The opinion
Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
3-9-2001
In Re: Unisys Corp.
Precedential or Non-Precedential:
Docket 99-1929
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Filed March 9, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NO. 99-1929
IN RE: UNISYS CORP. RETIREE
MEDICAL BENEFIT "ERISA" LITIGATION
FREDERICK E. TONNIES; WILLIAM M. LEONHARDT;
DAVID S. KAHL; ROBERT E. WILT; CLAY A. BERNICHON;
SOLVEIG TSCHANN; FREDERICK W. HORPE; LUDSON F.
WORSHAM; EDWIN MARJALA; KENYON T. BEMENT;
DONALD E. WAGNER; LUCIUS O. BROWNE, DONALD F .
FABRY; THOMAS L. DURKIN; BERNARD J. HAR T;
RONALD R. BENNETT; HERMAN HEIN; DONALD L.
THOMPSON, individually and on behalf of all members of
the Sperry, Burroughs and Unisys Classes
Appellants
On Appeal From the United States District Court
For the Eastern District of Pennsylvania
(MDL 969)
District Judge: Honorable Bruce W. Kauf fman
Argued July 18, 2000
BEFORE: MANSMANN, NYGAARD and STAPLETON,
Circuit Judges
(Opinion Filed March 9, 2001)
Arnold Levin
Levin, Fishbein, Sedran & Berman
510 Walnut Street, Suite 500
Philadelphia, PA 19106
Joseph A. Golden
Carl B. Downing
Sommers, Schwartz, Silver &
Schwartz
2000 Town Center, Suite 900
Southfield, MI 48075
Bryan L. Clobes
Miller, Faucher, Cafferty & W exler
One Penn Square West, Suite 2500
Philadelphia, PA 19102
Seymour J. Mansfield
Mansfield & Tanick
900 Second Avenue South,
Suite 1560
Minneapolis, MN 55402
Sarah E. Siskind
Miner, Barnhill & Galland
44 East Miffline Street, Suite 803
Madison, WI 53703
Henry H. Rossbacher
Rossbacher & Associates
445 South Flower Street
Citibank Center, Suite 2100
Los Angeles, CA 90071
Charles Gottlieb
Gottlieb & Goren
30150 Telegraph, Suite 249
Bingham Farms, MI 48025
Joseph F. Roda
Roda & Nast
801 Estelle Drive
Lancaster, PA 17602
2
Alan M. Sandals (Argued)
Sandals, Langer & Taylor
1650 Market Street
One Liberty Place, 50th Floor
Philadelphia, PA 19103
Attorneys for Appellants
Joseph J. Costello (Argued)
Joseph B.G. Fay
Morgan, Lewis & Bockius
1701 Market Street
Philadelphia, PA 19103
Joseph A. Teklits
UNISYS Corporation
P.O. Box 500
Blue Bell, PA 19424
Attorneys for Appellee
OPINION OF THE COURT
STAPLETON, Circuit Judge:
We are asked to review two or ders granting partial
summary judgment to the defendant in this ERISA action.
Review of one order requires us to interpret ERISA's statute
of limitations for breach of fiduciary duty claims, 29 U.S.C.
S 1113. Review of the other requir es us to determine
whether the defendant fiduciary, if found to have made
material misrepresentations to the plaintiffs, may be held
accountable to those plaintiffs who relied to their detriment
in making decisions other than decisions to r etire.
I.
The factual and procedural history of this case is
extensive and has been recounted elsewher e in detail.1 We
_________________________________________________________________
1. See e.g., In re Unisys Corp., 57 F.3d 1255, 1257-61 (3d Cir. 1995),
cert.
denied sub nom, Unisys v. Pickering, 517 U.S. 1103 (1996); In re Unisys
Corp., 957 F. Supp. 628, 631-32 (E.D. Pa. 1997); In re Unisys Corp., 837
F. Supp. 670, 672 (E.D. Pa. 1993), aff 'd, 58 F.3d 896 (3d Cir. 1995).
3
will explain only the status of the case as it comes to us on
this appeal. This is a class action filed on behalf of retirees
and disabled former employees of the Sperry, Burroughs,
and Unisys Corporations ("retirees" or "plaintiffs") against
Unisys Corporation ("Unisys"). The dispute arises out of
Unisys' termination of its post-retir ement medical plans for
retirees and disabled former employees of the three
companies.
On November 3, 1992, Unisys announced that it would
terminate all of its preexisting medical benefit plans and
replace them with a new one effective January 1, 1993.2
Under the majority of the old plans, Unisys paid the entire
medical premium for the lives of the retir ees 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 January 1,
1995, at which time the retirees would become responsible
for the entire premium.
Upon learning about this planned change in r etirement
benefits, retirees of Sperry, Burr oughs, and Unisys
separately filed eight different lawsuits against Unisys in
four jurisdictions. See In re Unisys Corp., 837 F. Supp. 670,
672 n.1 (E.D. Pa. 1993) (citing cases). These lawsuits were
eventually consolidated. The retirees asserted three causes
of action: breach of contract, estoppel, and br each of
fiduciary duty.
The District Court granted summary judgment to Unisys
on the breach of contract claims of the Burr oughs and
Unisys retirees, as well as on the estoppel and breach of
fiduciary duty claims of all plaintiffs. See In re Unisys Corp.,
837 F. Supp. 670 (E.D. Pa. 1993). After a non-jury trial, the
District Court granted judgment to Unisys on the contract
_________________________________________________________________
2. In September 1986, Sperry Corporation and Burr oughs Corporation
merged to form Unisys Corporation. Following the merger, Unisys
maintained the preexisting medical benefit plans of its component
corporations until 1989. That year, Unisys cr eated its own Post-
Retirement and Extended Disability Medical Plan to cover employees who
retired after April 1, 1989, most of whom were former Sperry and
Burroughs employees. Even with the addition of the new plan, however,
Unisys kept its predecessor plans intact.
4
claims of the Sperry retirees. See In re Unisys Corp., 1994
WL 284079 (E.D. Pa.).
During the trial, Unisys relied upon the fact that the
applicable ERISA plans and summary plan descriptions
("SPDs") 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 retir ees 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, i.e., guaranteed against change. The second
theory "was that although the SPDs used lifetime language
to describe the benefits of [both] actives and retirees, Sperry
had an unwritten `practice' or `policy' that once an
individual retired, his/her benefits`locked in.' Pursuant to
this `lock in' policy, the company could not r educe the
medical benefits of retirees under any circumstances." In re
Unisys Corp., 1994 WL 284079 at *23.
At the seven day trial, the District Court admitted and
considered extrinsic evidence tendered to show Unisys'
intent in promulgating the plans. The Court concluded that
"lifetime benefits" as used in the plans and SPDs did not
reflect an intent to create "vested" lifetime benefits,
observing that "the plaintiffs conceded thr oughout 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."
Id. at *22. With respect to the plaintiffs' second theory, the
District Court found no evidence of a corporate practice or
policy of "locking-in" benefits at r etirement, noting that "not
a single document corroborat[ed] the testimony that an
active/retiree distinction was in for ce." Id. at *23.
The District Court's ultimate conclusion at the end of the
trial was that the plaintiffs lacked any contract right to
lifetime benefits. The evidence that it hear d and our
intervening decision in Bixler v. Cent. Pa. T eamsters Health
& Welfare Fund, 12 F.3d 1292 (3d Cir. 1993), however,
caused it to reconsider its summary judgment in Unisys'
5
favor on the Sperry plaintiffs' breach offiduciary duty
claims. Ultimately, it reinstated those claims. 3 In the course
of doing so, it pointed to evidence that (1) a "r etirement
counselor [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' ", and (2) a "personnel manager . . . admitted
to routinely telling inquiring employees that their post-
retirement medical benefits were`guaranteed to them for
life.' " The Court described this evidence as"just a small
sample of the evidence on this issue." In r e Unisys Corp.,
1994 WL 284079 at *34 n.69. The Court also r eferenced
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." Id. at *26. The Court explained its
reinstatement decision by stating "that based on [this]
evidence and the law in this circuit, it seems possible that
at least some plaintiffs will be able to sustain a [breach of
fiduciary duty] claim." Id. at *27. 4 The Court declined,
however, to reinstate the estoppel claims.
