Solis v. the Food Employers Labor Relations Ass'n

• Decision Date: 04 May 2011
• Docket Number: No. 10–1687.,10–1687.
• Citation: 644 F.3d 221,50 Employee Benefits Cas. 2697
• Parties: Hilda L. SOLIS, Secretary of Labor, United States Department of Labor, Petitioner–Appellee,v.The FOOD EMPLOYERS LABOR RELATIONS ASSOCIATION and United Food and Commercial Workers Pension Fund; The Food Employers Labor Relations Association and United Food and Commercial Workers Health and Welfare Fund, Respondents–Appellants.
• Court: U.S. Court of Appeals — Fourth Circuit

644 F.3d 221

50 Employee Benefits Cas. 2697

Hilda L. SOLIS, Secretary of Labor, United States Department of Labor, Petitioner–Appellee,

v.The FOOD EMPLOYERS LABOR RELATIONS ASSOCIATION and United Food and Commercial Workers Pension Fund; The Food Employers Labor Relations Association and United Food and Commercial Workers Health and Welfare Fund, Respondents–Appellants.

No. 10–1687.

United States Court of Appeals, Fourth Circuit.

Argued: March 22, 2011.Decided: May 4, 2011.

ARGUED: Barry Steven Slevin, Slevin & Hart, PC, Washington, D.C., for Appellants. Ashton Schoonover Phillips, United States Department of Labor, Washington, D.C., for Appellee. ON BRIEF: Sharon M. Goodman, Sarah E. Sanchez, Slevin & Hart, PC, Washington, D.C., for Appellants. M. Patricia Smith, Solicitor of Labor, Timothy D. Hauser, Associate Solicitor for Plan Benefits Security, Elizabeth Hopkins, Counsel for Appellate and Special Litigation, United States Department of Labor, Washington, D.C., for Appellee.Before NIEMEYER and DAVIS, Circuit Judges, and RONALD LEE GILMAN, Senior Circuit Judge of United States Court of Appeals for the Sixth Circuit, sitting by designation.Affirmed by published opinion. Judge DAVIS wrote the opinion, in which Judge NIEMEYER and Senior Judge GILMAN concurred.

OPINION

DAVIS, Circuit Judge:

This appeal arises out of the district court's grant of a petition by the Secretary of the United States Department of Labor (“DOL”) to enforce administrative document subpoenas. The Secretary served the subpoenas on two multiemployer employee benefit plans, the Food Employers Labor Relations Association and United Food and Commercial Workers Pension Fund (“Pension Fund”) and the Food Employers Labor Relations Association and United Food and Commercial Workers Health and Welfare Fund (“Health Fund”) (collectively the “Funds”), as part of an investigation undertaken pursuant to § 504(a)(1) of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1134(a)(1), into possible mismanagement of fund assets. Claiming attorney-client and work product privileges, the Funds objected to the production of some responsive documents. After the Secretary sought judicial enforcement of the subpoenas, the district court ordered the Funds to produce the withheld documents, applying the fiduciary exception to the claimed privileges. The Funds timely appealed. Finding no error in the district court's order enforcing the subpoenas, we affirm.

I.

The DOL investigation into the management of the Funds arises out of a $10.1 million loss of ERISA plan assets as a result of the Funds' investments in entities related to Bernard L. Madoff, who has since been convicted of securities fraud for organizing a multi-billion dollar Ponzi scheme.¹

Specifically, the Funds indirectly invested in Bernard L. Madoff Investment Securities, LLC (“BMIS”), Madoff's investment firm. According to affidavits provided by the Funds, the Board of Trustees for the Pension Fund interviewed a number of investment hedge fund of funds ² in May 2004. The Board discussed the options with the Fund's investment consultants and decided to accept the consultants' recommendation to invest approximately three percent of the Fund's assets in the Meridian Diversified ERISA Fund Ltd. (“Meridian Fund”). The Meridian Fund's investment manager in turn invested a portion of those assets in the Rye Broad Market XL Portfolio Limited Fund. The investment advisors for the Rye Broad Market Fund hired BMIS to manage a portion of the Rye Broad Market Fund's assets. As of December 31, 2008, of the Pension Fund's $675 million in assets, approximately $41 million, or 6%, was invested in the Meridian Fund, of which approximately $2.5 million, or 0.4% of the Pension Fund's total assets, was invested in the Rye Broad Market Fund.

In a similar fashion, in May 2005, the Board of Trustees of the Health Fund, based on the recommendation of its investment consultant, invested $29 million in the Meridian Fund. As with the assets of the Pension Fund, the Meridian Fund invested a portion of the Health Fund's assets in the Rye Broad Market Fund, of which BMIS managed a portion. As of December 31, 2008, of the Health Fund's $97.5 million in assets, $7.6 million, or 7.8%, was invested in the Meridian Fund, of which $500,000, or 0.5% of the Health Fund's total assets, was invested in the Rye Broad Market Fund. As a result of losses associated with these Madoff-related investments, the Funds are members of a plaintiff-class in a suit against Meridian.

