . . to or from any attorneys and consultants" regarding the challenged plan amendments and/or Plaintiffs' administrative claims. (Declaration of Azeez Hayne, Esq., Exs. 1 and 2 (attached as Exhibit A hereto).) In response, Defendants produced to Plaintiffs logs of documents withheld as privileged.1 (Hayne Decl., Exs. 3 and 4.) Plaintiffs contend that documents 13, 30-32, 38, 39, 46, 49, 50, 57, 58, 59, 62, 63, 64, 70, 71, and 90-91 are not privileged because Defendants allegedly failed to establish certain elements of the privilege. As discussed in section III(A) below, Plaintiffs are mistaken.
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Many of the logged documents are not strictly responsive to Plaintiffs' request, but rather were logged by Defendants out of an abundance of caution.
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Plaintiffs further contend that documents 8-18, 21, 24, 30-33, 37-64, 68, 70, 73-75, 77-80, 82-87, 90-91, 103, 109, 113-121, and 123 fall within the fiduciary exception to the attorney-client privilege and are not work product. (Hayne Decl., Ex. 5.) With the exception of documents 64, 68, and 70, they also argue that the claims regulations require their disclosure. Id. Sections III(A) and (B) below demonstrate that Plaintiffs are wrong. There are no other disputes at issue in this motion. Defendants submit that the Court can resolve these disputes based on the briefing without the need for an in camera inspection of the documents. Defendants, therefore, will await further direction from the Court before submitting some or all of the documents for in camera review.
B.

The Documents At Issue Reflect Confidential Attorney-Client Communications and Work Product Created In Anticipation Of Threatened Litigation Over the SBA Offset.

