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WASHINGTON-BALTIMORE NEWSPAPER GUILD

July 16, 1982

WASHINGTON-BALTIMORE NEWSPAPER GUILD, LOCAL 35, affiliated with the Newspaper Guild, AFL-CIO-CLC, et al., Plaintiffs, Plaintiff-Intervenors,
v.
The WASHINGTON STAR COMPANY, et al., Defendants



The opinion of the court was delivered by: PARKER

MEMORANDUM OPINION AND ORDER

The plaintiffs in this proceeding are several former participants, and their union representatives, in the Evening Star Employees' Benefit Plan ("the Plan"). The lawsuit involves the disposition of some of the assets of the Plan, which was established in 1918 by the Washington Evening Star Company ("the Star"), publisher until 1981 of The Washington Star. The plaintiffs allege that in 1981 the defendants-the Plan, its trustees, and the Star *fn1" -illegally amended the Trust Agreement between the Plan's Trustees and its sponsor, the Star. The effect of the 1981 amendment was to provide for the reversion of surplus assets to the Star, rather than to the participants, upon termination of the Plan. The plaintiffs claim that, in so doing, the defendants breached their fiduciary duties imposed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"), violated their contractual obligations to the participants, and committed fraud and deceit.

 Although both parties have moved for summary judgment, those motions are not yet at issue. The plaintiffs seek to rely on an affidavit of a former counsel to the Plan, Fernando DiFilippo. The affidavit explains the factual background to a 1976 amendment to the Trust Agreement which, in contrast to the 1981 amendment, provided that the participants, not the Star, would receive any surplus assets. The defendants object to its filing, arguing that the proposed affidavit violates both the attorney-client privilege and the Canons of the Code of Professional Responsibility. The plaintiffs have therefore sought a ruling from this Court on this matter, and have submitted the proposed affidavit under seal. Both parties have also furnished memoranda on this question. *fn2"

 For the following reasons, the Court rules that the plaintiffs may proffer the proposed affidavit in connection with the pending motion for summary judgment.

 THE FACTS

 The background to this dispute may be briefly summarized. The plaintiffs claim that, following collective bargaining negotiations in 1976, the Star agreed to distribute to the Plan's participants or to their beneficiaries any surplus assets upon termination. This reversion agreement was incorporated into an amended Trust document.

 On July 23, 1981, the Star management announced that it would cease publication of The Washington Star. Six days later, on July 29, 1981, the defendants adopted another amendment to the Trust document which provided that any surplus in the Plan would, upon termination, revert to the Star and not to the participants or their beneficiaries. The Plan was, in fact, later terminated.

 The affiant, DiFilippo, was an associate in the Washington office of the Verner, Liipfert, Bernhard & McPherson law firm ("Verner, Liipfert") from May 1, 1976 until June 17, 1977. His affidavit explains the factual background to the 1976 Trust Agreement amendment which allegedly required the plaintiffs' receipt of the Plan's surplus assets. The affidavit provides details concerning (1) the scope and nature of DiFilippo's legal counsel to the Plan, (2) the process for amendment of the Trust document, (3) the position of the union representatives with respect to the 1976 amendment, (4) the reason for the amendment prohibiting reversion, and (5) the reason that DiFilippo amended the Trust document but did not amend a parallel document, the Plan Agreement.

 The defendants assert that the DiFilippo affidavit violates both the attorney-client privilege and the duties of confidentiality under the Canons of the Code of Professional Responsibility. Their legal argument is based on several factual premises. First, that during DiFilippo's association with Verner, Liipfert, the firm acted as general counsel to the Star and to the owner of the company. Second, that DiFilippo, along with other lawyers at the firm, provided legal services for both the Star and the Plan when the amendment was adopted in 1976. Third, that Verner, Liipfert performed work for the Plan and Trust as well as for the Star with no separation of legal services between these various activities. Fourth, that the Plan and Trust documents were unilateral creations of the employer, funded entirely by the Star; in addition, the Star appointed the Plan's Board of Trustees, all of whom were management personnel of the Star.

 LEGAL ANALYSIS

 A. The Attorney-Client Privilege

 The attorney-client privilege, as this Court was quite recently called upon to note, "protects the oldest of the confidential relationships." SEC v. Gulf and Western Industries, Inc., 518 F. Supp. 675, 680 (D.D.C.1981). The privilege applies if "the asserted holder of the privilege is or sought to become a client." United States v. United Shoe Machinery Corp., 89 F. Supp. 357, 358 (D.Mass.1950). A central question in this dispute is whether the Star is properly viewed as DiFilippo's client for purposes of the privilege.

 
As a representative for the beneficiaries of the trust which he is administering, the trustee is not the real client in the sense that he is personally being served. And, the beneficiaries are not simply incidental beneficiaries who chance to gain from the professional services rendered. The very intention of the communication is to aid the beneficiaries. The trustee here cannot subordinate the fiduciary ...

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