Court Opinion

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Opinions of the United
1996 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

1-4-1996

IN RE: Unisys Svgs. Plan Litigation v. Unisys Corp.
Precedential or Non-Precedential:

Docket 95-1156

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Recommended Citation
"IN RE: Unisys Svgs. Plan Litigation v. Unisys Corp." (1996). 1996 Decisions. Paper 240.
http://digitalcommons.law.villanova.edu/thirdcircuit_1996/240

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            UNITED STATES COURT OF APPEALS
              FOR THE THIRD CIRCUIT
                   ___________

     Nos. 95-1156, 95-1157 and 95-1186
                ___________

IN RE:    UNISYS SAVINGS PLAN LITIGATION

JOHN P. MEINHARDT, on behalf of himself and
all others similarly situated

     v.

UNISYS CORPORATION
(D.C. Civil No. 91-cv-03067)

MICHAEL HECK; JOSEPH MCCARTHY;
ANGELO DEPIETRO, on behalf of themselves
and all others similarly situated

     v.

UNISYS CORPORATION; THE ADMINISTRATIVE COMMITTEE
OF THE UNISYS SAVINGS PLAN; THE INVESTMENT COMMITTEE
OF THE UNISYS SAVINGS PLAN; JACK A. BLAINE;
JOHN J. LOUGHLIN; KENNETH MILLER; DAVID A. WHITE;
STEFAN RIESENFELD
(D.C. Civil No. 91-cv-03276)

GARY VALA, individually and on behalf
of all others similarly situated

     v.

JACK A. BLAINE; MICHAEL R. LOSEY; KENNETH L. MILLER;
STEFAN C. RIESENFELD; CURTIS A. HESSLER; DAVID A.
WHITE; UNISYS CORPORATION; THE NORTHERN TRUST COMPANY
(D.C. Civil No. 91-03278)

CAROLYN A. GOHLIKE, on behalf of herself and
all others similarly situated

     v.

UNISYS CORPORATION
(D.C. Civil No. 91-cv-03321)

DENNIS C. STANGA; JAMES M. COLLINS, on

                       1
behalf of themselves and all others
similarly situated

     v.
UNISYS CORPORATION
(D.C. Civil No. 91-cv-04689)

JOHN H. BURGESS, JR., on behalf
of himself and all others similarly situated

     v.

UNISYS CORPORATION
(D.C. Civil No. 91-cv-04696)

John M. Meinhardt, Michael Heck, Joseph McCarthy,
Angelo DiPietro, Gary Vala, Carolyn Gohlike,
Dennis C. Stanga, James M. Collins and John H.
Burgess, Jr.,

                  Appellants in No. 95-1156

IN RE:    UNISYS SAVINGS PLAN LITIGATION

JOHN P. MEINHARDT, on behalf of himself and
all others similarly situated

     v.

UNISYS CORPORATION
(D.C. Civil No. 91-cv-03067)

BERNARD MCDEVITT, on behalf of himself
and all others similarly situated

     v.

UNISYS CORPORATION
(D.C. Civil No. 91-cv-03126)

PARKER C. KEAN, on behalf of himself
and all others similarly situated

     v.

UNISYS CORPORATION
(D.C. Civil No. 91-cv-03164)

                       2
NADIA F. SOS; FAROUK M. SOS, individually
and on behalf of all others similarly situated

     v.

                     3
        UNISYS CORPORATION
        (D.C. Civil No. 91-cv-03582)

        KENNETH GOERS; JOHN J. CIESLICKI, on
        behalf of themselves and all others similarly situated

             v.

        UNISYS CORPORATION; THE NORTHERN TRUST COMPANY
        (D.C. Civil No. 91-cv-04678)

        WILLIAM TORKILDSON

             v.

        UNISYS CORPORATION
        (D.C. Civil No. 91-cv-04754)

          Bernard McDevitt, Parker Kean, Nadia F. Sos,
          Farouk M. Sos, Kenneth Goers, John J. Cieslicki
          and William Torkildson,

                         Appellants in No. 95-1157

        IN RE:    UNISYS SAVINGS PLAN LITIGATION

        JOHN P. MEINHARDT, on behalf
        of himself and all others similarly situated

             v.

        UNISYS CORPORATION
        (D.C. Civil No. 91-cv-03067)

        HENRY ZYLLA; RICHARD SILVER; RONALD GRIPPO; EDWARD
        LAWLER; RICHARD ANDUJAR; CLARENCE MULLER; CHARLES
        WAHLER; JAMES MCLAUGHLIN; DONALD RADER; JOSEPH LAU;
        JAMES GANGALE; ALFRED CONTARINO; RICHARD COLBY; JOHN
        MARCUCCI; JOSEPH FIORE; RICHARD MASTRODOMENICO; NICK
        KLEMENZ; PETER SZCZYBEK, on   behalf of themselves and
        all others similarly situated;     ENGINEERS UNION
LOCAL   444 OF THE INTERNATIONAL UNION OF ELECTRONIC,
        ELECTRICAL, SALARIED, MACHINE AND FURNITURE
        WORKERS, A.F.L.-C.I.O.; LOCALS 445 OF THE INTERNATIONAL
        UNION OF ELECTRONIC, ELECTRICAL, SALARIED, MACHINE AND
        FURNITURE WORKERS, A.F.L.-C.I.O.; LOCALS 450 OF THE
        INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL,
        SALARIED, MACHINE AND FURNITURE WORKERS, A.F.L.-C.I.O.;

                               4
          LOCALS 470 OF THE INTERNATIONAL UNION OF ELECTRONIC,
          ELECTRICAL, SALARIED, MACHINE AND FURNITURE WORKERS,
          A.F.L.-C.I.O.; LOCALS 165 OF THE INTERNATIONAL UNION OF
          ELECTRONIC, ELECTRICAL, SALARIED, MACHINE AND FURNITURE
          WORKERS, A.F.L.-C.I.O.; LOCAL 3, INTERNATIONAL
          BROTHERHOOD OF ELECTRICAL WORKERS,      A.F.L.-C.I.O.

                v.

           UNISYS CORPORATION; EDWIN P. GILBERT; JOHN J. LOUGHLIN;
           THOMAS PENHALE, individually and in their capacities as
           members of the Unisys Employee Benefits Executive
           Committee and administrators       of the Unisys
Retirement      Investment Plan; RICHARD H.   BIERLY;   CURTIS A.
HESSLER; LEON J. LEVEL; KENNETH L. MILLER; DAVID A. WHITE; JACK
           A. BLAINE; STEFAN C. RIESENFELD;   GEORGE T. ROBSON,
           individually and in their capacities    as members
           of the Investment Committee of the Unisys Retirement
           Investment Plan
           (D.C. Civil No. 91-cv-03772)

          Henry Zylla, Richard Silver, Ronald Grippo, Edward
          Lawler, Richard Andujar, Clarence Muller, Charles
          Wahler, James McLaughlin, Donald Rader, Joseph Lau,
          James Gangale, Alfred Contarino, Richard
          Colby, John Marcucci, Joseph Fiore, Richard
          Mastrodomenico, Nick Klemenz and Peter Szczybek,
          individually and on behalf of the class certified,

                         Appellants in No. 95-1186
                           ___________

          Appeal from the United States District Court
            for the Eastern District of Pennsylvania
                          ___________

                              Argued
                        September 13, 1995
     Before:   Mansmann, Scirica and Nygaard, Circuit Judges.

                     (Filed January 4, 1996)
                           ___________

James R. Malone, Jr., Esquire (Argued)
Michael D. Gottsch, Esquire
Chimicles, Jacobsen & Tikellis
361 West Lancaster Avenue
One Haverford Centre
Haverford, PA 19041

                                5
Joel C. Meredith, Esquire
Daniel B. Allanoff, Esquire
Meredith, Cohen & Greenfogel
117 South 17th Street
22nd Floor
Philadelphia PA 19103

James I. Wasserman, Esquire
Julian R. Birnbaum, Esquire
Vladeck, Waldman, Elias & Engelhard
1501 Broadway
Suite 800
New York, NY 10036

          Counsel for Appellants: John M. Meinhardt, Michael
          Heck, Joseph McCarthy, Angelo R. DiPietro, Gary Vala,
          Carolyn Gohlike, Dennis C. Stanga, James M. Collins,
          John H. Burgess, Jr., Bernard McDevitt, Parker Kean,
          Nadia F. Sos, Farouk M. Sos, Kenneth Goers, John J.
          Cieslicki, William Torkildson, Henry Zylla, Richard
          Silver, Ronald Grippo, Edward Lawler, Richard Andujar,
          Clarence Muller, Charles Wahler, James R. McLaughlin,
          Donald Rader, Joseph Lau, James Gangale, Alfred
          Contarino, Richard Colby, John Marcucci, Joseph A.
          Fiore, Richard Mastrodomenico, Nick Klemenz, Peter
          Szczybek

Laurence Z. Shiekman, Esquire (Argued)
Pepper, Hamilton & Scheetz
18th & Arch Streets
3000 Two Logan Square
Philadelphia, PA 19103-2799

Joseph A. Teklits, Esquire
Unisys Corporation
P.O. Box 500
M.S. C2NW 14
Blue Bell, PA 19424

          Counsel for Appellees: Unisys Corporation,
          Administrative Committee of the Unisys Savings Plan,
          Investment Committee of the Unisys Savings Plan, Jack
          A. Blaine, John J. Loughlin, Kenneth L. Miller, David
          A. White, Stefan C. Riesenfeld, Michael R. Losey,
          Curtis A. Hessler, Edwin P. Gilbert, Thomas Penhale,
          individually and in their capacities as Benefits
          Executive Committe and administrators of the Unisys
          Retirement Investment Plan; Richard H. Bierly, Curtis
          A. Hessler, Leon J. Level, George T. Robson,

                               6
Marcia E. Bove, Esquire
Room N-4611
United States Department of Labor
200 Constitution Avenue, N.W.
Washington, DC 20210

            Counsel for Amicus-appellant Secretary of Labor

Mary Ellen Signorille, Esquire
American Association of Retired Persons
601 E Street, N.W.
Washington, DC 20049

            Counsel for Amicus-appellant American Association of
            Retired Persons

Robert N. Eccles, Esquire
Karen M. Wahle, Esquire
O'Melveny & Myers
555 13th Street, N.W.
Suite 500 West
Washington, DC 10004

            Counsel for Amicus-appellees: ERISA Industry
            Committee, American Standard Inc., Bethlehem Steel
            Corp., Merck & Co., Inc., Rockwell International Corp.,
            Scott Paper Company, and USX Corporation
                              ___________

                        OPINION OF THE COURT
                             __________

MANSMANN,   Circuit Judge.

            This consolidated class action is brought pursuant to

the Employee Retirement Income Security Act of 1974, ("ERISA"),

29 U.S.C. § 1001 et seq. (1985 & Supp. 1995), and arises out of

the collapse in 1991 of the Executive Life Insurance Company of

California.    The plaintiffs, participants in individual account

pension plans that Unisys Corporation maintained for its

employees, alleged, inter alia, that the defendants breached

ERISA's fiduciary duties of prudence and diversification by

                                 7
investing plan assets in Executive Life guaranteed investment

contracts, as well as ERISA's fiduciary duty of disclosure by

providing participants with misleading or incomplete

communications regarding these investments and Executive Life's

financial condition.   In their defense, the defendants raised a

question of first impression, asserting that section 1104(c) of

the Act, which relieves fiduciaries of liability for losses which

result from a plan participant's exercise of control over

individual account assets, applies.    The plaintiffs appeal the

district court's decision to grant the defendants' motion for

summary judgment on the plaintiffs' breach of fiduciary duty

claims.

           We conclude that there are genuine issues of material

fact as to whether the defendants breached section 1104(a)'s

fiduciary duties and as to whether the defendants are entitled to

section 1104(c)'s protection.   We will, therefore, vacate the

district court's grant of summary judgment in the defendants'

favor and will remand the case to the district court for further

proceedings.

                                I.

