Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-28-1995

In Re: Unisys Corp (Mem Op)
Precedential or Non-Precedential:

Docket 94-1875




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                 UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT
                          ___________

                             No. 94-1875
                             ___________

          IN RE: UNISYS CORP. RETIREE
          MEDICAL BENEFIT "ERISA" LITIGATION

               Unisys Corporation,

                                  Appellant
                             ___________

          Appeal from the United States District Court
            for the Eastern District of Pennsylvania
                    (D.C. Civil No. MDL 969)
                          ___________

                             Argued
                           May 4, 1995
     Before:   MANSMANN, SCIRICA and McKEE, Circuit Judges.

                     (Filed June 28, l995)
                          ___________

Alan M. Sandals, Esquire
Berger & Montague
1622 Locust Street
Philadelphia, PA 19103


Joseph R. Roda, Esquire
36 East King Street
301 Cipher Building
Lancaster, PA 17602

J. Dennis Faucher, Esquire
Miller, Faucher, Chertow,
Cafferty & Wexler
One Penn Square West
Suite 1801
Philadelphia, PA 19102

Seymour J. Mansfield, Esquire
Mansfield & Tanick
900 Second Avenue South
Suite 1560
Minneapolis, MN 55402
Sarah E. Siskind, Esquire (Argued)
Davis, Miner, Barnhill & Galland
44 East Mifflin Street
Suit 803
Madison, WI 53703

          Counsel for Appellees
               Gerald E. Pickering, Fred Tonnies,
               William Leonhardt, Evelyn Schmidt,
               Dudley Keyes, David Kahl, Paul Wright,
               Robert Wilt, Clay Bernichon, Edward Valle,
               Robert B. Welsh, Solveig Tschann,
               Ludson F. Worsham, Edwin Marjala,
               Warren J. Hall, individually and on behalf of
               all members of the Sperry Class previously
               certified by the Court whose claims have not been
               settled

James F. Roegge, Esquire
Julie L. Levi, Esquire
Meagher & Geer
33 South Sixth Street
4200 Multifoods Tower
Minneapolis, MN 55402

          Counsel for Appellees
               Gerald E. Pickering, Fred Tonnies,
               William Leonhardt, Evelyn Schmidt,
               Dudley Keyes, David Kahl, Paul Wright,
               Robert Wilt, Clay Bernichon, Edward Valle,
               Robert B. Welsh, Solveig Tschann,
               Bernard J. Jansen, Donald I. Klippenstein,
               Frederick W. Hoppe

Joseph J. Costello, Esquire
Francis M. Milone, Esquire (Argued)
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103

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

               Counsel for Appellant
                           ___________

                      OPINION OF THE COURT
                             __________


MANSMANN,   Circuit Judge.
            We are asked to decide whether a claim for breach of

fiduciary duty may be maintained under section 502(a)(3)(B) of

ERISA, 29 U.S.C. § 1132(a)(3)(B), where, despite reservation

clauses that the company retained the right to terminate the

plans "at any time" and for "any reason," summary plan

descriptions informed retired employees that the duration of

their retiree medical benefits was for life, and company

representatives misinformed employees that once they retired,

their medical benefits would "be continued for the rest of your

life."   Because we hold that a breach of fiduciary claim may be

maintained under these circumstances, we must also decide whether

equitable relief is available under ERISA to individual plan

participants.    We hold that, assuming a breach of fiduciary duty

can be proven, equitable relief is available to individual plan

participants pursuant to 29 U.S.C. § 1132(a)(3)(B).



                                 I.

            This class action, filed on behalf of former employees

of Sperry Corporation, arises out of the termination of post-

retirement medical plans, sponsored by Unisys for retirees and

disabled former employees of Unisys and its corporate

predecessors, Sperry Corporation and Burroughs Corporation.     The

retirees sought to recover post-retirement medical benefits under
the terms of their benefit plans and under ERISA's provisions for

appropriate equitable relief.

          In September of 1986, Sperry Corporation and Burroughs

Corporation merged to form Unisys Corporation.    Prior to the

merger, Sperry consisted of a number of business units or

divisions.   Until 1984 each Sperry division maintained its own

medical benefits program, with each described in a separate

summary plan description.    In 1984, in an attempt to streamline

the medical benefits plans and in response to rising medical

costs, Sperry implemented Medflex, a corporate-wide medical

benefits plan that applied to the entire Sperry Corporation.14

Medflex was applied to future retirees only; existing retirees

continued to receive coverage under the pre-Medflex plans which

applied when they retired.

