United States District Court, E.D. Pennsylvania
August 2, 2004.
ELAINE L. CHAO, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR Petitioner
JOHN KORESKO, et al. Respondents.
The opinion of the court was delivered by: MARY A. McLAUGHLIN, District Judge
MEMORANDUM AND ORDER
On May 11, 2004, the Court issued a decision, rejecting the
respondents' general challenge to the enforceability of subpoenas
duces tecum issued by the Secretary of Labor pursuant to § 504 of
the Employee Retirement Home Security Act ("ERISA"),
29 U.S.C. § 1134. The Court did not decide the respondents' specific
objections to the subpoenas that were based on claims of
privilege. The Court ordered the parties to try to resolve the
specific objections to the subpoenas by June 1, 2004. The parties
did not do so.
The Court held a hearing on the specific objections on June 16,
2004. After the hearing, counsel for the parties spent several
hours trying to resolve the remaining objections. The Court then met with counsel in chambers for a substantial amount
of time to try to understand the respondents' objections and to
see if it could assist the parties in negotiating a settlement of
the dispute. The Court was unsuccessful. The Court ordered the
respondents to provide the Court with a privilege log and any
argument with respect to privilege. The respondents responded on
July 9, 2004. The petitioner filed an opposition to the
respondents' privilege arguments on July 19, 2004.
The respondents submitted a large binder with a table of
contents on the outside. Exhibit A consists of the respondents'
general objections most of which have already been overruled by
the Court's May 11 decision. There follows a "statement of
privileges" that appears to be a non-paginated discussion of
various privileges. It is not signed by anyone. There follow
copies of three cases, two Department of Labor Advisory Opinions,
and certain Pennsylvania Rules of Disciplinary Enforcement. Tab 8
to Exhibit A appears to be a copy of the subpoena with notations
next to each request, such as "P = privilege asserted and set
Exhibit B in the binder consists of the privilege log and 30
tabbed documents. The privilege log consists of four pages
listing 30 types of documents. The following privileges are
apparently asserted with respect to each document: attorney
client privilege; attorney work product; identity privilege; 7525
communication; and accountant/client privilege. There is a description of the subject matter of each category of document.
The 30 documents that follow appear to be samples of the
categories of documents the respondents want to withhold as
privileged. Some of the documents have been redacted.
Two of the five privileges asserted by the respondents are
inapplicable: privilege under 26 U.S.C. § 7525; and
accountant/client privilege. The tax practitioner privilege under
§ 7525 of the Internal Revenue Code may only be asserted in
either a noncriminal tax matter before the Internal Revenue
Service or a noncriminal tax proceeding in Federal Court brought
by or against the United States. 26 U.S.C. § 7525(a)(2). This
case is an action to enforce administrative subpoenas under the
Employee Retirement Income Security Act (hereinafter "ERISA"),
not a tax proceeding.
The state law accountant-client privilege also does not apply
here. Only federal privileges apply to claims arising out of
federal law. Pearson v. Miller, 211 F.3d 57, 66 (3d Cir. 2000).
Because federal law applies in proceedings to enforce
administrative subpoenas, only federal privileges are relevant.
See, e.g., NLRB v. N. Bay Plumbing, Inc., 102 F.3d 1005, 1009
(9th Cir. 1996) (finding state-law privilege irrelevant in an
agency subpoena enforcement case). Federal law does not recognize
an accountant-client privilege. See United States v. Arthur
Young & Co., 465 U.S. 805, 817 (1984). As to the other three privileges, the respondents have not
supported their claims with the kind of specific information that
is required. The Court cannot tell what documents the respondents
claim are protected by what privilege[s], by whom the document
was prepared, from whom and to whom it was sent, and why it is a
The Court has considered ordering the respondents to try again
to prepare an adequate privilege log. But the Court concludes
that the respondents have been given more than enough time to
support their claim that they should not be ordered to produce
documents in response to these subpoenas. The subpoenas were
issued on January 28, 2004. The petitioner tried over the next
several months to negotiate with the respondents. On April 19,
2004 the petitioner filed her motion to enforce the subpoenas.
