In Re: Unisys Corp

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
6-28-1995
In Re: Unisys Corp
Precedential or Non-Precedential:
Docket 94-1801
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Recommended Citation
"In Re: Unisys Corp" (1995). 1995 Decisions. Paper 175.
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NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 94-1801
___________
IN RE: UNISYS CORP. RETIREE MEDICAL BENEFIT
"ERISA" LITIGATION
*Ralph Bieber and Donald J. Paquette, individually
and on behalf of all members of the Unisys Class
previously certified by the Court who were
participants in the fall 1989 and fall 1991 early
retirement incentive programs and their eligible
spouses and dependents (referred to by the Court
as "Unisys 1989 and 1991 VERIP Plaintiffs"),
Appellants
*(Pursuant to F.R.A.P. 12(a))
___________
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(District: 0313-2: MDL 969)
District Judge: Honorable Edward N. Cahn, Chief Judge
___________
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 before us arising from the
termination of post-retirement medical plans offered to retirees
and their spouses through Unisys Corporation and its corporate
predecessors, Sperry Corporation and Burroughs Corporation. This
appeal focuses specifically on claims made by those who retired
from Unisys pursuant to "voluntary early retirement incentive
programs" offered in the fall of 1989 and the fall of 1991.1
In November, 1992, Unisys announced that effective
December 31, 1992, it would terminate existing post-retirement
medical plans funded through cost-sharing and replace them with a
revised plan which would gradually shift the entire cost of
medical coverage to the retirees. A spate of lawsuits filed
pursuant to ERISA followed. Cases pending in several states were
transferred to the Eastern District of Pennsylvania and three
plaintiff classes were certified pursuant to Fed. R. Civ. P.
23(b)(2).
As members of one of the subclasses of Unisys early
retirees, the Unisys VRIPs argued that in accepting an early
retirement package, they had relinquished future income and
accrual of pension benefits in return for attractive items in the
VRIP package. One of these items, they said, was the right to
receive vested lifetime medical benefits. Because the 1992
termination of the post-retirement medical plan substantially
affected the medical benefits under which they had retired, the
VRIPs challenged the termination, alleging breach of fiduciary
duty, equitable estoppel, and breach of contract.
1
. Throughout the course of the litigation this class of
retirees has been referred to as "VRIPs" of "VERIPs". At the
time of their retirement, the VRIPs were participants in the
Unisys Post-Retirement and Disability Plan.
The breach of contract claim had two components. The
VRIPs argued first that the plan documents contained lifetime
language and a reservation of rights clause, making the plan
documents ambiguous. The VRIPs contended that once this
ambiguity was resolved through extrinsic evidence, it would be
clear that there had been a promise of lifetime benefits and that
this promise was inconsistent with the plan termination. The
second breach of contract theory advanced by the VRIPs was based
upon an alleged bilateral contract created when the VRIPs
accepted the terms of the early retirement offers. The district
court summarized this theory as follows:
[VRIPs] base their contract claim on a
bilateral contract theory . . . that by
signing up for the VERIP, they entered into
separate bilateral contracts independent of
the normal retiree benefit plans, and that
this created a binding contract under which
Unisys was not free to change the terms.
1994 W.L. 284079, 28 (E.D. Pa. 1994).
The VERIP claims, along with claims made by Sperry
regular and incentive retirees and the Burroughs incentive
retirees, were tried to the district court. Ruling on the VRIP
claims, the district court rejected each of the theories of
liability and entered judgment for Unisys. On July 11, 1994, the
court entered a superseding order and final judgment which was
certified for appeal pursuant to Fed. R. Civ. P. 54(b). It is
from this order that the VRIPs appeal. Because we conclude that
the district court properly disposed of each of the VRIP claims,
we will affirm the order of the district court.
I.
In this opinion, we confine our discussion to the
VRIPs' bilateral contract theory.2 The VRIPs rest this claim on
statements made in documents issued by Unisys in September, 1989
and July, 1991, extending an early retirement option and
explaining the terms of the early retirement offers. The VRIPs
argue that the terms of these solicitation documents obligate
Unisys to continue the post-retirement medical benefits plan and
to fund a percentage of the cost of these benefits. Because the
terms of the 1989 and 1991 early retirement offers differ, we
highlight the relevant features of each before discussing the
applicable law.