          Following the merger in 1986, Unisys continued the

Medflex plan for active employees and those who retired after its

implementation but prior to April 2, 1989.    Unisys also continued

all of the pre-Medflex plans for those who retired prior to

Medflex's implementation.    In 1989, Unisys effected the

consolidation of its retiree medical benefit plans when it

created the Unisys Post-Retirement and Extended Disability

Medical Plan to cover all employees who retired after April 1,

1989, most of whom were former Sperry and Burroughs employees.


14
 .        Medflex applied to all Sperry business units by January
1, 1984, with the exception of one sub-group of the Sperry
Division, which commenced participation in Medflex on January 1,
1985.
            On November 3, 1992, Unisys publicly announced that

effective January 1, 1993, it was terminating all existing

medical benefit plans and replacing all of the pre-existing

medical plans with the new Unisys Post-Retirement and Extended

Medical Disability Plan.    Under the new plan, retirees would be

responsible for increasing levels of contributions until January

1, 1995, when they would have to pay the full cost of their

premiums.    Thus, the new plan sharply contrasted with earlier

plans, under the majority of which Unisys paid the entire premium

for an individual's life and provided benefits for the

individual's spouse as well.15

15
 .         Unisys' decision to terminate the benefit plans under
which it had provided coverage and to replace those plans with
the new Unisys Post-Retirement and Extended Disability Medical
Plan was challenged in nine separate actions which the Judicial
Panel on Multidistrict Litigation transferred to the Eastern
District of Pennsylvania and consolidated for disposition. On
June 9, 1993, after determining that Unisys "acted on grounds
generally applicable to the class," the district court certified
the case as a class action pursuant to Fed. R. Civ. P. 23(b)(2).
The class consists of approximately 21,000 former non-union
employees of Sperry, Burroughs and Unisys. The court certified
three distinct classes: Unisys retirees, Sperry retirees or
Burroughs retirees and the claims of each class were adjudicated
separately. Further, the retirees asserted two sets of claims:
general claims on behalf of all retirees, and separate claims on
behalf of "early" retirees who retired under various early
retirement incentive programs offered by the company throughout
the 1980s.

          This appeal concerns some of the claims of the Sperry
regular retirees, and the claims of a sub-group of Sperry early
retirees. The appeals docketed at Nos. 94-1800, 94-1801, 94-1912
and 94-2216 concern the claims of the Unisys and Burroughs
retirees, as well as the remaining claims of the Sperry retirees.
In appeal No. 94-1800 the Sperry regular retirees and certain
early retirees have appealed from an adverse judgment rendered
after trial on their claims for breach of contract and estoppel.
The claims of the Burroughs early retirees and many of the claims
          The appellees in this appeal are former employees of

Sperry corporation (and their eligible dependents) who retired

between 1969 and April 1, 1989, from Sperry Corporation or

Unisys, Sperry's successor.   Following Unisys' termination of

their post-retirement medical benefit plans in late 1992, the

retirees sought relief based on three theories:   breach of

contract, equitable estoppel, and breach of fiduciary duty.     The

Sperry retirees argued that Unisys' termination of their

respective medical plans violated ERISA.   They argued first that

Unisys had denied them "vested" benefits in violation of 29

U.S.C. § 1132(a)(1)(B) because the summary plan descriptions

("SPDs") explaining their medical benefits contained the term

"lifetime" benefits.   Regarding their contract claims, the

retirees relied on the explicit lifetime language in the plans,

e.g., "when you retire, your medical benefit will be continued


(..continued)
of the Sperry early retirees were settled pursuant to a partial
settlement agreement between Unisys and these retirees. In
appeal No. 94-1801 the Unisys early retirees have appealed from
an adverse judgment rendered after trial on their claims for
breach of contract, breach of fiduciary duty and estoppel. In
appeal No. 94-1912 the Burroughs and Unisys regular retirees have
appealed from the district court's grant of summary judgment in
favor of Unisys on their breach of contract and estoppel claims.
In appeal No. 94-2166, a sub-group of Sperry retirees attempted
to challenge the partial settlement between Unisys and the Sperry
and Burroughs early retirees which did not include them. On
October 3, 1994, we granted the parties' joint motion to
consolidate appeals Nos. 94-1800, 94-1801, 94-1875 and 94-1912
for purposes of filing a single joint appendix and for
disposition. All of these appeals have now been resolved, either
by our decisions in published opinions, see Nos. 94-1800 and 94-
1875, or by memorandum opinions rendered in Nos. 94-1801, 94-1912
and 94-2216.
for the rest of your life," and on statements to the same effect

made by the company both orally and in writing.

