Unisys Corp. Long-Term Disability Plan ERISA Litigation, In re

• Decision Date: 09 October 1996
• Docket Number: 96-1156,LONG-TERM,Nos. 96-1100,No. 96-1156,No. 96-1100,96-1100,s. 96-1100
• Citation: 97 F.3d 710
• Parties: In re UNISYS CORP.DISABILITY PLAN ERISA LITIGATION. John B.G. Roberts, III; Patty Guerrant, as Personal Representative of the Estate of Jackson Guerrant; Richard Stark; Margaret C. Roeller, as Personal Representative of the Estate of Eugene Roeller, as representatives of the certified plaintiff class, and John B.G. Roberts, III, acting individually, Appellants inFrances McFeely, Administratrix of the Estate of John McFeely Appellant in
• Court: U.S. Court of Appeals — Third Circuit

Page 710

97 F.3d 710

In re UNISYS CORP. LONG-TERM DISABILITY PLAN ERISA LITIGATION John B.G. Roberts, III; Patty Guerrant, as Personal Representative of the Estate of Jackson Guerrant; Richard Stark; Margaret C. Roeller, as Personal Representative of the Estate of Eugene Roeller, as representatives of the certified plaintiff class, and John B.G. Roberts, III acting individually, Appellants in No. 96-1100 Frances McFeely, Administratrix of the Estate of John McFeely Appellant in No. 96-1156.

Nos. 96-1100, 96-1156.

United States Court of Appeals Third Circuit.

Argued Aug. 15, 1996.

Decided Oct. 9, 1996.

Leonard N. Bebchick (argued), Washington, DC, for John B.G. Roberts, III, Patty Guerrant, Richard Stark, Margaret C. Roeller.

Spencer Steele, Lake Success, NY, for Frances McFeely.

Laurence Z. Shiekman, Brian T. Ortelere (argued), Pepper, Hamilton & Scheetz, Philadelphia, PA, Joseph A. Teklits, Unisys Corporation, Blue Bell, PA, for Unisys Corporation and The Unisys Long-Term Disability Plan.

Robert C. Johnson, Gerald E. Fradin (argued), Sonnenschein, Nath & Rosenthal, Chicago, IL, for The Travelers Insurance Company.

Before: GREENBERG and ALITO, Circuit Judges, and DEBEVOISE, Senior District Judge. ^*

OPINION OF THE COURT

DEBEVOISE, Senior District Judge.

This appeal requires interpretation of the "Income from Other Sources" provision of the Unisys Corporation Long Term Disability Plan (the "LTD Plan" or the "Plan"). The provision advises the Plan participant that the "benefits you receive may be adjusted if you receive pension benefits from ... other sources."

Appellants, employee-participants in the Plan, contend that only benefits they themselves receive from other sources may be deducted from Plan benefits. Unisys, on the other hand, contends that deductions must be made not only for benefits the participants receive from other sources but also for benefits which participants' dependents receive from other sources.

The district court, agreeing with Unisys, granted summary judgment in favor of Unisys and in favor of Travelers Insurance Company, the administrator of claims requests. This appeal followed.

The district court had subject matter jurisdiction under 28 U.S.C. § 1331 (federal question jurisdiction) and under 29 U.S.C. §§ 1132(e)(1) and 1132(f) (jurisdiction of participants' claims under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq.). We have jurisdiction over the appeal pursuant to 28 U.S.C. § 1291. Review of the grant of summary judgment is plenary.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. Factual Background

Unisys is the product of the merger in September 1986 of the Burroughs Corporation ("Burroughs") and the Sperry Corporation ("Sperry"). Each of those corporations had, prior to the merger, long term disability ("LTD") plans. Each of the former plans provided that the employer must adjust benefits by (i) the Social Security disability benefits paid to the participants and (ii) the Social Security benefits to which the participants' spouses and children were entitled on account of the participants' disability.

The language providing for each kind of deduction was explicit. The Burroughs LTD Plan effective January 1, 1984 provided that monthly benefits were to be reduced by the amount of Other Income Benefits. Other Income Benefits included "[i]ncome benefits available under ... [t]he Federal Social Security Act ... including benefits available thereunder to or for any and all of your dependents ... on account of your disability.... " (App. at 533-34). (Emphasis added).

The Sperry LTD Plan called for a reduction from monthly benefits of Other Income Benefits. "Other Income Benefits" included:

5. The amount of disability or retirement benefits under the United States Social Security Act, The Canada Pension Plan, or the Quebec Pension Plan,or any similar plan or act, as follows:

a. disability benefits for which:

i. you are eligible, and

ii. your spouse, child or children are eligible because of your disability;....

(App. at 565). (Emphasis added).

