The opinion of the court was delivered by: CAHN
Plaintiff retirees brought this class action against their former employer, Unisys Corporation,
pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"). Before the court are a motion for summary judgment by the Sperry retirees and two motions for partial summary judgment by Unisys. For the reasons stated below, Plaintiffs' motion is denied, and Defendant's motions are granted in part and deferred in part.
I. FACTS AND PROCEDURAL HISTORY2
This class action, filed on behalf of former employees of the Sperry, Burroughs, and Unisys Corporations, arises out of Unisys' termination of its post-retirement medical plans for retirees and disabled former employees of the three companies.
On November 3, 1992, Unisys announced that effective January 1, 1993, it was terminating all pre-existing medical benefit plans ("old plans") and replacing the old plans with a new one, called the Unisys Post-Retirement and Extended Medical Disability Plan ("new plan"). Under the majority of the old plans, Unisys had paid the entire medical premium for a retiree's life and provided continuing benefits for the retiree's spouse. In contrast, the new plan would require retirees to contribute an increasing portion of the premiums until January 1, 1995, at which time the retirees would become responsible for the entire premium. Plaintiffs, who will be referred to throughout this opinion as the retirees, brought suit in several jurisdictions to challenge the termination of benefits. The Judicial Panel on Multidistrict Litigation transferred the cases to the Eastern District of Pennsylvania. This court certified the class and identified several subclasses.
The claims raised by the retirees sought relief based on three causes of action: breach of contract, equitable estoppel, and breach of fiduciary duty. On the breach of contract claims, which sought reinstatement of the old plans based on the theory that the benefits had vested and that the company had an obligation to continue the plans, the court granted Unisys' summary judgment motion as to the Burroughs and Unisys retirees, but denied the motion on the Sperry retirees' claims. In re Unisys, 837 F. Supp. at 675-79. Following a non-jury trial, this court entered judgment for Unisys on the Sperry retirees' contract claims. In re Unisys Corp. Retiree Medical Benefits ERISA Litig., 1994 U.S. Dist. LEXIS 8549, MDL No. 969, 1994 WL 284079, at *18-25 (E.D. Pa. June 23, 1994), aff'd, 58 F.3d 896, 901-06 (3d Cir. 1995). On the equitable estoppel claims, this court granted Unisys' motion for summary judgment against all classes, 837 F. Supp. at 680-81, and this court's refusal to reinstate these claims was affirmed. 58 F.3d at 907-08.
On the breach of fiduciary duty claims, the court originally granted Unisys' motion for summary judgment. However, after trial of the Sperry retirees' contract claims, the court granted the Sperry retirees' motion to reinstate their fiduciary duty claims. In re Unisys, 1994 U.S. Dist. LEXIS 8549, 1994 WL 284079, at *25-27. The Burroughs and Unisys retirees then moved to reinstate their breach of fiduciary duty claims. The court stayed all further proceedings on all three classes' breach of fiduciary duty claims pending the resolution of an interlocutory appeal of the Sperry reinstatement decision. The Third Circuit Court of Appeals affirmed the decision to reinstate the Sperry retirees' fiduciary claims, and the petition for writ of certiorari to the United States Supreme Court was denied. In re Unisys Corp. Retiree Medical Benefit "ERISA" Litig., 57 F.3d 1255 (3d Cir. 1995), cert. denied, 116 S. Ct. 1316 (1996). This court then considered supplemental memoranda filed by the parties, and granted the Burroughs and Unisys retirees' motions for reinstatement of their breach of fiduciary duty claims. In re Unisys Corp. Retiree Medical Benefits ERISA Litig., MDL 969, 1996 WL 455968 (E.D. Pa. Aug. 13, 1996).
n reinstating the Burroughs and Unisys retirees' breach of fiduciary duty claims, the court invited Unisys to file dispositive motions based on the statute of limitations and the relief available for any successful plaintiffs. Id. at *6. Unisys has done so in the form of the two motions for partial summary judgment now before the court. Also before the court is a motion by the Sperry retirees for summary judgment on their breach of fiduciary duty claims. This opinion addresses all three motions.
