1995 Decisions

Opinions of the United

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Precedential or Non-Precedential: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.

http://digitalcommons.law.villanova.edu/thirdcircuit_1995/175
 NOT FOR PUBLICATION 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 postretirement 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.