An interlocutory appeal followed, bringing befor e us the
judgments in Unisys' favor on the contract and estoppel
claims and the decision to reinstate the br each of fiduciary
duty claims. We found judgment appropriate on the breach
of contract claim because the plans and SPDs pr ovided
unambiguous notice that lifetime medical benefits were not
guaranteed, even for those who retired when the plans still
provided for such benefits. On the unambiguous face of the
plans, there was no right to lifetime medical benefits and
extrinsic evidence should not be considered. See In re
Unisys Corp. ("Unisys I"), 58 F .3d 896, 904-06 (3d Cir.
1995).
We found that summary judgment was appr opriate on
the retirees' estoppel claim as well:
_________________________________________________________________
3. After we affirmed this decision, the District Court reinstated the
similar claims of the Burroughs and Unisys r etirees as well. In re Unisys
Corp., 1996 WL 455968 (E.D. Pa.).
4. At the same time, the Court stressed that the breach of fiduciary duty
claim was not before it and that it was "not holding that a breach did in
fact occur." Id. at *27.
6
Due to the unambiguous reservation of rights clauses
in the summary plan descriptions by which Unisys
could terminate its retiree medical benefit plans, the
regular retirees cannot establish"reasonable"
detrimental reliance based on an interpr etation that
the SPDs promised vested benefits. The r etirees'
interpretation of the plans as providing lifetime benefits
is not reasonable as a matter of law because it cannot
be reconciled with the unqualified reservation of rights
clauses in the plans.
Unisys I, 58 F.3d at 907.
In a separate opinion, we also upheld the District Court's
reinstatement decision. See In re Unisys Corp. ("Unisys II"),
57 F.3d 1255 (3d Cir. 1995). W e did so because the record
suggested that some retirees might be able to show one or
both of the following: (1) Unisys representatives counseled
them that they had lifetime medical benefits without
making reference to the reservation of rights clause, even
though the representatives were awar e that many
employees mistakenly understood such counsel to mean
that such benefits became vested at the time of r etirement,
see id. at 1260-61; and (2) Unisys repr esentatives
"affirmatively represent[ed] to them that their medical
benefits were guaranteed once they retir ed, when the
company knew in fact this was not true." Id. at 1266-67.
We held that such conduct could constitute a breach of
Unisys' fiduciary duty as plan administrator .
After the breach of fiduciary duty claim was reinstated for
all classes of plaintiffs, Unisys filed two motions for partial
summary judgment. At the same time, the Sperry r etirees
submitted a motion for summary judgment on their claims.
In its first motion, Unisys asked the District Court to grant
it summary judgment against all Sperry retir ees who retired
before November 17, 1986 (six years befor e the first
complaint by Sperry retirees was filed), and against all
Burroughs retirees who retir ed before December 3, 1986
(six years before the first complaint by Burr oughs retirees
was filed). Unisys argued that these plaintiffs were barred
from having their claims heard by ERISA's statute of
limitations, 29 U.S.C. S 1113.
7
In its second motion, Unisys sought to have the District
Court grant summary judgment against all the plaintiffs
who would not be able to prove that Unisys' alleged breach
of fiduciary duty led them to retire earlier than they
otherwise would have (e.g., retirees who did not voluntarily
retire). It argued that the only legally cognizable harm that
could have resulted from its alleged misr epresentations was
acceleration in individual decisions to retir e. Other
decisions made by the plaintiffs in reliance on Unisys'
misrepresentations, Unisys contended, should not be
considered a "resulting harm" of the alleged breach of
fiduciary duty.
In support of their summary judgment motion, the
Sperry retirees argued that ther e is no material dispute of
fact as to any of the elements of their breach of fiduciary
duty claims. Accordingly, they urged the District Court to
grant them judgment as a matter of law.
The District Court granted Unisys' motions for partial
summary judgment and denied summary judgment to the
Sperry retirees on their motion. Those r etirees whose claims
were extinguished by the partial summary judgments in
Unisys' favor then successfully moved under Fed. R. Civ. P.
54(b) for the entry of a final judgment on their claims so
they could prosecute this appeal. See In r e Unisys Corp.,
189 F.R.D. 149 (E.D. Pa. 1999).
II.
Section 1113 of ERISA, 29 U.S.C. S 1113 states, in its
entirety:
No action may be commenced under this subchapter
with respect to a fiduciary's breach of any
responsibility, duty, or obligation under this part, or
with respect to a violation of this part, after the earlier
of
(1) six years after (A) the date of the last action which
constituted part of the breach or violation, or (B) in the
case of an omission, the latest date on which the
fiduciary could have cured the breach or violation, or
8
(2) three years after the earliest date on which the
plaintiff had actual knowledge of the br each or
violation;
except that in the case of fraud or concealment, such
actions may be commenced not later than six years
after the date of discovery of such breach or violation.
29 U.S.C. S 1113.
The retirees argue that the District Court misapplied
S 1113 in two respects. First, they ar gue that the Court
erred in refusing to hold that under the"fraud or
concealment" provision, the limitations period did not end
until six years after they discovered the truth about their
health care benefits. In the alternative, the retirees argue
that even if we find the "fraud or concealment" provision
inapplicable here, their claims are nevertheless timely
under the six-year provision provided inS 1113(1)(A), which
does not begin to run until "the date of the last action
which constituted a part of the breach or violation." The
retirees contend that the date of the last action constituting
part of the breach in this case was the date on which
Unisys terminated the old benefit plans.
A. "Fraud or Concealment"
The purpose of the "fraud or concealment" pr ovision is to
codify a portion of the common law for ERISA br each of
fiduciary duty claims. The issue raised by this pr ovision is
not simply whether the alleged breach involved some kind
of fraud but rather whether the fiduciary took steps to hide
its breach so that the statute should not begin to run until
the breach is discovered. As we explained in Kurz v.
Philadelphia Elec. Co., 96 F.3d 1544 (3d Cir. 1996):
We now join our sister courts and hold thatS [1113]'s
"fraud and [sic] concealment" language applies the
federal common law discovery rule to ERISA br each of
fiduciary duty claims. In other words, when a lawsuit
has been delayed because the defendant itself has
taken steps to hide its breach of fiduciary duty, . . . the
limitations period will run six years after the date of
the claim's discovery. The relevant question is therefore
9
not whether the complaint "sounds in concealment,"
but rather whether there is evidence that the defendant
took affirmative steps to hide its br each of fiduciary
duty.
Id. at 1552.
In Kurz, the alleged breach of fiduciary duty was the
counseling of employees considering retir ement about their
retirement benefits without revealing that plan
amendments to increase those benefits wer e under serious
consideration. Because the "wrong . . . was neither self-
concealing nor actively concealed," we expr essly reserved
the issue, elsewhere debated, of "whetherS [1113]'s six year
period extends to both `self-concealing' wr ongs as well as
`active concealment' separate from the underlying
wrongdoing." Id. at 1552. In this context, "a self-concealing
act is an act committed during the course of the original
fraud that has the effect of concealing the fraud from its
victims, [while a]ctive concealment refers to acts intended
to conceal the original fraud that are distinct from the
original fraud." Wolin v. Smith Bar ney, Inc., 83 F.3d 847,
852 (7th Cir. 1996). We held in Kurz that, regardless of
whether the acts to conceal the breach occur in the course
of the conduct that constitutes the underlying br each or
independent of and subsequent to the breach, there must
be conduct beyond the breach itself that has the effect of
concealing the breach from its victims.
