In Re: Unisys Corp (Mem Op)

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
6-28-1995
In Re: Unisys Corp (Mem Op)
Precedential or Non-Precedential:
Docket 94-2166
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"In Re: Unisys Corp (Mem Op)" (1995). 1995 Decisions. Paper 173.
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NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 94-2166
___________
IN RE: UNISYS CORP. RETIREE MEDICAL BENEFIT
"ERISA" LITIGATION
*Waldo R. Udarbe, Geraldine S. Seaman, Peter
Freeman, Lawrence M. Merck, Reed C. Jansen, David
M. Burton, Dean Wright Martin, Frederick A.
Benson, Roger Vincent Gillette, Charles P.
Johnson, Lloyd E. VanDeBerg, Joan R. Johnson,
George Alvin McKellar, Kenneth Raymond Fechter,
Arthur Blaine Buckner, Marlan L. Nielson, Anthony
T. Dagostino, Lucille C. Amell, Dale E. Allar,
Robert B. Rademacher, Harry W. Duchene, Philip H.
Desilets, Jean B. Baregi, LeRoy C. Rees, Fred R.
Murray, Joan D. Harty, Charles M. Harkness,
Wallace L. Anderson, Edward J. Joa, Lewis H.
Sampson, James A. Moha, Billy M. Garrish, John
Kourajian, Marion K. Doody and other members of
the Sperry class who should have been included in
the settlement group but were not,
Appellants
*(Pursuant to F.R.A.P. Rule 12(a))
___________
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. MDL-969)
District Judge: Honorable Edward N. Cahn
___________
Argued
May 4, 1995
Before: MANSMANN, SCIRICA and McKEE, Circuit Judges.
(Filed June 28, 1995)
___________
MEMORANDUM OPINION OF THE COURT
__________
MANSMANN, Circuit Judge.
This appeal is one of five presently before us with
origins in a class action suit filed on behalf of retired
employees of Unisys Corporation and its predecessors, Sperry
Corporation and Burroughs Corporation.1 These employees contend
that Unisys violated provisions of the Employee Retirement Income
Security Act ("ERISA") when it terminated its post-retirement
medical plan effective January 1, 1993 and implemented a revised
plan. The former employees challenge this change in plan,
alleging breach of contract, breach of fiduciary duty, and
equitable estoppel.
While multiple issues are presented in the five
appeals, our focus in this particular appeal is limited.
Specifically, we must determine whether a sub-group of former
employees has standing to challenge the district court's October
26, 1994 approval of a settlement reached between Unisys and
certain other retirees following trial. Because we conclude that
the appellants in this matter lack standing to challenge the
settlement, we will affirm the order of the district court to the
extent that the order was based upon findings with respect to
standing.2
1
. The four other pending appeals Nos. 94-1800; 94-1801;
94-1875 and 94-1912 do not bear directly upon the issue presented
here and will be treated in separate opinions.
2
. Our opinion is confined to the issue of standing; we
make no determination regarding the terms of the partial
settlement.
I.
Because the factual underpinnings of this case are not
in dispute, we include here only those facts necessary to place
our decision in context.
Following the filing of multiple lawsuits by retirees
against Unisys in several states, the suits were consolidated and
transferred to the Eastern District of Pennsylvania where a class
action was certified. From some 21,000 former employees of
Burroughs, Sperry, and Unisys, three separate classes were
created: Sperry retirees, Burroughs retirees, and Unisys
retirees. For each corporate employer, the retirees' claims were
divided into two groups. The first group of claims was made on
behalf of all "regular" retirees. A second set of claims was
made on behalf of "early" retirees who left Unisys and its
predecessors under various early retirement incentive programs.
In October, 1993, the district court granted a partial
summary judgment in favor of Unisys on all claims brought by
Burroughs and Unisys regular retirees and on the breach of
fiduciary duty and equitable estoppel claims brought by Sperry
regular retirees. In re Unisys Corp. Retiree Medical Benefits
ERISA Litg., 837 F. Supp. 670 (E.D. Pa. 1993).
The remaining claims were tried to the court.
Following the trial but before the decision was announced, Unisys
negotiated a settlement on behalf of Sperry and Burroughs early
retirees. The proposed stipulation of settlement and dismissal
included those 7,400 former employees classified as VRIPs and
expressly excluded all Sperry regular retirees including those
former employees classified as VRIFs.
Taking the proposed settlement into account, the
district court further subdivided the Sperry retirees. Retirees
who had taken early retirement pursuant to a Voluntary Early
Retirement Plan (VRIPs) were distinguished from those who had
elected to retire early under the terms of a Voluntary Reduction
in Force Plan (VRIFs). VRIFs were classified as "regular" rather
than "early" retirees for purposes of further litigation. The
district court then disposed of the remaining claims by entering
judgment in favor of Unisys on the contract claims made by
regular Sperry retirees and on the contract, estoppel and
fiduciary duty claims of the Unisys VRIPs. Judgment was entered
on behalf of the Sperry regular retirees (including the VRIFs)
with respect to the breach of fiduciary duty claim. Timely
appeals were filed.
Proceedings in the district court continued while the
proposed settlement agreement was submitted for court approval.