           We begin our analysis by reviewing the evidence of

record.   In the fall of 1986, Burroughs Corporation and Sperry

Corporation merged to form Unisys.    Prior to the merger, both

Sperry and Burroughs had maintained retirement savings plans for

employees known as the Sperry Retirement Program - Part B (the

"Sperry Plan") and the Burroughs Employees Savings Thrift Plan

                                8
(the "BEST Plan"), respectively.        Each plan permitted an employee

to contribute a percentage of his or her compensation into an

individual account and to direct that it be invested in any one

or a number of funds that were comprised of different types of

investments.    One of the funds in both of these plans invested in

guaranteed investment contracts ("GICs") issued primarily by

insurers.   A GIC is a contract under which the issuer is

obligated to repay the principal deposit at a designated future

date and to pay interest at a specified rate over the duration of

the contract.

            Following the merger, the Sperry Plan and the BEST Plan

were consolidated to form the Unisys Savings Plan, which took

effect on April 1, 1988.0    Like its predecessors, the Unisys

Savings Plan established an individual account for each

participant and offered several fund alternatives into which a

0
          The parties agree that the Unisys Savings Plan is an
"individual account plan" within the meaning of the Employee
Retirement Income Security Act of 1974, ("ERISA"), 29 U.S.C.
§ 1001 et seq. (1985 & Supp. 1995). Section 1002(34) of the Act
provides:

            § 1002.   Definitions

              (34) The term "individual account plan" or
            "defined contribution plan" means a pension
            plan which provides for an individual account
            for each participant and for benefits based
            solely upon the amount contributed to the
            participant's account, and any income,
            expenses, gains and losses, and any
            forfeitures of accounts of other participants
            which may be allocated to such participant's
            account.

29 U.S.C. § 1002(34).

                                    9
participant could direct contributions on a tax-deferred basis:

the Diversified Fund, the Indexed Equity Fund, the Active Equity

Fund; the Unisys Common Stock Fund; the Short Term Investment

Fund, and the Insurance Contract Fund.0

           The Insurance Contract Fund invested in GICs.    The old

Sperry Plan Fixed Income Fund, a vehicle for GICs, continued to

exist, but was closed to new contributions.   As GICs matured,

assets invested in the Fixed Income Fund were reinvested in the

new Insurance Contract Fund; assets in the BEST Plan equivalent,

the Guaranteed Investment Contract Fund, were likewise reinvested

in that Fund, unless a participant specified otherwise.0

Contributions to the Insurance Contract Fund were allocated on a

pro rata basis among the various GICs held therein.

           The Unisys Savings Plan allowed a participant to

transfer assets from one equity fund to another on a monthly

basis.   Due to transfer limitation terms that were included in

the contracts purchased for the GIC Funds, however, asset

transfers involving those Funds were restricted.   For example,

all transfers between any of the GIC Funds and the Short-Term

Investment Fund, another low-risk, interest-earning vehicle, were

absolutely prohibited.   Moreover, if assets were transferred from

0
          The Plan also accepted "after-tax" and "tax-deductible"
contributions that had been made under the prior plans as well as
transfers from other qualified plans or individual retirement
accounts. The Plan further provided for matching company
contributions in the form of shares of Unisys common stock.
0
          For the sake of convenience, the BEST Plan Guaranteed
Investment Contract Fund, the Sperry Plan Fixed Income Fund, and
the Unisys Savings Plan Insurance Contract Fund will be referred
to collectively as the "GIC Funds".

                                10
one of the GIC Funds to the equity or Unisys common stock funds,

a year had to pass before any assets could be transferred to the

Short-Term Investment Fund; similarly, if assets were transferred

from the equity or the Unisys common stock funds to the Short-

Term Investment Fund, a year had to transpire before any assets

could be transferred out of one of the GIC Funds.0

          Because the Plan was designed to make final

distribution of a participant's account on retirement, death,

disability or employment termination, withdrawals of tax-deferred

contributions prior to those events were limited to circumstances

of "financial hardship" and were generally taxable as ordinary

income, plus 10%.

          In addition to the Unisys Savings Plan, Unisys

established the Unisys Retirement Investment Plan ("RIP") and the

Unisys Retirement Investment Plan II ("RIP II") for unionized

employees, which for all intents and purposes were identical to

the Unisys Savings Plan.0   Contributions to the Plans designated

for investment in the Fixed Income Fund or the Insurance Contract

Fund were invested together.

0
          In addition, the Plan placed a six-month restriction on
the transfer of assets to the Insurance Contract Fund from the
equity or Unisys common stock funds if those assets had been
previously transferred from the Short-Term Investment Fund, as
well as several other restrictions of six months or a year's
duration when transfers were made to or from the Best Plan
Guaranteed Investment Contract Fund or the Sperry Plan Fixed
Income Fund.
0
          Again, for the sake of convenience, the Unisys Savings
Plan, the Unisys Retirement Plan ("RIP") and the Unisys
Retirement Plan II ("RIP II") will be referred to collectively as
the "Plans".

                                 11
             Unisys was the Plans' administrator; the Administrative

Committee, established by the Unisys Board of Directors, carried

out the Plans' provisions; and the Investment Committee, also

established by the Board, was responsible for the Plans'

investments.     The Investment Committee delegated day-to-day

investment management responsibility for the GIC Funds to two of

the Investment Committee's members, defendants David White and

Leon Level, and appointed outside managers to manage investments

in the Plans' other funds.

             From time to time White and certain members of his

staff, including William Heller, Robert Rehley and Charles

Service, conducted a bid among insurers during which GIC

contracts were selected for the appropriate GIC Fund.     These

selections were subject to Level's approval and reported to the

Investment Committee.    White and his staff did not have written

guidelines for the bidding process or contract selection; they

did, however, have informal operating policies and procedures. In

particular, they developed a rule that no more than 20% of GIC

Fund assets would be invested with any one issuer.

             After the merger in 1986, but before the effective date

of the Plans in April, 1988, two bids for the Fixed Income Fund

were held.     The first bid occurred on June 9, 1987, in the

offices of Murray Becker of Johnson & Higgins, a consultant which

Sperry had used to assist in GIC selections.     Prior to bid day,

Becker mailed bid specifications on Unisys' behalf to a number of

insurers, including the Executive Life Insurance Company of

California, inviting them to make a GIC proposal.     It was Johnson

                                  12
& Higgins' practice to solicit bids only from insurers with a

superior AAA rating as to claims-paying ability from Standard &

Poors Corporation.   At the time, Standard & Poors had rated

Executive Life as a AAA company.     Likewise, A. M. Best Company,

another rating agency, had assigned Executive Life its highest

rating of A+.   According to Becker, however, the A+ from A. M.

Best was of marginal significance since A. M. Best was overly

generous with its ratings.

          On the day of the bid, White, his staff and Becker

reviewed material that Executive Life provided concerning the

insurer's financial condition and interviewed Executive Life

representatives about the company's outlook.     The group then

discussed the Executive Life GIC proposal.    As was his custom,

Becker noted that the prospect of purchasing Executive Life GICs

was "controversial" in light of the "junk bonds" Executive Life

held in its portfolio.   Junk bonds are non-investment securities

which carry an above-average credit risk and return.    Taking

their cue from Standard & Poors, which was of the view that the

risk generated by Executive Life's junk bond investments was

offset by other conservative aspects of the insurer's investment

strategy, White and his staff were not deterred from investing in

Executive Life.   Becker warned, however, that the Standard &

Poors AAA rating was reliable only as long as Executive Life's

junk bond holdings did not exceed 35% of its bond portfolio.

Ultimately, Becker recommended that Unisys consider the purchase

of a three-year GIC from Executive Life.     While White accepted

Becker's advice to invest in Executive Life, he rejected Becker's

                                13
view as to the contract's duration.    In order to acquire the

highest interest rate that Executive Life offered, 9.45%, White

purchased a five-year Executive Life GIC for approximately $30

million.   GIC bids from Travelers Insurance Company and Seattle

First Bank were also accepted.

           Subsequent to the June 9, 1987 bid, White and Level

terminated Johnson & Higgins and did not hire a replacement,

believing that Unisys personnel could select appropriate GICs

without the help of a consultant.     A second competitive GIC bid

for the Fixed Income Fund took place on December 2, 1987. Relying

heavily on Executive Life's ratings, which had not changed since

June 9, 1987, White invested just over $135 million into another

five-year Executive Life GIC paying 9.75% in interest.     Contracts

were purchased from Seafirst Bank and Travelers Insurance Company

as well, bearing interest rates of 9.25% and 9.15% respectively.

           Shortly thereafter, on January 13, 1988, Unisys

sponsored a GIC bid for the Insurance Contract Fund.    Once again,

based on the high marks Executive Life continued to receive from

the rating agencies, White invested about $46 million in a third

five-year, 9.48% interest-paying Executive Life GIC, bringing the

total investment in GICs issued by Executive Life to $213

million.

           Communications to participants regarding the GIC Funds,

beginning with BEST Plan and Sperry Plan documents, described the

Funds as designed to preserve capital and accumulate interest and

consistently emphasized that investments in GICs were

"guaranteed" by the issuing insurers.    BEST Plan materials stated

                                 14
that the goal of the Guaranteed Insurance Contract Fund was "to

preserve the amount invested and to guarantee a rate of return",

and provided that "[i]n addition to the interest earned, the

insurance company guarantees the principal of the fund[] . . .

[and that] your account cannot go down in value; it will always

be worth as much as you put in plus your share of the interest

earned under the contract."   Similarly, with respect to the Fixed

Income Fund, Sperry Plan materials declared that "each year's

minimum [interest] rate is guaranteed for an entire year."

           Likewise, the prospectuses for the Plans, distributed

in the Spring of 1988, stated that the Insurance Contract Fund

was intended "to preserve capital while earning interest

income[]" and described the Fund as "invested in contracts with

insurance companies and other financial institutions which

guarantee repayment of principal with interest at a fixed or

fixed minimum rate for specified periods. . . ."     The Unisys

Savings Plan prospectus noted, however, that "[Unisys] does not

guarantee the repayment of principal or interest."    Although the

1988 RIP and RIP II original prospectuses did not include this

caveat, it was subsequently included in a 1988 supplement to

each.   Additionally, the Plans' prospectuses pointed out that

assets of the Insurance Contract Fund were invested in contracts

issued by, inter alia, Executive Life.

           The 1988 Summary Plan Descriptions ("SPD"s) for the

Plans provided that the investment objective of the Insurance

Contract Fund was to "[p]reserve the amount invested while

earning interest income[]", described the Funds' investment

                                15
strategy as "[t]ypically contracts of between 3 and 7 years with

various insurance companies and other financial institutions

which guarantee the principal and a specified rate of return for

the life of each contract", and explained that the future

performance of any of the funds was not certain:
          [b]enefits available are based on your
          savings plan value at the time of
          distribution. Your payments from the Plan
          are subject to the performance of the funds
          in which your accounts are invested. If the
          value declines, you may receive less from the
          Plan than you and the Company contributed.

          With respect to the Employee Retirement Income Security
Act of 1974, ("ERISA"), 29 U.S.C. § 1001 et seq. (1985 & Supp.
1995), the 1988 and 1990 prospectuses for the Plans pointed out:
the Plan is subject to some, but not all, of the provisions of
the [Act] . . . which [a]mong other things . . . set minimum
standards of fiduciary responsibility, establish minimum
standards for participation and vesting, and require that each
member be furnished with an annual report of financial condition
and a comprehensive description of the member's rights under the
Plan.

The Plans' SPDs informed the participants:

          you are entitled to certain rights and
          protections under [ERISA] . . . . In
          addition to creating rights for Plan
          participants, ERISA imposes duties upon the
          people who are responsible for the operation
          of employee benefit plans. The people who
          operate the [Unisys Savings Plan, the Unisys
          Pension Plan, RIP, and RIP II], called
          `fiduciaries' of the Plans, have a duty to
          [operate] prudently, in your interest and
          that of all members and beneficiaries.

          After the prospectuses and the SPDs were distributed,

the Investment Committee received correspondence in 1988 and 1989

from individual participants, including Henry Zylla, the

                               16
president of one of Unisys' local unions who wrote on behalf of

the union's members, questioning whether Executive Life GICs

should have been purchased for the Plans, given the insurer's

high risk investments.    In responding correspondence, Unisys

stated that the Committee did not invite "risky" companies to its

GIC bids, that its GIC selection process continuously emphasized

"safety" and that all of the contracts it selected for the GIC

Funds carried investment-grade credit ratings.

             In January of 1990, some two years after Unisys' last

Executive Life GIC purchase, Executive Life announced that it had

written down $515 million in assets due to losses in its bond

portfolio.    Following this announcement, Executive Life's credit

ratings were lowered from AAA to A by Standard & Poors; from A+

to A by A. M. Best; and from A1 to BAA2 by a third rating

company, Moody's Investors Service.

