Unisys Corp. Retiree Medical Ben. ERISA Litigation, In re
| Decision Date | 28 June 1995 |
| Docket Number | No. 94-1800,94-1800 |
| Citation | 58 F.3d 896 |
| Parties | , 19 Employee Benefits Cas. 1545, Pens. Plan Guide P 23911N In re UNISYS CORP. RETIREE MEDICAL BENEFIT "ERISA" LITIGATION. * Gerald E. Pickering, Fred Tonnies, William Leonhardt, Evelyn Schmidt, Dudley Keyes, David Kahl, Paul Wright, Robert Wilt, Clay Bernichon, Edward Valle, Robert B. Welsh, Solveig Tschann, Bernard J. Jansen, Donald I. Klippenstein, Frederick W. Hoppe, Ludson F. Worsham, Edwin Marjala and Warren Hall, individually and on behalf of all members of the Sperry Class previously certified by the Court whose claims have not been settled, Appellants. |
| Court | U.S. Court of Appeals — Third Circuit |
Alan M. Sandals, Berger & Montague, Philadelphia, PA, Joseph R. Roda (argued), Lancaster, PA, J. Dennis Faucher, Miller, Faucher, Chertow, Cafferty & Wexler, Philadelphia, PA, Seymour J. Mansfield, Mansfield & Tanick, Minneapolis, MN, Sarah E. Siskind, Davis, Miner, Barnhill & Galland, Madison, WI, for appellees Gerald E. Pickering, Fred Tonnies, William Leonhardt, Evelyn Schmidt, Dudley Keyes, David Kahl, Paul Wright, Robert Wilt, Clay Bernichon, Edward Valle, Robert B. Welsh, Solveig Tschann, Ludson F. Worsham, Edwin Marjala, Warren J. Hall, individually and on behalf of all members of the Sperry Class previously certified by the Court whose claims have not been settled.
James F. Roegge, Julie L. Levi, Meagher & Geer, Minneapolis, MN, for appellees Gerald E. Pickering, Fred Tonnies, William Leonhardt, Evelyn Schmidt, Dudley Keyes, David Kahl, Paul Wright, Robert Wilt, Clay Bernichon, Edward Valle, Robert B. Welsh, Solveig Tschann, Bernard J. Jansen, Donald I. Klippenstein, Frederick W. Hoppe.
Joseph J. Costello, Francis M. Milone (argued), Morgan, Lewis & Bockius, Philadelphia, PA, Joseph A. Teklits, UNISYS Corp., Blue Bell, PA, Kevin P. Roddy, Milberg, Weiss, Bershad, Hynes & Lerach, Los Angeles, CA, Henry H. Rossbacher, Rossbacher & Associates, Los Angeles, CA, for appellant.
Before: MANSMANN, SCIRICA and McKEE, Circuit Judges.
This class action arises out of the termination of post-retirement medical benefit plans, sponsored by Unisys for retirees and disabled former employees of Unisys and its corporate predecessors, Sperry Corporation and Burroughs Corporation. The retirees seek to recover post-retirement medical benefits under the terms of their welfare benefit plans and under the Employee Retirement Income Security Act's ("ERISA's") provisions for appropriate equitable relief.
We are asked to decide in this particular appeal 1 whether the district court erred in holding, on this breach of contract claim, that summary plan descriptions that used the terms "lifetime" or "for life" to describe the duration of medical benefits, while at the same time reserving the employer's right to modify or terminate at "any time" and "for any reason" the plans under which these benefits are provided, were unambiguous. We also address whether the district court erred in refusing to reinstate the retirees' estoppel claims upon which Unisys had earlier been granted summary judgment. We will affirm the judgment of the district court.
In September of 1986, Sperry Corporation and Burroughs Corporation merged to form Unisys Corporation. Prior to the merger, Sperry consisted of a number of business units or divisions. Until 1984 each Sperry division maintained its own medical benefits program, with each described in a separate summary plan description. In 1984, in an attempt to streamline the medical benefits plans and in response to rising medical costs, Sperry implemented Medflex, a corporate-wide medical benefits plan that applied to the entire Sperry Corporation. 2 Medflex was applied to future retirees only; existing retirees continued to receive coverage under the pre-Medflex plans which applied when they retired.
Following the merger in 1986, Unisys continued the Medflex plan for active employees and for those who retired after its implementation but prior to April 2, 1989. Unisys also continued all of the pre-Medflex plans for those who retired prior to Medflex's implementation. 3 In 1989, Unisys effected the consolidation of its retiree medical benefit plans when it created the Unisys Post-Retirement and Extended Disability Medical Plan to cover all employees who retired after April 1, 1989, most of whom were former Sperry and Burroughs employees.
