1995 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-28-1995

In Re: Unisys Corp (Mem Op)

Precedential or Non-Precedential:

Docket 94-2166

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Recommended Citation

"In Re: Unisys Corp (Mem Op)" (1995). 1995 Decisions. Paper 173.

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 NOT FOR PUBLICATION 

 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ___________ 

 No. 94-2166 

 ___________ 

 IN RE: UNISYS CORP. RETIREE MEDICAL BENEFIT 

 "ERISA" LITIGATION 

 *Waldo R. Udarbe, Geraldine S. Seaman, Peter 

Freeman, Lawrence M. Merck, Reed C. Jansen, David 

M. Burton, Dean Wright Martin, Frederick A. 

Benson, Roger Vincent Gillette, Charles P. 

Johnson, Lloyd E. VanDeBerg, Joan R. Johnson, 

George Alvin McKellar, Kenneth Raymond Fechter, 

Arthur Blaine Buckner, Marlan L. Nielson, Anthony 

T. Dagostino, Lucille C. Amell, Dale E. Allar, 

Robert B. Rademacher, Harry W. Duchene, Philip H. 

Desilets, Jean B. Baregi, LeRoy C. Rees, Fred R. 

Murray, Joan D. Harty, Charles M. Harkness, 

Wallace L. Anderson, Edward J. Joa, Lewis H. 

Sampson, James A. Moha, Billy M. Garrish, John 

Kourajian, Marion K. Doody and other members of 

the Sperry class who should have been included in 

the settlement group but were not, 

 Appellants

 *(Pursuant to F.R.A.P. Rule 12(a)) 

 ___________ 

 Appeal from the United States District Court 

 for the Eastern District of Pennsylvania 

 (D.C. Civil No. MDL-969) 

 District Judge: Honorable Edward N. Cahn 

 ___________ 

 

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 presently before us with 

origins in a class action suit filed on behalf of retired 

employees of Unisys Corporation and its predecessors, Sperry 

Corporation and Burroughs Corporation.1 These employees contend 

that Unisys violated provisions of the Employee Retirement Income 

Security Act ("ERISA") when it terminated its post-retirement 

medical plan effective January 1, 1993 and implemented a revised 

plan. The former employees challenge this change in plan, 

alleging breach of contract, breach of fiduciary duty, and 

equitable estoppel. 

 While multiple issues are presented in the five 

appeals, our focus in this particular appeal is limited. 

Specifically, we must determine whether a sub-group of former 

employees has standing to challenge the district court's October 

26, 1994 approval of a settlement reached between Unisys and 

certain other retirees following trial. Because we conclude that 

the appellants in this matter lack standing to challenge the 

settlement, we will affirm the order of the district court to the 

extent that the order was based upon findings with respect to 

standing.2

 

1. The four other pending appeals Nos. 94-1800; 94-1801; 

94-1875 and 94-1912 do not bear directly upon the issue presented 

here and will be treated in separate opinions. 

2. Our opinion is confined to the issue of standing; we 

make no determination regarding the terms of the partial 

settlement. 

I. 

 Because the factual underpinnings of this case are not 

in dispute, we include here only those facts necessary to place 

our decision in context. 

 Following the filing of multiple lawsuits by retirees 

against Unisys in several states, the suits were consolidated and 

transferred to the Eastern District of Pennsylvania where a class 

action was certified. From some 21,000 former employees of 

Burroughs, Sperry, and Unisys, three separate classes were 

created: Sperry retirees, Burroughs retirees, and Unisys 

retirees. For each corporate employer, the retirees' claims were 

divided into two groups. The first group of claims was made on 

behalf of all "regular" retirees. A second set of claims was 

made on behalf of "early" retirees who left Unisys and its 

predecessors under various early retirement incentive programs. 

 In October, 1993, the district court granted a partial 

summary judgment in favor of Unisys on all claims brought by 

Burroughs and Unisys regular retirees and on the breach of 

fiduciary duty and equitable estoppel claims brought by Sperry 

regular retirees. In re Unisys Corp. Retiree Medical Benefits 

ERISA Litg., 837 F. Supp. 670 (E.D. Pa. 1993). 

 The remaining claims were tried to the court. 

Following the trial but before the decision was announced, Unisys 

negotiated a settlement on behalf of Sperry and Burroughs early 

retirees. The proposed stipulation of settlement and dismissal 

included those 7,400 former employees classified as VRIPs and 
expressly excluded all Sperry regular retirees including those 

former employees classified as VRIFs. 

 Taking the proposed settlement into account, the 

district court further subdivided the Sperry retirees. Retirees 

who had taken early retirement pursuant to a Voluntary Early 

Retirement Plan (VRIPs) were distinguished from those who had 

elected to retire early under the terms of a Voluntary Reduction 

in Force Plan (VRIFs). VRIFs were classified as "regular" rather 

than "early" retirees for purposes of further litigation. The 

district court then disposed of the remaining claims by entering 

judgment in favor of Unisys on the contract claims made by 

regular Sperry retirees and on the contract, estoppel and 

fiduciary duty claims of the Unisys VRIPs. Judgment was entered 

on behalf of the Sperry regular retirees (including the VRIFs) 

with respect to the breach of fiduciary duty claim. Timely 

appeals were filed. 

 Proceedings in the district court continued while the 

proposed settlement agreement was submitted for court approval. 

Following notification of all class members included in the 

settlement, the district court held a fairness hearing after 

which the court issued an order approving the agreement, stating 

that its terms were fair, reasonable, and adequate. The 

settlement was approved despite objections raised by VRIF 

retirees, who argued that they should have been included in the 

settlement given that there was no rational basis upon which they 

could be distinguished from the other Sperry early retirees (the 

VRIPs). In its memorandum discussing the approval of the 
settlement, the district court rejected the VRIF challenge, 

stating that: 

 [T]hese retirees do not have standing to 

object to the settlement before this court. 

