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. e du/thir dc ir c uit_1996/44UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 96-1100 and 96-1156

IN RE: UNISYS CORP. LONG-TERM DISABILITY PLAN ERI SA LITIGATION

JOHN B.G. ROBERTS, III; PATTY GUERRANT, as P ersonal Representative of the Estate of Jackson Gue rrant; RICHARD STARK; MARGARET C. ROELLER, as Per sonal Representative of the Estate of Eugene Roe ller, as representatives of the certified plaintif f class, and JOHN B.G. ROBERTS, III, acting individ ually,

Appellants i n No. 96-1100

FRANCES MCFEELY, Administratrix of the Es tate of John McFeely

Appellant in No. 96-1156

On Appeal from the United States District Court for the Eastern District of Pennsylvan ia (MDL-938)

Argued: August 15, 1996

BEFORE: GREENBERG and ALITO, Circuit Judge s, and DEBEVOISE, Senior District Judge*

(Filed: October 9, 1996)

*Honorable Dickinson R. Debevoise, United States Se nior District Judge for the District of New Jersey, sitting by de signation.

Leonard N. Bebchick (Argued) 888 Sixteenth Street, NW Washington, DC 20006

Attorney for Appellants, John B.G. Roberts, III ; Patty Guerrant, as Personal Representative of t he Estate of Jackson Guerrant; Richard Stark; Margaret C. Roeller, as Personal Representative of the Estate of Eugene Roeller, as representative s of the certified plaintiff class, and John B.G. Ro berts, III, acting individually,Spencer Steele

3000 Marcus Avenue, Suite 3E3 Lake Success, NY 11042

Attorney for Appellant, Frances McFeely, Admini stratrix of the Estate of John McFeely

Laurence Z. Shiekman Brian T. Ortelere (Argued) Pepper, Hamilton & Scheetz 3000 Two Logan Square

18th and Arch Streets Philadelphia, PA 19103-2799

Joseph A. Teklits Unisys Corporation P.O. Box 500, C2NW14 Blue Bell, PA 19424-0001

Attorneys for Appellees, Unisys Corporation and The Unisys Long-Term Disability Plan

Robert C. Johnson Gerald E. Fradin (Argued)
Sonnenschein Nath & Rosenthal

8000 Sears Tower Chicago, IL 60606

Attorneys for Appellee, The Travelers Insurance Company

OPINION OF THE COURT

DEBEVOISE, Senior District Judge.

This appeal requires interpretation of the "Inc ome from Other Sources" provision of the Unisys Corporation Long Term Disability Plan (the "LTD Plan" or the "Plan"). Th e provision advises the Plan participant that the "benefits you receive may be adjusted if you receive pension benefits from .. . other

sources." Appellants, employee-participants in the Plan, contend that only benefits they themselves receive from other so urces may be deducted from Plan benefits. Unisys, on the other hand, contends that deductions must be made not only for benefits the participants receive from other sources but also fo r benefits which participants' dependents receive from other s ources. The district court, agreeing with Unisys, grant ed summary judgment in favor of Unisys and in favor of Travele rs Insurance Company, the administrator of claims requests. Thi s appealfollowed.

The district court had subject matter jurisdict ion under 28 U.S.C. § 1331 (federal question jurisdiction) and u nder 29 U.S.C. §§ 1132(e)(1) and 1132(f) (jurisdiction of particip ants' claims under the Employee Retirement Income Security Act o f 1974 (ERISA), 29 U.S.C. § 1001 et seq.). We have jurisd iction over the appeal pursuant to 28 U.S.C. § 1291. Review of the grant of summary judgment is plenary.