II. STANDARD FOR SUMMARY JUDGMENT
Summary judgment is appropriate when the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The court's role is to determine whether the evidence is such that a reasonable jury could return a verdict for the non-moving party, with all reasonable inferences viewed in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 255, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The moving party has the burden of demonstrating that no genuine issue of material fact exists, but if the non-moving party fails to produce sufficient evidence in connection with an essential element of a claim for which it has the burden of proof, then the moving party is entitled to summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).
III. THE BREACH OF FIDUCIARY DUTY CLAIMS
The breach of fiduciary duty claims allege a violation of ERISA § 404(a):
[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan.
29 U.S.C. § 1404(a)(1)(A). ERISA § 502(a)(3)(B) provides the retirees with a cause of action:
A civil action may be brought by a participant, beneficiary, or fiduciary to obtain other equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.
29 U.S.C. § 1132(a)(3)(B).
In addressing the arguments made regarding the retirees' breach of fiduciary duty claims, it is important to note that this court has already ruled that Unisys had a contractual right, under ERISA, both to use the reservation of rights language in the summary plan description ("SPD") and to terminate the old plans. The breach of fiduciary duty claims survive because Unisys had fiduciary responsibilities independent of its contractual responsibilities under the plan. In re Unisys, 57 F.3d at 1265. In affirming this court's reinstatement of the breach of fiduciary duty claims, the Court of Appeals for the Third Circuit explained:
Satisfaction an employer as plan administrator of its statutory disclosure obligations under ERISA does not foreclose the possibility that the plan administrator may nonetheless breach its fiduciary duty owed plan participants to communicate candidly, if the plan administrator simultaneously or subsequently makes material misrepresentations to those whom the duty of loyalty and prudence are owed.
Id. at 1264.
The breach of fiduciary duty claims are based not on the termination of the old plans, since the court has already held that the termination of the plans was not a breach of the company's fiduciary duty. In re Unisys, 837 F. Supp. at 679. Rather, they rely on the misrepresentations about the lifetime benefits in the old plans. The court reinstated the claims because the retirees presented significant evidence that Unisys made repeated and pervasive representations that the medical benefits were "for life," without ever mentioning the reservation of rights clause, which allowed Unisys to terminate the plans at any time. The court will elaborate on the substance of the fiduciary claims as necessary throughout this opinion; however, the court will first address Unisys' motion for partial summary judgment based on the applicable statute of limitations.
IV. STATUTE OF LIMITATIONS
ERISA contains an express statute of limitations for breach of fiduciary duty claims. Section 413 of ERISA provides:
No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation . . . after the earlier of--
(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission, the latest date on which the fiduciary could have cured the breach or violation, or
(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation;
except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.
The court must resolve several issues regarding the application of the statute of limitations. The first is whether Unisys used fraud or concealment to hide its breach of fiduciary duty from the plaintiffs. If the court finds that there is a genuine factual dispute regarding whether Unisys used fraud or concealment to conceal a breach of fiduciary duty, Unisys' summary judgment motion must be denied, because the retirees filed suit within six years of the actual discovery of the breach.
If the court does not find fraud or concealment, I must next determine whether the case involves an action or an omission as defined in the statute. The third question is the date of the last action constituting a part of the breach or violation, or the latest date on which Unisys could have cured the breach or violation. Finally, the court must determine whether the statute of limitations should be equitably tolled given the circumstances of this case.
A. Did Unisys use fraud and concealment?
The retirees contend that the proper statute of limitations for the court to apply is the final clause of § 1113, which states that a showing of fraud and concealment tolls the statute of limitations, giving the plaintiffs six years from the date of discovery of the breach in which to sue. This court finds no genuine factual dispute about the allegations of fraud, and holds that the "fraud or concealment" tolling provision does not apply in this case. The court has already held that there are "no substantiated allegations of fraud or bad faith on Unisys' part." In re Unisys, 837 F. Supp. at 680-81 (footnote omitted), and finds no reason to disturb that holding here.
The Third Circuit Court of Appeals recently interpreted the "fraud or concealment" provision of § 1113, and held that the federal common law discovery rule now applies to ERISA breach of fiduciary duty claims. Kurz, 96 F.3d at 1552. "In other words, when a lawsuit has been delayed because the defendant itself has taken steps to hide its breach of fiduciary duty, the limitations period will run six years after the date of the claim's discovery." Id. (internal citation omitted). The Kurz opinion emphasized that "the relevant question is . . . not whether the complaint 'sounds in ...