          Concerned that a flood of policy and other contract

surrenders would cause a liquidity crisis that it would be unable

to overcome, Executive Life began meeting with its investors to

discuss its financial condition.       When representatives of

Executive Life and Unisys met on January 31, 1990, Executive Life

articulated reasons for asserting that it would continue to meet

its obligations and survive intact the situation it faced.

          The next day, Thomas Penhale, an employee in Unisys'

Human Resources department, sent to defendant Michael Losey, a

Vice President of Human Resources, a copy of a newspaper article

on Executive Life with a hand-written note, stating: "[defendant]

John L[oughlin] got this today.    It is not as `comforting' as

                                  17
Exec[utive] Life led us to believe yesterday." In a memorandum to

the Investment Committee dated February 2, 1990, however, White,

who attended the January 31 meeting with Executive Life,

expressed the view that the insurer "appears to be in reasonably

good shape to weather the storm."

          On February 5, 1990, members of the Investment

Committee and other interested Unisys personnel met to discuss,

inter alia, the questions Unisys had received from participants

regarding Executive Life's status and the disclosures the company

would make to the Plans' participants about the insurer.    After

some debate, the group decided that Unisys would disseminate

information to all participants regarding Executive Life's

condition through an updated prospectus and an accompanying cover

letter.

          In late March, 1990, Unisys sent to each participant a

revised prospectus which stated generally that "an investment in

any of the investment funds involves some degree of risk[]" and

that many factors, including the "financial stability of the

institutions in which assets are invested, the quality of the

investment portfolios of those institutions, and other economic

developments will affect . . . the value of a [participant's]

investment in those funds."   In bold letters, the prospectuses

added that "[a]s a result, there is no assurance that at any

point in time the value of an investment in any fund will not be

lower than the original amount invested."

          As for the Insurance Contract Fund, the revised

prospectus stated that its "objective . . . is to preserve

                                18
capital while earning interest income[]", characterized its

investments as "contractual obligation[s]" of the issuer, and

pointed out that the "repayment of principal and interest is

necessarily subject to the [issuer's] ability to pay . . . [such

that] a downturn or loss in one or more areas of the [issuer's]

investment portfolio could have an adverse effect on the

stability of the [issuer]."     Like the April 1, 1988 prospectus,

the revised prospectus stated that "[Unisys] does not guarantee

the repayment of principal or interest[]"; it also informed

participants that the Investment Committee's guidelines required

that Unisys purchase GICs from insurers rated "Secure" by

Standard & Poors, or "Highest Investment Quality" by Moody's

Invest[ors] Service, or "Superior" or "Excellent" by A. M. Best,

but that "[c]ontracts issued by an insurance company or other

institution whose rating is downgraded subsequent to selection

may continue to be held in the fund."     Finally, Executive Life

was identified as one of the companies from which GICs had been

purchased.

             With the 1990 prospectus, participants received a

letter from defendant Jack A. Blaine, a Vice President of Human

Resources, encouraging participants to review the prospectus

carefully and reminding them that Unisys would not give advice as

to appropriate investment strategy.    The letter responded to

questions concerning the "troubled `junk bond' market and the

effect, if any, that such problems would have on the [GIC Funds]"

by pointing out that the repayment of principal and interest

under GICs necessarily and entirely depended on the ability of

                                  19
the insurer to meet its obligations; that Unisys did not

guarantee the repayment; and that the financial stability of an

insurer depended on the success of its own portfolio, such that

an investment in junk bonds could have an adverse effect on

financial stability.   Lastly, the letter provided that only those

institutions with a "secure" credit rating at the time of a

contract bid would be selected for investment.

          Although a draft of Blaine's letter had made specific

mention of Executive Life, the letter the participants eventually

received did not.   The draft's reference to Executive Life's $515

million asset writedown was removed; a statement disclosing the

magnitude of the proportion of Fixed Income and Insurance

Contract Fund investments in Executive Life was crossed out

because it "could cause panic"; and a statement about informative

news articles was deleted because it "could cause more concern."

A comment on the draft stated:    "The overall content and tone do

[not] sooth[e] any fears and may in fact stir more interest in

this subject than it deserves."

          Blaine's letter was accompanied by an enclosure that

listed all of the GICs held in the GIC Funds at that time, with

investment value, maturity dates, and the bid day and current

ratings of the issuing insurer.    The enclosure revealed that

Executive Life GICs had a combined book value of over $200

million, maturity dates of June, 1991, June and September, 1992,

and March, June and August, 1993.      It also showed the recent

decline in ratings that Executive Life had suffered.     The 1990

prospectus and the letter from Blaine with the enclosure were the

                                  20
only communications Unisys made to all participants on a

systematic basis subsequent to Executive Life's January, 1990

announcement.

             At about the same time, Unisys distributed to its

benefits administration personnel a copy of a February 23, 1990

letter from Fred Carr, Executive Life's Chairman and President,

which portrayed the company as "healthy", "financially strong",

and "capable of providing all the benefits promised[]", and

written responses to specific questions about Executive Life for

use in addressing concerns that individual participants directed

their way.    According to Losey's deposition testimony, individual

participants who asked employees in the Human Resources

department "[w]ell, gee, how many people ever lost their money in

this kind of thing[?]" would be told, "I don't remember one time

they even halfway defaulted."     In March, 1990, Unisys also met

with union employees and responded to participants' inquiries

about Executive Life's financial status.

             Unisys did not, however, disclose two decisions it had

reached:   one involving its chairman's retirement annuity and the

second, an Investment Committee resolution.          With respect to

the first, a few months after sending the revised prospectus to

participants, Unisys replaced a $500,000 retirement annuity

issued by Executive Life for Unisys' then Chairman, Michael

Blumenthal, with an annuity from another insurer at some expense

to the company.    The second matter occurred at an Investment

Committee meeting on August 10, 1990, during which was discussed,

inter alia, the course of action the Plans would take in the

                                  21
event of a Executive Life default.     The Committee ultimately

resolved "that in the event of a default in any of the guaranteed

investment contracts . . . distribution to plan participants will

be reduced by that portion of the participant's account held in

the defaulted contract."

          Seeking to reduce the waiting period for asset

transfers between "non-competing" funds and the GIC Funds from

twelve months to six, Unisys contacted the issuers from whom GICs

had been purchased and asked that they agree to appropriate

contract modifications.    In exchange for Executive Life's consent

to a waiting period reduction in the contracts it had issued to

the Plans, Unisys executed a letter agreement on October 17, 1990

which provided in pertinent part:
          Unisys Corporation hereby further agrees that
          neither it nor its affiliates, employees,
          agents or other representatives will
          communicate with Plan participants regarding
          the financial condition or prospects of
          Executive Life nor issue any other
          communication regarding Executive Life which
          could be reasonably viewed as attempting to
          influence the investment choices of Plan
          participants without first obtaining
          Executive Life's written approval of such
          communication. In the event such prior
          written approval is not obtained, Executive
          Life may elect to not honor employee requests
          for withdrawals or reallocations provided
          that Executive Life reasonably believes that
          such requests were the direct result of such
          communication.

          During this time, Executive Life's condition was widely

reported in the financial press.      Eventually, on April 11, 1991,

the California Commissioner of Insurance seized Executive Life,

                                 22
placing it in conservatorship, and on April 12, 1991, issued a

moratorium on all payments from the insurer.   As a result, Unisys

isolated and froze the balance in any participant account

invested in Executive Life by way of the Fixed Income and/or

Insurance Contract Funds.   At this time, 30% of the Fixed Income

Fund and 7% of the Insurance Contract Fund were invested with the

insurer.   On December 6, 1991, the Superior Court of California

declared Executive Life insolvent.

           In 1991, several classes composed of Unisys employees

who participate in one of the Plans and have account balances

invested in Executive Life and the unions which represent Unisys

employees commenced twelve separate actions against Unisys, the

Investment and Administrative Committees of the Unisys Board of

Directors and individuals who allegedly had served on one or both

of the Committees.

           By Pretrial Order dated November 4, 1991, the twelve

cases were consolidated for all purposes, except trial.     Pursuant

to this Order, on November 25, 1991, the plaintiffs filed a three

count second amended consolidated class action complaint against

the above-named defendants.0   In Count I, all of the plaintiffs

assert under sections 1045, 1104, 1105, 1109 and 1132 of ERISA,

that Unisys breached fiduciary duties:   by investing in Executive

Life GICs; by failing to monitor the investments and divest them

0
          In their briefs, the defendants refer to themselves
collectively as "Unisys". We will adopt that designation from
this point forward.

                                 23
from the Plans;0 by failing to diversify the GIC Funds' assets;

and by failing to provide adequate disclosures to participants

regarding "the composition of the portfolios" of the Fixed Income

and Insurance Contract Funds and the "status of Executive Life's

financial condition and the effect of [the insurer's] insolvency

on their investment. . . ."   In Count II, they assert that Unisys

violated ERISA's reporting and disclosure requirements set forth

in sections 1021(a), 1022(a)(1),(b) and 1023(b) by not furnishing

an adequate summary plan description and an annual or other

periodic report which would have apprised the plaintiffs that

investments in the Fixed Income and Insurance Contract Funds were

in jeopardy due to Executive Life's financial condition.    In

Count III, the union plaintiffs claim that Unisys' decision to

invest in Executive Life and the actions it took when the insurer

was placed in conservatorship breached certain collective

bargaining agreements in violation of section 301 of the Labor

Management Relations Act, 1947, 29 U.S.C. § 141 et seq. (1973 &

Supp. 1995).

          In answer to the plaintiffs' ERISA claims, Unisys

denied the allegations in the second amended complaint and

asserted by way of a defense that 29 U.S.C. § 1104(c), which

provides in part that "no person who is otherwise a fiduciary

shall be liable under [Part 4 -- Fiduciary Responsibility] for

any loss, or by reason of any breach, which results from [a]

0
          It appears from the plaintiffs' briefs that they no
longer pursue their allegations that Unisys breached fiduciary
duties by failing to monitor the Executive Life investments and
divest them from the Plans.

                                24
participant's or beneficiary's exercise of control [over the

assets in his account]", relieves it of liability.

          On July 22, 1994, Unisys filed a motion for summary

judgment, requesting, inter alia, that judgment be entered in its

favor as to all counts of the second amended complaint.

          On January 25, 1995, the district court granted Unisys'

motion on the plaintiffs' ERISA claims (Counts I and II) and

denied the motion as to the union plaintiffs' Labor Relations

Management Act claim (Count III).0   In its opinion, the district

court began its analysis with what it designated as the

plaintiffs' ERISA "`Adequate Information' and Control Claim";

after setting forth the elements of an adequate summary plan

description, the court turned immediately to Unisys' section

1104(c) defense.   Considering whether the Plans' SPDs and

0
          In its motion for summary judgment, Unisys also
requested that the plaintiffs' jury demand be stricken and argued
that plaintiffs are not entitled to either punitive damages or
other extra-contractual remedies under ERISA. Finding that the
plaintiffs seek equitable relief under ERISA, the district court
ruled that the plaintiffs are not entitled to a jury trial on
Counts I and II. The court retained the union plaintiffs' jury
trial demand on Count III because it held that the union
plaintiffs' claim under the Labor Management Relation Act, 1947,
29 U.S.C. § 141 et seq. (1973 & Supp. 1995), raises a legal
issue.

          The plaintiffs did not appeal the court's decision to
grant summary judgment on Count II or its decision to strike the
jury trial demand on Counts I and II. Likewise, Unisys did not
appeal the district court's denial of summary judgment or its
refusal to strike the jury demand as to Count III.

          The court did not address Unisys' contention that ERISA
does not allow the plaintiffs to recover punitive or other extra-
contractual damages. The parties have not raised this issue on
appeal.

                                25
prospectuses provided "the specific warnings required by ERISA

and case law to allow the participants to exercise control over

their investments", the court concluded that Unisys had provided

the "required information and warnings" by advising participants

that "`[Unisys] does not guarantee the repayment of principal or

interest[]'" and "[t]here were no guarantees on their

investments."   Noting that the Plans were "voluntary" and that

"consistent with ERISA § 404(c), the plans gave participants the

option to invest their contributions in one or more of six

funds[]," with the SPDs stating that "`[y]ou direct how your

before-tax contributions are invested[]'", the court also

concluded that the participants had control over their assets.