Virtually all of the documents Plaintiffs challenge were created because litigation with retirees regarding the SBA offset was imminent. Even before Susan Martin, Esq. submitted an administrative claim on behalf of "several hundred" retirees raising numerous alleged ERISA violations, Honeywell anticipated that litigation with retirees over the SBA offset was likely. Shortly after the Garrett Retirement Plan merged into the Signal Retirement Plan, the Company began to receive complaints and claims regarding the new plan's changes to the SBA offset. (See, e.g., Doc. # 193, Ex. A (challenging that the new plan produced an SBA offset more than double the size of the old plan); see also id., Exs. B, C; Doc. # 189, Ex. 14; Doc. # 190, Ex. B.) In the mid-1990s, when the 12.3% interest participants earned in the SBA increased the size of participants' SBA balances and hence their offsets, a large number of participants vociferously challenged that the SBA offset constituted a "takeaway" of their benefits. (Doc. # 188 at ¶¶ 10-17.) In December 1995, the Company learned that "a group" was forming to sue "over the SBA." (Id., Ex. 22; see also Doc. # 192, Ex. A.) Periodically, the Company also learned that numerous participants had complained to governmental agencies regarding the SBA offsets. (See Doc. # 147, Ex. S; Doc. # 172; Doc. # 193, Ex. C; Doc. # 190, Ex. A.)
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Then, in 2001, Susan Martin, Esq. began submitting broad requests for information regarding the merger of the Garrett and Signal Retirement Plans and the SBA and Social Security offsets. (Declaration of Harry O'Neill, Esq. ¶¶ 11-12 (attached as Exhibit B hereto).) Thus, when the Company discovered in October 2001 that a group of retirees had hired an attorney to challenge the SBA and Social Security offsets and was collecting donations to fund their challenge, Honeywell believed that litigation with retirees concerning the offsets was likely. (O'Neill Decl. ¶ 10; Hayne Decl., Ex. 3 at # 64.) The Company's belief was confirmed when Ms. Martin submitted a 14 page administrative claim on behalf of "several hundred former Garrett Corporation salaried employees and their surviving spouses," and "others similarly situated," ("Retirees") alleging numerous complex "legal claims for violations of ERISA" that she contended need not be administratively exhausted before Retirees filed suit. (O'Neill Decl. ¶¶ 13-15.) Ms. Martin's claim letter also alleged legal claims against the Plan Administrator in his personal capacity. (O'Neill Decl. ¶ 14; Id., Ex. 9 at 5, 12-13.) As a result, Honeywell retained the law firm of Covington & Burling to provide legal advice to the Company regarding its potential liability in any ensuing litigation with Retirees, and to assist it in preparing for such litigation. (O'Neill Decl. ¶¶ 17-21; Declaration of Richard Shea, Esq. ¶ 1 (attached as Exhibit C hereto).) In light of the potential for litigation not only with Ms. Martin's "several hundred" clients, but also with all of the participants in the former Garrett Retirement Plan, the Company was advised by a team of at least six Covington attorneys. (O'Neill Decl. ¶¶ 18-19; Shea Decl. ¶ 3.) The Company also sought advice from three of its in house counsel, including the Deputy General Counsel of the Company.2 (O'Neill Decl. ¶¶ 18-19.) In addition, Honeywell relied on Hewitt Associates, a benefit consultant, to assist its attorneys in providing legal Honeywell's in house and outside counsel also provided advice to the Plan Administrator regarding its response to Ms. Martin's legal claims in light of the virtual certainty that the Plan Administrator would find itself in litigation with Ms. Martin's clients and perhaps others. (Id.)
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advice to the Company, and to assist Honeywell in preparation for litigation with Retirees. (O'Neill Decl. ¶ 21; Shea Decl. ¶ 8; Declaration of Kurt Denlinger ¶ 1 (attached as Exhibit D hereto).) While the administrative claims were pending, Ms. Martin continuously supplemented the number of individuals on behalf of whom the claims were brought. (O'Neill Decl. ¶ 16.) By the time Ms. Martin submitted the administrative appeal, the number of people she represented had grown from 335 at the initial claim stage to 615 individuals. (Id.) To avoid the practical certainty of litigation with Ms. Martin's growing list of clients, Honeywell engaged in settlement negotiations with Ms. Martin several times. (O'Neill Decl. ¶ 20.) In each case, Honeywell sought legal advice from its counsel regarding the settlement negotiations. (Id.) While discussing settlement, the parties entered into a tolling agreement "to ensure that there is ample time to engage in settlement discussions regarding the Former Garrett Employees' claims before suit is filed." (Doc. # 167 at Ex. A (emphasis added).) The agreement further acknowledged that "Honeywell has been advised that Former Garrett Employees may file suit in order to assert claims with respect to their pension benefits." (Id.) The settlement negotiations were ultimately unsuccessful, and as Honeywell had predicted, Plaintiffs filed suit on behalf of a putative class of all former participants in the Garrett plans raising the same claims Ms. Martin had submitted on behalf of "several hundred" retirees and "others similarly situated."
III.

ARGUMENT
A.

All of the Documents Plaintiffs Challenge Are Protected From Discovery By The Attorney-Client Privilege And/Or The Work Product Doctrine.

Plaintiffs requested the production of all communications to or from Honeywell's outside counsel or consultants regarding Plaintiffs' administrative claims or the challenged plan amendments. Despite this request for obviously privileged communications, Plaintiffs now assert that documents 13, 30-32, 38, 39, 46, 49, 50, 57, 58, 59, 62, 63, 64, 70, 71, and 90-91 are not protected by the attorney-client privilege.
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(Hayne Decl., Ex. 5.) In addition, Plaintiffs contend that documents 8-18, 21, 24, 30-33, 37-64, 68, 70, 73-75, 77-80, 82-87, 90-91, 103, 109, 113-116, 117-121, and 123 are not work product. (Id.) Plaintiffs are mistaken; all of these documents are protected by the attorney-client privilege and/or the work product doctrine.3
1.

