Southern District of Ohio Acknowledges the “Fiduciary Exception’s” Applicability to ERISA Communications — With a Twist

July 5, 2023

Under what is called the “fiduciary exception,” the law essentially deems a fiduciary’s beneficiary to be the fiduciary’s lawyer’s actual “client.” This normally enables the beneficiary to access communications between the fiduciary and her lawyer about fiduciary functions. Most “fiduciary exception” cases involve ERISA fiduciaries.

In Kramer v. American Electric Power Executive Severance Plan, Civ. A. No. 2:21-cv-5501, 2023 U.S. Dist. LEXIS 65544 (S.D. Ohio Apr. 13, 2023), defendant’s former Chief Digital Officer sued for severance benefits after he was terminated. Not surprisingly, he pointed to the fiduciary exception that generally applies in ERISA cases. But the court carefully analyzed the severance plan, and concluded that “it primarily provides deferred compensation.” Id. at *18. Because the plan “serves a select group of management or highly compensated employees,” the plan’s status as a “top-hat plan” meant that under ERISA the fiduciary exception did not apply. Id.

As noted in previous Privilege Points, the so-called “fiduciary exception” has its own “exceptions” — allowing defendants to withhold from ERISA beneficiaries communications about non-fiduciary action such as the Plan’s creation or termination (the “settlor exception”) and communications about the fiduciary’s defense to a claim against him or her (the “liability exception”). The inapplicability of normal ERISA fiduciary exception rules to “top-hat plans” can be seen as another exception to the exception.