Here, as in Kurz, the issue is "not whether the complaint
`sounds in concealment' [i.e., not whether Unisys
misadvised the retirees or counseled them without drawing
attention to the reservation of rights clause], but rather
whether there is evidence that the defendant took
affirmative steps [at any point] to hide its breach of
fiduciary duty." Id. at 1552 (emphasis added). Accordingly,
if all that a plaintiff can show is that a counselor
represented to him that he had guaranteed lifetime health
care benefits or failed to give him accurate advice knowing
that he believed he had such benefits, the fraud or
concealment clause is inapplicable. In such cases, Unisys
cannot be said to have taken affirmative steps, either as a
part of the original breach of duty or ther eafter, to cover up
its breach. To the contrary, pursuant to the relevant
10
provisions of ERISA, Unisys regularly distributed to its
employees and retirees SPDs unambiguously explaining
that the plan provisions calling for lifetime benefits could be
amended at any time for any reason. As the District Court
aptly put it,
While . . . compliance with SPD disclosure obligations
does not relieve a company of its fiduciary duty to
avoid confusing participants about their benefits, this
court will not hold that the truth about the "lifetime"
benefits was concealed from participants when the
information about the reservation of rights clause was
unambiguously printed and distributed [by the
company] in the SPD.
In re Unisys Corp., 957 F. Supp. at 635. Accordingly, we
hold that the "fraud or concealment" pr ovision of S 1113(2)
is inapplicable to such cases.5
It is true, as retirees stress, that the doctrine of equitable
tolling can under some circumstances pr event a limitations
period from running in favor of a trustee on a breach of
fiduciary duty claim even in the absence of concealment on
his part. Bailey v. Glover, 21 Wall 342 (1875), upon which
plaintiffs heavily rely, provides one example of such
circumstances. We conclude, however , that superimposing
such equitable tolling rules on the statutory limitations
scheme set forth in S 1113 would be inconsistent with
congressional intent and the clear teachings of the
Supreme Court.
In Lampf, Pleva, Lipkind, Prupis & Petigr ow v. Gilbertson,
501 U.S. 350, 360-62 (1991), the Court held that Rule
10(b)(5) misrepresentation claims ar e governed by S 9(e) and
S 18(c) of the Securities and Exchange Act, each of which
requires that suit be filed befor e the earlier of (a) one year
from the discovery of the facts constituting the violation or
(b) three years from "the violation" (or, in the case of S 18(c),
from the date "the cause of action accrued"). The plaintiff
_________________________________________________________________
5. Notwithstanding plaintiffs' argument to the contrary, we do not regard
the fact that the alleged misrepresentations were repeated (as opposed to
isolated) as satisfying the requirement that there be affirmative steps to
conceal beyond the misrepresentations themselves.
11
there argued that the doctrine of equitable tolling should
apply so that the three-year limitations period would not
start to run until the fraud was discovered even where no
steps where taken by the defendant to conceal the fraud.
The Court rejected that argument, finding it fundamentally
at odds with the legislative scheme:
Plaintiff-respondents note, correctly, that "[t]ime
requirements in lawsuits . . . are customarily subject to
`equitable tolling.' " Irwin v. Department of Veterans
Affairs, 498 U.S. 89, 95 (1990), citing Hallstrom v.
Tillamook County, 493 U.S. 20, 27 (1989). Thus, this
Court has said that in the usual case, "wher e the party
injured by the fraud remains in ignorance of it without
any fault or want of diligence or care on his part, the
bar of the statute does not begin to run until the fraud
is discovered, though there be no special
circumstances or efforts on the part of the party
committing the fraud to conceal it from the knowledge
of the other party." Bailey v. Glover, 21 Wall. 342, 348
(1875); see also Holmberg v. Armbr echt, 327 U.S. 392,
396-397 (1946). Notwithstanding this venerable
principle, it is evident that the equitable tolling
doctrine is fundamentally inconsistent with the 1-and-
3-year structure.
The 1-year period, by its terms, begins after
discovery of the facts constituting the violation, making
tolling unnecessary. The 3-year limit is a period of
repose inconsistent with tolling. One commentator
explains: "[T]he inclusion of the thr ee-year period can
have no significance in this context other than to
impose an outside limit." . . . Because the purpose of
the 3-year limitation is clearly to serve as a cutof f, we
hold that tolling principles do not apply to that period.
Id. at 363.
Although the specified duration of the limitations periods
here is different, the legislative scheme is the same.
Congress has determined that the cut-of f date should be
the earlier of (a) three years from the date of discovery of
the claim and (b) six years from the violation. The only
difference is that ERISA's statute makes a single express
12
exception for cases of "fraud or concealment." Just as in
Lampf, it would be fundamentally inconsistent with the
statutory scheme here to accept the argument that the six-
year period does not begin to run until discovery of the
fraud, where the defendant has engaged in no wr ongful
activity beyond the original fraud on which the plaintiffs'
claims are based. Indeed, given the fact that Congress
provided one express exception in S 1113(2), rejection of
equitable tolling here follows a fortiori from the Supreme
Court's holding in Lampf.
Similarly, we must decline plaintiffs' invitation to apply
their equitable tolling principles under the guise of
construing S 1113(2)'s "fraud or concealment" provision.
Accepting that invitation would require us to reject Kurz,
and we are bound by that precedent. Contrary to plaintiffs'
suggestion, we do not read our subsequent case law as
diluting the significance of Kurz in the context of this case.6
This does not end the matter, however . Unlike the District
Court, we are unwilling to say based on the current record
that no retiree will be able to successfully invoke the "fraud
or concealment" provision of S 1113(2). As we have noted,
the District Court, when deciding to reinstate the breach of
fiduciary duty claims, pointed to evidence suggesting that a
"retirement counselor [had] r esponded 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." In re Unisys Corp., 1994 WL 284079 at
*34 n.69. It seems to us entirely possible that advice of this
character might well bring the fraud or concealment
provision into play. If, for example, advice about the
_________________________________________________________________
6. In particular, plaintiffs point to this Court's decision in Adams v.
Freedom Forge Corp., 204 F.3d 475 (3d Cir. 2000). As we expressly
noted, no statute of limitations issue was befor e us in that appeal.
Although a footnote in that case makes refer ence to "issues left
unresolved in Kurz about the anatomy and scope of the fraudulent
concealment doctrine," i.e., whether ERISA's statute of limitations
applies to "self-concealing" as well as "active concealment" cases, id. at
494 n.5 (full citations and internal quotations omitted), we do not read
Adams as purporting to second guess the Kurz rule that the "fraud or
concealment" provision requires"affirmative steps to hide [the] breach of
fiduciary duty." Kurz, 96 F.3d at 1552.
13
reservation of rights clause was given under circumstances
such that an employee, who had consulted the SPD, was
dissuaded from consulting counsel regar ding that clause,
we believe that the advice could appropriately be regarded
as an affirmative step having the ef fect of concealing
Unisys' breach.
It would be inappropriate for us to decide at this stage
whether "fraud or concealment" within the meaning of
section 1113(2) has occurred in this case. W e hold only
that, drawing all permissible inferences against the party
seeking summary judgment, there may be r etirees 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.
B. "Date of the last action which constituted
part of the breach"
Having concluded that the six-year limitations period is
applicable to plaintiffs' claims, we must determine when
that period began to run, i.e., "the date of the last action
which constituted a part of the breach." Unisys insists that
this text focuses on the last action of the fiduciary which
was in violation of its fiduciary duty. While it does not
maintain that the current record pinpoints the date upon
which the last alleged misrepresentation was made, it
correctly points out that insofar as decisions to retire are
concerned, a retiree's date of r etirement is necessarily the
last date upon which Unisys could have made a r elevant
misrepresentation or upon which a clarifying
communication could have prevented detrimental reliance.
Unisys therefore asks us to affir m the District Court's grant
of summary judgment against those members of the
plaintiffs' class who retired mor e than six years before the
date on which their case was originally filed, in 1992.