I. FACTUAL BACKGROUND AND PROCEDURAL HIS TORY A. Factual Background Unisys is the product of the merger in Septembe r 1986 of the Burroughs Corporation ("Burroughs") and the Sperry Corporation ("Sperry"). Each of those corporations had, prior to the merger, long term disability ("LTD") plans. Each of the fo rmer plans provided that the employer must adjust benefits by (i) the Social Security disability benefits paid to the participan ts and (ii) the Social Security benefits to which the participa nts' spouses and children were entitled on account of the partic ipants' disability. The language providing for each kind of deducti on was explicit. The Burroughs LTD Plan effective January 1, 1984 provided that monthly benefits were to be reduced b y the amount
of Other Income Benefits. Other Income Benefits in cluded "[i]ncome benefits available under ... [t]he Federa l Social Security Act ... including benefits available there under to or for any and all of your dependents ... on account o f your disability...." (App. at 533-34). (Emphasis added)

. The Sperry LTD Plan called for a reduction from monthly
benefits of Other Income Benefits. "Other Income B enefits"
included: 5. The amount of disability or retirement benefits
under the United States Social Securit y Act, The Canada Pension Plan, or the Quebec Pen sion Plan, or any similar plan or act, as follows :

a. disability benefits for which:

i. you are eligible, and

ii. your spouse, child or child ren are eligible because of your di sability;

....

(App. at 565). (Emphasis added). Upon the merger of Burroughs and Sperry the res ulting corporation, Unisys, proceeded to draft a new plan for the employees of the constituent corporations. The new LTD Plan became effective on April 1, 1988, but the drafting process continued for a considerable period of time thereaf ter. In August 1988 Travelers, at Unisys' request, p repared and forwarded to Unisys a draft of the proposed text of the LTD Plan. The draft, in the form of a marked-up printer's pro of dated June 20, 1988, contained an "Income from Other Sources" text that expressly provided for the offset of LTD benefits b y the amountsof dependent Social Security benefits. (App. at 45 5-56).

At the same time Unisys' Director of Benefit Pr ograms and Planning, Mary Massman, undertook to draft a number of benefit plans including a new LTD Plan. She drew heavily u pon the Burroughs and Sperry plans, "cut and pasted" them a nd produced the new Unisys LTD Plan document. This document wa s adopted rather than the proof which Travelers had provided. Under the Unisys LTD Plan as prepared by Ms. Ma ssman, employees could elect to participate by agreeing to pay the applicable rates for coverage. The Plan is fully f unded by employee contributions. Participants qualifying fo r LTD benefits would receive "66-2/3% of your pay if you are total ly disabled." Benefits "continue for so long as you are totally d isabled, until you recover or reach the maximum benefit period." (App. at 316- 17). The income from other sources language differed significantly from the language of the Sperry and B urroughs Plans and from the language of the Travelers proof. The new LTD Plan did not provide in so many words for a deduction of Social Security benefits paid to dependents. Its income f rom other sources provision read: The LTD you receive may be adjusted if you rece ive pension benefits from Unisys and/or disability income from other sources, such as Social Security, Wo rkers' Compensation or state disability benefits. If the
combination of benefits from these sources and the Unisys LTD Plan equals more than 75% of your pa y, the Unisys LTD benefit will be reduced to bring the total
benefit from all sources to this 75% level. Re gardless of this feature, if you qualify for an LTD bene fit, you will receive at least $100 per month from the P lan.

(App. at 316). (Emphasis added). At her deposition Ms. Massman testified that th is language was intended to include adjustments for Social Secu rity benefits received by dependents as well as by the disabled e mployee: A. Okay. It was always the intent of the comp any that if income was payable by virtue of a disabi lity of one of our participants that that income wo uld be taken into account in determining the offse t. Because it was only payable by virtue of th e fact that the person was disabled.

Therefore, it didn't seem necessary to stip ulate the
difference between the two. Because it was only being paid because our participant was disa bled.

So it was always our intent to offset the i ndividual and the family Social Security disability b enefit.

(App. at 495).

A. Because an individual or a family member wo uld have received no Social Security absent that dis ability.To me it was a source of income, that was t he sole

result of the fact that our participant was disabled. Therefore, it did not seem necessary to spe cify separately 'family' or 'individual'.

. . .

Q. As I understand your testimony, the words ' family' or 'dependent' were not used because you just didn't feel it was necessary?

A. That's correct.

Q. All right. The matter was clear.

A. It was very clear to me.

(App. at 488).

Unisys, as Plan administrator, had the right to interpret

the Plan's terms: The Plan administrator has authority to control and manage the operation and administration of the plans.