           The Medflex SPD is illustrative.   A Sperry employee who

retired during the period January 1, 1984, through April 1, 1989,

received medical benefits under this plan.    The SPD for medical

benefits is set forth in a booklet titled, "Your Company and

You."   Included in this plan was the following description of

retiree medical benefit coverage:
          If you're eligible, Medical Plan benefits
          continue without cost after you terminate
          active employment. Benefits also may
          continue on a contributory basis for your
          eligible dependents who are covered when your
          employment terminated. . . . Coverage
          continues for you for life and for your
          dependents while they remain eligible
          provided you don't stop the contributions for
          their coverage. After your death, your
          eligible dependents may continue coverage by
          making the require contributions. Their
          coverage continues until your spouse dies or
          remarries.


(A 2227)(emphasis added).   Second, the retirees argued that even

if Unisys had the legal right to terminate the plans (pursuant to

the reservation of rights clause located in other sections of the

plans), Unisys had breached its fiduciary duty by affirmatively

misleading plan participants regarding the duration of their

retiree medical benefits.   Lastly, the retirees asserted claims

based on equitable estoppel.16



16
 .        The Sperry retirees' contract and estoppel claims are
not implicated in this appeal. They are the subject of an appeal
docketed at 94-1800.
          Unisys' response to these arguments was that it had

reserved the right to terminate the retirees' medical plans due

to a "reservation of rights clause" or "ROR" located in another

section of the plan.   Typical of these clauses is the one set

forth in the SPD describing the Medflex plan.   The Medflex SPD

booklet, "Your Company and You," was distributed to all employees

and contained the following reservation of rights clause:
          Plan Continuation

          The Company expects to continue the Plans,
          but reserves the right to change or end them
          at any time. The Company's decision to
          change or end the Plan may be due to changes
          in federal or state laws governing welfare or
          retirement benefits, the requirements of the
          IRS or ERISA, the provisions of a contract or
          policy involving an insurance company or any
          other reason . . . .


(A 2750) (emphasis added).

          In addition to the provisions set forth in the SPDs,

information about retiree medical benefits was also conveyed to

the Sperry retirees through various informal oral and written

communications.   As in the SPDs, the duration of medical benefits
was described as being "for life" or for the "lifetime" of the

retiree and his or her spouse.   Sperry did not include in these

informal communications a reference to the reservation of rights

clause.

          Notwithstanding these communications, Unisys denied

having created vested medical benefits through its use of the

word "lifetime," and early in this litigation filed a motion for

summary judgment seeking dismissal of all of the regular
retirees' claims based on the unambiguous reservation of rights

clauses in the plans.17   On October 13, 1993, the district court

granted summary judgment in favor of Unisys on the Sperry

retirees' claim that Unisys had breached its fiduciary duties.

In re 

, 679-80 (E.D. Pa. 1993).

          At the trial conducted on their contract claim, the

Sperry retirees moved for reconsideration of their breach of

fiduciary duty claim in light of our decision, rendered during

trial, in Bixler v. Central Pa. Teamsters Health and Welfare

Fund, in which we held that a direct action for breach of

fiduciary duty is available under section 1132(a)(3)(B).18

Bixler, 

(3d Cir. 1994).   The retirees argued that

"even if the reservation of rights clause in the SPDs were

intended to apply to existing retirees [as opposed to active

employees], Sperry and later Unisys, had a fiduciary duty to make

this point clear."   (A 2284).   The district court observed:

17
 .        Although the district court granted Unisys' motion on
the retirees' breach of fiduciary duty and estoppel claims, it
denied summary judgment on the retirees' contract claim. The
district court found that the internal inconsistency between the
lifetime promises and the RORs made the Sperry plans ambiguous
and that under Mellon Bank N.A. v. Aetna Business Credit, 