            Turning next to the plaintiffs' various claims in Count

I for breach of ERISA's fiduciary duties, the district court

disposed of the failure to disclose claim by holding that even

though "`[t]he duty to disclose material information is the core

of a fiduciary's responsibility'", a "`significant exception to

the rules governing fiduciaries applies to plans that permit

participants to exercise control over individual accounts

assets.'"

            With regard to the plaintiffs' assertion that the

investment in Executive Life GICs was imprudent, the court ruled

that "Unisys met the requirements of the `experienced prudent

person[]'" having based its decision to invest in Executive Life

on appropriate grounds:
          Unisys examined the financial statements of
          Executive Life, all of which indicated that
          it was sound. It sought the opinion of an

                                 26
          expert, who advised that Executive Life was a
          good investment. Most significantly, Unisys
          relied on the ratings of Standard & Poors and
          Moody's, both of which gave Executive Life
          high ratings of A+ or AAA. . . . With all
          of the information available to it at the
          time, Unisys clearly made prudent business
          and investment decisions. Plaintiffs cannot
          not now use 20/20 hindsight to impose
          liability on Unisys.

The district court did not address the plaintiffs' claim in Count

I that Unisys failed to satisfy ERISA's duty of diversification.

        Judgment on Counts I and II of the second amended

complaint was entered on January 26, 1995, and this consolidated

appeal by the plaintiffs followed.0

                               II.

          In examining the issues raised on appeal, we begin with

settled principles of procedure involving summary judgment.0

0
9.        Appeals in eleven of the twelve consolidated cases are
from final judgments as the entry of summary judgment in Unisys'
favor in those eleven finally resolved all of the claims between
the parties. In the twelfth action, where the union plaintiffs
assert the Labor Management Relations Act claim, the district
court's grant of summary judgment for the defendants on only the
ERISA claims does not dispose of all the claims between the
parties. Accordingly, for purposes of appeal, the plaintiffs in
that action sought the district court's certification pursuant to
Fed. R. Civ. P. 54(b), which was granted.

          Because the twelve cases were not consolidated for
trial, even though the district court's order granting summary
judgment to Unisys on Counts I and II of the second amended
consolidated complaint does not dispose of all of the claims in
the twelve consolidated actions, it is a final, appealable order
within the meaning of 28 U.S.C. § 1291. Hall v. Wilkerson, 926
F.2d 311, 314 (3d Cir. 1991) (holding that the dispositive factor
in determining whether an order disposing of less than all claims
in a consolidated case is appealable is whether the consolidation
was for all purposes).

                                27
Summary judgment should be granted where the record reveals that

no genuine issue of material fact exists for resolution at trial

and the moving party is entitled to judgment as a matter of law.

Fed. R. Civ. P. 56(c).   On summary judgment, the moving party

need not disprove the opposing party's claim, but does have the

burden to show the absence of any genuine issues of material

0
          On review of the district court's award of summary
judgment, we are required to apply the same test the district
court should have used initially. Goodman v. Mead Johnson & Co.,
534 F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038
(1977). When deciding a motion for summary judgment, a district
court's role remains circumscribed in that it is inappropriate
for a court to resolve factual disputes and to make credibility
determinations. Country Floors Inc. v. Partnership Composed of
Gepner and Ford, 930 F.2d 1056, 1061 (3d Cir. 1991). Even where
a case will be heard without a jury, the court on summary
judgment does not sit as the trier of fact; it only determines
whether there are issues which must be tried. Medical Inst. of
Minnesota v. National Ass'n of Trade and Technical Schools, 817
F.2d 1310, 1315 (8th Cir. 1987). To raise a genuine issue of
material fact the opponent need not match, item for item, each
piece of evidence proffered by the movant. Big Apple, BMW, Inc.
v. BMW of N. Am. Inc., 974 F.2d 1358, 1362-63 (3d Cir. 1992),
cert. denied, ___ U.S. ___, 113 S. Ct. 1262 (1993). In practical
terms, if the opponent has exceeded the "mere scintilla"
threshold and has offered a genuine issue of material fact, then
the court cannot credit the movant's version of events against
the opponent, even if the quantity of the movant's evidence far
outweighs that of its opponent. Id. It thus remains the
province of the factfinder to ascertain the believability and
weight of the evidence. Id.

          The party opposing the motion is entitled to have his
allegations taken as true, to receive the benefit of doubt when
his assertions conflict with those of the movant and to have
inferences from the underlying facts drawn in his favor. Big
Apple, BMW, 974 F.2d at 1362-63. Ambiguities and conflicts in a
deponent's testimony are generally matters for the fact-finder to
sort out. Wilson v. Westinghouse Elec. Corp., 838 F.2d 286, 289
(8th Cir. 1988). Any "unexplained gaps" in materials submitted
by the moving party, if pertinent to the material issues of fact,
justify denial of the motion. O'Donnell v. United States, 891
F.2d 1079, 1082 (3d Cir. 1989).

                                28
fact.    Celotex Corp v. Catrett, 477 U.S. 317, 323 (1985).    If the

movant meets this burden, then the opponent may not rest on

allegations in pleadings, but must counter with specific facts

which demonstrate that there exists a genuine issue for trial.

Id.     Further, even if the facts are undisputed, summary judgment

may not be granted where there is disagreement over inferences

that can be reasonably drawn from those facts.    As in this case,

when the nonmoving party will bear the burden of proof at trial,

the moving party may meet its burden by showing that the

nonmoving party has not offered evidence sufficient to establish

the existence of an element essential to its case.      Id. at 322.

            With these principles in mind, we turn first to the

plaintiffs' claim that Unisys committed several breaches of

ERISA's fiduciary duties.    We turn second to Unisys' assertion

that the defense set out in section 1104(c) applies in this case.

                                 III.

            Our analysis commences with the fiduciary

responsibility provision of the Employee Retirement Income

Security Act of 1974, ("ERISA"), 29 U.S.C. § 1001 et seq. (1985 &
Supp. 1995).    Section 1104(a) imposes several duties upon

fiduciaries which include the duty of loyalty, the duty to act

prudently, and the duty to diversify plan investments.      Section

1104(a) provides in pertinent part:
          § 1104. Fiduciary duties

                   (a) Prudent man standard of care

                                  29
                 (1) Subject to sections 1103(c) and (d),
            1342, and 1344 of this title, a fiduciary
            shall discharge his duties with respect to a
            plan solely in the interest of the
            participants and beneficiaries . . .

                               . . . .

                 (B) with the care, skill, prudence, and
            diligence under the circumstances then
            prevailing that a prudent man acting in a
            like capacity and familiar with such matters
            would use in the conduct of an enterprise of
            a like character and with like aims;
                 (C) by diversifying the investments of
            the plan so as to minimize the risk of large
            losses, unless under the circumstances it is
            clearly prudent not to do so[] . . .

29 U.S.C. § 1104(a)(1)(B),(C).

            When we apply section 1104(a) to the facts of a

particular case, we remain mindful of ERISA's underlying

purposes:    to protect and strengthen the rights of employees, to

enforce strict fiduciary standards, and to encourage the

development of private retirement plans.    29 U.S.C. § 1001; H.R.

Rep. No. 533, 93d Cong. 2d Sess. (1974), reprinted in 1974 U.S.

Code Cong. & Admin. News 4639, 4639-43.    We also bear in mind

that Congress has instructed that section 1104 "in essence,

codifies and makes applicable to . . . fiduciaries certain

principles developed in the evolution of the law of trusts."      S.

Rep. No. 127, 93 Cong., 2d Sess. (1974), reprinted in 1974 U.S.

Code Cong. & Admin. News 4838, 4865.

                                 A.

                                 30
           In Count I of the second amended complaint, the

plaintiffs allege, inter alia, that Unisys breached section

1104(a)(1)(B) by making imprudent investments of plan assets in

Executive Life.   Unisys contends that, to the contrary, the

evidence establishes that the purchases of the Executive Life

GICs were prudent under ERISA as a matter of law, thereby

entitling it to summary judgment.

           Under the common law of trusts, a trustee is duty-bound

"to make such investments and only such investments as a prudent

[person] would make of his own property having in view the

preservation of the estate and the amount and regularity of the

income to be derived. . . ."   Restatement (Second) of Trusts §227

(1959).   Further, a trustee is required to use due care, which

means he must investigate the safety of the investment and its

potential for income by securing reliable information, and may

take into consideration the advice of qualified others, as long

as he exercises his own judgment; to use the skill of a man of at

least ordinary intelligence; and to use caution, with a view to

the safety of the principal and to the securing of a reasonable

and regular income.   Id. cmts. (a) - (c), (e). Whether a trustee

has acted properly in selecting an investment depends upon the

circumstances at the time when the investment is made and not

upon subsequent events.   Thus, if at the time an investment is

made, it is an investment a prudent person would make, there is

no liability if the investment later depreciates in value.     Id.

cmt. o.

                                31
          Consistent with these common law principles, the courts

measure section 1104(a)(1)(B)'s "prudence" requirement according

to an objective standard, focusing on a fiduciary's conduct in

arriving at an investment decision, not on its results, and

asking whether a fiduciary employed the appropriate methods to

investigate and determine the merits of a particular investment.

Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915, 917-18 (8th Cir.

1994); Fink v. National Savings and Trust Co., 772 F.2d 951, 955-

56 (D.C. Cir. 1985); Katsaros v. Cody, 744 F.2d 270, 279 (2d

Cir.), cert. denied, 469 U.S. 1072 (1984); Donovan v. Mazzola,

716 F.2d 1226, 1232 (9th Cir. 1983), cert. denied, 464 U.S. 1040

(1984).   In addition, the prudence requirement is flexible, such

that the adequacy of a fiduciary's independent investigation and

ultimate investment selection is evaluated in light of the

"`character and aims'" of the particular type of plan he serves.

Donovan v. Cunningham, 716 F.2d 1455, 1467 (5th Cir. 1983), cert.

denied, 467 U.S. 1251 (1984).0

           In this case, our in-depth analysis of the evidence

convinces us that Unisys has failed to carry its burden on

summary judgment of showing the absence of any genuine issue of

0
          Similarly, the Department of Labor regulation
concerning the investment duties of ERISA fiduciaries provides
that the requirements of section 1104(a)(1)(B) of the Employee
Retirement Income Security Act of 1974, ("ERISA"), 29 U.S.C.
§1001 et seq. (1985 and Supp. 1995), are satisfied if fiduciaries
give "appropriate consideration to those facts and circumstances
that, given the scope of such fiduciary's investment duties, the
fiduciary knows or should know are relevant to the particular
investment or investment course of action involved, including the
role the investment plays in that portion of the plan's
investment portfolio. . . ." 29 C.F.R. § 2550.404a-1(b)(i).

                                 32
material fact as to whether its course of conduct and decision to

invest in five-year Executive Life GICs in June and December of

1987 and January of 1988 for the Fixed Income and Insurance

Contract Funds satisfied ERISA's duty of prudence.

          We begin with the most basic of ERISA's investment

fiduciary duties, the duty to conduct an independent

investigation into the merits of a particular investment.     When

David White, Unisys' Vice President of Capital Management and

Trust Investments, was asked at his deposition to describe the

evaluation he and his staff performed at the time of the June 9,

1987, bid to satisfy themselves that Executive Life was

financially sound, he responded that they depended on the

research that he "believed" Unisys' consultant, Johnson &

Higgins, had completed:
          Q.   Other than the financial information
               provided to you by the companies and the
               ratings of the agencies of which you
               just spoke, did you have any other
               review done of the financial status of
               the insurance companies that were
               bidding?

          A.   I don't know how to answer that clearly,
               but what was done was we relied on
               Murray's staff, also. It was conducted
               at his office. He, in this case -- we
               had never bid Executive Life, you know,
               for the Burroughs plan and it was
               Murray's relationship in effect and he
               had done, I believe, independent
               research. Otherwise, he would not have
               recommended Executive Life to us. So we
               had that recommendation.

                               33
          In his deposition, however, Murray Becker of Johnson &

Higgins did not confirm that Johnson & Higgins provided research

to White and his staff:
          Q.   Did you have a research staff at Johnson
               & Higgins?

                             *   *    *

          A.   Research as to what?

                             *   *    *

          Q.   As to the insurance companies?

          A.   Johnson & Higgins had a committee that I
               was not involved in that approved
               insurance companies that Johnson &
               Higgins was permitted to use. This was
               general for property casualty and life
               companies across the board.