. . .

The administrator for processing benefit reques ts will pay benefits in accordance with the terms of the pl ans. All final decisions with respect to the administrat ion and interpretation of the terms of the plan, howeve r, remain with the plan administrator.

(App. at 320A, 320B).

After the Plan became effective in April 1988 U nisys distributed explanatory materials to its employees. Its 1991 Enrollment Guide issued in the fall of 1990 provide d the first notice to all employees that LTD benefits were redu ced by dependent Social Security benefits. There was no m odification at
that time of the text of the LTD Plan or of its Sum mary Plan Description. The 1992 Enrollment Guide did not con tain a comparable notification. In the spring of 1993, with effect from January 1, 1993, Unisys republished its LTD Plan. This document exp ressly states that benefits are subject to reduction by amounts o f dependent Social Security awards. Unisys asserts that the ne w language expressed a continuation, rather than a change, of an existing provision. From the outset, upon Unisys' instructions, Tra velers reduced benefits payable under the Plan by the amou nts of Social Security benefits payable not only to Plan particip ants but also by the amounts payable to dependents. Until early 1991, when questioned about the appropriateness of the deducti ons on account of dependent benefits, Travelers supported its prac tice bysending to the claimant a copy of the printer's pro of,

representing that it constituted the text of the LT D Plan. This proof was not the text of the Plan and had never be en adopted by Unisys. B. Procedural History The present proceedings evolved from two compla ints filed on behalf of Unisys employees who claimed that their d isability benefits had been wrongfully reduced on account of Social Security benefits awarded to their dependents. The Roberts case, a class action, was filed in the District of Columb ia. The McFeely case, also a class action, was filed in the Supreme Court

of the State of New York. The Roberts complaint asserted four claims: Cl aim I sought recovery from the Plan for its reduction of LTD ben efits contrary to Plan provisions. Claim II sought to require Uni sys and Travelers to make the Plan whole for the payment on the ground that it was occasioned by their breach of fiduciary duties in administering the Plan. In Claim III Roberts sough t on his own behalf injunctive relief requiring Unisys and Trave lers to establish appeals procedures which comply with appl icable law. In Claim IV Roberts sought on his own behalf statut ory penalties for Unisys' failure timely to provide requested Pla n documents. By stipulation and order in the Roberts case th e class was certified, the case was transferred to the Eastern District of Pennsylvania, and four additional persons were perm itted to intervene as class representatives. The McFeely action, which asserted claims which tracked Claims I and II of the Roberts case, was removed to the Eastern
District of New York. The Panel on Multi-District Litigation
ordered it transferred to the Eastern District of P ennsylvania
where it was consolidated with the Roberts case. After completion of discovery the Roberts class representatives moved for summary judgment on class Claim I. Unisys moved for summary judgment on class Claims I and II. Travelers moved for summary judgment on class Claim II, the only claim asserted against it. The district Court rend ered a decision in January 1994. The Unisys LTD Plan provided that "[t]he Benefi t you receive may be adjusted if you receive pension benefits fro m Unisys and/or disability income from other sources, such a s social security...." The district court found that "the l anguage in dispute is not facially ambiguous" and thereupon en gaged in an analysis prescribed in Mellon Bank, N.A. v. Aetna B usiness Credit, Inc., 619 F.2d 1001 (3d Cir. 1980). Applyi ng Pennsylvania law, Mellon Bank ruled that it is the obligation of the judge "to hear the proffer of the parties and d etermine if there is objective indicia that, from the linguisti c reference point of the parties, the terms of the contract are susceptible of differing meanings." Id. at 1011. The object o f the district court's inquiry, of course, was to determine if, de spite its facial lack of ambiguity, the language "benefits yo u [the Plan participant] receive" was reasonably susceptible of meaning "benefits you [the Plan participant] and your depen dents
receive".The district court relied upon several linguist ic reference