This Court had a hearing on May 10, 2004, issued its decision on
the general objections on May 11, 2004, had another hearing on
June 16, 2004, ordered the parties to negotiate the dispute, and
met with counsel again in chambers. The respondents were not able
orally to state with any precision why any of the documents are
privileged. The Court gave the respondents another chance to do
it in writing but that too has proved futile.
The Court has spent hours trying to understand the nature of
the respondents' claims of privilege. The petitioner's response
was not very helpful. The petitioner submitted a general response
to the privilege log, arguing that it was inadequate as support for the claims of privilege. The Court
understands the petitioner's frustration; but, the Court cannot
reject claims of privilege without an analysis of the
respondents' arguments. That is why the Court has spent so much
time with this binder. What follows is the Court's decision with
respect to many categories. With respect to other categories, the
Court asks the petitioner to answer certain questions.
The 30 types of documents claimed to be privileged fall into
the following categories:
1. Transaction documents, such as plan documents, summary plan
descriptions, beneficiary nomination forms, etc. (Tabs 1, 2, 4,
5, 6, 7, 8, 10, 12, 22, 23, 24, and 25). The Court can see no
possible privilege to these documents. They are transaction
documents that relate to various benefit plans. In any event, the
respondents have now given them to the petitioner so any
privilege has been waived. Apparently, the respondents claim
privilege in connection with the names that have been redacted
from a few of the documents. This is apparently where the
so-called "identity" privilege comes in. The respondents appear
to argue that now that they have given the substance of the
documents to the petitioner, they are entitled to conceal the
names of participants in the various plans because to give the
names would reveal privileged information. The Court rejects this
argument as to the transaction documents described above. They
were never privileged from the beginning. 2. Retention letter from Koresko and Associates related to its
representation of someone in connection with an IRS request for
information about a certain tax return. (Tab 3). The names of the
persons involved have been redacted. This retention letter is
apparently a form letter sent by Koresko and Associates to
persons seeking their help in connection with an IRS request such
as the one included behind tab 3. A retention letter from a
lawyer is usually not privileged. But it may be that the
petitioner does not want these kinds of documents. The petitioner
shall explain to the Court its position with respect to documents
of this type.
3. Letters from Penn-Mont to various participants in plans
advising them of certain compliance requirements. (Tabs 9 and
11). Again, names of the participants are redacted. The
respondents have given over the substance of the documents and
now argue that to give the names of the recipients would breach
the privilege. Although the Court does not know what privilege is
being asserted because Penn-Mont is not a lawyer, the petitioner
should explain its position on any privilege relating to these
4. Census data forms. (Tabs 13 and 21). These are not
privileged but does the petitioner want these forms?
5. Various insurance forms. (Tabs 18, 19 and 20). The Court
assumes that these are the documents that the respondents claim are private medical documents. Does the
petitioner want these documents?
6. Various documents that relate to the day to day activity of
the benefit plans, such as blank benefit forms, wire transfer
requests, cancelled checks, bank statements, premium amounts,
etc. (Tabs 14, 15, 16, 17, 26, 27, and 29). These do not appear
to be privileged, but does the petitioner even want them?
7. Letters from Koresko & Associates to third parties making
various demands on behalf of the Real VEBA. (Tab 28). A letter
from a lawyer to a third party is not privileged; but does the
petitioner want these types of documents?
8. Tab 30 is a copy of a bill from Anderson Kill & Olick, P.C.
Law firm bills can usually be redacted to protect any privileged
information; but the Court understood that the petitioner did not
want law firm bills from Anderson Kill & Olick, P.C. Is that
At this time, the Court does not see any category of documents
that is privileged; but the Court instructs the petitioner to
answer the questions listed in this memorandum. The respondents
may reply briefly.
An appropriate order follows. ORDER
AND NOW, this 27th day of July, 2004, following a hearing in
the above captioned case on June 16, 2004, and upon consideration
of the Petition to Enforce Administrative Subpoenas (Docket No.
1), the responses thereto, the Respondents' Privilege Log (Docket
No. 36), and the responses thereto, IT IS HEREBY ORDERED that the
petitioner shall respond to the questions raised in a memorandum
of today's date by August 10, 2004. The respondents may reply by
August 17, 2004.
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