who retired more than six years before the first action in this case was filed are time-barred.
V. RETIREES WHO CANNOT PROVE AN ESSENTIAL ELEMENT OF THEIR CLAIMS
In addition to its statute of limitations arguments, Unisys asks this court to grant summary judgment against all retirees who Unisys contends will not be able to prove all four elements of their claim. Specifically, Unisys asserts that plaintiffs who retired before "lifetime" medical benefits were offered in their divisions, those who retired when the company still enforced a mandatory retirement age of 65, and those who left their company's employ involuntarily because of disability, layoffs, or other reasons cannot prove an essential element of their claim.
These plaintiffs cannot prove that the breach of fiduciary duty led them to retire earlier than they otherwise would have. Therefore, Unisys argues, they cannot demonstrate the "resulting harm" required for a breach of fiduciary duty claim, and summary judgment should be entered against them.
Plaintiffs have responded to Unisys' argument by providing a host of affidavits from retirees who allegedly made important decisions based on the "lifetime" misrepresentations. For example, some members of the class declined other employment opportunities based on their reliance on the representations of lifetime benefits, others chose to forego the opportunity to purchase supplemental health insurance for themselves or their spouses, and others made financial decisions for their retirement based on the lifetime representations. See, e.g. Declaration of James Moha, Sperry Pltf. Exh. O. P 8, Append. to Sperry Pltf. Mem. in Opp. to Partial Summ. Judg. (did not participate in other health plans); Declaration of Philip Desilets, Sperry Pltf. Exh. F, P 9, Append. to Sperry Pltf. Mem. in Opp. to Partial Summ. Judg. (created a post-retirement budget based on misrepresentations, and if not for misrepresentations would have secured other employment after laid off from Sperry). Many of the retirees are now too old to obtain supplemental insurance or to work. Plaintiffs argue that the retirees who made decisions beyond the one to retire based on Unisys' misrepresentations can show the resulting harm required to succeed on a breach of fiduciary duty claim. Plaintiffs also remind the court that Unisys was not free to mislead any plan participant, whether active employee or retiree.
The issue for this court, then, is whether the "harm" suffered by the retirees who made decisions other than the one to retire based on Unisys' misrepresentations is the type of "resulting harm" capable of supporting a breach of fiduciary duty claim in the context of this case. Thus far in this case, the "harm" considered actionable by this court and the court of appeals has been the decision, made without full information, to retire:
Unisys had knowledge that its employees believed the assurances of lifetime benefits they had been given and were making retirement decisions based on their understanding [that the benefits would be stable for life]. . . . Unisys' executives were aware that the lifetime medical benefit was an important consideration for employees who were considering when to retire. This evidence established that the company knew that employees accelerated their retirement plans because of the belief that by retiring at a certain point in time, they would "lock in" the lifetime coverage that they had under the current plan. . . . Unisys was aware of the fact that retirees were electing to retire based on this understanding . . . .
In re Unisys. 57 F.3d at 1266 (emphasis added). The court of appeals used similar language in Fischer v. Philadelphia Electric Co., 994 F.2d 130 (3d Cir.), cert. denied, 510 U.S. 1020, 126 L. Ed. 2d 586, 114 S. Ct. 622 (1993), in which it held that a plan administrator breaches its fiduciary duty under ERISA if it makes material misrepresentations to plan participants about proposed changes to benefit plans. The court stated that a misrepresentation would be considered "material" only if there was a "substantial likelihood that it would mislead a reasonable employee in making an adequately informed decision about if and when to retired." 994 F.2d at 135 (emphasis added).
More than the court's choice of phrase guides this decision. To allow retirees who did not retire based on the lifetime language to maintain a breach of fiduciary duty in this case would subvert the holdings of this court and the court of appeals in this case. Adoption of the retirees' position would resurrect the claim for equitable estoppel, which this court has previously rejected and has refused to reinstate. In re Unisys, 837 F. Supp. at 680-81; In re Unisys, 1994 U.S. Dist. LEXIS 8549, 1994 WL 284079, at *28, aff'd, 58 F.3d at 907-08. There simply has been no mention by either this court or the court of appeals that the fiduciary duties implicated in this case arise in connection with decisions other than the one about when to retire.
This court originally granted summary judgment on the retirees' breach of fiduciary duty claims. I reinstated them because of a window opened by the Third Circuit Court of Appeals in Bixler v. Central Pennsylvania Teamsters Health and Welfare Fund, 12 F.3d 1292 (3d Cir. 1994). In that case, the court of appeals recognized a direct cause of action under 29 U.S.C. § 1132(a)(3)(B) for breach of fiduciary duty when a plan administrator failed to advise the plaintiff, a widow of a plan participant, of information concerning COBRA election rights which may have been material to her decisions regarding whether to exercise those rights. Id. at 1302. The court of appeals found evidence that the employer knew that the widow had substantial unpaid medical expenses and that she could have received reimbursement for those expenses by signing and returning a COBRA notice her husband had received. Id. While the employer did not lie to the widow about the availability of the benefits, it did fail to convey the information to her when she contacted it about another issue. The widow then failed to elect to continue her medical coverage under COBRA. The court of appeals held that the employer may have breached its fiduciary duty by not providing full information that the employer had reason to know would be material to the plaintiff's decisions. Id. at 1302-03.