                            *    *    *

          Q.   Were there individuals at the company
               whose responsibility it was to analyze
               the credit worthiness of various
               insurance companies?

                            *    *        *

          A.   Johnson & Higgins didn't represent
               itself as a credit-rating agency so it
               did not provide a credit research
               service. And in my part of Johnson &
               Higgins, we simply adopted a standard of
               recommending companies that were
               recommended -- that a client consider
               companies that had a Triple A rating,
               and not consider companies that didn't
               have a rating, or were rated below
               Triple A.

          While we would encourage fiduciaries to retain the

services of consultants when they need outside assistance to make

prudent investments and do not expect fiduciaries to duplicate

                                 34
their advisers' investigative efforts, we believe that ERISA's

duty to investigate requires fiduciaries to review the data a

consultant gathers, to assess its significance and to supplement

it where necessary.   In our view, a reasonable factfinder could

infer from this evidence that Unisys failed to analyze the bases

underlying Johnson & Higgins' opinion of Executive Life's

financial condition and to determine for itself whether credible

data supported Johnson & Higgins' recommendation that Unisys

consider investing plan assets with the insurer.    A reasonable

factfinder could also conclude that Unisys passively accepted its

consultant's positive appraisal of Executive Life without

conducting the independent investigation that ERISA requires.

          Likewise, the record calls into question the

sufficiency of the investigation that White and William Heller

and Robert Rehley, members of White's staff, conducted prior to

the Executive Life GIC purchases that were made in December of

1987 and January of 1988.   Although the services of Johnson &

Higgins had been terminated and another consultant had not been

hired, White testified he did "nothing new" by way of research

into Executive Life's finances between June and December of 1987.

Heller and Rehley, when deposed, indicated that in connection

with these purchases, their task was to keep current Unisys files

on bidding insurers up-to-date.    If, as the record suggests,

Unisys' investigation consisted of nothing more than confirming

that Executive Life's credit ratings had not changed since June,

1987, a reasonable factfinder could find that the investigations

for the second and final GIC purchase were deficient.

                                  35
          Of course, the thoroughness of a fiduciary's

investigation is measured not only by the actions it took in

performing it, but by the facts that an adequate evaluation would

have uncovered.   Fink, 772 F.2d at 962 (Scalia, J., concurring in

part and dissenting in part) ("[T]he determination of whether an

investment was objectively prudent is made on the basis of what

the trustee knew or should have known; and the latter necessarily

involves consideration of what facts would have come to his

attention if he had fully complied with his duty to investigate

and evaluate." (emphasis in original)).   In this regard, the

plaintiffs presented evidence which showed that one who

investigated Executive Life in 1987 and 1988 would have found,

for example, that Moody's Investors Service had given Executive

Life a rating which was notably lower than those assigned by

Standard & Poors and A. M. Best; that the higher ratings that

Executive Life had received were being questioned in some

financial circles; that at least one reputable consultant had

strongly recommended against investments in Executive Life

annuity contracts; and that Executive Life's reinsurance

practices were under scrutiny by state regulators.   The record,

however, does not reveal which of these items Unisys may have

considered, and raises a question as to what conclusion

concerning an investment in Executive Life a prudent fiduciary

would have reached had they come to its attention.

          Turning to the credit ratings upon which Unisys

admittedly relied in large measure to make and defend its

decisions to invest in Executive Life, we observe that here, too,

                                36
the record raises genuine issues as to whether Unisys' reliance

was justified and informed.   As noted earlier, Becker advised

White and his staff that a AAA rating from Standard & Poors was a

valid indicator of Executive Life's economic vitality only if

junk bonds did not exceed 35% of its bond portfolio.      When

deposed, Becker testified that Executive Life's representatives

had reported in June of 1987 that the insurer met this standard;

White, who was ultimately responsible for assessing Executive

Life's prospects, however, was unable at his deposition to recall

the percentage of the insurer's junk bond holdings at relevant

times and guessed that the percentage was under "forty or fifty".

Thus, whether White was, in fact, cognizant of this significant

item of information when he decided to invest in Executive Life

is for the factfinder to decide.       Moreover, when Heller was asked

during his deposition what he knew about the bases underlying

Standard & Poors ratings, he testified to a limited

understanding, stating that "[Murray Becker] was the most

knowledgeable of anyone . . . of the methodology of Standard &

Poors.   We would not have been knowledgeable in that area."

Whether the rating was a reliable measure of Executive Life's

financial status under the circumstances and whether Unisys was

capable of using the rating effectively are, therefore, matters

which must be decided at trial.    See Donovan v. Cunningham, 716
F.2d at 1474 ("An independent appraisal is not a magic wand that

fiduciaries may simply waive over a transaction to ensure that

their responsibilities are fulfilled.      It is a tool and like all

tools, is useful only if used properly.").

                                  37
            When we focus on the five-year duration and interest

terms of the Executive Life GICs, we find additional issues for

trial.    The record is uncontroverted that, in June of 1987,

Becker advised in favor of the purchase of an Executive Life GIC

of only three-years duration and that White did not heed his

advice as to the contract's duration; the record does not

resolve, however, whether the relative merits of these different

maturity dates, which could have had a significant impact on the

risk associated with the investment, were debated and to what

result.   Rehley recalled some discussion on the issue; Heller did

not believe that such a discussion took place; and Becker could

not remember whether any consideration, one way or the other, was

given to the matter.    We believe that if this debate did not take

place, a reasonable factfinder could conclude that Unisys did not

adequately deliberate its investment decision and that had it

done so, it would have rejected a long-term investment in

Executive Life.    Moreover, that White sought to maximize interest

rates by investing in the five-year GICs is not disputed; whether

he inappropriately sacrificed security in making investments for

Funds where the preservation of capital was of paramount concern

is yet another issue for trial.    The dramatic disparity between

the interest rates that Executive Life offered and those offered

by other successful bidders could lead a factfinder to infer that

the risk accompanying Executive Life's yields was unacceptably

high.

            The record also raises a question as to whether Unisys

was equipped to conduct GIC bids unassisted and whether the

                                  38
absence of written guidelines for the bidding process impeded its

ability to make prudent investment decisions.   As noted, when

questioned about credit ratings, Heller testified that he and his

colleagues lacked a certain expertise, and when questioned about

the "negative consequence" of the absence of written guidelines,

he testified:   "[T]here was the possibility that we would be

placing money with companies that would subsequently run into

trouble.   There was also the fear that too much money could be

with any one issuer."

           Finally, we note a report prepared by George M.

Gottheimer, Jr., an expert retained by the plaintiffs, opining

that the purchases of long-term Executive Life GICs in 1987 and

1988 were imprudent.0   According to Mr. Gottheimer, Unisys

breached its fiduciary duties by not adequately investigating the

financial condition of Executive Life, by not having guidelines

against which to measure the insurer; by relying solely on the

credit ratings Executive Life had received; by placing almost

0
          Unisys argues that we may not consider Mr. Gottheimer's
report because it was not in the form of a sworn affidavit as
required by the Fed. R. Civ. P. 56(e). Unisys, however, did not
move to strike nor did it otherwise object to Dr. Gottheimer's
report in the district court. Indeed, Unisys placed the report
in the record.

          We agree with the plaintiffs and our sister courts of
appeals that Rule 56 defects are waived where they are not raised
in the district court. See, e.g., Humane Soc. of The United
States v. Babbitt, 46 F.3d 93, 96 n. 5 (D.C. Cir. 1995) (Rule 56
defects are waived where motions to strike are not filed);
DeCintio v. Westchester County Medical Center, 821 F.2d 111, 114
(2d Cir.), cert. denied, 484 U.S. 965 (1987) (citing "unanimous
accord" on the question in five other courts of appeals). We
think this rule is especially applicable given that it was Unisys
which submitted the report to the district court.

                                 39
exclusive emphasis on yield; and by not employing the services of

a consultant for all of the purchases in view of its lack of

knowledge and skill.   Mr. Gottheimer's opinion, based on his

interpretation of the deposition testimony and exhibits he

reviewed, is itself some evidence of Unisys' imprudence, capable

of defeating Unisys' motion for summary judgment.

          We thus conclude that in response to Unisys' motion for

summary judgment, the plaintiffs raised genuine issues of

material fact to support their claim that the investment of plan

assets in Executive Life GICs violated section 1104(a)(1)(B)'s

duty of prudence.

                                       B.

          We turn next to the plaintiffs' claim in Count I that

Unisys violated ERISA's fiduciary duty set forth in 29 U.S.C.

§1104(a)(1)(C), to "diversify[] the investments in the plan so as

to minimize the risk of large losses", by placing an excessive

amount of plan assets in Executive Life GICs.

          As a general proposition, ERISA's duty to diversify

prohibits a fiduciary from investing disproportionately in a

particular investment or enterprise.    A Congressional Committee

report on the Act's diversification provision provides:
          A fiduciary usually should not invest the
          whole or an unreasonably large proportion of
          the trust property in a single security.
          Ordinarily the fiduciary should not invest
          the whole or an unduly large proportion of
          the trust property in one type of security or
          in various types of securities dependent upon
          the success of one enterprise or upon

                                40
          conditions in one locality since the effect
          is to increase the risk of large losses.

H.R. Conf. Rep. No. 1280, 93d Cong., 2d Sess. (1974), reprinted
in 1974 U.S. Code Cong. & Admin. News 5038, 5085.0

          ERISA's duty to diversify is not measured by hard and

fast rules or formulas.   Congress has instructed that "[t]he

degree of investment concentration that would violate this

requirement to diversify cannot be stated as a true percentage,

because a prudent fiduciary must consider the facts and

circumstances of each case.   The factors to be considered include

(1) the purposes of the plan; (2) the amount of the plan assets;

(3) financial and industrial conditions; (4) the type of

0
          Section 1104(a)(1)(C) of ERISA in large part reflects
the fiduciary duty set forth in the Restatement (Second) of
Trusts:

          §228.   Distribution of Risk of Loss

          Except as otherwise provided by the terms of
          the trust, the trustee is under a duty to
          distribute the risk of loss by reasonable
          diversification of investments, unless under
          the circumstances it is prudent not to do so.

                            *   *   *
          Comment:
               a. Duty to diversity investments. The
          trustee is under a duty to the beneficiary to
          exercise prudence in diversifying the
          investments so as to minimize the risk of
          large losses, and therefore he should not
          invest a disproportionately large part of the
          trust estate in a particular security or type
          of security. It is not enough that each of
          the investments is a proper investment. . . .

Restatement (Second) of Trusts, § 228, cmt. a (1959).

                                41
investment, whether mortgages, bonds or shares of stock or

otherwise; (5) distribution as to geographic location; (6)

distribution as to industries; (7) the dates of maturity."       Id.

at 5085.   Further, the Act's legislative history informs that a

plan may invest wholly in insurance or annuity contracts, since

generally an insurance company's assets are to be invested in a

diversified manner.   Id.    Finally, if a plaintiff proves a

failure to diversify, the burden shifts to the defendant to

demonstrate that nondiversification was nonetheless prudent.      Id.

at 5084.

           Before we consider the substance of the plaintiffs'

failure to diversify charge and whether summary judgment was

properly entered in Unisys' favor, we must determine how the duty

set forth in section 1104(a)(1)(C) is measured in the context of

the kind of Plans before us, which are comprised of a number of

discrete funds, each with its own distinct type of investment.

Not surprisingly, the parties maintain diametrically-opposed

positions on the issue:     Unisys argues that we must measure

diversification by considering all of the investments the Plans

hold, and the plaintiffs urge evaluation of diversification by

considering the investments solely in the Fixed Income and

Insurance Contract Funds.

           Looking first to ERISA's language, we find little

guidance; the Act refers only to a fiduciary's duty to diversify

the "plan's" investments.     29 U.S.C. § 1104(a)(1)(C).   ERISA's

legislative history, however, indicates that a fiduciary's

performance of the duty may be measured by the diversity it has

                                  42
achieved in a particular investment vehicle and, where the

management of a plan's investments is distributed among several

managers, in the segment of the plan for which it has

responsibility. Congress stated:
          [A]lthough the fiduciary may be authorized to
          invest in industrial stocks, he should not
          invest a disproportionate amount of the plan
          assets in the shares of corporations engaged
          in a particular industry. If he is investing
          in mortgages on real property he should not
          invest a disproportionate amount of the trust
          in mortgages in a particular district or on a
          particular class of property so that a
          decline in property values in that district
          or of that class might cause a large loss.