(3d Cir. 1980), a trial on the extrinsic evidence was
necessary to resolve the ambiguity. In re 

. After trial, the district court reversed its position on
both the contract and breach of fiduciary duty claims, entering
judgment against the Sperry retirees on the contract claim and
reversing its earlier dismissal of the breach of fiduciary duty
claim.
18
 .        The district court opined that the Sperry retirees had
presumably brought their breach of fiduciary duty claim pursuant
to the "other equitable relief" clause in 29 U.S.C. §
1132(a)(3)(B).
            This is not a case where one or two low level
            benefits counselors told a few retirees that
            their benefits would continue for life. The
            message that medical benefits would last for
            life was confirmed repeatedly and
            systematically throughout the Sperry
            organization, by all levels of management, in
            writing and verbally. In fact, as the
            Findings make clear, several high level
            corporate executives, as well as personnel
            managers, testified that they believed the
            [reservation of rights clause] was
            inapplicable to retirees and counseled
            individuals accordingly.


(A 2284).    Although the district court also observed that the

summary plan description is the controlling document upon which

plan participants must rely and that informal communications

cannot alter the terms of a written plan, the court discerned "a

strong current in the Third Circuit that recognizes that an ERISA

fiduciary may not `affirmatively mislead' plan participants."

, and Fischer v. Phila. Elec.

Co., 

(3d Cir.), cert. denied, 

(1993)).

            Unisys argued that 

, and 

,
were inapposite in a situation where the summary plan description

itself informs the participants of the answer to their inquiry

regarding benefits.     After reviewing Fischer and Bixler, the

district court concluded that the evidence supported a breach of

fiduciary duty claim.    The court stated, "First, it is clear that

the highest levels of corporate management at Sperry, and later

Unisys, recognized that employees might be under the mistaken
belief that `lifetime' meant forever."19   The evidence suggested

to the court that "by the mid-1980's, defendant understood the

potential for confusion concerning the meaning of `lifetime

benefits.'"    The court further observed that the "Defendant then

exacerbated this potential [for confusion] with numerous informal

communications that discussed lifetime benefits without explicit

reference to the [reservation of rights clause]."20   (A 2289).

19
 .        The court found that this was evidenced in part by a
confidential letter in which John Loughlin, who was then staff
Vice President, Employees Benefits for Sperry, wrote:

            It is important to determine the implied promise that
            has been made regarding post-retirement medical
            benefits. Recent court cases have impaired the
            employer's ability to reduce these benefits after
            retirement. The Company should consider how the
            promise can be limited so as to control the impact on
            Company costs of future medical inflation and Federal
            cost-shifting.

(A 2288). The second letter upon which the district court relied
was a confidential 1988 memorandum from J.A. Blain, then Vice-
President of Human Resources for Unisys, to W.M. Blumenthal, then
CEO of Unisys, which cautioned:

            Although we have not suggested to either active
            employees or current retirees that we may consider
            changes in Post Retirement Medical for those already
            retired, we feel our analysis would be incomplete if we
            did not address possible changes to the Post-Retirement
            Medical Plans of our 16,000 current retirees. . . .
            Many retirees will undoubtedly suggest that when they
            retired, they felt that their medical program would
            continue without changes. . . .

(A 2288).
20
 .        The district court found that "Unisys could have easily
put an explicit [reservation of rights clause] in each informal
communication given to employees rather than only use the
lifetime language; also, when employees made specific inquiries
to benefit counselors during exit interviews and at group
retirement sessions, the company could have instructed the
          The court found that the retirees had presented

credible testimony that some individuals specifically asked if

their benefits would continue for life and were told they would,

without any mention of the reservation of rights clause.     (A

2290).   When faced with a specific inquiry as to the explanation

of benefits, the district court held that "an employer cannot

give vague or incorrect answers, especially on a repeated and

pervasive basis."   