The retirees, on the other hand, contend that the date of
the last action which constituted part of the br each was
November 3, 1992, the date on which Unisys announced
the termination of its "lifetime" plans. They argue that
S 1113 must be interpreted in this manner because no
14
actual harm occurred and thus no legitimate claim of
breach of fiduciary duty arose until Unisys terminated the
plans that it initially had misrepresented. Even though the
retirees concede that the termination of the old plans was
a non-fiduciary act, they nevertheless insist that a non-
fiduciary act can constitute "part of the br each or violation"
of fiduciary duty if it is the final act that gives rise to a
cause of action.
In Adams v. Freedom Forge Corp., 204 F.3d 475 (3d Cir.
2000), this Court recently reviewed the elements of a
breach of fiduciary duty claim like that of the plaintiffs
here. We found the controlling pr ecepts in our prior
decision in this case:
An employee may recover for a breach of fiduciary
duty if he or she proves that an employer , acting as a
fiduciary, made a material misrepresentation that
would confuse a reasonable beneficiary about his or
her benefits, and the beneficiary acted ther eupon to his
or her detriment.
Id. at 492, citing Unisys II, 57 F .3d at 1264.
Given these elements of a claim for breach offiduciary
duty in this context, it necessarily follows that any breach
that may have occurred was completed, and a claim based
thereon accrued, no later than the date upon which the
employee relied to his detriment on the misr epresentations.
Surely, any employee who sought counsel and who took
early retirement based on Unisys' expr ess assurance that
she possessed guaranteed lifetime health car e, thereby
reducing the amount of pension she would otherwise
receive, could bring suit immediately and secur e rescission
of her retirement or some other appr opriate equitable relief.7
_________________________________________________________________
7. The dissenting opinion assumes that an employee misled by Unisys
about guaranteed life care benefits would be entitled to a remedy taking
into account his or her expectancy interest in such benefits rather than,
or perhaps in addition to, the economic loss suffered when he changed
position in detrimental reliance on Unisys' conduct. The District Court
has not yet addressed what remedies may be available to a retiree who
establishes a breach of fiduciary duty, and we, of course, express no
opinion on the availability of expectancy compensation or any other form
15
Accordingly, it seems clear to us that the six-year period for
such plaintiffs commenced no later than the r espective
dates of their retirements.8
We therefore agree with the District Court that the denial
of free health care coverage was not an element of the
plaintiffs' claim. As the District Court pointed out, the
alleged breach of fiduciary duty here concerned the counsel
allegedly given or not given, and there is no causal nexus
between that counsel and the denial of free health care
coverage. In re Unisys Corp., 957 F . Supp. at 639. If Unisys
had provided clear and accurate counsel, some r etirements
may not have occurred when they did, but ther e is no
reason to believe retirees would now have free coverage. As
the District Court held, Unisys had a right to ter minate free
_________________________________________________________________
of relief. We do note, however, that there is a material difference
between
the value of a health care plan with guaranteed lifetime benefits and the
value of a health care plan with benefits that can be canceled at any
time for any reason. Accordingly, if an employee were entitled to an
expectancy remedy as a result of r etiring after being told he had the
former, when in fact he had the latter , he would be entitled to bring
suit
immediately for the difference between the value he was promised and
the value he received or for specific per formance of the promise to
provide a plan or policy with guaranteed lifetime health care. The dissent
is correct, however, that a retir ee who chose not to bring a suit for
guaranteed lifetime benefits or the value ther eof, and who died before
any change in the plan, would serendipitously have wound up in the
same position he would have been in had the misr epresentation been
true. Accordingly, his estate would have no claim based on lost health
care benefits.
8. If the "date of the last action which constitutes a part of the breach"
is the date of Unisys' last misrepresentation, it is theoretically
possible
that the statute could begin to run before a r etiree could seek relief
from
a court since detrimental reliance is a necessary element of a breach of
fiduciary duty of this kind. We need not decide, however, whether the six
year period can begin to run before a br each of fiduciary duty claim
accrues. As we have noted, the District Court and the parties have
regarded the date of the last relevant misrepresentations and the date of
detrimental reliance as being the same date and the only issue briefed
is whether that date or the date of the denial of fr ee health care
coverage
is the legally relevant date. Accordingly, we hold only that the statute
began to run no later than the date of alleged detrimental reliance.
16
health care coverage, and it exercised that right in a non-
fiduciary capacity. Id. at 638.9
It is not clear to us, however, that the claims of all Sperry
retirees who retired befor e November 17, 1986, and all
Burroughs retirees who retir ed before December 3, 1986,
are barred. While the primary theory of liability being
asserted here is clearly that many relied on the
misrepresentations to their detriment by deciding to take
voluntary retirement, as we explain her eafter, Unisys has
not persuaded us that this is the only viable theory of
liability. It may well be that retirees who retired before
those dates relied to their detriment in making other
decisions after those dates. Accordingly, the summary
judgment entered by the District Court was overbroad and
must be reversed. Summary judgment for Unisys would be
appropriate, however, with respect to those who assert
claims based solely on retirement decisions made more
than six years before suit was filed.
III.
Unisys argues that an essential element of the breach of
fiduciary duty claim recognized in our prior opinion is a
voluntary decision to retire made in r eliance on a mistaken
view that health care benefits were guaranteed for life. It
necessarily follows, according to Unisys, that it is entitled
to summary judgment with respect to anyone who was
mandatorily retired at age 65, left the company's employ
involuntarily because of disability, or for some other reason
made no such decision.
In response, the plaintiffs insist that the category of
claims we earlier recognized is not limited to claims based
on retirement decisions and have submitted affidavits from
members of the class who allege that, in reliance on their
_________________________________________________________________
9. It is only fortuitous that the fiduciary who did the alleged counseling
here was the employer who exercised its right to change the plans. If
Unisys had not been the administrator of the plans and an independent
administrator had breached its fiduciary duty by miscounseling retirees,
it would be even more clear that the plan admendments were not "the
last action which constituted a part of the br each."
17
belief that they had guaranteed lifetime benefits, they
declined other employment opportunities, chose to forego
the opportunity to purchase supplemental health
insurance, or made other important financial decisions for
their retirement.
The District Court agreed with Unisys and granted
summary judgment against all who would be unable to
prove a voluntary decision to retir e. We perceive no
principled basis, however, for so cabining our holding in
Unisys II. After all, in Bixler, upon which we heavily relied
there, the decision resulting from the breach of fiduciary
duty was a decision on whether to purchase COBRA
insurance rather than a decision regarding retirement. See
Bixler, 12 F.3d at 1301-03; see also Curcio v. John Hancock
Mut. Life Ins. Co., 33 F.3d 226, 237-39 (3d Cir. 1994)
(fiduciary's misrepresentations about a new life insurance
plan caused plaintiff to fail to obtain adequate coverage). It
is, of course, not clear that the plaintiffs who rely upon
these affidavits will be able to establish their entitlement to
relief, but we decline Unisys' invitation to adopt an across
the board prohibition of relief based upon reasonable
reliance in contexts other than retir ement decisions.
Understanding the import of our decision in Unisys II
requires a recognition of the pr ocedural posture in which
that appeal arose. As we have noted, the District Court
initially granted summary judgment to Unisys on the
breach of fiduciary duty claim. See In r e Unisys Corp., 837
F. Supp. at 679-80. It was only after the trial and our
decision in Bixler that it decided to r einstate that claim. See
In re Unisys Corp., 1994 WL 284079 at *25-27. It was the
propriety of that decision to reinstate, and only the
propriety of that decision, that was befor e us as a certified
issue in that interlocutory appeal. We held that
reinstatement was appropriate and r emanded "for further
proceedings."10 Unisys II, 57 F.3d at 1269.
_________________________________________________________________
10. At times, the plaintiffs appear to r ead our opinion as, in effect,
directing the entry of summary judgment in their favor on at least the
voluntary decision to retire claims. W e do not so read the opinion, and
the District Court did not so read it. At that point, Unisys had been
provided with no opportunity to build a trial or summary judgment
18
It is true, as Unisys stresses, that our opinion addressed
the issue for decision in the context of the plaintiffs having
relied to their detriment in making decisions to retire. That
was our focus because that was the plaintiffs' primary
contention, and the absence of any refer ence to other kinds
of reliance can hardly be taken as a ruling that other forms
of reliance could not provide a valid basis for relief. We
therefore reject the District Court's view that Unisys II, as
a matter of law, limits recovery on the br each of fiduciary
duty claims to claims based on voluntary decisions to
retire. Moreover, we have found no other precedent
supporting that position.
