Seventh Circuit Analyzes the “Fiduciary Exception”

June 8, 2005

Under the “fiduciary exception,” the beneficiaries of a fiduciary duty sometimes may obtain access to otherwise privileged communications between the fiduciary and its lawyer. However, the doctrine is more subtle than some lawyers realize.

In Bland v. Fiatallis North America, Inc., 401 F.3d 779 (7th Cir. 2005), former employees of defendant Fiatallis claimed that the company had wrongfully denied ERISA benefits. The Seventh Circuit upheld the magistrate judge’s determination that the “fiduciary exception” did not apply – because “the amendment or termination of plan benefits is not a fiduciary action.” Id. at 787.

Because the “fiduciary exception” only applies to communications between a fiduciary and a lawyer about the former’s fiduciary functions, substantive ERISA law defines the contours of the exception.