points: (i) "... the linguistic reference point is , in part, the manner in which dependent social security benefits had been treated in the prior plans of Burroughs and Sperry. " (Slip Op. at 5); (ii) "... another linguistic reference point is the social security benefits available to a plan participant, what triggers their availability and the purpose they serve." (S lip Op. at 5); (iii) "[w]hen reading the deposition of Mary Massma n, the Director of Benefit Programs and Planning for Unisy s, and the person who drafted the present plan, the linguistic reference point of Unisys' interpretation that social securit y benefits include primary as well as dependent benefits, is f urther clarified." (Slip Op. at 6). Relying on these "linguistic reference points", the district court concluded, "... the term 'you receive' as it appears in 'Income From Other Sources' is subject to reasonabl e alternative interpretations, one of which is set forth in plain tiff's brief, the other in defendant's brief. In short, the word s in the above text are ambiguous." (Slip Op. at 7). Having found ambiguity, the district court note d that the Plan provides that all decisions with respect to it s interpretation remain with Unisys, the Plan adminis trator. The court applied the deferential standard of review pr escribed by Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), to the
effect that in these circumstances a determination of the plan administrator must be upheld unless it was arbitrar y and capricious. The court found that Unisys' interpret ation was not arbitrary and capricious. Having reached these legal and factual determin ations the district court denied plaintiffs' motion for summar y judgment on Claim I (the Plan interpretation claim) and granted Unisys' motion for summary judgment on that claim. Since C laim II against Unisys and Travelers (the breach of fiducia ry duty claim) was based upon the premise that Unisys and Traveler s acted contrary to the clear and unambiguous provisions of the Plan, that claim could not survive in light of the dispos ition of Claim I. Therefore the district court granted Unisys' an d Travelers' motions for summary judgment on Claim II.
We conclude that the district court erred in it s application of Mellon Bank and its progeny and that the languag e of the "Income From Other Sources" provision of the Unisys LTD Plan is unambiguous. It requires (for the period prior to the Plan's January 1, 1993 amendment) adjustment for benefits which the Plan participants receive from other sources; it does no t require (or permit) adjustment for benefits which participants' dependents receive from other sources. Consequently the order granting summary judgment in favor of Unisys on Claims I and II and the order granting summary judgment in favor of Travele rs on Claim II
will be reversed. The case will be remanded with d irections to enter judgment in favor of the class plaintiffs on Claim I and for further proceedings on Claim II and the remaini ng areas of dispute on Claim III in accordance with this opinio n.
II. DISCUSSION The provision which is at issue in this case re ads:The LTD benefit you receive may be adjuste d if you

receive pension benefits from Unisys and/or dis ability income from other sources, such as Social Secur ity....

Whether an ERISA plan is ambiguous is a questio n of law. Alexander v. Primerica Holdings, Inc., 967 F.2d 90, 92 (3d Cir. 1992). "The strongest external sign of agreement b etween contracting parties is the words they use in their written contract. Thus, the sanctity of the written words of the contract is embedded in the law of contract interpr etation." Mellon Bank, N.A. v. Aetna Business Credit, Inc., 6 19 F.2d 1001, 1009 (3d Cir. 1980). As the district court acknowledged, "the langua ge in dispute is not facially ambiguous." On their face the word s "benefits you receive" mean benefits which the Plan participa nts receive. They do not mean benefits which the Plan participan ts and the Plan participants' dependents receive. This usage is consistent with the language used throughout the Plan. "You" refers to the participant. When a dependent is referred to, the reference is explicit. In Mellon Bank the court recognized that there may be some situations where the parties use words differently from their common meaning. To address that possibility the ju dge will "hear the proffer of the parties and determine if there i s objective indicia that, from the linguistic reference point o f the parties, the terms of the contract are susceptible of differ ent meanings." Id. at 1011. However, the court warned that "our a pproach does not authorize a trial judge to demote the written w ord to a reduced status in contract interpretation. Althoug h extrinsic evidence may be considered under proper circumstanc es, the parties remain bound by the appropriate objective d efinition of the words they use to express their intent.... Tra de terms, legal terms of art, numbers, common words of accept ed usage and terms of a similar nature should be interpreted in accord with their specialized or accepted usage unless such an interpretation would produce irrational results or the contract do cuments are internally inconsistent." Id. at 1013. Benefit offsets are common features of LTD plan s. There is an almost even split among Fortune 500 company LTD plans between those which provide for offsets of only the employe e's Social Security disability benefits and those which also p rovide for the offset of family Social Security disability benefit s. (App. at 619). It is a simple task of draftsmanship to spec ify which offsets are applicable in any particular plan. There is no evidence in the record which suppor ts Unisys' argument that the words "benefits you receive" are susceptible of the meaning "benefits you and your dependents recei ve." Two of the linguistic reference points upon which the dist rict court relied to find ambiguity (the language of the prior plans and Social Security disability benefit practices) actua lly support appellants' position that there is no ambiguity in the language used. The third linguistic reference point upon wh ich the court relied is the testimony of the drafter of the Plan (Ms. Massman) that she intended to provide for the offset of depe ndentbenefits.

