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In the complex and long-running ERISA suit brought by Unisys Corp. retirees who say the company misled them into believing they would receive lifetime medical benefits, a federal appeals court last week overturned a decision that said the statute of limitations had run on all the claims. The 3rd Circuit U.S. Court of Appeals found that some of the 20,000 retirees may be able to successfully invoke the “fraud or concealment” provisions of ERISA to extend the six-year statute of limitations. But the court split 2-1 on the question of when the statute would begin to run even in the case of fraud. The majority opinion, authored by Senior U.S. Circuit Judge Walter K. Stapleton and joined by U.S. Circuit Judge Richard L. Nygaard, said that the statute begins to run on the date that a worker retires. But U.S. Circuit Judge Carol Los Mansmann said the majority’s decision “threatens to undercut a fiduciary’s responsibility by allowing a safe harbor so long as the breaching fiduciary arranges to keep the beneficiaries in the dark for six years after they rely on his misrepresentations.” Mansmann said she joined that portion of the majority’s opinion “which recognizes that an ERISA fiduciary who has created confusion about rights under a benefit plan has an ongoing responsibility for harm stemming from beneficiaries’ decisions attributable to that confusion.” But Mansmann said she believes that the majority’s analysis of the statute of limitations “affords too little protection for trusting workers by using an artificial notion of detriment to start the statutory period, by disregarding the fiduciary’s ongoing obligation to correct known misunderstanding, and by effectively writing out of the statute the doctrine of tolling until discovery of a self-concealing wrong.” Instead, Mansmann said, she would hold that the “last action” which constituted a part of the breach for statute of limitation purposes “was the termination of the medical benefits that Unisys had assured the retirees they would receive for life, rather than any particular decisions the retirees made on the strength of that assurance.” Nonetheless, the ruling is a significant victory for the team of plaintiffs lawyers who brought the case — Alan M. Sandals of Sandals Langer & Taylor in Philadelphia (who argued the appeal); Arnold Levin of Philadelphia’s Levin Fishbein Sedran & Berman; Bryan L. Clobes of Miller Faucher Cafferty & Wexler in Philadelphia; Joseph F. Roda of Roda & Nast in Lancaster, PA; Joseph A. Golden and Carl B. Downing of Sommers Schwartz Silver & Schwartz in Southfield, Miss.; Seymour J. Mansfield of Mansfield & Tanick in Minneapolis; Sarah E. Siskind of Miner Barnhill & Galland in Madison, Wis.; Henry H. Rossbacher of Rossbacher & Associates in Los Angeles; and Charles Gottlieb of Gottlieb & Goren in Bingham Farms, Miss. The decision marked the third time that the 3rd Circuit has issued a published decision relating to the Unisys retirees’ claims that they were deceived about their entitlement to lifetime medical benefits. In Friday’s decision, Judge Stapleton found that U.S. District Judge Bruce W. Kauffman had erred in granting summary judgment to Unisys because “there may be retirees who will be able to prove that Unisys counselors concealed their breach from them and that the limitation period did not foreclose suit until six years after the date they discovered the breach had occurred.” The class-action suit began in November 1992 after Unisys — a company formed by the merger of Burroughs and Sperry Corp. — announced that it would terminate all of its pre-existing medical benefit plans and replace them with a new one effective Jan. 1, 1993. Under the majority of the old plans, Unisys paid the entire medical premium for the lives of the retirees and provided continuing benefits for their spouses. The new plan, in contrast, required the retirees to contribute escalating amounts to the cost of the premiums until Jan. 1, 1995, at which time the retirees would become responsible for the entire premium. Retirees responded by filing eight lawsuits that alleged breach of contract, estoppel and breach of fiduciary duty. The lower court granted summary judgment to Unisys on the breach of contract claims of the Burroughs and Unisys retirees, as well as on the estoppel and breach of fiduciary duty claims of all plaintiffs. After a non-jury trial, the lower court also granted judgment to Unisys on the contract claims of the Sperry retirees. During the trial, Unisys relied upon the fact that the applicable ERISA plans and summary plan descriptions contained a reservation of rights clause, reserving to Unisys the right to amend or terminate the plan at any time for any reason. The Sperry retirees advanced two theories in response. The first was that, when the applicable ERISA plans and summary plan descriptions described the health care benefits as “lifetime” benefits, this was intended to convey not only that the existing plan provided such benefits for life but also that those benefits were vested. The second theory was that while the ERISA plans used lifetime language to describe the benefits of both actives and retirees, Sperry had an unwritten policy that once an individual retired, his/her benefits “locked in.” As a result, they said, the company could not reduce the medical benefits of retirees under any circumstances. At the seven-day trial, the lower court concluded that “lifetime benefits” as used in the plans did not reflect an intent to create “vested” lifetime benefits, observing that “the plaintiffs conceded throughout the entire trial that an active employee’s benefits could always be awarded or terminated even though lifetime language was similarly used to describe that benefit … implicitly recogniz[ing] that lifetime is not synonymous with vested.” On the plaintiffs’ second theory, the lower court found no evidence of a corporate practice or policy of “locking-in” benefits at retirement, noting that “not a single document corroborat[ed] the testimony that an active/retiree distinction was in force.” At the end of the trial, the lower court concluded that the plaintiffs lacked any contract right to lifetime benefits. But the lower court reconsidered its decision and reopened the case after the 3rd Circuit handed down its decision in Bixler v. Cent. Pa. Teamsters Health & Welfare Fund. In reviving the claims, the lower court pointed to evidence that a retirement counselor at Unisys had “responded to questions about the reservation of rights clause raised by potential retirees by saying that the language pertained to active employees and not to retirees.” It also found that a personnel manager “admitted to routinely telling inquiring employees that their post-retirement medical benefits were ‘guaranteed to them for life.’ “ The lower court also found evidence indicating “the highest levels of corporate management at Sperry, and later Unisys, recognized that employees might be under the mistaken belief that ‘lifetime’ meant forever.” The 3rd Circuit heard an interlocutory appeal on the lower court’s decision to reinstate the claims and upheld that decision. But the court also upheld the lower court’s dismissal of the breach-of-contract claim because the plans provided “unambiguous notice that lifetime medical benefits were not guaranteed, even for those who retired when the plans still provided for such benefits.” When the case was sent back to the lower court, it granted Unisys’s renewed motion for partial summary judgment. Those retirees whose claims were extinguished by that ruling filed the appeal that resulted in last week’s decision. Unisys was represented in the appeal by attorneys Joseph J. Costello and Joseph B.G. Fay of Morgan Lewis & Bockius and in-house counsel Joseph A. Teklits.

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