In a strongly worded letter, Rep. Virginia Foxx, R-NC, chair of the House Committee on Education and the Workforce, says that the Department of Labor (DOL) abused its authority when it shared information from an ongoing investigation of Envision Radiology’s ESOP with the law firm Cohen Milstein, which is acting as the counsel for the plaintiffs in an ESOP valuation lawsuit against the trustee, selling share-holders, and individuals at the company. Foxx called on the DOL’s Office of the Inspector General to investigate certain practices concerning “secretly sharing confidential information with a plaintiffs’ attorney for use against plan fiduciaries.”
Foxx said the DOL is “working in concert with plaintiffs’ attorneys to circumvent the discovery protections of the [Federal Rules of Civil Procedure] by conducting a fishing expedition under the guise of an EBSA investigation and then supplying confidential information to plaintiffs’ attorneys for use in private litigation…Those who have been targets of DOL investigations and class action lawsuits involving benefits plans have long suspected that DOL has secretly shared information with class action law firms to give them a leg up in federal litigation, although this appears to be the first time such a cozy relationship has come to light.”
The DOL says that it has long been common practice to share information with private plaintiffs’ counsel in cases where there is a common interest agreement that specifies what information can be shared. The argument is that lawsuits brought by private parties may serve the government’s interests and act against practices the DOL deems potentially in violation of fiduciary rules.
The letter stemmed from a ruling in Harrison v. Envision Management, No. 21–cv–00304–CNS–MD (D.C. Colo., Sept 11, 2024). Cohen Milstein, a law firm that has filed a number of lawsuits concerning valuations in initial ESOP transactions, received information from the DOL from an ongoing investigation of Envision’s ESOP not specifically related to the lawsuit. The investigation had not reached any conclusions. The attorneys for the defendants discovered the information-sharing only the night before an important deposition. The defendants’ attorneys argued that information from the common interest agreement between Cohen Milstein and the DOL should be discoverable and brought the matter to federal court. The defendants also argued the material given to Cohen Milstein was not related to the valuation issue or the issue of who is a fiduciary, the primary issues in question in the litigation. The DOL contended that because both it and plaintiffs’ attorneys were pursuing actions against Envision, they had a common interest per se. The defendants argued that this was not sufficient grounds to share information given in confidence, which can be provided only in cases where there is an “ongoing and joint effort to create a common legal strategy,” which, the defendants argued, was not here.
Cohen Milstein had sought a copy of the DOL demand letter from the trustee in the case, Argent, but parties could not agree on appropriate redactions. The court intervened and in that process learned that Cohen Milstein “obtained the same letter—in unredacted form—directly from the DOL. It was then that the Court learned, for the first time (and Defendants learned the same just a month prior), that the DOL appeared to be feeding Plaintiffs information pursuant to a common interest agreement. Concerned that Plaintiffs failed to disclose that information sooner, the Court ordered the immediate production of the CIA, and required Plaintiffs to log all documents received from the DOL.”
The federal magistrate in the case ruled that “courts in this district apply the common interest privilege ‘only to communications given in confidence and intended and reasonably believed to be part of an on-going and joint effort to set up a common legal strategy.’ The DOL has not described the legal interest(s) it purportedly shares with Plaintiffs.”
The magistrate ruled that “the DOL Demand Letter is generally accurate, but for purposes of identifying a common legal interest, the letter’s significance is overstated. First, the DOL Demand Letter concerns six different ESOPs, and only one of those is The Plan. Second, the DOL Demand Letter concerns the alleged breach of fiduciary duties by one Defendant—Argent. In contrast here, Plaintiffs filed multiple claims against Argent, and multiple claims against multiple other Defendants. Third, and accepting for the sake of argument Plaintiffs’ articulation of its shared interest with the DOL, an interest in ‘restoring funds’ is not a legal interest, it is a financial one.... The DOL is not a party to this case, it continues to separately investigate other ESOPs, it has not reached conclusions, and it expressly takes no position on the merits of this litigation. This makes a common legal strategy with Plaintiffs not only improbable, but impossible. To hold otherwise in a case like this 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.”