          An investment manager, A, is responsible for
          10% of the assets of a plan and is instructed
          by the named fiduciary or trustee to invest
          solely in bonds; another investment manager,
          B, is responsible for a different 10% of the
          assets of the same plan and instructed to
          invest solely in equities. . . . In these
          circumstances, A would invest solely in bonds
          in accordance with his instructions and would
          diversify the bond investments in accordance
          with the diversification standard, the
          prudent man standard, and all other
          provisions applicable to A as a fiduciary.
          Similarly, B would invest solely in equities
          in accordance with his instructions and these
          standards.

H.R. Cong. Rep. No. 1280, reprinted in 1974 U.S. Code Cong. &

Admin. News at 5084.

          In addition to Congress' direction, we believe the case

of GIW Indus., Inc. v. Trevor, Stewart, Burton & Jacobsen, Inc.,

895 F.2d 729, 733 (11th Cir. 1990), is instructive.   There the

plaintiff maintained a profit sharing plan for its employees

which consisted of three funds.    Plan participants allocated

                                  43
their respective account balances among the funds and were

permitted to change their investment election or to withdraw from

the plan once a year.    The plaintiff hired the defendant to

manage the investments of Fund A, an asset allocation account

which was invested in fixed income securities, equities of

publicly traded companies and money market instruments.      The

defendant adopted a strategy to invest Fund A assets in primarily

long-term government bonds, which were highly liquid and carried

a minimal credit risk.    Due to a series of required cash

disbursements, however, the defendant was required to sell Fund A

assets at a loss.   The plaintiff filed suit, alleging that, inter

alia, the defendant breached its fiduciary duty under ERISA to

diversify the Fund's investments.

          On appeal from the judgment entered against it, the

defendant argued that its obligation to diversify was properly

measured by considering the investments of the entire plan, not

merely the investments in Fund A.     The court of appeals disagreed

and affirmed the judgment, reasoning:
          It is undisputed, though, that [the
          defendant] exercised no control over any fund
          other than Fund A. Moreover, Fund A could
          not draw upon the other funds for the purpose
          of cash pay-outs. Even if the entire plan
          were to be considered in determining whether
          the diversification requirement has been met,
          [the defendant] made no investigation of the
          other funds, either. Mr. Burton, whose
          testimony the district court credited,
          declared that the existence of Fund D did not
          influence how [the defendant] invested the
          assets of Fund A.

Id. at 733.

                                 44
          Although the facts in this case and GIW Industries

differ in certain respects,0 we find the approach taken by the

Court of Appeals for the Eleventh Circuit applicable, persuasive,

and in keeping with Congress' intent in section 1104(a)(1)(C).

Here, as there, Unisys was responsible for investing a portion of

the Plans' assets in designated investments.   Similarly, the

investments that other managers made for the Plans in other

investment areas had no bearing on the investment choices Unisys

made for the Funds it managed.   Moreover, plan-wide investments

were not available (and it would appear could not be available)

to offset losses sustained by the Fixed Income and Insurance

Contract Funds as a result of Executive Life's failure.   Thus,

the risk of loss which section 1104(a)(1)(C) aims to minimize was

not distributed among the Plans' total holdings; it was, instead,

spread only among the GIC Funds' contracts.    We, therefore,

conclude that under these circumstances, Unisys' satisfaction of

the duty to diversify is properly assessed by examining the

concentration of Executive Life investments in the Fixed Income

and Insurance Contract Funds.

          Because the record is incomplete in critical respects,

however, we cannot determine whether Unisys is entitled to
0
          We note that the fund at issue in GIW Indus., Inc. v.
Trevor, Stewart, Burton & Jacobsen, Inc., 895 F.2d 729 (11th Cir.
1990), in contrast to the GIC Funds here, was, by definition, to
include a variety of investment types -- fixed income securities,
equities of publicly traded companies and money market
instruments. Id. at 730. Thus, it would seem that the
defendant's investment strategy -- to invest primarily in long-
term bonds -- violated the funds inherent diversification
requirement. In our view, this fact difference is not
significant to our analysis.

                                 45
summary judgment on this aspect of the plaintiffs' case.   For

example, as the record does not reveal the rationale for Unisys'

rule not to place more than 20% of GIC Fund assets with a single

issuer, the process by which Unisys may have applied the rule to

the GIC purchases at issue, or the analysis that Unisys may have

undertaken of the factors Congress has directed prudent

fiduciaries to consider, we cannot decide whether reasonable

minds could differ as to the adequacy of Unisys' actions with

regard to diversification.   We are also left to ponder how Unisys

attempted to maintain a steady degree of diversification where

due to the reinvestment of proceeds from the Fixed Income into

the Insurance Contract Fund, the percentage of assets in

Executive Life contracts in each Fund changed over time or why,

as White testified, Unisys assessed diversification according to

the Funds' aggregate exposure to Executive Life, and not

according to the exposure in each Fund.0   Moreover, assuming that

the concentration of assets placed with Executive Life in the

Fixed Income or the Insurance Contract Fund was excessive, the

record does not reveal whether, as section 1104(a)(1)(C) permits,

there may have been special circumstances excusing Unisys from

diversifying GICs.   Finally, by its terms, ERISA requires a

fiduciary to diversify so as to avoid "large losses". Because the

0
          In December of 1988, the record shows that 21.7% of the
Fixed Income Fund and 19.18% of the Insurance Contract Fund were
invested in Executive Life; as of March 31, 1991, shortly before
the plaintiffs' account balances were frozen, 30% of the Fixed
Income Fund and 7% of the Insurance Contract Fund were invested
in the insurer, with exposure on an aggregate basis at about 15%.

                                46
amount of losses the Fixed Income and Insurance Contract Funds

will ultimately suffer has remained uncertain, the district court

stayed discovery on the issue of damages; the summary judgment

materials submitted to the district court by the parties were, by

order, limited to liability issues.    We further understand that

discovery on damages issues proceeded after Unisys' summary

judgment motion was filed.    Obviously, whether "large losses"

were avoided and in turn, whether Unisys satisfied its burden on

summary judgment as to the duty to diversify, cannot be

determined on the record before us.

            We, therefore, conclude that Unisys' request for

summary judgment in its favor on the plaintiffs' section

1104(a)(1)(C) failure to diversify claim was premature.    Upon

remand, the record may be developed and a motion for summary

judgment may be judged on the basis of the principles we have set

forth.

                                 C.

            We now turn our attention to the plaintiffs' claim in

Count I that Unisys breached section 1104(a)'s fiduciary duty to

disclose.   As we understand it, the plaintiffs' claim is that

Unisys misrepresented the risks associated with investing monies

in the Fixed Income and Insurance Contract Funds through

misleading or incomplete communications regarding the Funds'

portfolio once the Executive Life GICs had been purchased, as

well as Executive Life's financial condition in 1990.    In view of

the district court's ruling that Unisys' disclosure obligations

                                 47
are defined solely by section 1104(c), the threshold issue we

must consider is whether the plaintiffs' claim under section

1104(a) may continue.

          Looking for guidance to our cases regarding ERISA's

fiduciary duty to inform, we note that we have repeatedly held

that a fiduciary may not materially mislead those to whom section

1104(a)'s duties of loyalty and prudence are owed.    In re Unisys

Corp. Retiree Medical Benefit "ERISA" Litigation, 57 F.3d 1255,

1261 (3d Cir. 1995); Curcio v. John Hancock Mut. Life Ins. Co.,

33 F.3d 226, 238 (3d Cir. 1994); Bixler v. Central Pennsylvania

Teamsters Health and Welfare Plan, 12 F.3d 1292, 1300 (3d Cir.

1994); Fisher v. Philadelphia Elec. Co., 994 F.2d 130, 135 (3d

Cir.), cert. denied, ___ U.S. ___, 114 S. Ct. 622 (1993).     Thus,

in Fisher, where the plaintiffs alleged that the defendant

misrepresented its intention to establish a "retirement

sweetener", we held that under section 1104(a) "[a] plan

administrator may not make affirmative material

misrepresentations to plan participants when asked about changes

to an employee pension benefits plan.   Put simply, when a plan

administrator speaks, it must speak truthfully." 994 F.2d at

135.   We also concluded that a misrepresentation was "material"

if there was a "substantial likelihood that it would mislead a

reasonable employee in making an adequately informed decision

about if and when to retire."   Id.   Because the content of the

communications at issue and whether such communications

constituted affirmative, material misrepresentations were

                                48
questions of fact, we reversed the summary judgment that had been

entered for the defendant and remanded the case for trial.      Id.

            Shortly thereafter, in Bixler v. Central Pennsylvania

Teamsters Health and Welfare Fund, 12 F.3d 1292 (3d Cir. 1994),

where the plaintiff claimed that her deceased husband's employer

had engaged in repeated misrepresentations that prevented her

from electing to continue medical coverage under COBRA, we

considered "to what extent a fiduciary's alleged misinformation

or failure to provide relevant information constitutes a breach

of fiduciary duty under § [11]04(a)."     Id. at 1300.   Guided by,

inter alia, section 173 of the Restatement (Second) of Trusts,0

we concluded that "[the] duty to inform is a constant thread in

the relationship between beneficiary and trustee; it entails not

only a negative duty not to misinform, but also an affirmative

duty to inform when the trustee knows that silence might be

harmful."   Id.    We acknowledged that "the duty recognizes the

disparity of training and knowledge that potentially exists

0
            Under the Restatement (Second) of Trusts:

                  d. Duty in the absence of a request by
                  the beneficiary. Even if the trustee is
                  not dealing with the beneficiary or the
                  trustee's own account, he is under a
                  duty to communicate to the beneficiary
                  material facts affecting the interest of
                  the beneficiary which he knows the
                  beneficiary does not know and which the
                  beneficiary needs to know for his
                  protection in dealing with a third
                  person.

Restatement (Second) of Trusts § 173, cmt. d, cited in, Bixler v.
Central Pennsylvania Teamsters Health and Welfare Fund, 12 F.3d
1292, 1300 (3d Cir. 1994).

                                  49
between a lay beneficiary and a trained fiduciary[]", and we

further concluded that "the fiduciary's obligations will not be

excused merely because [the beneficiary] failed to comprehend or

ask about a technical aspect of the plan."      Id.   Finding evidence

from which a trier of fact could have inferred that the employer

knew that the plaintiff was left with substantial unpaid medical

expenses and that she could have received reimbursement for those

expenses under the employer's plan by signing and returning the

COBRA notice her husband received, we viewed the employer's

failure to advise the plaintiff of COBRA coverage as a potential

breach of fiduciary duty.     This was so even though the plaintiff

contacted the employer while the COBRA election period was open

and inquired only about the availability of death benefits.       Id.

at 1302.    Thus, we held:   "[I]f indeed [the employer] was acting

in a fiduciary capacity, it acted under a duty to convey complete

and accurate information that was material to [the plaintiff's]

circumstance.    Her circumstance was clearly broader than her

inquiry".   Id. at 1302-03.    Reversing the grant of summary

judgment for the defendant and remanding, we instructed the

district court to determine whether "`material information' may

have included more than the mere fact that the [employer] did not

offer life insurance . . . ."    Id. at 1303.
            Most recently, In re Unisys Corp. Retiree Medical

Benefit "ERISA" Litigation, 57 F.3d 1255 (3d Cir. 1995), we

reaffirmed that an ERISA fiduciary has a duty under section

1104(a) to convey complete and accurate information when it

speaks to participants and beneficiaries regarding plan benefits.

