Lawmakers Probe DOL Data Sharing Pact With Plaintiffs’ Firm (1)

A newly unearthed information sharing agreement the US Labor Department maintained with a plaintiffs’ law firm is under fire by GOP lawmakers, after a federal magistrate judge undercut the pact she said would allow regulators to “litigate in the shadows.”

Republicans on the House Committee on Education & the Workforce called on the DOL’s inspector general Thursday to investigate the department’s Employee Benefits Security Administration after it shared confidential investigative material with a firm suing one of the companies that had been the target of an agency audit.

The DOL’s “common interest agreement” with Cohen Milstein Sellers & Toll PLLC suggests a new link between federal benefits enforcement action and private-sector litigation brought by plaintiffs’ firms.

Hundreds of workplace retirement plans have been the target of private-sector fiduciary breach litigation recently, costing companies millions of dollars in legal fees and settlements. Republican lawmakers and defense attorneys now want to know to what extent the government has been involved in gathering evidence for potential claims.

“That kind of practice erodes trust with the regulated community,” said Lars Golumbic, a Groom Law Group Chartered principal and litigation co-chair. “A fiduciary expects that a regulator will be fair and neutral, so to hear that the department has a practice of back channeling that information to law firms that sue employee benefit plans is troubling.”

The DOL’s involvement in private-sector litigation was uncovered by Golumbic and his team earlier this year as part of the discovery phase in a fiduciary breach lawsuit Cohen Milstein filed against an Envision Management Holding Inc. employee stock ownership plan.

When the parties reached an impasse over whether Envision’s trustee should be compelled to hand over an audit letter it had received from the DOL, the plaintiffs in the case came to court with the document. They had received it not from the trustee but directly from the DOL itself.

“That’s not something that we’ve ever seen before,” Golumbic said. “Law firms have long suspected in these private plaintiff suits that the department would talk with class-action lawyers about the department’s investigations, but now we understand that this practice had grown to a point that they are entering into formal information sharing agreements.”

Common interest agreements between the DOL and private-sector litigants are “common, legal, and have been entered into by different administrations for decades,” a Cohen Milstein spokesperson said. Attempts by a defendant to paint them as “inherently suspect is as transparent as it is irresponsible,” the spokesperson said.

‘Dangerous Precedent’

Court filings in the US District Court for the District of Colorado reveal both the defense attorneys and Magistrate Judge Maritza Dominguez Braswell were taken aback by the level of cooperation that appeared to exist between the government and the private-sector firm.

Common interest agreements are usually maintained by two parties in active litigation, but the DOL was not party to the lawsuit, nor had it filed a lawsuit against Envision Management Holding or the trustee Argent Trust Co. itself.

In September, Braswell invalidated the common interest agreement dated April 2023, saying such a deal “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,” she wrote. “Moreover, the government could litigate in the shadows, without giving the opposing party an opportunity to adequately probe and defend itself.”

Information the DOL shared with Cohen Milstein included the identity of five other retirement plans to which Argent Trust served as trustee, at least one of which the firm is actively suing, said Golumbic.

The DOL is aware of the request to DOL’s Office of the Inspector General, said Grant Vaught, a department spokesman.

“Common interest agreements are a well-established legal tool that recognize existing legal privileges,” he said. “They are used by government and private litigants alike.”

Lawmakers want the DOL inspector general to uncover how many common interest agreements EBSA has with plaintiffs’ firms. It’s also unclear whether the DOL has the authority to share confidential data with law firms when that information isn’t covered by work product privilege.

Federal benefits law guarantees almost identical rights of action to private- and public-sector litigants. It “grants the DOL and retirement participants the same claim and provides the exact same relief,” the Cohen Milstein spokesperson said.

Other branches of the Labor Department besides EBSA have occasionally been known to use these confidential pacts. The DOL’s federal contractor watchdog office in 2019 was required to turn over some documentation related to agreements it had with attorneys suing Oracle for pay discrimination.

In that dispute, the agency defended the use of the agreements as “routine.”

“A ‘common interest agreement’ pursuant to which DOL, in the midst of an open and ongoing investigation, secretly shares confidential information with a class action law firm is contrary to the public policy of encouraging plan fiduciaries to cooperate with EBSA investigations and to sponsor employee benefit plans voluntarily, eroding the public’s trust in DOL as a regulator,” House Committee on Education & the Workforce Chairwoman Rep. Virginia Foxx told the DOL watchdog office Thursday.

The DOL has broad subpoena power to force companies to hand over data that could be used against them in court, said Kent A. Mason, outside counsel for the American Benefits Council, an employer advocacy group.

“Plan sponsors are voluntarily providing benefits; it is wholly inappropriate for the government to secretly help plaintiffs lawyers sue them,” he wrote in an unpublished alert to ABC members provided to Bloomberg Law.

“Congress and the Administration need to know the extent to which DOL is helping accelerate this dangerous trend,” he added.