Unisys Sav. Plan Litigation, In re

Decision Date06 February 1996
Docket NumberNos. 95-1156,95-1157 and 95-1186,No. 91-03278,No. 95-1157,No. 95-1186,No. 91-,No. 95-1156,91-,91-03278,95-1156,95-1157,95-1186,s. 95-1156
Citation74 F.3d 420
Parties, 19 Employee Benefits Cas. 2393, Pens. Plan Guide P 23916R In re UNISYS SAVINGS PLAN LITIGATION John P. MEINHARDT, on behalf of himself and all others similarly situated v. UNISYS CORPORATION (D.C.Civilcv-03067) Michael HECK; Joseph McCarthy; Angelo DiPietro, on behalf of themselves and all others similarly situated v. UNISYS CORPORATION; The Administrative Committee of the Unisys Savings Plan; The Investment Committee of the Unisys Savings Plan; Jack A. Blaine; John J. Loughlin; Kenneth Miller; David A. White; Stefan Riesenfeld (D.C.Civilcv-03276) Gary VALA, individually and on behalf of all others similarly situated v. Jack A. BLAINE; Michael R. Losey; Kenneth L. Miller; Stefan C. Riesenfeld; Curtis A. Hessler; David A. White; Unisys Corporation; The Northern Trust Company (D.C.Civil03278) Carolyn A. GOHLIKE, on behalf of herself and all others similarly situated v. UNISYS CORPORATION (D.C.Civilcv-03321) Dennis C. STANGA; James M. Collins, on behalf of themselves and all others similarly situated v. UNISYS CORPORATION (D.C.Civilcv-04689) John H. BURGESS, Jr., on behalf of himself and all others similarly situated v. UNISYS CORPORATION (D.C.Civilcv-04696) John P. Meinhardt, Michael Heck, Joseph McCarthy, Angelo DiPietro, Gary Vala, Carolyn Gohlike, Dennis C. Stanga, James M. Collins and John H. Burgess, Jr., Appellants inIn re UNISYS SAVINGS PLAN LITIGATION John P. MEINHARDT, on behalf of himself and all others similarly situated v. UNISYS CORPORATION (D.C.Civilcv-03067) Bernard McDEVITT, on behalf of himself and all others similarly situated v. UNISYS CORPORATION (D.C.Civilcv-03126) Parker C. KEAN, on behalf of himself and all others similarly situated v. UNISYS CORPORATION (D.C.Civilcv-03164) Nadia F. SOS; Farouk M. Sos, individually and on behalf of all others similarly situated v. UNISYS CORPORATION (D.C.Civilcv-03582) Kenneth GOERS; John J. Cieslicki, on behalf of themselves and all others similarly situated v. UNISYS CORPORATION; The Northern Trust Company (
CourtU.S. Court of Appeals — Third Circuit

James R. Malone, Jr. (Argued), Michael D. Gottsch, Chimicles, Jacobsen & Tikellis, Haverford, PA, Joel C. Meredith, Daniel B. Allanoff, Meredith, Cohen & Greenfogel, Philadelphia, PA, James I. Wasserman, Julian R. Birnbaum, Vladeck, Waldman, Elias & Engelhard, New York City, for Appellants: John M. Meinhardt, Michael Heck, Joseph McCarthy, Angelo R. DiPietro, Gary Vala Laurence Z. Shiekman (Argued), Pepper, Hamilton & Scheetz, Philadelphia, PA, Joseph A. Teklits, Unisys Corporation, Blue Bell, PA, for Appellees: Unisys Corporation, Administrative Committee of the Unisys Savings Plan, Investment Committee of the Unisys Savings Plan, Jack A. Blaine, John J. Loughlin, Kenneth L. Miller, David A. White, Stefan C. Riesenfeld, Michael R. Losey, Curtis A. Hessler, Edwin P. Gilbert, Thomas Penhale, individually and in their capacities as Benefits Executive Committee and administrators of the Unisys Retirement Investment Plan; Richard H. Bierly, Curtis A. Hessler, Leon J. Level, George T. Robson.