                                  50
There retired employees were informed by summary plan

descriptions and company representatives that they had lifetime

medical benefits.   Nonetheless, relying on a reservation of

rights clause in the plans that gave it the right to terminate

"at any time" or for "any reason", the company announced its

decision to terminate all existing medical benefits plans and

replace them with a new plan that altered post-retirement medical

benefits in substantial measure.     The retirees filed a class

action against the company, asserting, inter alia, that the

company breached its fiduciary duty under ERISA by affirmatively

misleading plan participants about the duration of their retiree

medical benefits.   Noting that our prior decisions "firmly

establish that when a plan administrator affirmatively

misrepresents the terms of a plan or fails to provide information

when it knows that its failure to do so might cause harm, the

plan administrator has breached its fiduciary duty to individual

plan participants and beneficiaries", id. at 1264, we upheld the

district court's decision to permit the plaintiffs' breach of

fiduciary duty claim to proceed where the evidence established

"that the [defendant] company actively misinformed its employees

by affirmatively representing to them that their medical benefits

were guaranteed once they retired, when in fact the company knew

this was not true and that employees were making important

retirement decisions relying upon this information . . . ."       Id.
at 1266-67.0

0
          In In Re Unisys Corp. Retiree Medical Benefit "ERISA"
Litigation, 57 F.3d 1255 (3d Cir. 1995), we also reaffirmed our

                                51
            Contrary to the district court's ruling, we believe

these principles may apply in the instant case, even if the Plans

fall within the purview of 29 U.S.C. § 1104(c).   By its terms,

section 1104(c) relieves fiduciaries of liability for breaches of

fiduciary duty which result from a participant's or a

beneficiary's exercise of control; it does not define nor does it

relieve fiduciaries of section 1104(a)'s duties in the first

instance.   Therefore, the question we face at this juncture is

not whether section 1104(c), even assuming it applies, exempts

Unisys from section 1104(a)'s disclosure duty; it is whether the

duty as we have defined it extends to the circumstances presented

in this case.   Although our prior decisions concerned allegations

of material misrepresentations relating to the terms of a plan or

the benefits to which participants or beneficiaries were

entitled, we hold that their underlying rationale applies with

the same force here.   We can discern no reason why our

admonitions that "when a [fiduciary] speaks, it must speak

truthfully[]", Fisher, 994 F.2d at 135, and when it communicates

with plan participants and beneficiaries it must "convey complete

and accurate information that [is] material to [their]

circumstance[]", Bixler, 12 F.3d at 1302-03, should not apply to
alleged material misrepresentations made by fiduciaries to

participants regarding the risks attendant to a fund investment,

where, as here, the participants were charged with directing the

conclusion in Bixler, 12 F.3d at 1298, that under section
1132(a)(3) of ERISA, equitable relief is available to an
individual harmed by a breach of fiduciary duty. 57 F.3d at
1266-69. The issue of relief is not raised in this appeal.

                                 52
investment of their contributions among the Plans' various funds

and the benefits they were ultimately provided depended on the

performance of their investment choices.   We also hold that in

this context, a misrepresentation is "material" if there was a

substantial likelihood that it would have misled a reasonable

participant in making an adequately informed decision about

whether to place or maintain monies in the Fixed Income and/or

Insurance Contract Funds.   See Fisher, 994 F.2d at 135.

          It is important to note what we have not decided.    As

the uncontroverted record reveals that Unisys elected and indeed

intended to communicate with participants about the risks

accompanying investments in the Fixed Income and Insurance

Contract Funds and Executive Life's financial condition in 1990,0

we have not determined whether Unisys had a duty under section

1104(a) to communicate anything at all to the Plans' participants

about these matters in the first place.    We also note that we do

not view the plaintiffs as claiming, nor do we hold, that Unisys

was obligated to give investment advice, to opine on Executive

Life's financial condition or to predict Executive Life's

eventual demise.   See id. at 135 (citations omitted) ("[W]e

0
          Unisys does not dispute that it made disclosures to
participants, and describes the information it disseminated as
intended to disclose the "nature of the [Plan's Executive Life
holdings] and the attendant risks" and the "developments
surrounding Executive Life . . . ." (See Memorandum in Support
of Defendants' Motion for Summary Judgment and to Strike Jury
Demand, pp. 17, 24). As in the district court, on appeal Unisys
discusses the adequacy of its disclosures only in terms of
section 1104(c).

                                53
hasten to add that ERISA does not impose a `duty of clairvoyance'

on fiduciaries.").

          Turning our attention to the record, we find a number

of triable issues.   Clearly there is evidence of several

communications made by Unisys to plan participants on an

individual, group or systematic basis regarding the nature of and

risks associated with investments in the Fixed Income and

Insurance Contract Funds and Executive Life's downturn.0 Whether

the communications constituted misrepresentations and whether

they were material under the principles we have articulated are

questions of fact that are properly left for trial.   Id. at 135.

See Curcio, 33 F.3d at 236 (holding that misleading summary plan

description coupled with misrepresentations in an audiotape and a

pamphlet supported a claim for breach of fiduciary duty).   At

this point, we observe that what was stated, as well as what was

left unstated, by Unisys in its communications to plan

participants is relevant. In our view, while Unisys was not

obligated to share with participants everything it knew about

GICs and Executive Life, it was obligated to impart to

participants material information of which it had knowledge that

was sufficient to apprise the average plan participant of the

risks associated with investing in the Fixed Income and Insurance

0
          For the first time on appeal Unisys asserts that the
plaintiffs "have submitted no cognizable proof of detrimental
reliance." Because Unisys did not proffer this issue in the
district court, we decline to address it. See Selected Risks
Ins. Co. v. Bruno, 718 F.2d 67, 69 (3d Cir. 1983) (federal
appellate court generally does not consider issues not raised in
the district court).

                                54
Contract Funds in view of the purchases of the Executive Life

GICs and the financial condition Executive Life presented in

1990.   Moreover, in this regard, we do not, as Unisys urges,

distinguish between "public" and "non-public" information nor do

we limit Unisys' duty to disclose to the latter.    We do not see

any reason under the circumstances for doing so, and at any rate,

Unisys included public data, (credit ratings, for example), in

its communications to plan participants.

           Accordingly, we conclude that the plaintiffs raise

genuine issues of material facts on their section 1104(a) failure

to disclose claim.

                                IV.

           Lastly, we address Unisys' assertion that section

1104(c) of the Employee Retirement Income Security Act of 1974,

("ERISA"), 29 U.S.C. § 1001 et seq. (1985 & Supp. 1995), applies

in this case.

           Generally speaking, ERISA holds fiduciaries who commit

breaches of duty liable for resulting losses.    29 U.S.C. §1109.0

0
          Section 1109 of the Employee Retirement Income Security
Act of 1974, ("ERISA"), 29 U.S.C. § 1001 et seq. (1985 & Supp.
1995), states in pertinent part:

           § 1109.   Liability for breach of fiduciary duty

                (a) Any person who is a fiduciary with
           respect to a plan who breaches any of the
           responsibilities, obligations, or duties
           imposed upon fiduciaries by this subchapter
           shall be personally liable to make good to
           such plan any losses to the plan resulting
           from each such breach. . . .

                                 55
Under section 1104(c) of the Act, however, a fiduciary is not

liable for any loss or breach which results from a participant's

exercise of control over the assets in his or her individual

account.   Moreover, a participant who exercises such control is

not deemed a fiduciary.   Section 1104(c) states:
     § 1104. Fiduciary Breaches
     (c) Control over assets by participant or beneficiary

                In the case of a pension plan which
           provides for individual accounts and permits
           a participant or beneficiary to exercise
           control over the assets in his account, if a
           participant or beneficiary exercises control
           over the assets in his account (as determined
           under regulations of the Secretary0)--

29 U.S.C. § 1109(a).
0
     Recognizing that "there may be difficulties in determining
whether the participant in fact exercises control over his
account[,]" Congress directed that "whether participants and
beneficiaries exercise independent control is to be determined
pursuant to regulations prescribed by the Secretary of Labor."
H.R. Conf. Rep. No. 1280, 93d Cong., 2nd Sess. (1974), reprinted
in 1974 U.S. Code Cong. & Admin. News 5038, 5086.

          The Secretary of Labor issued a final regulation for 29
U.S.C. §1104(c) in October, 1992. 29 C.F.R. § 2550.404c-1. The
regulation sets forth in considerable detail the "kinds of plans
that are 'ERISA section [1104(c)] plans,' the circumstances in
which a participant or beneficiary is considered to have
exercised independent control over the assets in his account as
contemplated by section [1104(c)], and the consequences of a
participant's or beneficiary's exercise of control." Id.
§2550.404c-1(a).

          Briefly, under the regulation, a plan must inform
participants or beneficiaries that the plan is intended to
constitute a plan described in section 1104(c) of ERISA and Title
29 of the Code of Federal Regulations and that "the fiduciaries
of the plan may be relieved of liability for any losses which are
the direct and necessary result of investment instructions given
by such participant or beneficiary." Id. § 2550.404c-
1(b)(2)(1)(i). The plan must also allow participants the
opportunity to choose from a broad range of investment

                                56
                           (1) such participant or
               beneficiary shall not be deemed to
               be a fiduciary by reason of such
               exercise, and

                           (2) no person who is
               otherwise a fiduciary shall be
               liable under this part for any
               loss, or by reason of any breach,
               which results from such
               participant's or beneficiary's
               exercise of control.

29 U.S.C. § 1104(c) (footnote added).

          Finding that the Plans gave the plaintiffs the

authority to determine into which Funds their respective

contributions were directed and that Unisys advised them of the

"non-guaranteed" nature of the investments in the Fixed Income

and Insurance Contract Funds, the district court held that the

plaintiffs had "control" over their assets under section 1104(c)

and that, therefore, Unisys was freed from section 1104(a)'s

disclosure duties.   Because the court concluded that Unisys was

entitled to summary judgment on the plaintiffs' breach of

fiduciary duty claims, it did not reach Unisys' assertion that

alternatives, give investment instruction with appropriate
frequency, diversify investments, and obtain sufficient
information to make informed investment decisions. Id.
§2250.404c-1(a)-(c).

          Generally, the regulation "is effective with respect to
transactions occurring on or after the first day of the second
plan year beginning on or after October 13, 1992." Id.
§2250.404c-1(g)(1). Transactions occurring before this date are
governed by section 1104(c) of the Act without regard to the
regulation. Id. § 2250.404c-1(g)(3).

          As the regulation was not in effect when the
transactions at issue occurred, it does not apply or guide our
analysis in this case.

                                57
section 1104(c) applies to relieve it of liability for the

plaintiffs' alleged losses.   We have already determined that the

court erred in granting summary judgment to Unisys on the

plaintiffs' breach of fiduciary duty claims and in using section

1104(c) to excuse Unisys from the duty to inform that ERISA

imposes upon fiduciaries.   We must now determine whether the

district court's decision to grant Unisys summary judgment should

nonetheless be affirmed because Unisys urges that section 1104(c)

provides it with a complete defense to the plaintiffs' claims.

          Our task in interpreting section 1104(c) and applying

it here is, of course, to effectuate Congress' intent.     Negonsott

v. Samuels, ___U.S.___, 113 S. Ct. 1119, 1122-23 (1993).    As with

any inquiry of statutory construction, we start with the text of

the statute, Pension Benefit Guar. Corp. v. White Consolidated

Indus., Inc., 998 F.2d 1192, 1198 (3d Cir. 1993), cert. denied,

___ U.S. ___, 114 S. Ct. 687 (1994); "where [Congress'] will has

been expressed in reasonably plain terms, that language must

ordinarily be regarded as conclusive."   Griffin v. Oceanic

Contractors, Inc., 458 U.S. 564, 570 (1982).   If the statutory

language is unclear, we then look to the Act's legislative

history. Blum v. Stenson, 465 U.S. 886, 896 (1984).
          It is Unisys' position that even if it failed to

satisfy ERISA's duties of prudence and diversification in the

first instance by purchasing the Executive Life GICs for the

Plans, the losses allegedly sustained in this case resulted from

the "control" each plaintiff as a plan participant exercised --

the decision to invest in Executive Life by making an informed

                                58
choice to contribute to and maintain assets in the Fixed Income

and Insurance Contract Funds.   The plaintiffs' control, according

to Unisys, emanated from two sources:    the information Unisys

distributed to plan participants regarding the personal

responsibility they assumed for investment decisions, the nature

of investments in the Fixed Income and Insurance Contract Funds

in general and the Funds' holdings in Executive Life in

particular,0 as well as the Plans' contribution and transfer

terms, which allowed each participant the freedom to allocate his

or her assets among the various investment funds as he or she saw

fit.