The Attorney-Client Privilege

The Ninth Circuit has set forth the "essential elements" of the attorney-client privilege as follows: (1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence, (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or the legal adviser, (8) unless the protection be waived. In re Grand Jury Investigation, 974 F.2d 1068, 1071 n. 2 (9th Cir. 1992). The Ninth Circuit further explained that: it is important to recognize that the attorney-client privilege is a two-way street: "The attorney-client privilege protects confidential disclosures made by a client to an attorney in order to obtain legal advice, . . . as well as an attorney's advice in response to such disclosures." U.S. v. Bauer, 132 F.3d 504, 507 (9th Cir. 1997) (emphasis in original, citations omitted). Moreover, communications to or from an agent of the client or his attorneys are also privileged "so long as the communications were intended to be confidential and made in rendering legal advice." Segerstrom v. U.S., No. C 00-0833 SI, 2001 WL 283805 (N.D. Cal. Feb. 6, 2001) (finding that documents shared with and prepared by consultants to assist attorneys to provide legal advice were privileged); see also, e.g., U.S. v. Judson, 322 F.2d 460, 462 (9th Cir. 1963) (finding that documents prepared by accountant at
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Note that Plaintiffs' motion to compel is moot with respect to Documents 49 and 116. Defendants produced Document 49 and produced Document 116 in an unredacted format to Plaintiffs without waiver of any privilege with respect to any other document.
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attorney's request to facilitate legal advice to the client were privileged). The proponent of the privilege may prove the elements of the privilege by any of several means, including through a privilege log, declarations, or a combination of the two. See In re Grand Jury Investigation, 974 F.2d at 1071 (finding privilege log and associated declarations sufficient to establish the attorney-client privilege). Documents 13, 30-32, 38, 39, 46, 50, 57, 58, 59, 62, 63, 64, 70, 71, 90 and 91, therefore, are protected by the attorney-client privilege. (See Shea Decl. ¶¶ 10-11, 27; O'Neill Decl. ¶¶ 25-27; Denlinger Decl. ¶¶ 3-4; Declaration of John Vine, Esq. ¶¶ 7-9 (attached as Exhibit E hereto); Declaration of Marie Gangone ¶¶ 9, 11 (attached as Exhibit F hereto); Declaration of David E. Gordon, Esq. ¶ 5 (attached as Exhibit G hereto); Hayne Decl., Ex. 3 at #s 13, 30-32, 38, 39, 46, 49, 50, 57, 58, 59, 62, 63, 64, 70, 71, 90 and 91.)
2.

The Work Product Doctrine.

The work product doctrine protects from discovery "documents and tangible things prepared by a party or his representative in anticipation of litigation." Fed. R. Civ. P. 23(b)(3); In re Grand Jury Subpoena (Mark Torf/Torf Envtl. Mgmt.), 357 F.3d 900, 906-7 (9th Cir. 2004). A document is considered to have been prepared "in anticipation of litigation" if it was "prepared or obtained because of the prospect of litigation." Torf Envtl. Mgmt., 357 F.3d at 907. The work product doctrine extends not only to documents prepared by a party or its representative, but also to documents prepared by consultants hired by the party's attorneys. Id. Documents 8-18, 21, 24, 30-33, 37-48, 50-64, 68, 70, 73-75, 77-80, 82-87, 90-91, 103, 109, 113-115, 117-121, and 123, therefore, are protected by the work product doctrine. (See Shea Decl. ¶¶ 9-17, 19-27; Declaration of Frederick G. Sandstrom, Esq. ¶¶ 5-15 (attached as Exhibit H hereto); Gangone Decl. ¶¶ 5-14; O'Neill Decl. ¶¶ 24-27; Vine Decl. ¶¶ 4-9; Denlinger Decl. ¶¶ 3-4; Declaration of Jeffrey G. Huvelle, Esq. ¶¶ 4-5 (attached as Exhibit I hereto); Declaration of Eric R. Sonnenschein, Esq. ¶ 3 (attached as Exhibit J hereto); Hayne Decl., Ex. 3 at #s 8-18, 21, 24, 30-33, 37-64, 68, 70, 73-75, 7780, 82-87, 90-91, 103, 109, 113-115, 117-121, and 123.)
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B.

The Challenged Communications Do Not Fall Within The Fiduciary Exception To The Attorney Client Privilege.

Plaintiffs argue that "documents generated prior to denial of Plaintiffs' administrative appeal" and "documents Defendants claim contain advice to Honeywell as Plan sponsor, but not as Plan Administrator" are discoverable because they fall within the fiduciary exception to the attorney-client privilege. (Doc. # 171.) Specifically, Plaintiffs contend that documents 8-18, 21, 24, 30-33, 37-64, 68, 70, 73-75, 77-80, 82-87, 90-91, 103, 109, 113-115, 117-121, and 123 are within the fiduciary exception and are not work product.4 (Hayne Decl., Ex. 5.) As discussed in more detail below, these documents do not fall within the "fiduciary exception" to the attorney-client privilege and this Court should reject Plaintiffs' motion to compel.
1.