The 1989 Retirement Offer
On September 15, 1989, Unisys announced a voluntary
retirement incentive program for eligible employees. This
program was detailed in a September 25th mailing. One of the
"two major elements" of the plan was described as:
a lifetime retirement enhancement that
adds two years to your age and service
for calculations of your benefits under
2
. The law as it applies to the remaining VRIP claims
based on breach of contract and equitable estoppel is fully
explored in our opinion in appeal numbered 94-1800. Because the
law set forth there applies equally to the claims of the VRIPs,
in affirming the order of the district court we adopt that
analysis and do not reiterate it here. With respect to the
breach of fiduciary duty claim, the district court found that
"the Unisys VERIP plaintiffs . . . did not present any evidence
which suggested a breach of fiduciary duty. . . ." 1994 W.L.
284079 at 33. Having found no ground upon which to challenge
this finding, we adopt the analysis of the district court; the
VRIPs do not have a cognizable legal claim for breach of
fiduciary duty.
the Unisys Pension Plan formula and your
points in determining your contribution
rates for the Unisys Post-Retirement and
Extended Disability Medical Plan.
The age and service enhancement was referred to elsewhere in the
document as a "lifetime service-related benefit."
The VRIPs contend that the "lifetime" statements
contained in the offering were made in conjunction with a
separate announcement by Unisys that those retiring outside the
time-frame of the offering would not be eligible to receive
Unisys-subsidized medical coverage once they reached the age of
65. The VRIPs argue that the coupling of the early retirement
offer with the announcement limiting medical benefits for other
retirees led them to believe reasonably that they would have
greater retirement security if they opted for the early
retirement plan. Use of the word "lifetime", they say, meant
that they were entitled to expect to receive medical benefits
indefinitely.
For purposes of evaluating the VRIPs' position, it is
important to note that the offering document also contained a
brief description of the Unisys Post-Retirement and Extended
Disability Plan and charted the employee's monthly percentage
costs. The following language was included below the monthly
cost table:
Unisys will attempt to maintain your
contribution at the levels in effect during
the year in which your participation begins.
However, this cannot be guaranteed, given the
unpredictable conditions that continue to
influence post-retirement medical coverage,
such as rising medical costs and legislative
actions.
The 1991 Retirement Offer
In July, 1991, Unisys offered a second early retirement
plan to employees retiring between July 25, 1991 and October 31,
1991. This plan did not feature enhanced medical benefits but
did provide for certain incentive payments based on the
employee's age and service. It also contained a lump-sum payment
option not offered to regular retirees. Reference was made to
the Unisys Post-Retirement and Extended Disability Plan and, as
in the 1989 offer, a chart was included for purposes of
calculating the employees' monthly percentage costs for medical
coverage. Unlike the 1989 offer, however, the 1991 document
contained an explicit reservation of rights clause:
The Unisys Post-Retirement and Extended
Disability Medical Plan provides the same
coverages as the Unisys Medical Plan Option 2
available through the Unisys Flexible
Benefits Program. Unisys cannot, however,
guarantee that post-retirement medical
coverage will not be changed in the future.
The company continues to reserve the right to
modify or terminate this coverage at any
time. . . .
Although Unisys will attempt to maintain your
contributions at the levels in effect during
the year in which your participation begins,
the Company cannot guarantee that the
contribution levels will remain unchanged in
the future. The Company continues to reserve
the right to increase contribution levels at
any time.
The VRIPs argue that acceptance of this offer, too,
created a contract obligating Unisys to continue providing
subsidized medical coverage. They attempt to avoid the
reservation of rights language in the offer, arguing that Unisys
did not reserve the right to modify or terminate benefits for
those electing early retirement but intended that the clause
apply only to employees choosing to retire at a later time. The
same logic is applied to the clause reserving the right to
increase contribution levels.
II.
The sole issue we must address is whether the 1989 or
1991 Unisys early retirement offers entitle the VRIPs to vested
medical benefits. We conclude that they do not.
In support of their position that the early retirement
offers were sufficient to establish enforceable contracts for
lifetime medical benefits despite restrictive language in the
underlying benefits plans, the VRIPs cite one case in which a
district court held that an independent bilateral contract claim
may be cognizable under ERISA. See Sprague v. General Motors
Corp., 843 F. Supp. 266 (E.D. Mich. 1994). Relying on Sprague,
the VRIPs contend that statements made in the Unisys offers of
early retirement were sufficient to create contracts, the terms
of which were are variance with the underlying Unisys benefits
plans. We are convinced that Sprague is factually inapposite.
We decline, therefore, to follow its reasoning.3
3
. Because the Sprague facts are so dissimilar from those
presented here, we do not reach the question of whether we could
or would, under our own precedent, adopt the Sprague legal
analysis in a factually similar case.
