In re Unisys Corp. Retiree Med. Bene. ERISA Lit.

Citation886 F. Supp. 445
Decision Date20 March 1995
Docket NumberMDL No. 969.
PartiesIn re UNISYS CORPORATION RETIREE MEDICAL BENEFITS ERISA LITIGATION.
CourtU.S. District Court — Eastern District of Pennsylvania
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OPINION

CAHN, Chief Judge.

Plaintiffs brought this action alleging that Unisys Corporation ("Unisys") violated the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq., when it unilaterally modified its retiree medical benefits plans. On October 26, 1994, the court approved a partial settlement ("the settlement") as to Sperry and Burroughs incentive retirees ("the settlement class"). Attorneys for plaintiffs now petition the court for an award of fees and expenses.

I. BACKGROUND & PROCEDURAL HISTORY

The court will recite the background and procedural history of this case, and describe the settlement, because of their relevance to the award of attorneys' fees. In September, 1986, Sperry Corporation and Burroughs Corporation merged to form Unisys Corporation. After the merger, Unisys maintained the pre-existing medical benefit plans ("the predecessor plans") for Sperry and Burroughs retirees. In 1989, Unisys created the Post-Retirement and Extended Disability Medical Plan ("the old plan") to cover all employees who retired after April 1, 1989, most of whom were former Sperry and Burroughs employees. At that time, Unisys left the predecessor plans intact. On January 1, 1993, Unisys terminated the predecessor plans and the old plan and replaced them with the new Unisys Post-Retirement and Extended Disability Medical Plan. Under this plan, the retirees no longer receive free medical insurance. Instead, they must pay a portion of the monthly premiums. The plan required the retirees to pay the full cost of premiums beginning January 1, 1995.

This litigation was commenced by a series of lawsuits filed in federal courts in Pennsylvania, New York, Minnesota, and Michigan by various groups of retirees who had worked for Unisys or its Sperry and Burroughs predecessors in those states and elsewhere throughout the country. The New York, Minnesota, and Michigan actions subsequently were transferred to this court by the Judicial Panel on Multi-District Litigation, and this court ultimately consolidated all of the actions. On June 9, 1993, this court certified the case as a class action pursuant to Fed.R.Civ.P. 23(b)(2).

The class action covered all former Sperry, Burroughs, and Unisys employees, and their eligible dependents, who were participating in the former Sperry, Burroughs, and Unisys post-retirement medical plans in November 1992. Among these plaintiffs were "incentive retirees", who retired under a voluntary early retirement incentive program.1

Plaintiffs asserted three general claims. First, they claimed that they were entitled to lifetime benefits as a matter of contract. They based this assertion on the summary plan descriptions ("SPDs") in the predecessor plans, which promised them that their benefits would continue for life.

Second, plaintiffs asserted that even if the SPDs were not enforceable as contracts, Unisys and its predecessors had breached their fiduciary duty to the retirees by affirmatively leading them to believe, by repeated written and oral assurances, that their benefits would continue for life, and that the benefits would not be subject to change after retirement.

Third, plaintiffs asserted that Unisys should be equitably estopped, given these assurances and plaintiffs' reliance on them, from exercising any right to change or terminate the plans.

Additionally, the incentive retirees asserted contract claims separate from the claims they shared with the regular retirees. They claimed that Unisys offered them certain benefits to induce them to retire, that they accepted those offers by retiring earlier than they otherwise would have done, and that the offer and acceptance formed binding contracts, apart from the contracts arising from the SPDs.

Unisys defended each of these claims based on language in all of the SPDs reserving the right to change or end the plans. Unisys argued that these reservation of rights clauses ("RORs") gave it the right to modify the lifetime benefit provisions or terminate the plans at any time.

The court granted partial summary judgment disposing of all claims brought by the regular retirees of Burroughs and Unisys. In re Unisys Corp. Retiree Medical Benefits ERISA Litigation, 837 F.Supp. 670 (E.D.Pa. 1993). As to the regular retirees of Sperry, the court denied Unisys' motion for summary judgment with respect to the breach of contract claims,2 but granted summary judgment on the claims for breach of fiduciary duty and estoppel. The partial summary judgment had no effect on the incentive retirees' claims, however, because Unisys moved for summary judgment against the regular retirees only.