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4

The "Fiduciary Exception" To The Attorney-Client Privilege Is A Narrow Doctrine And Plaintiffs Bear The Burden Of Establishing That It Applies To The Challenged Communications.

Confidential communications with one's attorneys seeking legal advice are generally held inviolate with few exceptions. This privilege is "essential to the just and orderly operation of our legal system." Bauer, 132 F.3d at 510. In the Ninth Circuit, therefore, the attorney-client privilege is "jealously guarded." Fischel v. Equitable Life Assurance, 191 F.R.D. 606, 607 (N.D. Cal. 2000). Equally critical to our system of justice is the work product privilege, which allows a party to prepare for potential litigation without the fear that an adversary will be able to "free ride" on his attorneys' mental impressions and legal theories. Torf Envtl. Mgmt., 357 F.3d at 907 ("At its core, Plaintiffs also argue that the claims regulations defining the documents that are "relevant" to an administrative claim require the disclosure of documents 8-18, 21, 24, 30-33, 37-64, 73-75, 77-80, 82-87, 90-91, 103, 109, 113-115, 117-121, and 123. (Hayne Decl., Ex. 5; Doc. # 171 at 3 (citing 29 C.F.R. § 2560.503-1(m)(8).) These regulations are irrelevant to Plaintiffs' attempt to pierce the attorney-client privilege. Nothing in the regulations suggests that they are intended to render privileged documents discoverable. Similarly, Plaintiffs have not cited any case, nor are Defendants aware of any case, in which a court considered these regulations relevant to the fiduciary exception, much less ruled that they trumped the attorney-client privilege.
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the work-product doctrine shelters the mental processes of the attorney, providing a privileged area in which he can analyze and prepare his client's case."). Thus, although the Ninth Circuit has recognized the "fiduciary exception" to the attorney-client privilege, it has rejected an expansive interpretation of the exception, and cautioned that "hard cases should be resolved in favor of the privilege, not in favor of disclosure." U.S. v. Mett, 178 F.3d 1058, 1065 (9th Cir. 1999); Fischel, 191 F.R.D. at 608 (noting that the Ninth Circuit "rejected an expansive construction of the fiduciary exception"). Furthermore, it is the party asserting the fiduciary exception to the privilege who bears the burden of proving that it applies to the communications or documents at issue. Mett, 178 F.3d at 1064 (finding that the government bore the burden of establishing the fiduciary exception); Fischel, 191 F.R.D. at 607 ("the party seeking to pierce [the privilege] bears the burden of showing an exception exists"); see also Bauer, 132 F.3d at 509 (noting that the government bore the burden of establishing the crime-fraud exception). The fiduciary exception does not apply to legal advice provided to a fiduciary when the interests of the fiduciary and the beneficiaries have diverged to the point that it is not reasonable to assume that the fiduciary is seeking legal advice for the participants' benefit. Mett, 178 F.3d at 1064, Fischel, 191 F.R.D. at 608. Thus, "where a plan fiduciary retains counsel in order to defend [itself] against the plan beneficiaries . . . the attorney-client privilege remains intact." Id. at 1064; see also Fischel, 191 F.R.D. at 6089 (interpreting Mett as adopting "a test that focuses on the intended recipient of the advice and the purpose for which it is sought") In this case, Plaintiffs cannot meet their burden of proving that the fiduciary exception applies to the documents they seek.
2.

The Documents Created During The Pendancy Of Plaintiffs' Administrative Claims Do Not Fall Within The Fiduciary Exception Because They Were Not Created For Plaintiffs' Benefit.

