Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Civil No. MDL 969).
Before: Mansmann, Scirica and McKEE, Circuit Judges.
We are asked to decide whether a claim for breach of fiduciary duty may be maintained under section 502(a)(3)(B) of ERISA, 29 U.S.C. § 1132(a)(3)(B), where, despite reservation clauses that the company retained the right to terminate the plans "at any time" and for "any reason," summary plan descriptions informed retired employees that the duration of their retiree medical benefits was for life, and company representatives misinformed employees that once they retired, their medical benefits would "be continued for the rest of your life." Because we hold that a breach of fiduciary claim may be maintained under these circumstances, we must also decide whether equitable relief is available under ERISA to individual plan participants. We hold that, assuming a breach of fiduciary duty can be proven, equitable relief is available to individual plan participants pursuant to 29 U.S.C. § 1132(a)(3)(B).
This class action, filed on behalf of former employees of Sperry Corporation, arises out of the termination of post-retirement medical plans, sponsored by Unisys for retirees and disabled former employees of Unisys and its corporate predecessors, Sperry Corporation and Burroughs Corporation. The retirees sought to recover post-retirement medical benefits under the terms of their benefit plans and under ERISA's provisions for appropriate equitable relief.
In September of 1986, Sperry Corporation and Burroughs Corporation merged to form Unisys Corporation. Prior to the merger, Sperry consisted of a number of business units or divisions. Until 1984 each Sperry division maintained its own medical benefits program, with each described in a separate summary plan description. In 1984, in an attempt to streamline the medical benefits plans and in response to rising medical costs, Sperry implemented Medflex, a corporate-wide medical benefits plan that applied to the entire Sperry Corporation.*fn1 Medflex was applied to future retirees only; existing retirees continued to receive coverage under the pre-Medflex plans which applied when they retired.
Following the merger in 1986, Unisys continued the Medflex plan for active employees and those who retired after its implementation but prior to April 2, 1989. Unisys also continued all of the pre-Medflex plans for those who retired prior to Medflex's implementation. In 1989, Unisys effected the consolidation of its retiree medical benefit plans when it created the Unisys Post-Retirement and Extended Disability Medical Plan to cover all employees who retired after April 1, 1989, most of whom were former Sperry and Burroughs employees. On November 3, 1992, Unisys publicly announced that effective January 1, 1993, it was terminating all existing medical benefit plans and replacing all of the pre-existing medical plans with the new Unisys Post-Retirement and Extended Medical Disability Plan. Under the new plan, retirees would be responsible for increasing levels of contributions until January 1, 1995, when they would have to pay the full cost of their premiums. Thus, the new plan sharply contrasted with earlier plans, under the majority of which Unisys paid the entire premium for an individual's life and provided benefits for the individual's spouse as well.*fn2
The appellees in this appeal are former employees of Sperry corporation (and their eligible dependents) who retired between 1969 and April 1, 1989, from Sperry Corporation or Unisys, Sperry's successor. Following Unisys' termination of their post-retirement medical benefit plans in late 1992, the retirees sought relief based on three theories: breach of contract, equitable estoppel, and breach of fiduciary duty. The Sperry retirees argued that Unisys' termination of their respective medical plans violated ERISA. They argued first that Unisys had denied them "vested" benefits in violation of 29 U.S.C. § 1132(a)(1)(B) because the summary plan descriptions ("SPDs") explaining their medical benefits contained the term "lifetime" benefits. Regarding their contract claims, the retirees relied on the explicit lifetime language in the plans, e.g., "when you retire, your medical benefit will be continued for the rest of your life," and on statements to the same effect made by the company both orally and in writing.
The Medflex SPD is illustrative. A Sperry employee who retired during the period January 1, 1984, through April 1, 1989, received medical benefits under this plan. The SPD for medical benefits is set forth in a booklet titled, "Your Company and You." Included in this plan was the following description of retiree medical benefit coverage:
If you're eligible, Medical Plan benefits continue without cost after you terminate active employment. Benefits also may continue on a contributory basis for your eligible dependents who are covered when your employment terminated. . . . Coverage continues for you for life and for your dependents while they remain eligible provided you don't stop the contributions for their coverage. After your death, your eligible dependents may continue coverage by making the require contributions. Their coverage continues until your spouse dies or remarries.
(A 2227)(emphasis added). Second, the retirees argued that even if Unisys had the legal right to terminate the plans (pursuant to the reservation of rights clause located in other sections of the plans), Unisys had breached its fiduciary duty by affirmatively misleading plan participants regarding the duration of their retiree medical benefits. Lastly, the retirees asserted claims based on equitable estoppel.*fn3
Unisys' response to these arguments was that it had reserved the right to terminate the retirees' medical plans due to a "reservation of rights clause" or "ROR" located in another section of the plan. Typical of these clauses is the one set forth in the SPD describing the Medflex plan. The Medflex SPD booklet, "Your Company and You," was distributed to all employees and contained the following reservation of rights clause:
The Company expects to continue the Plans, but reserves the right to change or end them at any time. The Company's decision to change or end the Plan may be due to changes in federal or state laws governing welfare or retirement benefits, the requirements of the IRS or ERISA, the provisions of a ...