The District Court expressed two related concerns in the
course of granting summary judgment to Unisys on the
claims not based on voluntary retirement decisions: a
concern about opening Unisys to unjustifiably broad relief
and a concern about inconsistency with this Court's
disposition of the estoppel claims. It expressed those
concerns as follows:
In allowing the breach of fiduciary claims to go
forward, this court and the Court of Appeals for the
Third Circuit have essentially held that r eliance by the
employees on the misrepresentations of Unisys, while
not "reasonable reliance" for purposes of a claim of
equitable estoppel, can still support a claim for br each
of fiduciary duty. In a sense, the rulings in this case
_________________________________________________________________
record in opposition to Bixler claims, and any ruling on the merits of
those claims would have been inappropriate. On remand, the District
Court noted that the breach of fiduciary duty claims had not been before
it during the trial on the contract and estoppel claims and that, when
reinstating those claims, it had made no deter mination that any plaintiff
had proven his breach of fiduciary duty claim. On the contrary, the
District Court on remand quoted the following observations it had made
at the time of reinstatement:
[B]ecause some plaintiffs have str onger cases than others based on
their specific inquiries and the information given to them
personally,
the court finds that subclasses, and possibly even individual
hearings, will be necessary to adjudicate these claims.
In re Unisys Corp., 957 F. Supp. at 645.
19
excuse the plan participants from their failur e to read
their summary plan documents in the limited context
of making the retirement decision: because of the
breach of duty, the employees may have r etired earlier
than they otherwise would have, and even if their
reliance on the misrepresentations was not reasonable,
the reliance supports a breach of fiduciary duty claim
because it was at least partially the fault of Unisys.
The "unreasonable" reliance excused here is narrow,
and supports a breach of fiduciary duty claim only in
certain limited circumstances--in this case, where the
employees retired earlier than they might have had
they not been misled by the lifetime
misrepresentations. This court believes that expanding
the concept of "resulting harm" in this case to the
types of reliance alleged in the retir ees' affidavits would
create an unjustified expansion of the narr ow holdings
of this court, and would by indirection r einstate the
claims for equitable estoppel.
In re Unisys Corp., 957 F. Supp. at 644.
The District Court's characterization of our decision in
Unisys II as excusing "unreasonable r eliance" is
inappropriate. We did not there hold that the existence of
the SPD was irrelevant to the analysis of the breach of
fiduciary duty claims. An employer, even when acting in a
fiduciary capacity, is not responsible for harm that is not
reasonably foreseeable. As we pointed out in our prior
opinion in this case and in Adams, in or der for relief to be
afforded, the conduct of the fiduciary must be such as to
create a "substantial likelihood that it would mislead a
reasonable employee in making [a decision to change his or
her position]." Unisys II, 57 F .3d at 1264. Any
determination of whether Unisys conveyed a message that
was "materially misleading" in this sense cannot simply
ignore the existence of the SPD. Rather , what we held on
this score in Unisys II was as follows: (1) that the SPD did
not as a matter of law satisfy Unisys' fiduciary
responsibility; and (2) that there was evidence from which
a trier of fact could conclude that Unisys should have
foreseen that its conduct with respect to at least some of
the class would cause reasonable employees to r ely to their
20
detriment, despite the existence of the SPD. Whether that is
the case depends, of course, on the content of the message
conveyed and the context in which it was conveyed.
We did recognize in Unisys II that there are situations in
which a fiduciary can reasonably foresee unreasonable
reliance and, accordingly, be held accountable. Bixler, 12
F.3d 1292 (3d Cir. 1994), provides an example. Mrs. Bixler
there acknowledged that she had received a notice from the
fiduciary concerning a right to apply for COBRA health care
insurance, but she mistakenly believed that she and her
husband were not eligible to do so because he was already
hospitalized. Shortly after Mr. Bixler's death but still well
within the period when she could have elected to secure
COBRA coverage, Mrs. Bixler called the fiduciary's
representative to inquire about a death benefit. The
fiduciary accurately informed her that ther e was no death
benefit but failed to advise her that she could r eceive
reimbursement for her husband's considerable hospital
expenses by signing and returning the COBRA notice the
fiduciary had sent to her husband. We concluded that there
was evidence from which a trier of fact could infer that the
fiduciary was aware of the Bixlers' cir cumstances and of
Mrs. Bixler's mistaken belief about the unavailability of
COBRA insurance. See id. at 1302-03. In these
circumstances, we held that the trier of fact could find a
breach of fiduciary duty, and we did so without inquiring
whether Mrs. Bixler's understanding of the COBRA notice
was reasonable or unreasonable.
Our decision in Bixler is based on a fiduciary's duty to
deal fairly with its beneficiary and, more specifically, "to
communicate to the beneficiary material facts af fecting the
interest of the beneficiary which he knows the beneficiary
does not know and which the beneficiary needs to know for
his protection." Bixler, 12 F .3d at 1300, quoting
Restatement (Second) of Trusts, S 173, comment (d) (1959).
As we noted in Unisys II, there is evidence here with respect
to some employees from which a trier of fact could conclude
that specific inquiries were made giving notice to Unisys
representatives that the employees could be expected to
make retirement decisions based on the mistaken belief
that their health benefits were guaranteed for life. See
21
Unisys II, 57 F.3d at 1266. Under Bixler, in these
situations, a duty to advise of the reservation of rights
clause would arise, and the existence of the SPD would not
be relevant.
We also recognized in Unisys II that a duty to advise
affirmatively of the reservation of rights clause might have
arisen even in the absence of beneficiary-specific
information concerning confusion or mistake. The evidence
then of record, we suggested, could per mit a finding that
Unisys had acquired knowledge of confusion so pervasive
that a reasonable fiduciary would have done more than
simply rely on its SPD. See id. We did not, however, require
clairvoyance on the part of the fiduciary. The law requires
only that a fiduciary deal fairly with his beneficiaries and,
in doing so, that it "exercise such car e and skill as a man
of ordinary prudence would exercise" in his own affairs.
Restatement (Second) of Trusts, S 174.
A judgment remains to be made as to whether a
reasonable fiduciary in Unisys' position would have
foreseen that its conduct towards the various plaintiffs
would result in important decision making on their part
based on a mistaken belief that they possessed guaranteed
lifetime benefits. In situations involving actual knowledge
on the part of Unisys that an employee was about to rely on
such a misunderstanding, we agree with the District Court
that the existence of the SPD is irrelevant. In other
situations, however, the fact that Unisys had distributed
what purported to be an authoritative guide to benefits is
one of the circumstances that must be consider ed in
passing this judgment on its conduct.
We do not believe holding Unisys to the kind of fair
dealing standard we recognized in Unisys II will impose an
unfair burden upon it even if it is held to that standard in
the context of decisions other than voluntary r etirement.
We stress, however, that the character of the decision made
and reliance claimed will, of course, play an important role
in determining the extent of Unisys' fiduciary duty and
whether that duty was breached. We also note that the
District Court has not yet addressed what equitable
remedies may be available to members of the class.
Common law damages are not recoverable under ERISA for
22
a breach of fiduciary duty, and this fact may also limit
Unisys' exposure. See Mertens v. Hewitt Assoc., 508 U.S.
248 (1993).
Our insistence on reasonable foreseeability as a
prerequisite to legal responsibility on the breach of
fiduciary duty claims is not inconsistent with our resolution
of the plaintiffs' estoppel claims in Unisys I. As our earlier
quotation above from our prior opinion demonstrates, those
claims were predicated on an allegation that the plaintiffs
had relied to their detriment on the text of the plan and
SPD. See Slip at 25, supra. On that occasion, we
summarized our holding as follows:
Because our decisions require that any detrimental
reliance on plan language also be "r easonable," our
finding that the [reservation of rights clauses] are
unambiguous undercuts the reasonableness of any
detrimental reliance by the retirees. Accordingly, we
hold that the district court did not err in concluding,
on summary judgment, that the retirees' estoppel claim
failed as a matter of law.