This court, believing that the reasoning of Bixler and other recent appellate decisions might support the retirees' claims for breach of fiduciary duty, reinstated the Sperry regular retirees' breach of fiduciary duty claims. However, I certified the case for interlocutory appeal because of the "uncertainty of the contours of Bixler." In re Unisys, 1994 U.S. Dist. LEXIS 8549, 1994 WL 284079, at *27. When the court of appeals affirmed the reinstatement of the fiduciary claims, that court confronted two governing principles of ERISA cases. The first is the "well-established policy disfavoring informal plan amendments." In re Unisys, 57 F.3d at 1264. The second is the paramount importance of the summary plan description ("SPD") as the primary means of informing plan participants of the terms of their benefit plans. See Curtiss-Wright, 115 S. Ct. at 1230 (emphasizing the importance of SPDs for communicating essential elements of the plan to participants). The court of appeals expanded its ruling in Bixler because of the extraordinary history of misrepresentations in this case, but it was careful to emphasize that it was not creating a "precedent for any beneficiary to make claims beyond those provided in a plan." In re Unisys, 57 F.3d at 1265 (citation omitted). In discussing the evidence of resulting harm in this case, the court relied solely on the evidence that the misrepresentations "influenced [plaintiffs'] decisions to retire," Id. at 1266; it did not imply that other types of harm would support breach of fiduciary duty claims.
In allowing the breach of fiduciary claims to go forward, this court and the Court of Appeals for the Third Circuit have essentially held that reliance by the employees on the misrepresentations of Unisys, while not "reasonable reliance" for purposes of a claim of equitable estoppel, can still support a claim for breach of fiduciary duty. In a sense, the rulings in this case excuse the plan participants from their failure to read their summary plan documents in the limited context of making the retirement decision: because of the breach of duty, the employees may have retired earlier than they otherwise would have, and even if their reliance on the misrepresentations was not reasonable, the reliance supports a breach of fiduciary duty claim because it was at least partially the fault of Unisys.
The "unreasonable" reliance excused here is narrow, and supports a breach of fiduciary duty claim only in certain limited circumstances -- in this case, where the employees retired earlier than they might have had they not been misled by the lifetime misrepresentations. This court believes that expanding the concept of "resulting harm" in this case to the types of reliance alleged in the retirees' affidavits would create an unjustified expansion of the narrow holdings of this court, and would by indirection reinstate the claims for equitable estoppel.
Plaintiffs rely on In re Unisys Savings Plan Litigation, 74 F.3d 420 (3d Cir.), cert denied sub nom. Unisys Corp. v. Meinhardt, 136 L. Ed. 2d 19, 117 S. Ct. 56 (1996), and Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226 (3d Cir. 1994) in support of their arguments that breach of fiduciary duty claims can proceed where plan participants rely on incomplete or inaccurate representations from plan administrators to make decisions about investments or insurance coverage. These cases are distinguishable for two important reasons. First, unlike the retirees in this case, the plaintiffs in Curcio and Unisys Savings Plan did not have available SPDs which unambiguously provided the material information. For the Curcio and Unisys Savings Plan plaintiffs, a careful reading of the SPD by the average plan participant would not have revealed the material information. Curcio, 33 F.3d at 236-37; Unisys Savings Plan, 74 F.3d at 431, 447.
Second, and more importantly, in Curcio and Unisys Savings Plan the nexus between the misrepresentations and the reliance was close. The Curcios did not purchase insurance (and then did not have enough insurance) because they relied on misrepresentations about insurance policies the Curcios already had; the Unisys Savings Plan participants alleged that they made poor investment decisions (and then lost money on their investments) because they relied on the defendant's silence regarding material investment risks. These cases are consistent with the decision by this court that there is a close nexus between Unisys' misrepresentations about lifetime benefits and Plaintiffs' reliance on those representations in determining when to retire (and then retiring earlier than they would have in the absence of misrepresentations). However, the nexus between Unisys' misrepresentations about the duration of the lifetime benefits guarantee and the other types of reliance presented to the court, such as forsaken opportunities for insurance, employment, and investment, is not as close. This nexus, while it might suffice as reliance in an equitable estoppel claim, is simply too tenuous to constitute the resulting harm in a breach of fiduciary duty claim. The misrepresentations must be material ones; the harm must flow directly from the breach. The court of appeals has held that "in the present context, a misrepresentation is material if there is a substantial likelihood that it would mislead a reasonable employee in making an adequately informed retirement decision." In re Unisys, 57 F.3d at 1264. Given the facts of this case, this court will not expand the concept of materiality to include other types of reliance beyond the decision to retire.