          Given Unisys' position, the first question we must

answer regarding section 1104(c) is whether the statute allows a

fiduciary, who is shown to have committed a breach of duty in

making an investment decision, to argue that despite the breach,

it may not be held liable because the alleged loss resulted from

a participant's exercise of control.    In light of section

1104(c)'s plain language, we believe that it does.    There is

0
          The information which Unisys contends is a source of
the plaintiffs' control includes representations that the
plaintiffs allege were materially misleading in violation of
section 1104(a)'s fiduciary duty to disclose. Obviously, given
the role these representations play in Unisys' section 1104(c)
defense, Unisys cannot claim that section 1104(c) would relieve
it from liability in the event that the representations are found
to constitute breaches of ERISA's disclosure duties. It is also
obvious that in the event these representations are found to have
materially misled the plaintiffs, Unisys' theory of control under
section 1104(c) would fail. Indeed, the parties do not dispute
that accurate and complete information regarding the investments
Unisys made for Fixed Income and Insurance Contract Funds is
essential to the section 1104(c) control Unisys contends the
plaintiffs exercised in this case.

                                59
nothing in section 1104(c) which suggests that a breach on the

part of a fiduciary bars it from asserting section 1104(c)'s

application.   On the contrary, the statute's unqualified

instruction that a fiduciary is excused from liability for "any

loss" which "results from [a] participant's or [a] beneficiary's

exercise of control"0 clearly indicates that a fiduciary may call

upon section 1104(c)'s protection where a causal nexus between a

participant's or a beneficiary's exercise of control and the

claimed loss is demonstrated.   This requisite causal connection

is, in our view, established with proof that a participant's or a

beneficiary's control was a cause-in-fact, as well as a

substantial contributing factor in bringing about the loss

incurred.   See Willett v. Blue Cross and Blue Shield of Alabama,

953 F.2d 1335, 1343 (11th Cir. 1992) ("Section [1109] of ERISA

establishes that an action exists to recover losses that

`resulted' from the breach of fiduciary duty; thus the statute

does require that the breach of the fiduciary duty be the

proximate cause of the losses claimed . . . ."); Brandt v.

Grounds, 687 F.2d 895, 898 (7th Cir. 1982) (Under 29 U.S.C.

§1109, where "a fiduciary . . . who . . . breaches . . . shall be

personally liable to make good . . . any losses resulting from

each such breach", a causal connection is required between the

breach of the fiduciary duty and the losses alleged.).

0
     In this regard, section 1104(c) operates in alternative
circumstances, excusing a fiduciary from liability for "any loss"
or "by reason of any breach" which "results from [a]
participant's or [a] beneficiary's exercise of control." 29
U.S.C. § 1104(c).

                                60
            Section 1104(c)'s text, however, neither defines nor

clarifies its central element -- the "control" a pension plan may

permit a participant or a beneficiary to exercise.    29 U.S.C.

§1104(c).   Accordingly, we look to ERISA's legislative history

for assistance.   From a House Conference Report, we learn that

section 1104(c) established a "special rule" for plans which

allow a participant or a beneficiary "independent control" over

individual account assets:
               Certain individual account plans. [A]
          special rule is provided for individual
          account plans where the participant is
          permitted to, and in fact does, exercise
          independent control over the assets in his
          individual account. In this case, the
          individual is not to be regarded as a
          fiduciary and other persons who are
          fiduciaries with respect to the plan are not
          to be liable for any loss that results from
          the exercise and control by the participant
          or beneficiary.

H.R. Conf. Rep. No. 1280, reprinted in 1974 U.S. Code Cong. &

Admin. News at 5085-86.

            From that same Report, we further learn that Congress
conceptualized control in terms of authority on the part of a

participant or a beneficiary to issue investment instructions to

a fiduciary:

            Therefore, if the participant instructs the
            plan trustee to invest the full balance of
            his account in, e.g., a single stock, the
            trustee is not be liable for any loss because
            of a failure to diversify or because the
            investment does not meet the prudent man
            standards. However, the investment must not
            contradict the terms of the plan, and if the
            plan on its face prohibits such investments,

                                 61
          the trustee could not follow the instructions
          and avoid liability.

Id. at 5086.
          Finally, the Report tells us that a section 1104(c)

plan must offer a "broad range of investments".   Id.0
Before we turn to section 1104(c)'s application to the evidence

in this case, we have several observations to make.      First, our

analysis of the statute and Congress' statements of legislative

intent lead us to believe that while all plans which qualify

under section 1104(c) have certain elements in common, each

section 1104(c) plan is unique, depending on the control a plan

permits participants and beneficiaries to exercise by way of the

investment instructions they may give.   Second, because section

1104(c) speaks in terms of a plan which permits control to a

participant or a beneficiary, a participant's or a beneficiary's

0
          In accordance with Congress' direction that we consult
the common law of trusts for additional insight into ERISA's
provisions, we note that a trustee may under certain
circumstances be discharged from liability for losses that arise
out of a particular transaction which represents a breach of
trust. According to sections 216, 217 and 218 of the Restatement
(Second) of Trusts respectively, where a beneficiary consents to,
subsequently affirms or releases a trustee's breach of trust, he
cannot thereafter hold the trustee liable for losses, unless at
the time of consent, affirmance or release, the beneficiary was
incompetent, not informed by the trustee of his rights and the
material facts, subjected to the trustee's improper influence or
made party by an interested trustee to an unfair or unreasonable
bargain. Restatement (Second) of Trusts, §§ 216, 217, 218
(1959). In addition, under section 219 of the Restatement, a
beneficiary may be barred from holding a trustee liable for
losses by laches. Id. § 219.

          We have not found, however, a common law trust
principle that is analogous to the scheme that Congress
established in 29 U.S.C. § 1104(c) as we understand it.

                               62
control under section 1104(c) stems from a plan's specific

provisions, not from elements which lie outside the plan's

structure and which may arguably amount to control in connection

with a single transaction.   Finally, section 1104(c) is akin to

an exemption from or a defense to ERISA's general rule, relieving

fiduciaries in the appropriate circumstances of the liability to

which they would otherwise be exposed under 29 U.S.C. § 1109.

Accordingly, a fiduciary which seeks section 1104(c)'s protection

bears the burden of showing its application. See Lowen v. Tower

Asset Management, Inc., 829 F.2d 1209, 1215 (2d Cir. 1987)

(holding that the defendant is in the best position to prove and

should bear the burden of establishing its entitlement to an

exemption under 29 U.S.C. §1108 from 29 U.S.C. §1106(b), ERISA's

prohibited transactions provision); Donovan v. Cunningham, 716 F.
2d 1455, 1467-68 (5th Cir. 1983), cert. denied, 467 U.S. 1251

(1984) (ESOP fiduciaries charged with violations of section

1104(a)'s duty of prudence bear the burden of proving the

"statutory defense" of adequate consideration under 29 U.S.C.

§1108(e)).

          Having carefully reviewed the record with this

background in mind, we conclude that Unisys is not entitled to

summary judgment on its section 1104(c) defense.   The record is

inadequately developed as to critical facts and demonstrates the

existence of disputed material facts as to whether the Plans fall

within the statute's coverage.

          Starting with Congress' mandate that a section 1104(c)

plan provide "a broad range of investments", we look to see

                                 63
whether the uncontroverted evidence Unisys submitted establishes

that the Plans gave participants a wide array of investments with

materially different risk and return characteristics.    Given

Unisys' theory of control, we also look to see whether the

evidence establishes that a participant could remove his or her

assets from, in this instance, the Fixed Income or Insurance

Contract Funds and place them in a comparable investment vehicle.

In our view, if the Plans did not offer an acceptable alternative

to GIC investments, a participant did not have the freedom and,

in turn, the control to decide how his or her assets were

ultimately invested.   In this regard, we find the evidence

lacking.   The record includes documents which give a general

description of the six funds the Plans offered; it does not,

however, include evidence sufficient to measure the breadth of

actual plan investments or assess all of the investment

alternatives available to participants.

           As stated, Unisys' contention that the plaintiffs were

permitted control under section 1104(c) and indeed exercised it

is premised, in part, on the information Unisys allegedly

disseminated to participants regarding "his or her investment

options[,] [his or her] obligation to manage his or her own

investments[,] the risks associated with th[e] election to invest

in GICs[,] and developments surrounding Executive Life. . . ."

(See Defendants' Memorandum of Law in Support of their Motion for

Summary Judgment and to Strike Jury Demand, pp.15-17).    We agree

that information, both general and relating specifically to

Executive Life, is an essential element of Unisys' section

                                64
1104(c) theory that the plaintiffs themselves ultimately

controlled whether their respective assets were invested in

Executive Life GICs, even though Unisys chose the investment in

the first place.   For Unisys to prevail under section 1104(c),

however, it must establish that the Plans provided information

sufficient for the average participant to understand and assess:

the control the Plans permitted a participant to exercise and the

financial consequences he or she assumed by exercising that

control; the rights that ERISA provided to participants and the

obligations that the Act imposed upon fiduciaries; the Plans'

terms and operating procedures; the alternative funds the Plans

offered; the investments in which assets in each fund were

placed; the financial condition and performance of the

investments; and developments which materially affected the

financial status of the investments.

          Based on our careful review of the record, we find that

Unisys has not satisfied its burden on summary judgment to show

that this necessary information was provided to the Plans'

participants.   Significantly, the written documents which

establish and maintain the Plans are conspicuously missing from

the record.   Thus, we cannot determine what information the Plans

made available to participants as a matter of course.    If Unisys'

dissemination of the information it relies upon to assert section

1104(c)'s application in this case was not performed pursuant to

a plan term but was merely situational, an isolated response to a

crisis in one investment, then the control that Unisys contends

the plaintiffs had was not permitted by the Plans as section

                                65
1104(c) requires and the statute's relief would be unavailable.

As for the disclosures that Unisys included in the record,

whether they communicated to the average participant the

information we have decided is critical to Unisys' section

1104(c) defense are questions of fact properly left to the

factfinder to decide at trial.

          Moving to the second component of Unisys' position

regarding the plaintiffs' control -- the Plans' contribution and

transfer terms -- we agree with Unisys that the evidence is

uncontroverted that for all intents and purposes, a participant's

ability to make initial contributions to the Plans' various

investment funds was unfettered.      The transfer restrictions that

the Plans imposed upon participants, however, are problematic.

The record reveals that the Plans restricted transfers which

involved all of the GIC Funds and the Short-Term Investment Fund

in order to obtain higher interest rates from GIC issuers.0 While

we have no quarrel with the reason for the transfer restrictions

or with the notion that the frequency with which a participant

issues investment instructions may be restricted without

necessarily eliminating the control that section 1104(c)

contemplates, we believe that a reasonable factfinder could

conclude that the duration and pervasiveness of the restrictions

imposed upon participants by the Plans so significantly limited

0
     Charles Service, a member of Unisys Corporation's Capital
Management Trust Investment Department explained: "These
restrictions allow the insurance companies to forecast their cash
flows with greater certainty, thereby reducing their risk. With
their risk reduced, the insurance companies which bid for our
GICs can offer significantly higher yields."

                                 66
their ability to decide in which Funds their respective assets

were allocated, that the restrictions are antithetical to the

concept of "independent control" that Congress enacted in section

1104(c).   Moreover, assuming that control existed at the Plans'

inception, the factfinder could conclude that when Unisys agreed

on October 17, 1990, to give Executive Life the right under

certain circumstances "to not honor employee requests for

withdrawal" in exchange for Executive Life's consent to a

reduction in the waiting period for asset transfers between "non-

competing" funds and the GIC Funds, control within the meaning of

section 1104(c) was no longer available to the participants under

the Plans from that point forward.

           Thus, we conclude that Unisys is not entitled to

summary judgment on its section 1104(c) defense to the

plaintiffs' breach of fiduciary duty claims.

           Finally, we observe that in the event the plaintiffs

prove that Unisys breached section 1104(a)'s duty of prudence

and/or duty of diversification and Unisys proves that section

1104(c) applies as a defense, the losses for which Unisys would

not be liable are those which, as to each plaintiff, occurred

after he or she, free under the Plans' transfer terms to place

the assets in any of the Plans' investment vehicles, exercised

control by making the informed decision to contribute to and/or

maintain assets in the Fixed Income Fund or the Insurance

Contract Fund.

                                V.

                                67
          For the foregoing reasons, we will vacate the district

court's order of January 25, 1995 granting summary judgment to

the defendants on Count I of the second amended consolidated

class action complaint and remand for further proceedings on the

plaintiffs' breach of fiduciary claims under section 1104(a) of

the Employee Retirement Income Security Act of 1974, 29 U.S.C.

§1001 et seq. (1985 & Supp. 1995).

                               68