breach of fiduciary duty

claim was not directly before the court at trial, it did not hold

that a breach in fact occurred.     In granting reconsideration of

this issue though, the district court concluded that "based on

the 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."21    (A 2291).   Given the complexity of the

legal question involved and its uncertainty of the contours of

Bixler, the district court certified its decision for

interlocutory appeal pursuant to 28 U.S.C. § 1292(b).     On July

22, 1994, Unisys filed a petition for permission to appeal




(..continued)
counselors to tell prospective employees that although the word
`lifetime' is used, the company always reserves its right to
terminate the plans." (A 2289-90).
21
 .        Because the court believed that some plaintiffs had
stronger cases than others based on their specific inquiries and
the information given to them personally, the court found that
subclasses, and possibly even individual hearings, would be
necessary to adjudicate the breach of fiduciary duty claims. The
court did not express an opinion as to what damages would be
recoverable and recognized that the parties would brief the issue
at a later time.
pursuant to 28 U.S.C. § 1292(b).      We granted Unisys' petition on

August 8, 1994.22



                                II.

          Section 404(a)(1) of ERISA provides that "a fiduciary

shall discharge his duties with respect to a plan solely in the

interest of the participants and beneficiaries . . . ."     29

U.S.C. § 1104(a)(1).23   Recognizing this statutory obligation, we

22
 .        The district court certified for immediate appeal and
we accepted the following controlling questions of law:

               (a) May a breach of fiduciary duty
          claim be maintained under ERISA where:

                    (1) the applicable summary plan
          descriptions ("SPDs") informed class members
          that the duration of retiree medical benefits
          was for life, but reservation clauses in the
          SPDs stated that the company reserved the
          right to terminate the plans at any time and
          for any reason; and

                    (2) company representatives
          misinformed class members that once they
          retired, their medical benefits would
          continue for life, as detailed in the Court's
          Opinion of June 23, 1994?

               (b) Assuming that a breach of fiduciary
          duty claim may be maintained under the above
          circumstances, is equitable relief available
          to individual participants under ERISA?
23
 .        ERISA broadly defines a fiduciary as any person who
"exercises any discretionary authority or discretionary control
respecting management of such plan . . . or has any discretionary
authority in the responsibility in the administration of the
plan." 29 U.S.C. § 1002(21)(A).

          There is no question that both Sperry and later Unisys
were acting as plan administrators, and thus were acting in a
fiduciary capacity, when they made the material
have held that in the exercise of these duties, the fiduciary

"may not materially mislead those to whom the duties of loyalty

and prudence . . . are owed."   

; 

; Curcio v. John Hancock Mutual Life Insurance

Co., 

, 238 (3d Cir. 1994).

          In Fischer, we held that a plan administrator may not

make affirmative material misrepresentations to plan participants

about changes to employee benefit plans.   Fischer involved

employees who retired shortly before their employer offered an

early retirement plan or "retirement sweetener."   Although the

company had announced that it might offer such a plan, when

employees inquired about its availability, they were told by

benefits counselors that "no plan was being considered."

.   The benefit counselors were

technically telling the truth, since they had not been informed

by the corporation that a retirement sweetener was under serious

(..continued)
misrepresentations that support the claim for breach of fiduciary
duty in this case. Our decisions firmly establish that when a
plan administrator explains plan benefits to its employees, it
acts in a fiduciary capacity. See, e.g., Genter v. ACME Scale
and Supply Co., 

(3d Cir. 1985) (holding that ACME
Scale and Supply met the ERISA definition of fiduciary as an
employer-administrator of the plan at issue); Fischer v. Phila.
Elec. Co., 

, 133 (3d Cir. 1993) (finding employer to
have fiduciary status solely on the basis of its role as plan
administrator under ERISA); Hozier v. Midwest Fasteners, Inc.,

, 1158 (3d Cir. 1990) (holding that when employers
serve as plan administrators, they assume the role of fiduciary
under ERISA). When a corporate plan administrator speaks about
benefits to its employees, the administrator acts in a fiduciary
capacity even if he speaks about a non-fiduciary decision such as
the business decision to terminate a welfare benefit plan. See

.
consideration.   Nonetheless, we held that a material issue of

fact existed as to whether the employer had breached its

fiduciary duty to its employees by responding in a misleading

fashion to their questions about the sweetener.   