VI. EQUITABLE REMEDIES
Unisys has moved for summary judgment against all retirees "insofar as they seek restitution or specific performance in the form of vested medical benefits." Def. Mot. Partial Summ. Judg. on Claims of Sperry Regular Retirees P 4; Def. Mot. Partial Summ. Judg. on Claims of Burroughs and Unisys Regular Retirees P 3. The parties have fully briefed and argued the issue of what equitable remedies are properly available to the retirees who remain in the class and who prove all the elements of their breach of fiduciary duty claims. The court will address equitable remedies in a separate opinion. Defendant's Motions for Partial Summary Judgment regarding the equitable remedies available in this case are therefore deferred.
VII. SPERRY RETIREES' MOTION FOR SUMMARY JUDGMENT
As stated earlier in this opinion, the Court of Appeals for the Third Circuit has established four elements for each plaintiff to prove in order to succeed on his or her breach of fiduciary duty claim: proof of fiduciary status, misrepresentations, company knowledge of the confusion, and resulting harm to the plaintiff. The Sperry retirees have moved for summary judgment, asking the court to hold that there is no genuine factual dispute preventing the legal conclusion that the Sperry retirees have proved all four elements of their claims.
When this court reinstated the Sperry plaintiffs' breach of fiduciary duty claims, I explained that they had not been directly before the court during the trial of the contract and equitable estoppel claims. I did not hold that each plaintiff had proved his claim of breach of fiduciary duty; in fact, in granting reconsideration of them, I held:
Because some plaintiffs have stronger cases than others based on their specific inquiries and the information given to them personally, the court finds that subclasses, and possibly even individual hearings, will be necessary to adjudicate these claims.
In re Unisys, 1994 U.S. Dist. LEXIS 8549, 1994 WL 284079, at *27.
Because at least one element of the claims, resulting harm, has not been proved on a class-wide basis, summary judgment cannot be entered for the Sperry plaintiffs. As has been discussed throughout this opinion, the harm contemplated by this court is a retiree's premature decision to retire based on a false sense of the security of the lifetime benefits promised by Unisys. The court finds that there is a genuine factual dispute about how many of the retirees actually suffered this type of harm. Additional discovery and hearings will be necessary to determine the extent of the reliance by and resulting harm to the retirees.
For the purpose of guiding the future discovery and proceedings, the court notes that the first element of the claims, proof of fiduciary status, has been established on a class-wide basis. The court of appeals has held:
There is no question that both Sperry and later Unisys were acting as plan administrators, and thus were acting in a fiduciary capacity, when they made the material misrepresentations that support the claim for breach of fiduciary duty in this case.
In re Unisys, 57 F.3d at 1261 n.10. The second element, company misrepresentations, has also been proved on a class-wide basis for all Sperry retirees.
This court found, and the court of appeals agreed, that Unisys "both actively and affirmatively, systematically misinformed its employees about the duration of their benefits." Id. at 1266. There is no genuine factual dispute that the retirees all heard or read, at least once, the lifetime benefit language.
The Sperry retirees' Motion for Summary Judgment is denied.
As this court has previously observed, this case comes at time when our country is grappling with the cost of medical care. This case arose because Unisys was faced with revised accounting standards, a more competitive global market, an increase in longevity, and rising health care costs. In the future, a case like this is unlikely to arise not only because employers will be more careful about communicating the nature and impact of reservation of rights clauses to their employees, but also because employers can no longer afford to offer the type of lifetime benefits which Unisys once provided.
The retirees in this litigation are individuals who worked, in some cases, for thirty or forty years for an employer in whom they placed great trust. The corporations which are defendants in this case provided generous medical benefits and would probably have continued to do so if costs had not so escalated and if accounting rules had not changed. This court has been faced with a case in which there is no villain, and a case in which both sides will suffer serious financial loss if they do not prevail. Faced with this difficult situation, a careful study of the text and case law of ERISA convinces the court that the statute of limitations bars the claims of many of the retirees, and that many of the retirees cannot demonstrate the resulting harm required to maintain a breach of fiduciary duty claim.
An appropriate order follows.
BY THE COURT:
Edward N. Cahn, Chief Judge
AND NOW, this 10th day of March, 1997, upon consideration of the following motions and the opposition thereto:
(1) Defendant Unisys Corporation's Motion for Partial Summary Judgment on Breach of Fiduciary Duty Claims of Sperry Regular Retirees; (2) Defendant Unisys Corporation's Motion for Partial Summary Judgment on Breach of Fiduciary Duty Claims of the Burroughs and Unisys Regular Retirees; and (3) Plaintiff Sperry Regular Retirees' Motion for Summary Judgment; IT IS ORDERED as follows:
1. Summary Judgment is GRANTED in favor of Unisys on the claims of all Sperry regular retirees who retired before November 17, 1986, six years before the first lawsuits were filed by the Sperry retirees.