Plaintiffs claim that "documents generated prior to denial of Plaintiffs' administrative appeal" fall within the fiduciary exception and are discoverable. (Doc. # 171.) Plaintiffs apparently contend that all such communications involved a plan
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fiduciary and relate to plan administration.5 Plaintiffs, however, cannot meet their burden of establishing that these documents fall within the exception. Even assuming a fiduciary was involved in each communication, the exception would not apply because the evidence demonstrates that Honeywell retained outside counsel specifically to prepare for potential class action litigation with Retirees. The "fiduciary exception" to the attorney-client privilege is a narrow doctrine that prevents plan fiduciaries from asserting the privilege against plan beneficiaries regarding certain advice on matters of plan administration. Mett, 178 F.3d at 1062-63; Fischel, 191 F.R.D. at 608. Deciding whether an act is considered "plan administration" ­ i.e. a fiduciary function ­ is not always clear. Indeed, this question is often the ultimate issue in a case. In addition, this standard "fail[s] satisfactorily to address the situation in which the trustee sought advice regarding its own liability . . . ." Fischel, 191 F.R.D. at 608. The Ninth Circuit in Mett, therefore, looked to the underlying rationale supporting the fiduciary exception to define its boundaries. See Mett, 178 F.3d at 1063-64. The Ninth Circuit: focused on what it termed the `justifying rationale' for the exception ­ that is, the legal fiction that the trustee in seeking advice is simply a proxy for the beneficiaries. Fischel, 191 F.R.D. at 609. Applying this test, the Ninth Circuit ruled that: [w]hen an ERISA trustee seeks legal advice for his own protection, the legal fiction of "trustee as representative of the beneficiaries" is dispelled, notwithstanding the fact that the legal advice may relate to the trustee's administration of the trust.
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The fiduciary exception, by its terms, does not apply to communications that do not involve a plan fiduciary. See Mett, 178 F.3d at 1063-64; see also, e.g., In re Unisys Corp. Retiree Medical Benefits ERISA Litig., No. MDL 969, 1994 WL 6883 (E.D. Pa. Jan. 6, 1994) (fiduciary exception "only applies when the person receiving the information was acting in a fiduciary capacity pursuant to ERISA") (emphasis in original). In this case, Honeywell delegated its authority as Plan Administrator to the Senior Vice President, Human Resources and Communications. (O'Neill Decl. ¶ 6.)
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Id. at 1065. In other words, the legal fiction supporting the fiduciary exception disappears, and the fiduciary exception does not apply, when the interests of the fiduciary and the beneficiaries diverge sufficiently that it is no longer reasonable to assume that the fiduciary is seeking legal advice for the participants' benefit. Id. at 1064; see also Fischel, 191 F.R.D. at 608-9. Here, there can be no doubt that Honeywell sought legal advice from its in house and outside counsel to evaluate its potential liability stemming from litigation with Retirees, and to prepare for that threatened litigation, not for the benefit of plan beneficiaries. (See Section II(B) supra at 3-5.) The vast majority of the documents Plaintiffs seek to discover were created to assist Honeywell to understand its potential liability in litigation with Retirees and to prepare for that threatened litigation: · Many of the challenged documents reflect communications regarding information that the Company's in-house and outside counsel needed to render the requested advice and/or that the Company or its representatives needed to prepare for anticipated litigation. (See Gangone Decl. ¶¶ 5-11, 13-14; Vine Decl. ¶¶ 4, 6-9; O'Neill Decl. ¶ 26; Shea Decl. ¶ 9; Huvelle Decl. ¶ 5; Hayne Decl., Ex. 3 at #s 15, 21, 24, 40, 41, 42, 43, 44, 45, 46, 48, 50, 53, 54, 55, 56, 57, 58, 59, 60, 61, 63, 117-120.)6 · Other communications are legal memoranda providing advice or used to advise Honeywell concerning the strengths and weaknesses of the claims Retirees asserted and the claims they could have (but did not) assert, potential litigation defenses to those claims, etc. (See Sandstrom Decl. ¶¶ 8, 11, 14; Vine Decl. ¶¶ 8-9; Shea Decl. ¶ 13; Sonnenschein Decl. ¶ 3; Hayne Decl., Ex. 3 at #s 37, 52, 58, 59, 73, 77, 87.) · Likewise, some of the challenged documents are communications between the Company and its counsel regarding the strengths and weaknesses of Retirees' claims, potential liability from those claims, etc. (See O'Neill Decl. ¶¶ 24-25, 27; Vine Decl. ¶ 5; Hayne Decl., Ex. 3 at #s 11, 13, 47, 64.)