DOL's Employee Benefit Security Administration (“EBSA”) conducts audits pursuant to § 504(a)(1) of ERISA, which authorizes DOL to investigate whether a violation of Title I of ERISA or regulations or orders issued thereunder has occurred or is about to occur. 29 U.S.C. § 1134(a)(1). On April 15, 2009, DOL issued two subpoenas duces tecum requesting documents relating to the administration of the Funds. The request covered a range of the Funds' activities, but focused on information concerning the decision to commit assets to Madoff-related investments.

On April 16, 2009, the Funds provided documents partially responsive to the subpoenas, but redacted portions of some documents and wholly withheld some others, claiming they were protected by attorney-client and work product privileges. DOL and the Funds negotiated over the next few months regarding the scope of the subpoenas. In response to the Funds' concerns, DOL agreed to limit the time period covered by the request and to narrow the scope of 29 of the 38 subpoena specifications. Throughout these discussions, EBSA maintained that the Funds were not permitted to withhold documents based on attorney-client or work product privileges. The negotiations eventually broke down, however, and, on March 10, 2010, the Secretary filed a petition in federal district court to obtain compliance with the subpoenas.

Following briefing and a hearing, the district court granted the Secretary's petition on May 19, 2010. In reaching its decision, the district court applied the fiduciary exception to the privileges asserted by the Funds. The district court ordered the Funds to comply with the subpoenas and produce documents dealing with: (1) Board of Trustees and Policy Committee meeting minutes for the Funds; (2) documents referred to or distributed during these meetings; (3) notes taken at these meetings; (4) any correspondence relating to the Funds' Madoff-related investments; and (5) documents outside the four categories listed above that the Funds withheld based on privilege claims. In accordance with the Secretary's offer to exempt certain categories from production, the district court excluded the production of documents dealing exclusively with benefits disputes, benefits claims, subrogation agreements, delinquent contributions, withdrawal liability, or collection actions involving employers. The district court's order also excluded information covered by the attorney-client privilege or work product protection in documents dated after service of the subpoenas or prepared in connection with the current investigation.

Notably, the district court addressed the Funds' concerns about the ability of third parties to access the information disclosed in response to the subpoenas, finding that “compliance with [the] Order does not waive any attorney-client or work product privilege with respect to any third party” and ordering DOL to notify the Funds of any requests received under the Freedom of Information Act, 5 U.S.C. § 552, for documents produced under the order. J.A. 85. The Funds produced the documents required by the district court's order and filed a timely notice of appeal. The Funds seek reversal of the district court's order and the return of the privileged documents.³

II.

Recognizing that Congress delegated enforcement mechanisms to agency discretion, this court has emphasized that the district court's role in a proceeding to enforce an administrative subpoena is “sharply limited.” EEOC v. City of Norfolk Police Dept., 45 F.3d 80, 82 (4th Cir.1995) (internal quotation marks omitted); see also EEOC v. Am. & Efird Mills, Inc., 964 F.2d 300, 303 (4th Cir.1992). To enforce an administrative subpoena, the district court need only find that (1) the agency is authorized to make such an investigation; (2) the agency has complied with statutory requirements of due process; and (3) the materials requested are relevant. See, e.g., United States v. Am. Target Adver., Inc., 257 F.3d 348, 351 (4th Cir.2001); Am. & Efird Mills, 964 F.2d at 302–03. If the agency can make such a showing, “the court must enforce the subpoena unless the party being investigated demonstrates that the subpoena is unduly burdensome.” EEOC v. Maryland Cup Corp., 785 F.2d 471, 475–76 (4th Cir.1986) (citing FTC v. Texaco, Inc., 555 F.2d 862, 882 (D.C.Cir.1977) (en banc)). This court reviews the factual findings underlying a district court's enforcement of an agency subpoena for clear error. EEOC v. Lockheed Martin Corp., Aero & Naval Systems, 116 F.3d 110, 113 (4th Cir.1997). We review questions of law de novo. See Maryland Cup Corp., 785 F.2d at 475–76 (internal citations omitted).

On appeal, the Funds do not challenge the Secretary's authority to issue the subpoenas; nor do they raise due process or relevance concerns. Instead, they argue that the attorney-client and work product privileges protect some of the materials requested by the Secretary from disclosure and that the district court erred in applying the fiduciary exception to override these privileges. This court reviews de novo a district court's decision regarding the scope and applicability of an asserted privilege “to the extent the court's holding rests on application of controlling legal principles to the facts.” In re Allen, 106 F.3d 582, 601 (4th Cir.1997); see also In re Grand Jury Subpoena, 341 F.3d 331, 334 (4th Cir.2003). We address in turn the Funds' claims...