Unisys I, 58 F.3d at 908. The claim here, however, is not
that the retirees relied on the text of the plans or the SPDs,
but rather that they relied on counseling which they
received from Unisys representatives.
IV.
The District Court's order dated March 10, 1997, will be
reversed and this matter will be remanded to the District
Court for further proceedings consistent with this opinion.
23
MANSMANN, Circuit Judge, concurring in part, and
concurring in the result in part.
I am pleased to join with my colleagues in Part III of the
majority opinion, which recognizes that an ERISA fiduciary
who has created confusion about rights under a benefit
plan has an ongoing responsibility for har m stemming from
beneficiaries' decisions attributable to that confusion. While
I also agree with the holding in Part II of the majority
opinion that summary judgment must be reversed, I am
unable to subscribe to the reasoning of that Part II because
it threatens to undercut a fiduciary's r esponsibility by
allowing a safe harbor so long as the breachingfiduciary
arranges to keep the beneficiaries in the dark for six years
after they rely on his misrepresentations. I believe that the
majority's analysis of the statute of limitations af fords 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.1
_________________________________________________________________
1. Part II of the majority opinion contemplates entry of summary
judgment against retirees whose claims (i) are based solely on retirement
decisions made more than six years befor e this action was filed, and (ii)
were not concealed by Unisys's advice. It is not clear that any actual
person's claim will meet these criteria, however . As the majority
recognizes, retirees may rely on the presence of medical coverage in
making many of life's decisions beyond the decision to retire. Most
people probably take such vital backgroundfinancial circumstances into
consideration, at least tacitly, in everything that they do. Moreover, as
explained below, I believe that all of these participants and
beneficiaries
detrimentally relied on Unisys's ongoing impr oper omission to correct its
misrepresentations in declining to sue before they ultimately brought
this action.
In light of the wide scope of Unisys's alleged concealment, and the
potentially pervasive presence of acts of r eliance beyond the retirement
decision, my disagreement with Part II of the majority's analysis may be
no more than theoretical, as it may well be that no claims at issue are
"based solely on retirement decisions", and that all claims fall within
the
saving provisions of Part IIA or Part III.
24
I.
The applicable statute of limitations requir es that claims
be brought within six years of the "date of the last action
which constituted a part of the breach or violation." 29
U.S.C. S 1113(1)(A). As the majority acknowledges, the "last
action" necessary to make out the claims at issue is
detrimental reliance. See Opinion at 15 (r eferring to
material misrepresentation and detrimental reliance as
elements) (quoting Adams v. Freedom For ge Corp., 204 F.3d
475, 492 (3d Cir. 2000)). See also Unisys II, 57 F.3d at
1265 (defining elements of claim for fiduciary breach as (1)
proof of fiduciary status, (2) misrepr esentations, (3)
company knowledge of confusion, and (4) resulting harm).2
The majority reasons, essentially, that the br each of duty
by Unisys was its misrepresentation of the plan's
provisions, and the detriment or "resulting harm" to the
participants was their retirement without the protection of
a guarantee. See Opinion at 15-16. This ef fectively reads
the element of harm or detriment out of the claim.
Although the retirement decisions wer e made in reliance,
such reliance did not become detrimental until Unisys
announced termination of the promised post-retirement
medical benefits. If the benefits had continued, there would
have been no injury. Cf. Texas v. United States, 523 U.S.
296, 300 (1998) ("A claim is not ripe for adjudication if it
rests upon `contingent future events that may not occur as
anticipated, or indeed may not occur at all.' ") (quoting
Thomas v. Union Carbide Agric. Prod. Co., 473 U.S. 568,
580-81 (1985)). Here, resulting har m was contingent on the
company's future conduct.
The majority argues that actual harm is not a necessary
element of a claim for breach of fiduciary duty. While that
may be correct as a general proposition, it is incorrect as
_________________________________________________________________
2. We recently observed that construction of ERISA's six-year statute
"implicates sophisticated questions about whether the statute begins to
run at the date of the misrepresentations, the date of the plan
amendment, or some other date". Adams, 204 F.3d at 494 n.19. As will
appear, I believe it runs from the date of the detrimental amendment,
while the majority believes it runs from "some other date" -- viz., the
date of the last act undertaken in reliance on the misrepresentations.
25
applied to the subset of fiduciary claims pr edicated on
detrimental reliance. "Actual harm" and "detriment" appear
to be synonymous. To the extent that ther e may be a
difference between legal detriment and actual harm, only
the latter should start the clock running for the statute of
limitations. The significance of harm in the limitations
context is that it brings the existence of the claim home to
the claimant so that he may reasonably be expected to act.
This purpose is not well served by a technical notion of
"detriment" that does not actually impact the claimant.3
The majority illustrates its view of detriment by
hypothesizing that an employee who "sought counsel" and
took early retirement based on the company's assurance of
lifetime health care could "surely" bring suit immediately
and secure rescission of her retir ement or other appropriate
equitable relief.4 Opinion at 15. However, the question of
_________________________________________________________________
3. Moreover, cases holding that it is not necessary to demonstrate harm
to establish a breach of fiduciary duty do not stand for the proposition
that harm, where present, is not part of the breach. See Adams, 204
F.3d 475, 492 (3d Cir. 2000). Fiduciary conduct is measured in light of
all the attendant circumstances. There is a qualitative difference between
an act by a fiduciary which falls short of the standard imposed by law
and an act that also injures cestui que trust. Consequently, even a "non-
fiduciary" act by the company which imposes injury on a beneficiary left
vulnerable by a prior fiduciary breach becomes "part of the breach," and
worsens it character. Thus, the "last action" could consist in the
imposition of harm where it is part of the fiduciary breach, even if it
were not a required element.
4. Although the question of remedy is not now before us, the majority's
reference to rescission as an illustrative remedy is significant. As the
majority recognizes in Part III, participants may rely on their
misapprehension of the plan benefits in many ways beyond deciding to
retire. Some of these acts of reliance -- those involving expenditures or
commitments made in expectation of a strongerfinancial position --
would be difficult to rescind, and rescission would not make the
participant whole. So in general the rescission remedy may be unwieldy
and inadequate. This follows from the majority's unrealistic assumption
that the decisions themselves constitute the detriment to be redressed;
whereas, actually the harm to be r emedied is the unexpected withdrawal
of promised benefits.
If instead of assuming that the object of a suit is to undo the retiree's
life decisions, we recognize that the paradigmatic remedy may be
26
what actual or prospective harm is sufficient to allow suit
by one apprized of her rights is not before us. 5 To my view,
a more apt hypothetical concerns whether the estate of a
participant who died before the old plan was terminated,
and so received the promised medical benefits for life,
would nevertheless be able to sue for breach offiduciary
duty because the promised benefits, though paid, had not
been sufficiently assured by the written plan? Surely not.
The claim would fail due to the absence of actual injury.
Thus, while I am not prepared to say that a retiree may
never bring suit prior to enactment of a thr eatened
detrimental change, I do not believe that the statute of
limitations requires her to bring a pr eemptive action to
ward off potential harm that might never occur.
Accordingly, I 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 retir ees made on
the strength of that assurance.6
II.
Even if our statute of limitations analysis wer e limited to
fiduciary conduct by Unisys, the retir ees' claims still should
_________________________________________________________________
enforcement of the promise on which the participants relied, then it
becomes clear that the injury that triggers the suit results from the
fiduciary's failure to comply with the pr omise, rather than from the
employee's decision to retire. Cf. Unisys II, 57 F.3d at 1269 (indicating
that "an injunction ordering specific per formance of the assurances
Unisys made" is an equitable remedy available under 29 U.S.C.
S 1132(a)(3)).