Carolyn Gohlike, Dennis C. Stanga, James M. Collins, John H. Burgess, Jr., Bernard McDevitt, Parker Kean, Nadia F. Sos, Farouk M. Sos, Kenneth Goers, John J. Cieslicki, William Torkildson, Henry Zylla, Richard Silver, Ronald Grippo, Edward Lawler, Richard Andujar, Clarence Muller, Charles Wahler, James R. McLaughlin, Donald Rader, Joseph Lau, James Gangale, Alfred Contarino, Richard Colby, John Marcucci, Joseph A. Fiore, Richard Mastrodomenico, Nick Klemenz, Peter Szczybek.

Marcia E. Bove, United States Department of Labor, Washington, DC, for Amicus-appellant Secretary of Labor.

Mary Ellen Signorille, American Association of Retired Persons, Washington, DC, for Amicus-appellant American Association of Retired Persons.

Robert N. Eccles, Karen M. Wahle, O'Melveny & Myers, Washington, DC, for Amicus-appellees: ERISA Industry Committee, American Standard Inc., Bethlehem Steel Corp., Merck & Co., Inc., Rockwell International Corp., Scott Paper Company, and USX Corporation.

Before: MANSMANN, SCIRICA and NYGAARD, Circuit Judges.

OPINION OF THE COURT

MANSMANN, Circuit Judge.

This consolidated class action is brought pursuant to the Employee Retirement Income Security Act of 1974, ("ERISA"), 29 U.S.C. Sec. 1001 et seq. (1985 & Supp.1995), and arises out of the collapse in 1991 of the Executive Life Insurance Company of California. The plaintiffs, participants in individual account pension plans that Unisys Corporation maintained for its employees, alleged, inter alia, that the defendants breached ERISA's fiduciary duties of prudence and diversification by investing plan assets in Executive Life guaranteed investment contracts, as well as ERISA's fiduciary duty of disclosure by providing participants with misleading or incomplete communications regarding these investments and Executive Life's financial condition. In their defense, the defendants raised a question of first impression, asserting that section 1104(c) of the Act, which relieves fiduciaries of liability for losses which result from a plan participant's exercise of control over individual account assets, applies. The plaintiffs appeal the district court's decision to grant the defendants' motion for summary judgment on the plaintiffs' breach of fiduciary duty claims.

We conclude that there are genuine issues of material fact as to whether the defendants breached section 1104(a)'s fiduciary duties and as to whether the defendants are entitled to section 1104(c)'s protection. We will, therefore, vacate the district court's grant of summary judgment in the defendants' favor and will remand the case to the district court for further proceedings.

I.

We begin our analysis by reviewing the evidence of record. In the fall of 1986, Burroughs Corporation and Sperry Corporation merged to form Unisys. Prior to the merger, both Sperry and Burroughs had maintained retirement savings plans for employees known as the Sperry Retirement Program--Part B (the "Sperry Plan") and the Burroughs Employees Savings Thrift Plan (the "BEST Plan"), respectively. Each plan permitted an employee to contribute a percentage of his or her compensation into an individual account and to direct that it be invested in any one or a number of funds that were comprised of different types of investments. One of the funds in both of these plans invested in guaranteed Following the merger, the Sperry Plan and the BEST Plan were consolidated to form the Unisys Savings Plan, which took effect on April 1, 1988. 1 Like its predecessors, the Unisys Savings Plan established an individual account for each participant and offered several fund alternatives into which a participant could direct contributions on a tax-deferred basis: the Diversified Fund, the Indexed Equity Fund, the Active Equity Fund; the Unisys Common Stock Fund; the Short Term Investment Fund, and the Insurance Contract Fund. 2

investment contracts ("GICs") issued primarily by insurers. A GIC is a contract under which the issuer is obligated to repay the principal deposit at a designated future date and to pay interest at a specified rate over the duration of the contract.

The Insurance Contract Fund invested in GICs. The old Sperry Plan Fixed Income Fund, a vehicle for GICs, continued to exist, but was closed to new contributions. As GICs matured, assets invested in the Fixed Income Fund were reinvested...

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