Gluck v. Unisys Corp.
| Citation | 960 F.2d 1168 |
| Decision Date | 31 March 1992 |
| Docket Number | No. 91-1170,91-1170 |
| Parties | 15 Employee Benefits Cas. 1095 Simon E. GLUCK, John R. Clarke, Harry G. Ganderton, Robert K. Williams, George E. Lund, Jack Richards, Richard Jackson, Charles S. Derenzi, John Lapic, Angelo Deluca, Gwen Smolnik, John Maloney, Lee N. Caplan, William E. Howe, Jr., Joseph G. Barney, Lawrence G. Wagner, Harold D. Atkins, John E. Legory, and Mark Wright, on behalf of themselves and all others similarly situated, v. UNISYS CORPORATION, Unisys Pension Plan, Administrative Committee of the Unisys Pension Plan and all Members Thereof and Retirement Committee of the Burroughs Employees' Retirement Income Plan and All Members Thereof, Kenneth L. Miller, Jack A. Blaine, Michael R. Losey, John J. Loughlin, Stefan C. Riesenfeld, Michael R. Capo, Stanley Jones, Walter J. Williams, Richard H. Bierly, Bobette Jones, Raymond V. Thomas, Thomas E. McKinnon, Michael N. Johnson, Ronald C. Anderson, Leon J. Level and William N. Geary, Simon E. Gluck, Lee N. Caplan, John R. Clarke, Harry G. Ganderton, Robert K. Williams, William E. Howe, Jr., George E. Lund, Jack Richards, Richard Jackson, Charles S. DeRenzi, John Lapic, Angelo DeLuca, Max Rosenzqeig, Gwen Smolnik, Joseph G. Barney, Lawrence G. Wagner, Angelo R. DiPetro, Joseph J. McCarthy, Charles Martino, Harold D. Atkins, John E. Legory, and Mark Wright, on behalf of themselves and all others similarly situated, Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Roslyn G. Pollack, Howard J. Eichenbaum, Leslie M. Thoman, Cohen, Shapiro, Polisher, Shiekman & Cohen, Philadelphia, Pa., Charles R. Watkins (argued), Suzanne McCarthy, Jeffrey L. London, Sachnoff & Weaver, Chicago, Ill., for appellants.
Joseph J. Costello, Robert J. Lichtenstein, Francis M. Milone (argued), Morgan, Lewis & Bockius, Philadelphia, Pa., Joseph A. Teklits, Unisys Corp., Blue Bell, Pa., for appellees.
Before MANSMANN and ALITO, Circuit Judges, and DIAMOND, District Judge. *
In this appeal we are called upon to interpret the "actual knowledge" requirement in ERISA's limitation on actions for breach of fiduciary duty, to determine the effect of a choice of law provision in an ERISA plan, and to address the standard for determining a partial termination for ERISA purposes.
Here employees of Unisys Corporation and its predecessor, Burroughs Corporation, brought this action for violations of, and breaches of fiduciary duty under, the Employee Retirement Income Security Act (ERISA), and for related state law claims. The district court barred the fiduciary claims as untimely because they were filed more than three years after an event giving rise to the breach, but held that the employees' other ("non-fiduciary") claims were timely under Michigan's six-year statute of limitations. Nonetheless, the district court dismissed these non-fiduciary claims on the grounds, inter alia, that a "partial termination," which would have effected a vesting of the employees' accrued benefits, had not occurred.
We hold that the district court erred as a matter of law in dismissing the fiduciary claims, because ERISA requires that a plaintiff must have actual knowledge of the fiduciary breach or ERISA violation underlying a breach of fiduciary duty claim, and here it is not clear precisely what the employees knew and when. Thus we will reverse the order of the district court which barred the fiduciary claims and remand for a finding of the date the plaintiffs acquired actual knowledge.
Secondly, we find that although the district court erred in applying the Michigan limitations period to the non-fiduciary claims, the district court's decision to reach the merits of the non-fiduciary claims was correct for a different reason and the court's disposition will be generally affirmed. However, with respect to the "non-fiduciary" claim involving partial termination, we further conclude that a partial termination may have resulted as a matter of law. We will therefore reverse that part of the district court's judgment dismissing the employees' complaint for failure to state a claim.
Simon E. Gluck and the other named plaintiffs are Pennsylvania residents who, with few immaterial exceptions, worked for over 20 years for Unisys Corporation or its predecessor, Burroughs Corporation. The defendants are the Unisys pension plan, Unisys Corporation, and the various fiduciaries and administrators of the Unisys and Burroughs plans.