Upon the merger of Burroughs and Sperry the resulting corporation, Unisys, proceeded to draft a new plan for the employees of the constituent corporations. The new LTD Plan became effective on April 1, 1988, but the drafting process continued for a considerable period of time thereafter.

In August 1988 Travelers, at Unisys' request, prepared and forwarded to Unisys a draft of the proposed text of the LTD Plan. The draft, in the form of a marked-up printer's proof dated June 20, 1988, contained an "Income from Other Sources" text that expressly provided for the offset of LTD benefits by the amounts of dependent Social Security benefits. (App. at 455-56).

At the same time Unisys' Director of Benefit Programs and Planning, Mary Massman, undertook to draft a number of benefit plans including a new LTD Plan. She drew heavily upon the Burroughs and Sperry plans, "cut and pasted" them and produced the new Unisys LTD Plan document. This document was adopted rather than the proof which Travelers had provided.

Under the Unisys LTD Plan as prepared by Ms. Massman, employees could elect to participate by agreeing to pay the applicable rates for coverage. The Plan is fully funded by employee contributions. Participants qualifying for LTD benefits would receive "66-2/3% of your pay if you are totally disabled." Benefits "continue for so long as you are totally disabled, until you recover or reach the maximum benefit period." (App. at 316-17).

The income from other sources language differed significantly from the language of the Sperry and Burroughs Plans and from the language of the Travelers proof. The new LTD Plan did not provide in so many words for a deduction of Social Security benefits paid to dependents. Its income from other sources provision read:

The LTD you receive may be adjusted if you receive pension benefits from Unisys and/or disability income from other sources, such as Social Security, Workers' Compensation or state disability benefits. If the combination of benefits from these sources and the Unisys LTD Plan equals more than 75% of your pay, the Unisys LTD benefit will be reduced to bring the total benefit from all sources to this 75% level. Regardless of this feature, if you qualify for an LTD benefit, you will receive at least $100 per month from the Plan.

(App. at 316). (Emphasis added).

At her deposition Ms. Massman testified that this language was intended to include adjustments for Social Security benefits received by dependents as well as by the disabled employee:

A. Okay. It was always the intent of the company that if income was payable by virtue of a disability of one of our participants that that income would be taken into account in determining the offset. Because it was only payable by virtue of the fact that the person was disabled.

Therefore, it didn't seem necessary to stipulate the difference between the two. Because it was only being paid because our participant was disabled.

So it was always our intent to offset the individual and the family Social Security disability benefit.

(App. at 485).

A. Because an individual or a family member would have received no Social Security absent that disability. To me it was a source of income, that was the sole result of the fact that our participant was disabled. Therefore, it did not seem necessary to specify separately 'family' or 'individual'.

. . . . .

Q. As I understand your testimony, the words 'family' or 'dependent' were not used because you just didn't feel it was necessary?

A. That's correct.

Q. All right. The matter was clear.

A. It was very clear to me.

(App. at 488).

Unisys, as Plan administrator, had the right to interpret the Plan's terms:

The Plan administrator has authority to control and manage the operation and administration of the plans.

. . . . .

The administrator for processing benefit requests will pay benefits in accordance with the terms of the plans. All final decisions with respect to the administration and interpretation of the terms of the plan, however, remain with the plan administrator.

(App. at 320A, 320B).

After the Plan became effective in April 1988 Unisys distributed explanatory materials to its employees. Its 1991 Enrollment Guide issued in the fall of 1990 provided the first notice to all employees that LTD benefits were reduced by dependent Social Security benefits. There was no modification at that time of the text of the LTD Plan or of its Summary Plan Description. The 1992 Enrollment Guide did not contain a comparable notification.

In the spring of 1993, with effect from January 1, 1993, Unisys republished its LTD Plan. This document expressly states that benefits are subject to reduction by amounts of dependent Social Security awards. Unisys asserts that the new language expressed a continuation, rather than a change, of an existing provision.

From the outset, upon Unisys' instructions, Travelers reduced benefits payable under the Plan by the amounts of Social Security benefits payable not only to Plan participants but also by the amounts payable to dependents. Until early 1991, when questioned about the appropriateness of the deductions on account of dependent benefits, Travelers supported its practice by sending to the claimant a copy of the printer's proof, representing that it constituted the text of the LTD Plan. This proof was not the text of the Plan and had never been adopted by Unisys.

B. Procedural History

The present proceedings evolved from two complaints filed on behalf of Unisys employees who claimed that their disability benefits had been wrongfully reduced on account of Social Security benefits awarded to their dependents. The Roberts case, a class action, was filed in the District of Columbia. ¹ The McFeely case, also a class action, was filed in the Supreme Court of the State of New York. ²

The Roberts complaint asserted four claims:...