Following notification of all class members included in the
settlement, the district court held a fairness hearing after
which the court issued an order approving the agreement, stating
that its terms were fair, reasonable, and adequate. The
settlement was approved despite objections raised by VRIF
retirees, who argued that they should have been included in the
settlement given that there was no rational basis upon which they
could be distinguished from the other Sperry early retirees (the
VRIPs). In its memorandum discussing the approval of the
settlement, the district court rejected the VRIF challenge,
stating that:
[T]hese retirees do not have standing to
object to the settlement before this court.
This settlement does not pertain to them;
rather it is a settlement of the claims of
7400 other members of the plaintiff class.
Unisys saw these retirees and their claims as
distinct from the settlement class and thus
refused to include them in settlement
negotiations. The fact that Unisys did so
does not make the existing settlement unfair.
Moreover, these plaintiffs not included in
the settlement will continue to have their
claims litigated as regular retirees.
In re Unisys, MDL No. 969 (E.D. Pa. 1994) at p.10.
The Sperry VRIF retirees ask that we vacate the
settlement approved by the district court. They attack the
settlement on a number of grounds, arguing that: (1) the
settlement is invalid because it discriminates against members of
the Sperry class by providing benefits to some members of the
class (the VRIPs) while denying benefits to other members of the
class (the VRIFs); (2) there is no rational basis for
surrendering the rights of non-settling (VRIF) members of the
class; (3) the plaintiffs' attorney had conflicts of interest;
and (4) the non-settling members of the class (the VRIFs) were
not adequately represented.
Because we conclude that the Sperry VRIF retirees lack
standing to challenge the validity of the partial settlement
between Unisys and the Sperry and Burroughs VRIP retirees, we
need not reach the merits of the VRIF claims.
II.
Standing is an "essentially legal question" and our
review is plenary. In re School Asbestos Litigation, 921 F.2d
1330, 1332 (3d Cir. 1990), cert. denied, 499 U.S. 976 (1991).
Our caselaw is clear that the appellants bear the
burden of establishing standing and that, in order to meet this
burden, a non-settling party to a settlement agreement must do
more than claim an interest in the lawsuit; the non-settling
party "must show some cognizable prejudice to a legal
relationship between it and the settling parties." Id. See also
In re Fine Paper Litig. State of Wash., 632 F.2d 1081, 1087 (3d
Cir. 1980) (non-party to a settlement cannot object to settlement
terms not affecting non-party's rights); Utility Contractor's
Ass'n of New Jersey v. Toops, 507 F.2d 83, 85 (2d Cir. 1975)
(non-party lacks standing to object to partial settlement absent
showing of interference with legal relationship between non-party
and those settling).
The VRIF retirees in this matter have failed to meet
their burden with respect to standing in that the partial
settlement reached between Unisys and Sperry and Burroughs VRIP
retirees does not affect the VRIFs' separate claims against
Unisys. The claims of breach of contract, equitable estoppel and
breach of fiduciary duty were pursued diligently at each stage of
the proceedings in the district court and continue to be pressed
in the related appeals. While we well understand that the Sperry
VRIF retirees would prefer to have been included in the
settlement reached, their exclusion, without more, does not
constitute legal prejudice. "[C]ourts have repeatedly held that
a settlement which does not prevent the later assertion of a non-
settling party's claims . . . does not cause plain legal
prejudice to the non-settling party." Agretti v. ANR, Freight
Sys., Inc., 982 F.2d 242, 247 (7th Cir. 1992).
The order of the district court approving the partial
settlement places no limits whatever on the rights of the Sperry
VRIF retirees. In fact, the very essence of these retirees'
challenge to the settlement is that their rights were not
affected. The position of the VRIFs may be understandable.
Nonetheless, it is not legally cognizable.
III.
We will affirm the order of the district court to the
extent that it is based on the finding that Sperry VRIF retirees
lack standing to challenge the settlement.
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 94-2166
___________
IN RE: UNISYS CORP. RETIREE MEDICAL BENEFIT
"ERISA" LITIGATION
*Waldo R. Udarbe, Geraldine S. Seaman, Peter
Freeman, Lawrence M. Merck, Reed C. Jansen, David
M. Burton, Dean Wright Martin, Frederick A.
Benson, Roger Vincent Gillette, Charles P.
Johnson, Lloyd E. VanDeBerg, Joan R. Johnson,
George Alvin McKellar, Kenneth Raymond Fechter,
Arthur Blaine Buckner, Marlan L. Nielson, Anthony
T. Dagostino, Lucille C. Amell, Dale E. Allar,
Robert B. Rademacher, Harry W. Duchene, Philip H.
Desilets, Jean B. Baregi, LeRoy C. Rees, Fred R.
Murray, Joan D. Harty, Charles M. Harkness,
Wallace L. Anderson, Edward J. Joa, Lewis H.
Sampson, James A. Moha, Billy M. Garrish, John
Kourajian, Marion K. Doody and other members of
the Sperry class who should have been included in
the settlement group but were not,
Appellants
*(Pursuant to F.R.A.P. Rule 12(a))
___________
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. MDL-969)
District Judge: Honorable Edward N. Cahn
___________
Before: MANSMANN, SCIRICA and McKEE, Circuit Judges.
__________
JUDGMENT
This cause came to be considered on the record from the
United States District Court for the Eastern District of
Pennsylvania and was argued on May 4, 1995.
On consideration whereof, it is now here ordered and
adjudged by this court that the judgment of the district court
entered on Oc