On November 3, 1992, Unisys publicly announced that effective January 1, 1993, it was terminating all existing medical benefit plans and replacing all of the pre-existing medical plans with the new Unisys Post-Retirement and Extended Medical Disability Plan. Under the new plan, retirees would be responsible for increasing levels of contributions until January 1, 1995, when they would have to pay the full cost of their premiums. Thus, the new plan sharply contrasted with earlier plans, under the majority of which Unisys paid the entire premium for an individual's life and provided benefits for the individual's spouse as well. 4
The appellees in this case are former employees of Sperry Corporation (and their eligible dependents) who retired between 1969 and April 1, 1989, from Sperry Corporation or Unisys, Sperry's successor. Following Unisys' termination of their post-retirement medical benefit plans in late 1992, the retirees sought relief based on three theories: breach of contract, equitable estoppel, and breach of fiduciary duty. The Sperry retirees argued that Unisys' termination of their respective medical plans violated ERISA. They argued first that Unisys had denied them "vested" benefits in violation of 29 U.S.C. Sec. 1132(a)(1)(B) because the summary plan descriptions ("SPDs") explaining their medical benefits contained the term "lifetime" benefits. Regarding their contract claims, the retirees relied on the explicit lifetime language in the plans, e.g., "when you retire, your medical benefit will be continued for the rest of your life", and on statements made by the company both orally and in writing to the same effect. 5
The Medflex SPD is illustrative. A Sperry employee who retired during the period January 1, 1984 through April 1, 1989 received medical benefits under this plan. The SPD for Medflex is set forth in a booklet titled, "Your Company and You." Included in this plan was the following description of retiree medical benefit coverage:
If you're eligible, Medical Plan benefits continue without cost after you terminate active employment. Benefits also may continue on a contributory basis for your eligible dependents who are covered when your employment terminated.... Coverage continues for you for life and for your dependents while they remain eligible provided you don't stop the contributions for their coverage. After your death, your eligible dependents may continue coverage by making the required contributions. Their coverage continues until your spouse dies or remarries.
(A 2227) (emphasis added).
The retirees argued alternatively, that even if the court were to find that "lifetime" is not synonymous with "vested", the evidence established that Unisys intended that a reservation of rights clause in the plan, enabling the company to change the plan at will, only applied to active employees and not to retirees; thus, the company never intended to reserve its right to terminate the plans as far as retirees are concerned. In addition, the retirees contended that Unisys breached its fiduciary duty by systematically misrepresenting the plans and should be equitably estopped from exercising any right to terminate their benefits. 6
Unisys responded that it had indeed reserved the right to terminate the retirees' medical plans due to the reservation of rights clauses or "RORs" located in other sections of the plans. Typical of these clauses is the one set forth in the SPD describing the Medflex plan. The Medflex SPD booklet, "Your Company and You," was distributed to all employees and contained the following reservation of rights clause:
Plan Continuation
The Company expects to continue the Plans, but reserves the right to change or end them at any time. The Company's decision to change or end the Plan may be due to changes in federal or state laws governing welfare or retirement benefits, the requirements of the IRS or ERISA, the provisions of a contract or policy involving an insurance company or any other reason....
(A 2750) (emphasis added).
In addition to the provisions set forth in the summary plan descriptions, information about retiree medical benefits was also conveyed to the Sperry retirees through various informal oral and written communications. As in the summary plan descriptions, the duration of medical benefits was described as being "for life" or for the "lifetime" of the retiree and spouse. Sperry did not include in these informal communications a reference to the reservation of rights clause.
Notwithstanding these communications, Unisys denied having created vested medical benefits through its use of the words "lifetime" or "for life", and early in the litigation filed a motion for summary judgment seeking dismissal of all of the regular retirees' claims based on the unambiguous reservation of rights clauses in the plans. Although the district court granted Unisys' motion on the retirees' breach of fiduciary duty and estoppel claims, it denied summary judgment on the retirees' contract or plan-based claim. The district court initially found that the internal inconsistency between the lifetime promises and the reservations of rights clauses made the plans ambiguous and thus a trial on the extrinsic evidence was necessary to resolve the ambiguity. In re Unisys, 837 F.Supp. 670, 679 (E.D.Pa.1993). After trial, 7 the district court reversed its position on both the contract and breach of fiduciary duty claims, entering judgment against the Sperry regular and VRIF retirees on...
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