   We

held that, "Put simply, when a plan administrator speaks, it must

speak truthfully."   

this principle in Bixler in holding that a

plan administrator has an affirmative duty to "speak when it

knows that silence might be harmful."   There the widow of a plan

participant contacted her husband's employer while the COBRA

election period was still open, to ask whether there was a death

benefit to which she was entitled. We held that:
          If [the employer's agent] knew that Mr.
          Bixler's death left Mrs. Bixler with
          substantial unpaid medical expenses and that
          she could receive reimbursement for those
          expenses under the Drivers' plan by signing
          and returning the COBRA notice that [he] had
          sent to her husband, we believe the failure
          to advise her of the available benefits might
          be found to be a breach of fiduciary duty
          despite the fact that her inquiry was limited
          to the availability of a death 

.   Although we did not decide whether a breach of

fiduciary duty in fact occurred, we observed that the fiduciary's

duty to inform "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."   

Significantly, we held that the employer's failure to advise Mrs.

Bixler regarding her COBRA rights could constitute a breach of

its fiduciary duty even though the employer had previously
provided the information in a written COBRA notice24 and even

though the employer's omission in that case concerned facts about

which Mrs. Bixler had not specifically inquired.

           Similarly in Curcio v. John Hancock Mutual Life

Insurance Co., 

(3d Cir. 1994), we held that an

employer's misrepresentations regarding the existence of

supplemental accidental death and dismemberment insurance, in

representations made to employees during solicitations for

enrollment in a new life insurance program which provided only

for supplemental life insurance, established a breach of

fiduciary claim.   See also Smith v. Hartford Ins. Group, 

(3d Cir. 1993) (employer's erroneous representations that

Smith would receive some level of coverage under new plan gives

rise to a breach of fiduciary duty claim under ERISA); Taylor v.

Peoples Natural Gas Co., 

(3d Cir. 1995) (a plan

administrator may be liable for the material misrepresentations

made by individuals who have been selected as non-fiduciary

agents by the plan administrator to assist it in its fiduciary

obligation to administer a plan).

           Unisys argues that the district court's decision in

this case is based on an unwarranted extension of our holding in

Bixler.   Unisys points to the fact that Sperry and later Unisys


24
 .        Mrs. Bixler received the requisite notice that she had
a right to elect "COBRA" contribution coverage at her own
expense, but she did not do so, believing that the COBRA notice
did not apply to her since her husband was already in the
hospital and she mistakenly believed that this precluded him from
being eligible for coverage. 

.
unambiguously advised employees in summary plan descriptions that

the company had reserved the right to terminate its retiree

medical benefit plans.    Thus, Unisys contends that Bixler did not

address the principal issue in this appeal which Unisys frames as

"whether an employer has a fiduciary duty to remind its employees

of its right to modify or terminate a benefit plan when it

already disclosed that information in an SPD."    Appellants' brief

at p. 19.    We reject Unisys' characterization of the fiduciary

duty involved as "one to remind" and of the cases upon which

Unisys relies.

            Under ERISA, fiduciaries have certain duties which

include "the disclosure of specified information."    Massachusetts

Mutual Life Ins. Co. v. Russell, 

, 142-45 (1985).          A

fiduciary's statutory disclosure obligations are set forth in

ERISA, 29 U.S.C. §§ 1102, 1021 and 1022.    Under 29 U.S.C. §

1102(a)(1), "[e]very employee benefit plan shall be established

and maintained pursuant to a written instrument . . . ."       Under

section 1022(a), "[a] summary plan description of employee

benefit plan is to be furnished to plan participants" and the

plan description "shall be sufficiently accurate and

comprehensive to reasonably apprise such participants and

beneficiaries of their rights and obligations under the plan."

29 U.S.C. § 1022(a)(1).    Further, ERISA requires that the summary

plan description "explain the circumstances which may result in

disqualification, ineligibility, or denial or loss of benefits,"

29 U.S.C. § 1022(b), "in a manner that is calculated to be

understood by the average plan participant."     29 U.S.C. §
1022(a)(1).25   A summary plan description "must not have the

effect [of] misleading, misinforming or failing to inform

25
 .        § 1021.     Duty of Disclosure and Reporting

                (a)   Summary plan description and information to
                      participants and beneficiaries

                   The administrator of each employee benefit plan
                shall cause to be furnished in accordance with
                section 1024(b) of this title to each participant
                covered under the plan and to each beneficiary who
                is receiving benefits under the plan --

                        (1) a summary plan description described
                      in section 1022(a)(1) of this title; and