From 1951, Burroughs maintained the Burroughs Employees' Retirement Income Plan ("BERIP"), a defined benefit plan 1 consisting of two separate parts. Under the first, "non-contributory" part, all employees received annual retirement benefits without any obligation to pay money into the plan. The second, "contributory" part, was voluntary, and required after-tax employee contributions.
An employee who chose to become a "contributory member" was entitled to receive an additional "contributory retirement benefit" equal to an annual payment of 40 percent of his total contributions. The amount of the accrued contributory benefit thus increased with each payment. The right to receive the contributory benefit vested after a contributory member either reached age 65 before discontinuing contributions or had made continuous contributions over a 10 year period of employment.
Any contributory member could discontinue voluntary contributions and receive a refund of the amount contributed plus interest at a rate of two to five percent. Contributory members whose benefit had vested, however, could discontinue voluntary contributions, receive a refund of their total contributions with interest, and still receive the defined contributory benefit, less the withdrawn contributions, the actuarial value of which BERIP set at ten percent per year of the amount withdrawn. For example, if a vested employee elected a refund on the day of his retirement after contributing a total of $1,000, he would receive $400 per year minus $100 per year, or $300 per year under the formula: (40%)($1,000) - (10%)($1,000) = $300. In this litigation, the parties have referred to the remaining defined contributory benefit (the $300 per year in our example) as the "residual benefit" or "residual."
BERIP also provided early retirement benefits for both contributory and non-contributory members whose benefits had vested. The formula for a contributory early retirement benefit reduced the normal contributory retirement benefit by one-half of one percent for each calendar month by which the retirement date preceded the retiree's sixty-second birthday. In our example, a contributory member retiring on his sixty-first birthday would receive $282 annually, that is, $300 minus 6%. Members who retired after age 60 with over 30 years of service would receive their full, unreduced benefit. In our example, a 61-year old member with 30 years' service would receive the full $300 per year, as compared to $282 per year received by a similarly situated member without 30 years' service.
Based on actuarial assumptions about Burroughs' future liabilities under BERIP, Burroughs funded both the contributory and the non-contributory parts of the plan with pre-tax dollars and invested the assets of the plan, including the employee contributions, at market rates of interest. It is undisputed that in 1984, the assets in the plan exceeded the present value of Burroughs' liability to pay future defined benefits. In their complaint, the employees claim that this overfunding, or "surplus," amounted to $100,000,000.
Sometime in 1984, Burroughs amended BERIP to terminate the contributory part of the plan, effective July 1, 1984. Also effective July 1, 1984, Burroughs initiated the Burroughs Employees Savings Thrift ("BEST"). BEST is a 401(k) plan, in which employees could defer income, receive matching contributions by Burroughs, and make additional voluntary contributions. BEST participants are at all times 100% vested in their own deferred and additional contributions, and vested according to a schedule in the company's matching contributions.
Burroughs heralded the 1984 creation of BEST as
a major addition to your benefits which will give you an opportunity to enhance substantially your future financial security.
The Burroughs Employees Savings Thrift (B.E.S.T.) plan represents a significant improvement in your benefit package and a major financial commitment from the Company.... Because the B.E.S.T. offers a more tax-efficient way to build a personal investment fund, on June 30 we are discontinuing ... the contributory portion of Burroughs Employees' Retirement Income Plan.... If you are contributing to Burroughs' retirement plan, you'll receive a personal letter in April showing your account balance. Your contributions plus interest will be transferred to the new B.E.S.T. and invested or paid out as you direct.
Letter from W.M. Blumental, CEO (Feb. 15, 1984), App. at 367.
The amended BERIP gave two options to contributory members, who could no longer accrue contributory benefits by paying into BERIP. Contributory members could opt to withdraw their total contributions, as they could have done under BERIP. Under the amended BERIP, they would receive five percent interest applied retroactively to all contributions. Vested contributory members would receive the residual benefit, calculated, as under the original plan, by reference to their total contributions. Alternatively, a contributory member's total contributions and interest would be transferred to a BEST account and he would receive the residual benefit based on contributions through June 30, 1984. Thus, employing our previous example, a non-vested contributory member could either elect to receive $1,000 cash and no residual, or to transfer the $1,000 to BEST and receive a residual upon retirement of some amount less than $300 per year. 2 Under the amended BERIP, vested...
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