Siskind v. Sperry Retirement Program, Unisys

• Decision Date: 06 February 1995
• Docket Number: D,No. 336,336
• Parties: Pens. Plan Guide P 23906C Philip SISKIND, et al., Plaintiffs-Appellees, v. The SPERRY RETIREMENT PROGRAM, UNISYS, formerly known as Burroughs/Sperry Corporation, the Sperry Corporation Employee Benefits Executive Committee, as fiduciaries of the Sperry Retirement Program, and as successors and Unisys Pension Plan, and its named fiduciaries, Defendants-Appellants. ocket 94-7120.
• Court: U.S. Court of Appeals — Second Circuit

Page 498

47 F.3d 498

Pens. Plan Guide P 23906C

Philip SISKIND, et al., Plaintiffs-Appellees, v. The SPERRY RETIREMENT PROGRAM, UNISYS, formerly known as Burroughs/Sperry Corporation, the Sperry Corporation Employee Benefits Executive Committee, as fiduciaries of the Sperry Retirement Program, and as successors and Unisys Pension Plan, and its named fiduciaries, Defendants-Appellants.

No. 336, Docket 94-7120.

United States Court of Appeals Second Circuit.

Argued Aug. 31, 1994.

Decided Feb. 6, 1995.

Francis M. Milone, Philadelphia, PA (Robert J. Lichtenstein, Joseph J. Costello, Morgan, Lewis & Bockius, Philadelphia, PA, Henry Rose, Epstein, Becker & Green, P.C., Washington, DC; Joseph A. Teklits, UNISYS Corporation, Blue Bell, PA, all of counsel), for defendants-appellants.

Sarah E. Siskind, Madison, WI (Davis, Miner, Barnhill & Galland, P.C., of counsel), for plaintiffs-appellees.

Before: NEWMAN, Chief Judge, KEARSE and CARDAMONE, Circuit Judges.

CARDAMONE, Circuit Judge:

This appeal compels us to revisit an area of ERISA law that involves the fiduciary duties of trustees administering a single employer pension plan. When such trustees hold corporate offices it may appear that they are placed in a position of divided loyalty: they are obliged to act, on the one hand, for the plan's members, so as to secure and make certain that benefits will be available to them and, on the other hand, for the employer, so as to safeguard the business entity's profits. Concededly, trustees have a duty of loyalty to beneficiaries that prohibits them--when their own personal interests clash with those of the beneficiaries--from engaging in self-interested conduct. But the type of private single employer plan before us was established to benefit both employees and the employer, not for the benefit of one only. Thus, it may fairly be said that the trustees have dual--not divided--loyalties. Under the single employer pension plan a trustee's action that benefits the employer will not necessarily have negative consequences for employees. The fund of a defined-benefits pension plan may be likened to a pond that benefits employer and employee alike, reduced in dry periods and increased when the income streams that feed it flow full.

Before us is an appeal by defendants Unisys, the Sperry Retirement Program and its fiduciaries and successors from the December 22, 1993 order of the United States District Court for the Southern District of New York (Broderick, J.) that granted summary judgment and injunctive relief to plaintiffs, former employees of the Sperry Corporation. The district court found that by excluding plaintiffs from a selective early retirement incentive program, defendants had breached not only their fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) Sec. 404, 29 U.S.C. Sec. 1104 (1988 & Supp. V 1993), but also the contractual guarantees they had made under the Sperry Retirement Plan documents. The injunction accordingly ordered defendants to make compensatory payments to plaintiffs, and all other employees excluded from the early retirement incentive program, premising relief on ERISA Secs. 502(a)(1)(B) and (a)(3), 29 U.S.C. Secs. 1132(a)(1)(B) and (a)(3) (1988).

Early retirement incentive programs--like the one challenged here--have become common in recent years, as corporate employers streamline their workforces and eliminate departments with overlapping missions. Providing early retirement incentives rather than full-scale layoffs is less costly to the employer and also less traumatic to employees In the instant case the district court found that employees of the Sperry Corporation had been excluded from a selective early retirement program in violation of their pension guarantee of non-discriminatory treatment. It therefore ordered retroactive payments to the excluded employees, effectively eliminating the program's personnel-selecting objective, without which the program would not have been adopted in the first place. In so doing, the trial court overlooked one of Congress' aims in enacting ERISA--that is, to afford employers designing pension plans a degree of flexibility and control.

facing the loss of their jobs. At the same time, employees considered indispensable by the employer may think it a perverse reward for success to be denied participation in the enhanced benefits granted selected employees in a retirement incentive program.