This settlement does not pertain to them; 

rather it is a settlement of the claims of 

7400 other members of the plaintiff class. 

Unisys saw these retirees and their claims as 

distinct from the settlement class and thus 

refused to include them in settlement 

negotiations. The fact that Unisys did so 

does not make the existing settlement unfair. 

Moreover, these plaintiffs not included in 

the settlement will continue to have their 

claims litigated as regular retirees. 

In re Unisys, MDL No. 969 (E.D. Pa. 1994) at p.10. 

 The Sperry VRIF retirees ask that we vacate the 

settlement approved by the district court. They attack the 

settlement on a number of grounds, arguing that: (1) the 

settlement is invalid because it discriminates against members of 

the Sperry class by providing benefits to some members of the 

class (the VRIPs) while denying benefits to other members of the 

class (the VRIFs); (2) there is no rational basis for 

surrendering the rights of non-settling (VRIF) members of the 

class; (3) the plaintiffs' attorney had conflicts of interest; 

and (4) the non-settling members of the class (the VRIFs) were 

not adequately represented. 

 Because we conclude that the Sperry VRIF retirees lack 

standing to challenge the validity of the partial settlement 

between Unisys and the Sperry and Burroughs VRIP retirees, we 

need not reach the merits of the VRIF claims. 
II. 

 Standing is an "essentially legal question" and our 

review is plenary. In re School Asbestos Litigation, 921 F.2d 

1330, 1332 (3d Cir. 1990), cert. denied, 499 U.S. 976 (1991). 

 Our caselaw is clear that the appellants bear the 

burden of establishing standing and that, in order to meet this 

burden, a non-settling party to a settlement agreement must do 

more than claim an interest in the lawsuit; the non-settling 

party "must show some cognizable prejudice to a legal 

relationship between it and the settling parties." Id. See also

In re Fine Paper Litig. State of Wash., 632 F.2d 1081, 1087 (3d 

Cir. 1980) (non-party to a settlement cannot object to settlement 

terms not affecting non-party's rights); Utility Contractor's 

Ass'n of New Jersey v. Toops, 507 F.2d 83, 85 (2d Cir. 1975) 

(non-party lacks standing to object to partial settlement absent 

showing of interference with legal relationship between non-party 

and those settling). 

 The VRIF retirees in this matter have failed to meet 

their burden with respect to standing in that the partial 

settlement reached between Unisys and Sperry and Burroughs VRIP 

retirees does not affect the VRIFs' separate claims against 

Unisys. The claims of breach of contract, equitable estoppel and 

breach of fiduciary duty were pursued diligently at each stage of 

the proceedings in the district court and continue to be pressed 

in the related appeals. While we well understand that the Sperry 

VRIF retirees would prefer to have been included in the 

settlement reached, their exclusion, without more, does not 
constitute legal prejudice. "[C]ourts have repeatedly held that 

a settlement which does not prevent the later assertion of a nonsettling party's claims . . . does not cause plain legal 

prejudice to the non-settling party." Agretti v. ANR, Freight 

Sys., Inc., 982 F.2d 242, 247 (7th Cir. 1992). 

 The order of the district court approving the partial 

settlement places no limits whatever on the rights of the Sperry 

VRIF retirees. In fact, the very essence of these retirees' 

challenge to the settlement is that their rights were not

affected. The position of the VRIFs may be understandable. 

Nonetheless, it is not legally cognizable. 

III. 

 We will affirm the order of the district court to the 

extent that it is based on the finding that Sperry VRIF retirees 

lack standing to challenge the settlement. 

 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 
 ___________ 

 No. 94-2166 

 ___________ 

 IN RE: UNISYS CORP. RETIREE MEDICAL BENEFIT 

 "ERISA" LITIGATION 

 *Waldo R. Udarbe, Geraldine S. Seaman, Peter 

Freeman, Lawrence M. Merck, Reed C. Jansen, David 

M. Burton, Dean Wright Martin, Frederick A. 

Benson, Roger Vincent Gillette, Charles P. 

Johnson, Lloyd E. VanDeBerg, Joan R. Johnson, 

George Alvin McKellar, Kenneth Raymond Fechter, 

Arthur Blaine Buckner, Marlan L. Nielson, Anthony 

T. Dagostino, Lucille C. Amell, Dale E. Allar, 

Robert B. Rademacher, Harry W. Duchene, Philip H. 

Desilets, Jean B. Baregi, LeRoy C. Rees, Fred R. 

Murray, Joan D. Harty, Charles M. Harkness, 

Wallace L. Anderson, Edward J. Joa, Lewis H. 

Sampson, James A. Moha, Billy M. Garrish, John 

Kourajian, Marion K. Doody and other members of 

the Sperry class who should have been included in 

the settlement group but were not, 

 Appellants
 *(Pursuant to F.R.A.P. Rule 12(a)) 

 ___________ 

 Appeal from the United States District Court 

 for the Eastern District of Pennsylvania 

 (D.C. Civil No. MDL-969) 

 District Judge: Honorable Edward N. Cahn 

 ___________ 

 

 Before: MANSMANN, SCIRICA and McKEE, Circuit Judges. 

 __________ 

JUDGMENT 

 This cause came to be considered on the record from the 

United States District Court for the Eastern District of 

Pennsylvania and was argued on May 4, 1995. 

 On consideration whereof, it is now here ordered and 

adjudged by this court that the judgment of the district court 

entered on Oc