In Sprague, 84,000 General Motors retirees and their
surviving spouses filed suit pursuant to ERISA in order to
prevent the restructuring of medical benefits. From this large
pool of retirees, four classes were certified. Two classes,
early retirees who signed long-form or short-form documents
accepting written offers of early retirement under incentive
plans, are relevant here. These early retirees claimed that GM,
through a number of early retirement incentive plans, had offered
them a "special deal" not available to others. By the terms of
this "deal", GM "agreed to continue health care benefits at no
cost to them throughout their retirement at the same level they
received before retirement." 943 F. Supp. at 269. GM disputed
this, contending that it had never intended to vest lifetime
health benefits and, in fact, had promised early retirees nothing
more than enhanced pension benefits.
Because the court determined that the documents
evidencing acceptance of early retirement were facially
ambiguous, additional evidence was introduced to establish the
full scope of the early retirement package. The GM early
retirees relied "on information provided to them, both written
and oral, at the time of retirement." Id. at 270.
Sixty-four documents describing benefits available to
early retirees were introduced into evidence as was testimony
from human resources and supervisory personnel detailing
communications to the early retirees concerning medical benefits.
The court summarized this evidence as follows:
Although various formulations exist,
virtually all of the benefit explanations
provided to the early retirees by GM contain
statements regarding both the duration of
health care benefits ("for life," "during
retirement," "continued after retirement,"
"lifetime," "will be continued," "for the
rest of your lives"); and the cost of
benefits ("no cost to retiree," "paid up,"
"at corporation expense," "without cost,"
"corporation paid basis," "at GM's expense,"
"paid for life by General Motors," "fully
paid by GM").
843 F. Supp. at 317.
The court stressed that:
GM repeatedly used the lifetime language. It
appears in many of the benefit summaries
relied on by plaintiff class, in addition to
the SPDs. In addition, GM supervisors and
personnel representatives often assured
potential retirees that health care would be
provided for their lifetimes.
Id. The court concluded that the GM early retirees had reason to
believe that they had been offered and had accepted a special
package with features distinct from those available to regular
retirees; it was reasonable for them to assume that limitations
set forth in the regular benefits documents had no application to
them. GM's claim that the "lifetime" language used in the
benefit summaries was of no legal consequence in light of
disclaimers in actual plan documents failed due to overwhelming
evidence of the employees' reasonable reliance on multiple
contrary statements made by those with authority to bind GM.
The overwhelming evidence of use of "lifetime" language
and the early retirees' reasonable reliance thereon is
conspicuously absent in this case.4 Here, there is no suggestion
in the offers of early retirement or in statements made to the
VRIPs that Unisys undertook a contractual obligation separate
from the underlying medical benefits plan available to all
retirees. Like the regular retirees, the VRIPs were entitled to
receive benefits in accordance with the then-existing post-
retirement medical plan.
Most importantly, despite the VRIPs' creative argument
to the contrary, it is also clear that both the 1989 and 1991
offering documents "specifically alerted the [VRIP] participants
. . . that the contribution rates were not guaranteed.5 The 1989
offering stated that contribution rates "cannot be guaranteed."
The 1991 offering is even more explicit in that it includes an
unambiguous reservation of rights clause. These disclaimers are
sufficient to defeat the VRIPs' contention that they reasonably
believed that their medical benefits were vested.
4
. We recognize that the 1989 VRIP did contain the phrase
"lifetime retirement enhancement." The use of the word
"lifetime" in this context is dramatically different from the
assurances detailed in Sprague. We cannot accept the VRIPs'
argument that use of this phrase in the offering document was
sufficient to allow them to conclude reasonably that medical
benefits had vested. See Chevrin v. Seelzer Bingham Pumps, Inc.,
1990 W.L. 303125 (D. Ore. 1990) (no ambiguity created where plan
document used the term "Lifetime Maximum Benefit").
5
. The district court, in an abundance of caution, went
beyond the clear language in the offering documents to consider
the reservation of rights clause set forth in the summary plan
description. We are convinced, however, that it is not necessary
to look beyond the offering documents in order to reach a
disposition with respect to the VRIPs' bilateral contract claim.
The limitations contained in the offering are consistent with
those in the underlying plan and create no ambiguity.
While we sympathize with the unfortunate position in
which the VRIPs find themselves, we are not able to offer them
legal redress. We agree with the district court that "Unisys
unambiguously reserved its right to increase contribution rates
and/or terminate the medical plan", 1994 W.L. 284079 at 31
(footnote omitted), and give weight to its finding that the VRIPs
"presented no testimony from any VRIP participant who made a
specific inquiry about the duration of his medical benefits and
was given misleading, or false, information." Id. We conclude,
therefore, that the VRIPs have failed to establish the existence
of an enforceable bilateral contract.
III.
Having considered each of the VRIP claims of error and
determining that the district court did not err, we will affirm
the order of the district court.