The court then held a non-jury trial on all of the claims which remained after the partial grant of summary judgment. Testimony was heard from more than 80 witnesses and approximately 800 exhibits were admitted. After trial, extensive briefing, and oral argument, the court ruled in favor of Unisys on all claims brought by the Unisys incentive retirees. The court also ruled in favor of Unisys on the Sperry regular retirees' contract and estoppel claims. However, the court allowed the Sperry regular retirees to proceed with their breach of fiduciary duty claims.3 It remains to be determined whether individual hearings will be necessary to determine which Sperry regular retirees are entitled to a remedy for Unisys' breach of fiduciary duty, and what such remedy should be. Cross-appeals are pending from the summary and post-trial judgments.

II. SETTLEMENT

Following the trial, and four days before closing arguments, the Sperry and Burroughs incentive retirees and Unisys agreed on a proposed settlement. On October 17, 1994, the court held a hearing pursuant to Fed.R.Civ.P. 23(e) on plaintiffs' motion to approve the settlement.4 The court subsequently approved the settlement. See In re Unisys Corp. Retiree Medical Benefits ERISA Litigation, No. MDL 969, 1994 WL 702638 (E.D.Pa. Nov. 3, 1994).

The settlement obligates Unisys to pay $111 million — $72.9 million for the Sperry incentive retirees and $38.1 million for the Burroughs incentive retirees — as a "present value" contribution toward the cost of continued medical coverage for the incentive retirees. Since these settlement amounts are "present value" amounts, they will grow each quarter by a fixed rate of interest applied to the outstanding, unused balance of the settlement amounts promised by Unisys.

The settlement amounts will be supplemented by retiree contributions. These monies will be combined and used to pay for a benefits plan designed by the retirees in consultation with Unisys and administered by Unisys.5 These benefits will continue until the settlement monies are exhausted, or until the end of the life of the last living incentive retiree, whichever is earlier. After the settlement amounts are exhausted, Unisys will be obligated to permit incentive retirees to participate in any other non-bargaining post-retirement medical plan Unisys then maintains. If Unisys is sold before exhaustion of the funds, its obligations under the settlement will be binding on successor entities.

The Sperry and Burroughs settlement accounts will be supervised by separate Advisory Committees consisting of Sperry and Burroughs incentive retirees. The Committees will be assisted by actuarial consultants and attorneys as needed. The Committees' principal responsibility will be to monitor Unisys' compliance with its settlement obligations, periodically to review the status of the settlement accounts, and to determine any needed changes in the contribution schedules or coverage terms of the plan. Disputes about implementation and compliance with the Settlement Agreement, if not resolved under the negotiated dispute resolution procedures established by the settlement, will be subject to this court's jurisdiction.

III. PETITIONS FOR ATTORNEYS' FEES

Under the terms of the settlement, Unisys will pay to Class Counsel "reasonable attorneys' fees and disbursements relating to the Incentive Retirees' claims and the settlement thereof...." Stipulation and Agreement of Settlement and Dismissal of Claims of Sperry and Burroughs Incentive Retirees at 31. This payment "shall be credited against and reduce the applicable Incentive Retiree Subclass Settlement Amount." Id.

Counsel from the following thirteen law firms now jointly petition the court for an award of attorneys' fees and reimbursement of litigation expenses: Berger & Montague, P.C.; Davis, Miner, Barnhill & Galland; Joseph F. Roda, P.C.; Mansfield & Tanick; Meagher & Geer; Hirsch & Associates; Heller, Kapustin, Gershman & Vogel; Milberg, Weiss, Bershad, Specthrie & Lerach; Rossbacher & Associates; Schiffrin & Craig, Ltd.; Levin, Fishbein, Sedran & Berman; Gottlieb & Goren; and Sommers, Schwartz, Silver & Schwartz, P.C. They seek out-of-pocket costs and expenses of $401,775.30 from the Sperry settlement amount and $153,943.81 from the Burroughs settlement amount. They also seek $7,949,500 in fees — $5,092,000 from the Sperry settlement amount, and $2,857,500 from the Burroughs settlement amount — and have agreed among themselves upon a tentative allocation of this aggregate amount. They argue that this amount is reasonable under either the "lodestar" method of awarding attorneys' fees, as a product of their aggregate lodestar of $3,727,689 times a "blended" multiplier of 2.13,6 or as a reasonable percentage of the present value of the settlement funds.

These counsel had anticipated that counsel from the firm of Miller, Faucher, Chertow, Cafferty & Wexler would join their petition. After adding the tentative allocation to that firm, they...

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