For the reasons that follow, the award of summary judgment to plaintiffs is reversed and this case is remanded to the district court for it to vacate the injunction and grant summary judgment to defendants.

BACKGROUND

I Facts

The Sperry Retirement Program consists of Part A, a defined benefit pension plan (the Sperry plan), and Part B, a defined contribution plan, not at issue in this litigation. The program was established and maintained pursuant to a written instrument as required by ERISA Sec. 402(a)(1), 29 U.S.C. Sec. 1102(a)(1) (1988). The plan documents designated the Sperry Corporation Employee Benefits Executive Committee (the Committee) as the fiduciary and administrator of the Sperry plan. The plan documents also identified the Committee as the entity with power to amend the plan. Usually in a single employer plan of this type, the employer includes a provision reserving to itself the power to amend the plan, but Sperry failed to include such a provision. Instead, it retained only a power to veto those plan amendments costing over $3 million per year. Article 4.5 of the Sperry plan contains a "uniformity provision" that states:

[a]ny discretionary actions taken ... by the Committee with respect to the classification of employees, Members, contributions or benefits shall be uniform in nature and applicable to all persons similarly situated.

In September 1986 Sperry merged with Burroughs Corporation to form a new entity now known as Unisys. Unisys determined to divest itself of some overlapping corporate divisions and cut back its workforce in others. To further these goals Unisys management developed a proposed amendment to the Sperry plan, known as the Special Voluntary Retirement Program (Special Retirement Program or Program). The Program was to be funded from the Sperry plan's existing surplus of $362 million, and would offer selected Sperry employees incentives for early retirement. Employees in divisions whose workforce Unisys sought to retain for business reasons--in general, those divisions slated for divestment--were to be excluded from the Special Retirement Program.

Unisys management submitted the proposed Program to the Committee on October 7, 1986, together with a list of those business units to be included in the Program. The Committee made no express declaration that employees in excluded divisions were not "similarly situated" to participating employees within the meaning of Article 4.5 of the Sperry plan. It simply adopted the plan amendment as proposed, along with the list of participating divisions.

The proposed list excluded, among others, the Flight Simulations Systems Division in Reston, Virginia, the Microwave and Support Systems Division in Clearwater, Florida, and the Surveillance and Fire Control Division in Great Neck, New York, the locations where plaintiffs were employed. On November 5, 1986 Unisys extended a modified version of the Program (the "60/30" plan) to employees of the Surveillance and Fire Control Division who were at least 60 years of age and had at least 30 years of credited service. By contrast, employees in other included divisions qualified for the Special Retirement Program's benefits at age 55 and with only 15 years of credited service (the "55/15" plan). In excluded divisions, where Unisys desired

to maintain personnel, no employees were offered Program benefits. Which employees to offer these benefits, and which to exclude, were decisions made solely to advance the business goals of Unisys.

II Prior Proceedings

Plaintiffs are 41 former Sperry employees who were denied the enhanced retirement benefits package either because they worked at divisions Unisys excluded from the Program or at a division where Unisys offered the Program only in its restricted "60/30" version.

Plaintiffs brought suit on November 21, 1986 against the Sperry plan and its fiduciaries and successors, seeking declaratory and injunctive relief for violations of the fiduciary provisions of ERISA Secs. 404 and 409, 29 U.S.C. Secs. 1104, 1109 (1988). They alleged that defendants had breached their duty to act for the sole benefit of Sperry plan participants and beneficiaries in accordance with the Sperry plan's governing documents. When defendants moved to dismiss the complaint, plaintiffs moved for summary judgment. On October 26, 1987 the district court denied both parties' motions and ordered them to supplement the record. Upon completion of discovery, the parties filed cross-motions for summary judgment.

On April 13, 1992 the district court granted plaintiffs summary judgment. It held that the Committee, as the sole entity with authority to amend the Sperry plan, had wrongfully delegated to Unisys management the power to determine eligibility for benefits, and thereby breached its fiduciary duty under Sec. 404. It also held that the creation of a discriminatory incentives plan violated the provision in Article 4.5 of the Sperry plan requiring the Committee's administrative actions to be "uniform in nature and applicable to all persons similarly situated." As a result, the trial court concluded that the Committee, in violation of ERISA Sec. 402(b)(3), had failed to adhere to the requirements and procedures of the Sperry plan documents.

On June 22, 1992 the district court issued an order in which it characterized its April 13, 1992 order as finding all defendants in violation of ERISA Secs. 102, 104, 402, and 404. 29 U.S.C. Secs. 1022, 1024, 1102 and 1104 (1988 & Supp. V 1983). The court ruled...