                           *    *   *   *

          § 1022.     Plan Description and summary plan description

                (a)(1) A summary plan description of any employee
                benefit plan shall be furnished to participants
                and beneficiaries as provided in section 1024(b)
                of this title. The summary plan description shall
                include the information described in subsection
                (b) of this section, shall be written in a manner
                calculated to be understood by the average plan
                participant, and shall be sufficiently accurate
                and comprehensive to reasonably apprise such
                participants and beneficiaries of their rights and
                obligations under the plan. A summary of any
                material modification in terms of the plan and any
                change in the information required under
                subsection (b) of this section shall be written in
                a manner calculated to be understood by the
                average plan participant and shall be furnished in
                accordance with section 1024(b)(1) of this title.

                            *   *   *   *

                (b) The plan description and summary plan
                description shall contain the following
                information: The name and type of administration
                of the plan; the name and address of the person
                designated as agent for the service of legal
                process, if such person is not the administrator;
                the name and address of the administrator; names,
participants and beneficiaries."   29 C.F.R. § 2520-102-2(b)

(1987).

          Unisys argues that we should reject the notion that

Bixler can be interpreted as imposing a broad duty to inform

"upon a fiduciary that has satisfied its statutory disclosure

obligations."   Unisys is correct that we have held that a

fiduciary may satisfy its statutory disclosure obligations

regarding the terms of a plan by distributing a summary plan

description that complies with ERISA.   See, e.g., Stahl v. Tony's

Bldg. Materials Inc., 

(9th Cir. 1989) (holding

employee trust fund did not breach its fiduciary duty to a union

member by failing to warn him individually that his pension

benefits could be drastically reduced where the rule that applied

was adequately explained in the summary plan description); Allen

(..continued)
                titles, and addresses of any trustee or trustees
                (if they are persons different from the
                administrator); a description of the relevant
                provisions of any applicable collective bargaining
                agreement; the plan's requirements respecting
                eligibility for participation and benefits; a
                description of the provisions providing for
                nonforfeitable pension benefits; circumstances
                which may result in disqualification,
                ineligibility, or denial or loss of benefits; the
                source of financing of the plan and the identity
                of any organization through which benefits are
                provided; the date of the end of the plan year and
                whether the records of the plan are kept on a
                calendar, policy, or fiscal year basis; the
                procedures to be following in presenting claims
                for benefits under the plan and the remedies
                available under the plan for the redress of claims
                which are denied in whole or in part (including
                procedures required under section 1133 of this
                title).
v. Atlantic Richfield Retirement Plan, 

(E.D. Pa.

1979), aff'd, 

(3d Cir. 1980) ("Congress did not

intend to impose a duty to provide the kind of individualized

attention urged by plaintiff here, but rather envisioned that a

fiduciary could discharge its obligations through the use of an

explanatory booklet"); Schlomchik v. Retirement Plan of

Amalgamated Ins. Fund, 

(E.D. Pa. 1980), aff'd,

(3d Cir. 1981) ("no duty on the part of defendants

to provide this particular employee with individualized attention

. . . ."); Schiffer v. Equitable Assurance Sec. of the U.S., 

(3d Cir. 1988) (rejecting argument that a fiduciary owed

an obligation to a beneficiary to explain the terms of a written

plan).   These cases, however, are inapplicable here.   In each of

them, breach of fiduciary duty claims were rejected because the

plan documents clearly explained the benefits in question; none

involved allegations that a breach of fiduciary duty had occurred

because a plan administrator had affirmatively and materially

misrepresented the terms of a plan.   Furthermore, satisfaction by

an employer as plan administrator of its statutory disclosure

obligations under ERISA does not foreclose the possibility that

the plan administrator may nonetheless breach its fiduciary duty

owed plan participants to communicate candidly if the plan

administrator simultaneously or subsequently makes material

misrepresentations to those whom the duty of loyalty and prudence

are owed.

            Contrary to Unisys' claim, this is not a case involving

an employer's "duty to remind".   Instead, this case is more
accurately characterized as a dispute over an employer's duty, as

an ERISA fiduciary, not to misinform employees through material

misrepresentations and incomplete, inconsistent or contradictory

disclosures.   In the present context, a misrepresentation is

material if there is a substantial likelihood that it would

mislead a reasonable employee in making an adequately informed

retirement decision.    Fischer v. Philadelphia Elec. 

