Recent Decision Places Spotlight on Coordination Between DOL and Plaintiffs’ Firms

Defending ERISA claims against an enterprising plaintiffs’ bar is challenging enough. That task becomes even more challenging when the Department of Labor (“DOL”) is working behind the scenes to support private-sector litigants.  For example, the DOL has the power to issue subpoenas for documents and testimony without any pending litigation, which private plaintiffs cannot do.  The DOL, as regulator, can exert pressure on sponsors, fiduciaries and others to sit for interviews, even if no litigation is pending.   Private plaintiffs and their lawyers do not have these advantages – unless the DOL secretly helps them.  To date, evidence of such public-private enforcement coordination has been limited.  But should defense counsel be more concerned about the possibility of the DOL supporting a private plaintiff in pending litigation?  And if such support is occurring, are defendants entitled to access all communications between plaintiffs’ counsel and the DOL about the matter?  A recent federal court ruling by a magistrate judge in the District of Colorado suggests the answer is “yes” to both questions. See Harrison v. Envision Management Holding, Inc. Board of Directors et al., D. Colo. 1:21-cv-00304-CNS-MDB.

In Harrison,the Plaintiffs were former employees of a company that was sold as part of an ESOP transaction.  The plaintiffs sued the ESOP’s fiduciaries for various ERISA violations arising out of the ESOP’s acquisition of the company.  Plaintiffs brought suit in the District of Colorado on behalf of all ESOP participants and the parties eventually proceeded to discovery.

Meanwhile, behind the scenes, the DOL had also been investigating the same transaction. Using its investigative subpoena powers, the DOL, which was not a party to any litigation related to the transaction, had obtained documents from, and conducted interviews of, among others, the ESOP trustee being sued by the private plaintiffs as part of a broader investigation of the trustee by the DOL (whose investigation also covered other transactions).  Unbeknownst to those targets, the DOL was sharing information obtained through that investigation with the private plaintiffs, pursuant to a common interest agreement.

The scheme came to light when, as part of discovery, Plaintiffs sought to obtain a demand letter sent to the ESOP’s trustee, one of the ESOP’s fiduciaries, by the DOL, presumably to get that letter, in which the DOL purportedly accused the trustee of breaching its fiduciary duties, into the record. The trustee refused to produce an unredacted copy of the letter, and Plaintiffs moved to compel its production. The scheme came crashing down when the Court subsequently learned that Plaintiffs had not only already obtained the letter directly from the DOL, but also had been receiving additional documents from the DOL throughout Plaintiffs’ litigation pursuant to the common interest agreement.  

Upon learning of Plaintiffs’ coordination with the DOL, the Court immediately ordered Plaintiffs to produce the common interest agreement and log all documents it had received from the DOL. Among these were summaries of interviews the DOL conducted as part of its own investigation into the ESOP.  When Plaintiffs asserted a common interest privilege and refused to produce these interview summaries, Defendants moved to compel their production.

The Court ultimately granted Defendants’ motion to compel. In so holding, the Court concluded that there was not a sufficiently common legal interest between Plaintiffs and the DOL and that the DOL had therefore waived privilege over the interview summaries when it shared them with Plaintiffs.

The Court’s ruling shed light on potential coordination between the DOL and private litigants and provides several key takeaways for ERISA practitioners going forward:

• Defense Counsel Should Seek to Identify DOL Coordination at the Outset of the Case. Remarkably, it is unclear whether any of the coordination uncovered in Harrison would have ever been disclosed absent Court intervention. In fact, the Court explicitly noted its “concern[]” that Plaintiffs had failed to previously advise Defendants of his arrangement with the DOL. The ruling thus stands as a stark reminder for defense counsel to use the tools at their disposal to suss out DOL involvement at the outset, including targeted discovery requests that force plaintiffs to identify any potential coordination early in the matter.  Companies should also consider potential coordination agreements when facing DOL investigations. 

• ERISA Does Not Broaden the Common Interest Exception.  The Court squarely rejected Plaintiffs’ argument that ERISA affords special protection to communications between the DOL and third parties. While the ERISA statute authorizes the DOL to share investigative material with those affected by an investigation, the Court declined to hold that this authority expanded the scope of the common interest doctrine or otherwise protected the DOL’s communications from discovery. To the contrary, the Court held that the DOL’s communications are subject to the same privilege and waiver analyses as any other communications.

• Plaintiffs and the DOL Face a High Bar in Satisfying the Common Interest Exception.  The decision in Harrison also underscores the uphill battle for plaintiffs seeking to assert the common interest exception over their communications with the DOL. The Court underscored that the common interest doctrine applies narrowly and only where communications are shared in furtherance of a common legal—as opposed to financial or commercial—strategy. Thus, according to the Court, the DOL’s and Plaintiffs’ common interest in “restoring losses” was not sufficiently legal so as to protect their communications from discovery. The Court also carefully scrutinized the precise interests of each party, noting that the DOL’s interest in investigating the Defendant trustee was broader than the claims Plaintiffs were asserting in the litigation and that the DOL admitted that it had not reached any final conclusions about whether the defendant trustee had, in fact, breached their fiduciary duties—fatally undermining any claim of common interest. As the Court put it: “If the DOL has not even formed a position on the merits of this case, how can it develop a common legal strategy with Plaintiffs?” This holding essentially forecloses application of the common interest to DOL communications concerning an ongoing investigation. 

The Harrison decision has also sparked interest on Capitol Hill. Republicans on the House Committee on Education & the Workforce cited the ruling in a recent letter to the DOL’s inspector general calling for an investigation into information sharing between the DOL and outside law firms.  The findings of any investigation could provide even greater insight into the extent of DOL-plaintiff coordination in private litigation.  For its part, the DOL has commented publicly on this recent development, asserting its view that common interest agreements “are a well-established legal tool” that “are used by government and private litigants alike.”[1]  The DOL’s position – which suggests that the use of a common interest agreement in this case is not an isolated incident or out of the ordinary – further highlights the need to be mindful going forward of possible coordination.  Any target of ERISA litigation or an investigation should be sure to take the necessary steps to uncover that coordination as early as possible, and perhaps this may extend beyond cases involving ERISA.

If you have questions, please contact the authors or your regular Thompson Hine attorney.

[1] https://www.napa-net.org/news/2024/11/dol-improperly-shares-information-with-plaintiffs-bar-house-republicans-allege/