5. That question concerns the requir ement that we may only decide
cases and controversies, and so turns on different policies from those
underlying the statute of limitations.
6. I disagree with the majority's statement that it is merely "fortuitous"
that the fiduciary that misrepresented the permanency of the benefits is
the same entity that ultimately cut off those benefits. To the contrary,
it
was the ability of Unisys to honor its promises that helped to induce the
retirees' reliance and created a real prospect that they would not be
injured.
27
not be barred on the present recor d, as there is evidence
that Unisys continued to breach its duty by failing to
correct the mistaken beliefs that its prior misstatements
created. Because this continuing breach involved an
omission rather than an act, the six-year limitations period
would not commence until "the latest date on which the
fiduciary could have cured the breach or violation". 29
U.S.C. S 1113(1)(B).
As the majority observes, we have previously r ecognized
that a fiduciary has a "duty to deal fairly with its
beneficiary and, more specifically, `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.' " Supra at 21, quoting Bixler v. Central Pa.
Teamsters Health & Welfare Fund , 12 F.3d 1292, 1300 (3d
Cir. 1993).7 Here, the evidence suggests that Unisys
breached this duty continuously from the time it first
misrepresented the terms of the plan until the time the
beneficiaries learned the material facts by receiving notice
of the plan termination. Under the majority's holding, the
beneficiaries' interests were not pr otected by the fiduciary's
word, but could only be protected if they brought suit
within six years. They therefore "needed to know for their
protection" that the plan was not as it had been
represented; and as the majority acknowledges in Part III of
its opinion, there is evidence that Unisys knew that the
employees were unaware of the material facts.
Unisys therefore had an ongoing duty to inform the
participants of the true state of affairs. As long as Unisys
had reason to believe that the retir ees remained unaware of
the material fact that the company retained a right to cut
off their "lifetime" medical benefits, it was a violation of
trust (i.e., a breach of fiduciary duty) every day for Unisys
not to inform them.8 See Adams, 204 F.3d at 493-94
_________________________________________________________________
7. Indeed, "[t]he duty to disclose material information is the core of a
fiduciary's responsibility." Harte v. Bethlehem Steel Corp., 214 F.3d 446,
452 (3d Cir. 2000) (quoting Glaziers & Glassworkers Union Local No. 252
Annuity Fund v. Newbridge Sec., Inc., 93 F .3d 1171, 1182 (3d Cir. 1996)).
8. As the majority recognizes, "a duty to advise affirmatively of the
reservation of rights clause might have arisen even in the absence of
28
("[B]ecause Unisys was aware that it r etained the right to
modify, a knowing failure to clarify the material information
about the retention of power was breach of its fiduciary
duty.").
Had Unisys told plaintiffs the truth, they could have
acted to protect themselves. Cf. Harte v. Bethelehem Steel
Corp., 214 F.3d 446, 448 (3d Cir. 2000) (holding that where
beneficiaries might predictably and r easonably rely on a
misinterpretation of a plan provision,"a fiduciary may be
held liable for failing to inform a beneficiary" of his rights
"in a timely manner . . . (so that he might attempt to
protect himself)."). Consequently, the participants and
beneficiaries should be permitted to pr ove that they relied
to their detriment on Unisys's continuing non-disclosure,
by refraining from bringing the pr esent suit until after the
omitted information was supplied.
Recognition of an ongoing duty to correct prior
misstatements entails that the statute of limitations does
not run while a misstatement remains uncorr ected.9
Conversely, the majority's holding that the statute runs
from the date of retirement amounts to absolving the
fiduciary from any ongoing duty to corr ect the
misstatement. Today's holding is therefor e contrary to our
decisions in Bixler and Harte.
III.
The most troubling aspect of the majority opinion is its
treatment of the self-concealing wrong issue. As the
_________________________________________________________________
beneficiary-specific information of confusion or mistake" where the
fiduciary has "acquired knowledge of confusion so pervasive that a
reasonable fiduciary would have done mor e than simply rely on its SPD."
Supra at 22 (citing Unisys II, 57 F .3d at 1266). This duty is independent
of the reasonableness of, or even the r easons for, the misapprehension.
9. It might be objected that recognition of an ongoing duty would result
in an open-ended statute of limitations. However , I believe that it is
entirely consistent with public policy and the federal common law
embodied in the "fraud or concealment exception" to hold that a
fiduciary who has misled his beneficiary may never seek refuge behind
the statute of limitations as long as he allows the deception to continue
unabated.
29
majority observes, in Kurz v. Philadelphia Elec. Co., 96 F.3d
1544, 1552 (3d Cir. 1996) we "expr essly reserved the issue,
elsewhere debated, of `whether S [1113]'s six year period
extends to both "self-concealing" wrongs as well as "active
concealment" separate from the underlying wr ongdoing.' "
Supra at 10. Although the majority does not expr essly state
whether its opinion is meant to address that issue, its
requirement of "affirmative steps to conceal beyond the
misrepresentations themselves" in or der to toll the statute,
supra at 11 n.5, amounts to an outright r ejection of the
self-concealing wrong doctrine. A requir ement of additional
conduct beyond the breach itself is fundamentally at odds
with the concept that a wrong may be self -concealing.
I believe that the majority errs in interposing an
additional requirement of an affir mative act of concealment
on self-concealing wrongs. In so holding, it permits the
ERISA statute of limitations to become an instrument to
immunize fiduciary wrongdoing.
The "fraud or concealment" provision incorporates the
long-established principle of federal common law that a
statute of limitations is tolled until discovery of the wrong
where there is either underlying fraud or separate acts to
conceal wrongdoing.10 As the Seventh Circuit has explained,
The reading we adopt . . . interprets the phrase "fraud
or concealment" in a way that gives both ter ms
meaning. An ERISA fiduciary can delay a wr onged
beneficiary's discovery of his claim either by
misrepresenting the significance of facts the beneficiary
is aware of (fraud) or by hiding facts so that the
beneficiary never becomes aware of them
(concealment).
. . . [T]his interpretation of "fraud or concealment"
harmonizes the phrase's meaning with the widely
known doctrine of fraudulent concealment, which tolls
the running of a statute of limitations when the
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10. The effect of the majority's requirement of additional acts of
concealment even in cases of self-concealing fraud is to allow tolling
only
in cases of concealment, and so to write the fraud alternative out of the
statutory exception.
30
defendant has prevented the plaintiff 's timely discovery
of the wrong she has suffered.
Radiology Ctr., S.C. v. Stifel, Nicholas & Co., 919 F.2d 1216,
1220 (7th Cir. 1990). See also Kurz v. Philadelphia Elec.
Co., 96 F.3d 1544, 1552 (3d Cir. 1996) (observing that
S 1113 "does not protect defendants in instances involving
concealment or fraud") (quoting Gluck v. Unisys Corp., 960
F.2d 1168, 1177 (3d Cir. 1992)) (emphasis added).
The majority misinterprets our decision in Kurz as
holding that even where concealing acts occur in the course
of the underlying breach, "there must be conduct beyond
the breach itself that has the effect of concealing the breach
from its victims." Supra at 10. On the contrary, in Kurz, we
expressly distinguished "self-concealing wr ongs" from
" `active concealment' separate from underlying wrong". Id.
at 1552 n.5.11
This case is not like Kurz. There was no occasion to
address the effect of a self-concealing wrong there, because
there was no concealment. Indeed, we observed in Kurz
that the employer's announcement of the amendment at
issue just 35 days after the alleged misrepr esentation
"exemplifie[d] the type of timely notification that companies
should give their employees", and "for eclosed any
suggestion that [the employer] attempted to conceal its
plans or engaged in a campaign of fraud to pr event the
plaintiff class from suing for the alleged breach". 96 F.3d at
1552. In the present case, in contrast, the company's
conduct was far from exemplary, as it engaged in a
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11. See also Bailey v. Glover, 88 U.S. 342, 349-50 (1874) (distinguishing
between a fraud which "has been concealed" and one which "is of such
character as to conceal itself "). Indeed, the majority opinion expressly
acknowledges this distinction: "In this context,`a self-concealing act is
an act committed during the course of the original fraud that has the
effect of concealing the fraud from its victims, [while a]ctive
concealment
refers to acts intended to conceal the original fraud that are distinct
from
the original fraud.' Wolin v. Smith Bar ney, Inc., 83 F.3d 847, 852 (7th
Cir. 1996)." Supra at 10. Nevertheless, it proceeds to conflate the two
concepts by requiring acts distinct from the original breach even where
concealment occurs in the course of the underlying breach. See supra at
10-11.