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Although documents 15, 21, 40-43, 50, 57, 61, and 117-120 are technically privileged (and are included here to prevent a waiver of the privilege), disputes over these communications are irrelevant. These communications were purely ministerial in nature to transmit requested information to Honeywell's attorneys, and Defendants have already produced to Plaintiffs the underlying documents attached to the privileged communications to the extent they were otherwise responsive.
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· Other challenged documents contain or reflect counsel's notes and mental impressions used to facilitate advice to Honeywell concerning the threatened litigation or to prepare for that litigation. (See Shea Decl. ¶¶ 12, 14-17, 26; Sandstrom Decl. ¶¶ 5-7, 9-12; Huvelle Decl. ¶ 4; Hayne Decl., Ex. 3 at #s 14, 17, 30, 33, 51, 66, 68, 74, 78, 79, 80, 83, 86, 87, 103, 113, 114, 115, 121, 123.) · Still other challenged communications concern the Company's efforts to quantify its potential liability in litigation with Retirees. (See Denlinger Decl. ¶¶ 3-4; Shea Decl. ¶ 10; Vine Decl. ¶ 5; Hayne Decl., Ex. 3 at #s 32, 47, 62.) · And, other communications concern Honeywell's efforts to settle Retirees' claims before litigation ensued. (See Shea Decl. ¶¶ 10-11; Sandstrom Decl. ¶ 7; Denlinger Decl. ¶ 4; Hayne Decl., Ex. 3 at #s 30, 31, 32, 33, 38, 39, 62.) In addition, outside counsel provided advice to the Plan Administrator regarding its responses to Retirees' administrative claims in preparation for the imminent litigation with Retirees. (See Shea Decl. ¶¶ 19-27; Sandstrom Decl. ¶¶ 13-15; Hayne Decl., Ex. 3 at #s 8, 9, 10, 12, 16, 18, 75, 77, 82, 84, 85, 86, 90, 91.) All of these documents were created because Honeywell and the Plan Administrator believed that litigation with Retirees was imminent, and at a time when Retirees' interests had significantly diverged from Honeywell's and the Plan Administrator's interests. (See Section II(B) supra at 3-5.) For example, the claim letter alleged breaches of ERISA fiduciary duties and of ERISA § 502(c) ­ claims that must be asserted against a plan administrator personally. (O'Neill Decl., Ex. 9 at 5, 12-13.)7 In addition, the parties (including the Plan Administrator) executed a tolling agreement to "ensure that there is ample time to engage in settlement discussions regarding the Former Garrett Employees' claims before suit is filed." (Doc. # 167, Ex. A (emphasis added).) The tolling agreement further recognized that "Honeywell has been advised that Former Garrett Employees may file suit in order to assert claims with respect to their pension Moreover, Ms. Martin argued that her clients were not required to bring such claims to the Plan Administrator's attention before filing suit ­ i.e. that they were statutory claims over which the Plan Administrator exercised no discretion. (O'Neill Decl., Ex. 9 at 2; O'Neill Decl., Ex. 15 at 15.)
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benefits." (Id.) Finally, nothing demonstrates that Retirees' interests had diverged from Honeywell's and the Plan Administrator's interests more clearly than the claim letter's offer to "resolve these matters amicably without resort to litigation," (O'Neill Decl., Ex. 9 at 2), and the parties' subsequent settlement negotiations. (O'Neill Decl. ¶ 20.) Simply put, parties who share identical interests do not need to resolve matters amicably to avoid litigation. Indeed, Plaintiffs tacitly admit as much, for they do not seek disclosure of advice to Honeywell concerning its efforts to settle Retirees' claims ­ even though these documents were "generated prior to denial of Plaintiffs' administrative appeal." (Doc. # 171 at 3.; compare Hayne Decl., Ex. 5 with Hayne Decl., Ex. 3 at #s 22, 25, 26, 28, 29, 34, 35, 36, 76, 81, 88, 89.) This striking admission illustrates precisely why Plaintiffs' argument must fail. There is nothing unique about advice regarding settlement negotiations that exempts it from the fiduciary exception. Rather, such advice falls outside of the fiduciary exception only because settlement discussions clearly evidence a divergence of interests between the parties. This divergence of interests, moreover, cannot logically remove advice regarding settlement negotiations from the fiduciary exception while leaving other contemporaneous advice within the exception. Instead, once the divergence of interests eliminates the legal fiction that a fiduciary is obtaining advice for the participants' benefit, the fiduciary exception can no longer apply to any advice because its justifying rationale no longer exists. Mett, 178 F.3d at 1065 (finding that fiduciary exception no longer applies when "the legal fiction of `trustee as representative of the beneficiaries' is dispelled"). Under these circumstances, Plaintiffs cannot assert that Honeywell or the Plan Administrator sought to obtain advice for the benefit of Retirees, who were demanding to be "made whole for all losses suffered as a result of [] numerous ERISA and plan violations . . . ." (O'Neill Decl., Ex. 9 at 2.) The challenged documents, therefore, remain privileged. Mett, 178 F.3d at 1064 ("where a plan fiduciary retains counsel in order to defend [itself] against the plan beneficiaries . . . the attorney-client privilege remains
