House Education and Workforce Committee Chairwoman Foxx targets DOL cooperation with plaintiffs’ law firms
Department of Labor cooperation with plaintiffs’ lawyers in plan fiduciary litigation came to light in a September 11, 2024, Magistrate’s decision in Harrison et al. v. Envision Management et al. (ERISA fiduciary litigation with respect to Envision’s employee stock ownership plan (ESOP)). On November 21, 2024, Representative Virginia Foxx, Chairwoman of the House Committee on Education and the Workforce drew attention to this decision and raised a series of questions about it in a letter to DOL’s Inspector General Larry D. Turner.
In this article we briefly discuss the issue presented in the Magistrate’s decision – whether defendants in these cases have a right to see what DOL is sharing with the plaintiffs’ lawyers. We then discuss the concerns that Chairwoman Foxx is raising with respect to DOL’s cooperation with plaintiffs’ law firms more generally and (very briefly) the possibility of Trump Administration action to curb it.
Magistrate’s decision
The Magistrate’s decision involves a relatively narrow issue – whether defendants in Harrison v. Envision have a right to see DOL “interview reports,” summarizing “interviews the DOL conducted as part of its separate investigation into several [ESOPs], including The Plan at issue [in this case]. … Some of the DOL Interview Reports concern the individual Defendants in this case. … Plaintiffs are in possession of them and object to their disclosure.”
Without going deep into the technicalities of this issue, the Magistrate’s decision turned on whether she found that a “Common Interest Agreement” which DOL and the plaintiffs’ lawyers had entered into protected these documents from defendants’ demand for disclosure.
In its objection to plaintiffs’ demand for disclosure, DOL stated that the “investigation [to which the interview reports relate] is still open, and DOL has not yet made a disposition decision.” The Magistrate found that, because DOL’s investigation of defendants was ongoing and it had not come to any conclusion as to what action to take, the “common interest” necessary to prevent disclosure (specifically, a litigation strategy shared between DOL and the plaintiffs) did not exist, and the Common Interest Agreement, therefore, did not protect these documents from defendants’ disclosure demand. The Magistrate, however, stayed this decision to give plaintiffs the opportunity to (in effect) appeal it to the District Court.
Thus, this litigation and the Magistrate’s decision are simply about the right of defendants in this case to see what DOL is sharing with plaintiffs’ lawyers.
Chairwoman Foxx’s letter
Chairwoman Foxx’s letter addresses broader concerns – the extent and propriety of DOL working with plaintiffs’ lawyers in connection with open investigations.
In the critical part of Chairwoman Foxx’s letter, she quotes the Magistrate at length:
A federal court harshly condemned the secret arrangement between DOL and [plaintiffs’ lawyers in Harrison v. Envision]. The court explained:
[Allowing such information sharing] could set a dangerous precedent. It would allow a government agency to weaponize private litigation against some target before confirming the target should be a target. Moreover, the government could litigate in the shadows, without giving the opposing party an opportunity to adequately probe and defend itself. The inverse is also true. A private litigant could leverage government powers for its own use in private litigation—before the government has sufficient grounds to leverage itself…. The Court cannot allow that to continue.
Chairwoman Foxx then went on to ask the DOL IG to examine eleven different issues:
How many times DOL shared information “gleaned from EBSA [Employee Benefit Security Administration] investigations with outside law firms before any lawsuit had been filed.”
How many times DOL shared such information “with outside law firms that do not have access to that information under normal discovery rules at the time it was shared.”
The names of law firms DOL shared this confidential information with.
How many times DOL shared this information “before a formal written ‘common interest agreement’ … had been executed or acknowledged.”
How many times DOL “directed resources to assist a plaintiffs’ law firm in litigation, including moot court practices, strategy phone calls, expert advice, or any other assistance, and whether any of these instances exceeded the scope of DOL’s statutory authority.”
Where “DOL views plaintiffs’ law firms as assisting DOL in its enforcement initiatives and regulatory goals, whether DOL is in compliance with procurement rules.”
The criteria DOL uses to choose law firms to share information with.
“An assessment of the monetary value of the information that DOL is providing to plaintiffs’ law firms …. Questions would include: Does DOL determine the value of the information it shares with these law firms? Does DOL consider whether it is reasonable or appropriate to use confidential information collected during investigations to enrich plaintiff’s law firms? Does DOL cap the value of information it shares with any plaintiffs’ law firm? Does DOL receive anything of value in exchange for providing this valuable confidential information?”
“The extent to which any law firm or firms are the recipient of more DOL assistance than others. Questions would include: Are there revolving door relationships with these law firms, i.e., have any attorneys at these firms worked at EBSA, and have any EBSA attorneys worked at these firms? What does a search of emails and call logs between DOL and the firms reveal? To what extent do DOL employees communicate with plaintiffs’ law firms using unofficial channels, such as personal cell phones or personal email accounts?”
“An assessment of the reputational risk to DOL resulting from sharing information gathered during EBSA investigations with plaintiffs’ law firms.”
“The extent to which sharing information gathered during EBSA investigations with plaintiffs’ law firms will have a negative impact on DOL’s role promoting employee benefit plan sponsorship.”
Trump Administration action?
To what extent will the new Trump Administration tackle the issues raised in this letter? Industry groups representing plan sponsors – and sponsors themselves in, e.g., defined contribution plan fee litigation – have for some time complained about the cost of (what they regard as) “baseless” litigation. In this context, the fact that DOL may be effectively encouraging that litigation is disturbing.
Moreover, Chairwoman Foxx’s letter touches on a set of issues that (in other contexts, such as health care) have been a key policy issue for some of President Trump’s allies, including Secretary of Health and Human Services nominee Robert Kennedy – the conflicts of interest presented by “revolving door” agency/practitioner relationships.
Whether all of that – plus the active interest of at least one Congressional policymaker – will be enough to change DOL’s approach is, at this point, anybody’s guess.
At this point, however, the most important takeaway for sponsors is that they should consult with counsel and exercise caution in interacting with DOL investigators – what they say “can and will be used against you in a court of law" (as they say), not just by DOL, but by the plaintiffs’ bar.
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We will continue to follow this issue.