Unisys Retirees Get Another Day in Court

The appeals court reversed the trial court’s later dismissals of claims of many retirees, noting that it was possible for the retirees to show that company misrepresentations about the promised medical benefits was “fraud or concealment” that prevented the company from using the statute of limitations as a defense.

The appeals court also rejected the ruling that only employees who had retired “voluntarily” had valid legal claims.

Background

The suits (there were eight different ones originally, filed in four different jurisdictions, later consolidated) arose out of a November 1992 decision by Unisys to terminate all preexisting medical benefit plans and replace them with a new one, effective January 1993.  Under most of the old plans, Unisys paid the entire medical premium for the life of the retirees, and provided continuing benefits for their spouses.

In contrast, the new plan required employees to contribute a gradually increasing proportion of the premiums until January 1, 1995, when the retirees would be responsible for the entire premium.

The retirees claimed the company falsely misled them into believing they would receive lifetime medical benefits paid by the company (and its predecessors) as part of their retirement benefits before terminating company-paid retiree medical benefits programs in 1992.  Some claims had been dismissed by the trial court based on the statute of limitations and the circumstances of the terminations.

First Impressions

During the trial, Unisys relied upon the fact that the ERISA plans and summary plan descriptions (“SPDs”) contained a reservation of rights clause, which reserved the employer’s right to amend or terminate the plan at any time for any reason.

In response, the retirees noted that the plans and SPDs described the health care benefits as “lifetime” benefits, which they took to mean a guarantee against change as well as a benefit for their lifetime. Additionally, though the SPD used the same language to describe benefits for both active and retired workers, there was an unwritten practice or “policy” that once an individual retired, his/her benefits “locked in.” 

The District Court held that “lifetime benefits” as used in the plans and SPDs did not reflect an intent to create “vested” lifetime benefits.  The court also found no evidence of a corporate practice or policy of locking in benefits at retirement and ultimately held that plaintiffs had no contract right to lifetime benefits.

“Try” Again
 
The appellate court ultimately held that despite the use of the term “lifetime benefit,” unambiguous language in the plans and SPD made clear that the benefits were not guaranteed.  They also held that individual plaintiffs that could prove misrepresentation by the employer in a particular circumstance would have an action for breach of Unisys’ fiduciary duty as plan administrator.

The court found that while the alleged acts of misrepresentation by company employees did not constitute an active fraud or concealment sufficient to extend ERISA’s statute of limitations in view of the ready distribution of written materials that clearly stated the terms of the benefits.  However, the court was unwilling to say that no retiree would be able to individually invoke the fraud or concealment provisions, based on evidence before the court.

The court found the summary judgment by the District Court to be “overbroad,” and rejected the view that recovery was limited to voluntary decisions to retire.

The court also reserved judgment on whether a reasonable