31
"systematic campaign of confusion." In r e: Unisys Corp.
Retiree Medical Benefit "ERISA" Litigation, 1994 WL 284079
at 33 (E.D. Pa. June 24, 1994); see also In r e: Unisys Corp.
Retiree Medical Benefit "ERISA" Litigation, 1996 WL 455968
at *4-6 (discussing sufficiency of evidence of systematic
misrepresentation and confusion in r einstating claims of
Burroughs and Unisys plaintiffs). As discussed above, one
effect of the resultant confusion was to mislead
beneficiaries into believing they had no need or cause to sue.12
Consequently here, unlike in Kurz, it is necessary to
consider the effect of such self-concealing misconduct on
ERISA's statute of limitations.
The rationale underlying the self-concealing wr ong
doctrine has long been recognized in our law:
To hold that . . . by committing a fraud in a manner
that it concealed itself until such time as the party
committing the fraud could plead the statute of
limitations to protect it, is to make the law which was
designed to prevent fraud the means by which it is
made successful and secure.
Bailey v. Glover, 88 U.S. 342, 349 (1874). This principle
that the law should not reward concealment is particularly
applicable in the context of a fiduciary r elationship. See
Amen v. Black, 234 F.2d 12, 26 (10th Cir . 1956) ("The law
does not require one to suspect his fiduciary. Surely no one
would contend that the . . . statute of limitations was
intended to impose upon the defrauded party the bur den of
discovering a fraud perpetrated by one standing in a
position of trust.").13
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12. See Barker v. American Mobile Power Corp. , 64 F.3d 1397, 1402 (9th
Cir. 1995) (fraudulent concealment involves"affirmative conduct upon
the part of the defendant which would, under the cir cumstances of the
case, lead a reasonable person to believe that he did not have a claim for
relief "). Cf. Lettrich v. J.C. Penney Co., Inc., 213 F.3d 765 (3d Cir.
2000)
(holding placement of amendment notice within technical document and
failure to use more effective channels would support inference that
employer intended to conceal amendment from af fected employees).
13. Congress enacted ERISA to "pr otect . . . the interests of
participants
in employee benefit plans . . . by establishing standards of conduct,
responsibility and obligation for fiduciaries." 29 U.S.C. S 1001(b). ERISA
32
If ever a case calls for application of the self-concealing
wrong doctrine, this is such a case. Considering the facts in
the light most favorable to the participants, as the party
opposing summary judgment: Unisys purposely
systematically misled its workers into believing that they
had a legally protected right to medical benefits for life;14 it
perpetuated the misinformation by repeating its
misstatements to many employees over a period of years;15
and it avoided any action that would have br ought the
misrepresentation to the participants' attention, by paying
the benefits until after the statutory period had passed.
Thus, Unisys's conduct may be distinguished fr om a
garden-variety fiduciary breach by two important factors:
first, the beneficiaries were deceived, and remained so, to
Unisys's knowledge, for several years, until shortly before
suit was filed; and second, the deception was pr ocured by
a systematic course of repeated misrepr esentations
calculated to prevent the entire class of aggrieved retirees
from learning the truth. I believe this amounts to a self-
concealing wrong, sufficient to toll the statute without
regard to "additional" conduct -- such as telling retirees
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should therefore be applied to avoid r esults that "would afford less
protection to employees and their beneficiaries than they enjoyed before
ERISA was enacted." Heasley v. Belden & Blake Corp., 2 F.3d 1249,
1257 (3d Cir. 1993). Enabling fiduciaries to secure immunity for their
self-concealing misrepresentations by lapse of time would violate this
principle.
14. See Unisys II, 57 F.3d at 1266 (noting that the District Court "found
that the company, both actively and affirmatively, systematically
misinformed its employees about the duration of their benefits").
15. See Unisys II, 57 F.3d at 1265 ("Here the district court found that
virtually the entire company management had consistently
misrepresented the plan, not just on one occasion to one employee, but
over a period of many years and both orally (in gr oup meetings) and in
writing (in newsletters) as well."). I disagr ee with the majority's
offhand
remark that mere repetition of a misr epresentation cannot constitute
concealment -- especially in the present context, where the
misrepresentation was repeated to all and sundry, creating pervasive
misunderstanding. It seems clear that consistent r epetition of a
falsehood to all employees would well serve to pr event the truth from
becoming known.
33
that the reservation of rights in the SPD did not apply to
them -- which the majority properly finds sufficient to
create a triable issue of concealment.16
The majority gives great weight to Unisys's distribution of
a Summary Plan Description with a reservation of rights
clause. Any implication that there can be no concealment
where an accurate SPD is provided is inconsistent with our
cases holding that participants can be misled despite an
accurate SPD, and that a fiduciary should not be permitted
to prey upon the participants' foreseeable confusion.17
Moreover, it is inconsistent with the majority's own
recognition of evidence that, "despite the existence of the
SPD", employees had "the mistaken belief that their health
benefits were guaranteed for life." Supra at 21.18
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16. I agree with the majority's conclusion that the company's advice that
the reservation of rights clause "pertained to active employees and not to
retirees" supra at 6, quotingIn re Unisys Corp., 1994 WL 284079 at*34,
amounts to an affirmative step to conceal the effect of the clause at
issue, and thus to conceal the retirees' potential injury. Cf. Adams, 204
F.3d at 492 (finding participants likely to succeed on merits
notwithstanding explicit reservation of rights where participants
contended that, based on the employer's communications, they
"reasonably believed that the active employees' booklets did not apply to
them").
17. See, e.g., Adams, 204 F.3d at 492-93 ("[A] company cannot insulate
itself from liability by including unequivocal statements retaining the
right to terminate the plans at any time in the SPDs. . . . .
[C]onflicting
assertions cannot be ignored because they ar e not in the formal ERISA
document."); Harte, 214 F.3d at 451 n.6 ("[T]he fiduciary duty to disclose
and explain is not achieved solely by technical compliance with the
statutory notice requirements."); Unisys II, 57 F.3d at 1264
("[S]atisfaction . . . of . . . disclosur e obligations [through an SPD] .
. .
does not foreclose the possibility that the plan administrator may
nonetheless breach its fiduciary duty . . . to communicate candidly, if
the plan administrator simultaneously or subsequently makes material
misrepresentations to those [to] whom the dut[ies] of loyalty and
prudence are owed.").
18. The majority holds that the SPD is but "one of the circumstances
that must be considered" on the question offiduciary breach. Supra at
22. The same must hold true for the role of the SPD on the question of
concealment.
34
In sum, this case involves systematic conduct by Unisys
that foreseeably led participants and beneficiaries to believe
that they did not have a claim.19 That the concealing acts
were woven into the fabric of Unisys's initial wrongdoing
should be of no moment. Accordingly, I concur with the
majority's holding that the plaintiffs have established at
least a triable issue as to whether this is a case of "fraud
or concealment", so that the statute of limitations would
only begin to run upon discovery of the breach.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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19. As the majority concludes in Part III of its opinion, "there was
evidence from which a trier of fact could conclude that Unisys should
have foreseen that its conduct . . . would cause reasonable employees to
rely to their detriment, despite the existence of the SPD." Supra at 20.
By
the same token, a factfinder could conclude that Unisys's conduct would
cause those employees "to believe that [they] did not have a claim for
relief " -- which is the essential characteristic of concealment. Barker,
64
F.3d at 1402.
35