The manner in which dependent social security b enefits had been treated in the prior plans of Burroughs and Sp erry is not a linguistic reference point justifying a departure f rom the facial meaning of the Unisys Plan. Both the Burroughs and the Sperry plans contained language which specifically provide d for dependent offsets. The absence of such language in the Unisys Plan simply confirms the plain meaning of "benefits you receive." It does not include dependent benefit offsets. Nor are the Social Security benefits available to plan participants a linguistic reference point creating ambiguity in the Unisys Plan. Social Security disability benefi ts are of two kinds - those awarded to the disabled person and th ose awarded to the disabled person's dependents. The statutory pr ovisions grant directly to wives and children (including divorced wives and children not living in the household of the disable d person) Social Security disability benefits. 42 U.S.C. §§ 402(b) and 402(d). The statute provides that they "shall be e ntitled" as individuals in their own right to such benefits, a right spelled out in the regulations - 20 C.F.R. §§ 404.330-404.3 33 for wives
and 20 C.F.R. §§ 404.351-404.369 for children. The se payments are deemed to be the property of the wife or child.
Because of the twofold nature of Social Securit y disability awards - primary and dependent - LTD plans must spe cify whether one or both kinds of awards are to be offset from p lan benefits. The Social Security disability award structure does not create ambiguity in the Unisys Plan. Rather it confirms t hat the Plan's language unambiguously provides for the offset of p rimary Social Security benefits and not dependent benefits. To rely upon Ms. Massman's testimony as a lingu istic reference point is to fall into the trap which Mell on Bank warned against: "... in order to interpret contracts with some consistency, and in order to provide contracting pa rties with a legal framework which provides a measure of predict ability, the courts must eschew the ideal of ascertaining the pa rties' subjective intent and instead bind parties by the o bjective
manifestations of their intent." Id. at 1009. The fact that while Ms. Massman was cutting and pasting the Burro ughs and Sperry plans she intended to include dependent bene fits in "benefits you receive" is irrelevant. If the Plan language were in fact ambiguous the subjective intent of the Plan 's sponsor might, along with other evidence, be relevant in as certaining its meaning. Alexander v. Primerica Holdings, Inc., 96 7 F.2d 90, 96 (3d Cir. 1992). However, the undisclosed, subjecti ve intent of the draftsman cannot be relied upon to render unamb iguous language ambiguous. Unisys argues that Plan participants "both lite rally and figuratively 'receive' their dependents' Social Sec urity benefits." (Unisys Br. at 6). Unisys notes that i n the usual case a participant will benefit from the fact that his dependent receives a Social Security award because it will as sist him in meeting his support obligation to his dependent. U nisys further notes that in some situations, such as when a depen dent is a minor, Social Security benefits may be paid directl y to theparticipant to hold for the dependent.