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intact"); Fischel, 191 F.R.D. at 610 (finding legal advice regarding "drafts of response letters . . . to [beneficiaries'] inquiries, complaints, and claims" were privileged); Anderson v. Suburban Teamsters of N. Ill. Pension Fund Board of Trustees, No. CV051377 PHX-DGC, 2006 WL 1734685 at *2 (D. Ariz. June 22, 2006) (finding that documents concerning "Defendants' responses to Plaintiff's claims" did not fall within the fiduciary exception). Furthermore, the vast majority of the documents are also protected work product because they were prepared because of the clearly anticipated litigation with Retirees. (See Section III(A)(2) supra at 9.)8 In response, Plaintiffs will likely point to Loewy v. Retirement Committee, Plan Administrator of the Motorola Inc. Pension Plan in which this Court found that a letter from an attorney to two agents of the plan regarding the plaintiff's administrative claim fell within the fiduciary exception. (Hayne Decl., Ex. 6.) Plaintiffs have also directed the Court to the decisions in Lewis v. Unum Corp. Severance Plan, 203 F.R.D. 615 (D. Kan. 2001) and Geissal v. Moore Med. Corp., 192 F.R.D. 620 (D. Mo. 2000). (Doc. # 171.) These decisions, however, are easily distinguishable from the instant matter. In Loewy, this Court addressed whether a letter from an attorney to the employee charged with deciding the plaintiff's administrative claim was privileged. The plaintiff sought the document, arguing that the fiduciary exception should apply because he had not "threatened litigation when the . . . letter was written." (Hayne Decl., Ex. 6 at 4.) The defendant responded that the letter "was primarily directed at providing legal advice to the Plan administrator in anticipation of litigation." This Court recognized Mett's instruction that the attorney-client privilege remains intact when "a plan fiduciary retains counsel in order to defend herself against the plan beneficiaries," (Id. at 4), but ruled that the letter, which was "directed at advising the employee reviewing [plaintiff's] claim whether
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In addition, advice regarding the primary claims Retirees asserted, which were based on alleged statutory violations, clearly does not relate to "plan administration." As this Court noted, the Plan Administrator has no discretion to interpret the statute. (Doc. # 73 at 12.)
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benefits could reasonably be denied," fell within the fiduciary exception. (Id. at 6.) Unlike the instant case, in Loewy, "the likelihood of suit was unclear" when the letter was written, (id.), and the Court was "unpersuaded that the . . . letter was prepared in anticipation of litigation." (Id. at 9.) Likewise, in Geissal, the court found the challenged advice to be within the fiduciary exception because it rejected the defendant's assertion that the advice was rendered in anticipation of litigation. Geissal, 192 F.R.D. at 625 ("Defendants have not shown that the pre-decisional legal advice and opinion are attorney work product. . . . The fact that litigation later resulted does not change the ordinary business nature of the attorney's legal advice into litigation work product."). The same is true of Lewis. 203 F.R.D. at 623 (finding that challenged advice was within the fiduciary exception and not work product because it was rendered before "the divergence of interests occurred"). By contrast, as discussed above, the advice at issue in this case was plainly rendered to protect against threatened litigation with Retirees. In fact, it could not have been clearer that Ms. Martin's clients' interests had diverged from Honeywell's and the Plan Administrator's interests. (See Section II(B) supra at 3-5, and III(B) supra at 12-13.) Thus, in this case, the documents created "prior to denial of Plaintiffs' administrative appeal" do not fall within the fiduciary exception, and, even assuming the fiduciary exception applied, the documents would still be protected as work product. (See Section III(A)(2) supra at 7.)9