These observations do not change the meaning of the Plan language. If offsets were to be made whenever the Plan participant benefited from a Social Security award to another person, the Plan language would have so stated. No t all dependent Social Security awards result in an incid ental benefit to the disabled plan participant and therefore an o ffset of that nature would require an inquiry into the extent a P lan participant benefited from Social Security awards t o his dependents. Neither Unisys nor Travelers ever cond ucted such an inquiry when awarding benefits under the Plan, and the Plan language does not call for such an inquiry. The fact that in some cases a Plan participant may take custody of the Social Security award made to a depe ndent does not mean that the participant receives the award. Disa bility benefits paid to family members such as children ar e designed to provide the recipient for loss of support he or she sustains because of the disability of a parent. These award s are the property of the dependent. Where it appears that a dependent because of youth or mental or physical condition ma y be unable to manage the proceeds of the award, a representative payee will be appointed if that is determined to be in the best i nterests of the beneficiary. 20 C.F.R. §§ 404.2001-404.2030. The representative payee must use the payments only for the use and benefit of the dependent consistent with regulatory guidelines and reporting requirements. 20 C.F.R. §§ 404.2040- 404-2045; 20 C.F.R. § 404.2065. The fact that a disabled Plan p articipant may be designated as the representative payee does not render him the recipient of the award. Unisys relies heavily on Hopkins v. Cohen, 390 U.S. 530 (1968). In Hopkins the plaintiff's attorney challe nged the lower
court's refusal to award him fees for his successfu l efforts in securing both primary and dependent social Security benefits. The applicable statute and regulations permitted th e claimant to seek a fee for his attorney not to exceed 25 percen t of "past benefits due you". (Emphasis added). The district court ruled that the "past benefits due you" did not include pa st benefits due the claimant's dependents which the attorney su cceeded in recovering. The Supreme Court stated "[t]hat seems to us to be
too technical construction of the Act which we need not adopt. In this instance, proof of the husband's 'claim' re sults in a package of benefits to his immediate family; and th ose benefits inure to the benefit of the head of the family who files the
'claim'". Id. at 534. Hopkins provides no assistance in interpreting the Unisys LTD Plan. The Court was required to interpret a st atute and seek the intent of Congress in a context far removed fro m a dispute over the meaning of an ERISA plan document. The ca nons of construction and the methodology of interpretation of a remedial legislative enactment differ from those applicable to the interpretation of a contract or trust instrument. E.g. Appalachian States Low-Level Radioactive Waste Comm ission v. Hon. Hazel O'Leary, F.3d (3d Cir. 1996). Hopkinsprovides no support to Unisys' position.Thus we have concluded as a matter of law that the language

of the Income From Other Sources provision of the U nisys LTD Plan is unambiguous. It provides that the benefits whic h a participant receives may be adjusted for disability benefits which the participant himself receives from other s ources, such as Social Security. It does not provide for adjust ments for disability benefits which a participant's dependent s receive from

other sources. This conclusion requires that the judgment in f avor of Unisys on Claim I must be reversed and that summary judgment on Claim I must be entered in favor of the plaintiff c lass. The summary judgment in favor of Unisys on Clai m I led to the district court's grant of summary judgment in f avor of Unisys and Travelers on the Claim II breach of fiduciary d uty claim. The breach of fiduciary duty was alleged to have ar isen out of the deduction of dependents' benefits in the face o f a Plan provision which unambiguously permitted the deducti on of only the other benefits of a Plan participant. If the Plan permitted deduction of dependents' benefits, as the district court found, Unisys' and Travelers' deduction of such benefits c ould not have been a breach of a fiduciary duty. The circumstances have changed now that it has been determined that deduction of dependents' benefits a re not provided for under the Plan and that the deductions for dependents' benefits which were made in this case w ere unauthorized. Unisys and Travelers argue that even in these circumstances the undisputed facts require that sum mary judgment be granted in their favor on Claim II. They urge t hat an error in interpreting the Plan is not a breach of a fiduc iary duty.
Travelers contends that as a matter of law it was n ot a fiduciary and therefore could not be charged with a breach of a fiduciary duty. These are questions which the district court should consider in the first instance. The judgment in fa vor of Unisys
and Travelers on Claim II will be reversed. On rem and the
district court will reconsider the motions for summ ary judgment on those claims in the light of this opinion and th e record
before it.

III. CONCLUSION The order of the district court granting summar y judgment in favor of Unisys on Claims I and II and the order of the district court granting summary judgment in favor of Travele rs on Claim II
will be reversed. The case will be remanded with d irections that judgment in favor of the class plaintiffs be entere d on Claim I and for further proceedings on Claim II and with re spect to the remaining areas of dispute on Claim III in accordan ce with this opinion.