9

Even if the Court finds that the requested documents are not privileged, Plaintiffs are not entitled to their discovery. None of the requested documents contain information that is properly discoverable. They do not make any fact at issue any more or less likely. Nor will the documents lead to the discovery of any admissible evidence ­ they were created almost exclusively decades after the events at issue. The only conceivable reason for Plaintiffs to seek these documents is to gain an advantage from discovering Honeywell's work product and attorney mental impressions. The Court should deny this inappropriate discovery.
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3.

Plaintiffs Cannot Establish That The Documents Created In 1983 and 1984 Fall Within The Fiduciary Exception Because They Are Communications Regarding Proposed Plan Amendments, A Plan Sponsor Function, Not A Fiduciary Function.

Plaintiffs also challenge that the fiduciary exception covers several documents created in 1983 and 1984. These documents do not fall within the scope of the fiduciary exception, however, because they concern plan design and proposed amendments, topics that do not relate to "plan administration" as a matter of law. The fiduciary exception applies only to legal advice a fiduciary receives regarding matters of plan administration. Mett, 178 F.3d at 1064. Decisions regarding plan structure, design, and amendment do not involve ERISA fiduciary duties. See, e.g., Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 445 (1999) ("without exception, plan sponsors who alter the terms of a plan do not fall into the category of fiduciaries"). For this reason, advice regarding plan design or amendment does not fall within the fiduciary exception because it does not concern "plan administration." See, e.g., Hudson v. Gen. Dynamics, 73 F. Supp. 2d 201, 203 (D. Conn. 1999) (advice regarding plan amendments and communication of plan amendments not within the fiduciary exception); In re: Unisys, 1994 WL 6883 at * 3 (fiduciary exception did not apply to decision to terminate the plan). Documents 70-72 are communications from outside counsel to the plan sponsor providing advice on plan design and potential plan amendments. (See Gordon Decl. ¶¶ 45; Hayne Decl., Ex. 3 at # 70-72.) These documents, therefore, clearly fall outside of the fiduciary exception and are privileged. See, e.g., Hudson, 73 F. Supp. 2d at 203 (advice regarding plan amendments and communication of plan amendments not within the fiduciary exception); In re Unisys, 1994 WL 6883 at * 3.
IV.

CONCLUSION Based on the unmistakable threat of class action litigation with Retirees,

Honeywell retained outside counsel specifically to provide advice regarding this litigation. Plaintiffs now argue that this advice falls within the "fiduciary exception" to the attorney16 Case 2:04-cv-00424-ROS Document 225 Filed 08/23/2006 Page 17 of 18

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client privilege, i.e. that Honeywell effectively sought the advice on their behalf. Plaintiffs' argument is untenable in light of the facts. It is clear that Honeywell sought legal advice strictly for its own protection, indeed for protection from this very lawsuit. The fiduciary exception cannot apply under these circumstances. Defendants, therefore, respectfully request that the Court deny Plaintiffs' motion to compel. Respectfully submitted this 23rd day of August, 2006.
OSBORN MALEDON, P.A. By: s/ David B. Rosenbaum_____ David B. Rosenbaum Dawn L. Dauphine Osborn Maledon, P.A. 2929 North Central Avenue, Suite 2100 Phoenix, AZ 85012-2794 Michael L. Banks (Pro Hac Vice) William J. Delany (Pro Hac Vice) Azeez Hayne (Pro Hac Vice) MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 Attorneys for Defendants

CERTIFICATE OF SERVICE
I do certify that on August 23, 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: Susan Martin Martin & Bonnett P.L.L.C. 3300 N. Central Avenue, Suite 1720 Phoenix, Arizona 85012-2517 Attorney for Plaintiff s/ David B. Rosenbaum David B. Rosenbaum

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