.   Here the district court found that Unisys affirmatively

and systematically represented to its employees that once they

retired, their medical benefits would continue for life -- even

though as the district court concluded in rejecting the retirees'

contract claim, the plans clearly permitted the company to

terminate benefits.26   We have no doubt that the conduct Unisys

engaged in, based on the findings of the district court, would

constitute a breach of fiduciary duty in its most basic form.

Our decisions in Bixler, Fischer, Curcio and Smith firmly

establish that when a plan administrator affirmatively

misrepresents the terms of a plan or fails to provide information

26
 .        We have previously held that the Sperry retirees did
not have a claim for relief based on breach of contract due to
the unambiguous language of the reservation of rights clauses.
See In re Unisys, No. 94-1800, slip opinion (3d Cir. June 28,
1995). This decision does not foreclose the retirees' claims for
relief based on a breach of fiduciary duty. In 

, we
upheld Mrs. Curcio's claim for breach of fiduciary duty, even
though we had rejected her contract claim arising out of the same
set of circumstances. See also Howe v. Varity Corp., 

, 753 (8th Cir. 1994), cert. granted, 

(April
24, 1995) (Howe I, in which plaintiffs' contract-type claims that
benefits had vested were rejected, does not bar plaintiffs from
urging in Howe II that they were entitled to relief on the basis
of breach of fiduciary duty or estoppel).
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.

          Imposing upon an employer a fiduciary duty in this case

does not threaten or contradict our well-established policy

disfavoring informal plan amendments.27   We recently recognized
27
 .        Unisys argues that we recently recognized the
"troubling implications" of a misrepresentation claim based upon
alleged oral misrepresentations to plan participants where
accurate information was available in a summary plan description.
(Unisys brief at pp. 31-32). Unisys directs our attention to a
footnote in our decision in Haberern v. Kaupp Vascular Surgeons
Ltd Defined Benefit Pension Plan, 

, 1501 n.6 (3d Cir.
1994) in which we stated:

          Thus, we do not reach the question whether
          Haberern's misrepresentation argument could
          be upheld under Section 502(a)(3). [citation
          omitted]. We do note, however, that
          Haberern's misrepresentation argument has
          troubling implications because the summary
          plan description pages given to her made it
          clear that the retirement benefit was based
          on compensation and the compensation did not
          include bonuses. [citations omitted]. Of
          course, the summary plan description mirrored
          the plan itself. Thus, Haberern effectively
          is relying on parol evidence to contradict
          clearly defined terms of a plan revealed to
          her in writing. Accordingly, if we adopt her
          approach we will create a precedent for any
          beneficiary to make claims for benefits
          beyond those provided in a plan. It would be
          difficult to reconcile that result with our
          cases holding that oral or informal
          amendments to ERISA benefit plans are
          precluded. See Confer v. Custom Eng'g Co.,
          

, 43 (3d Cir. 1991); Frank v. Colt
          Indus. Inc., 

, 98 (3d Cir. 1990);
          Schoonejongen v. Curtiss-Wright Corp., 

, 1040 (3d Cir. 1994), rev'd and
          remanded on other grounds, ___ U.S. ___, 

(1995) ("Unless and until the
          written plan is altered in a manner, and by a
in 

, that our equitable theories of relief under

ERISA (breach of fiduciary duty and estoppel) are "not to be

construed as conflicting with our precedent precluding oral or

informal amendments to ERISA benefit 

n.17.

          The retirees here do not argue that Unisys'

misrepresentations modified their retiree medical benefit plans.

Rather, for purposes of their breach of fiduciary claim, they

assume the plans did not contractually vest benefits, and claim

instead that the company breached its fiduciary duty by leading

employees to believe that the plans did.    This claim is distinct

from a claim for benefits under the terms of the plan because it

requires different proof (proof of fiduciary status,

misrepresentations, company knowledge of the confusion and

resulting harm to the employees) than would be required for a

contract claim that the plans had been modified.

          In recognizing the retirees' breach of fiduciary claim

here, we do not intend to "create a precedent for any beneficiary

to make claims beyond those provided in a plan."    See Haberern,

, 1501 n.6 (3d Cir. 1994).     However, the facts and

circumstances in this case clearly warrant our recognition of a

(..continued)
          person or persons authorized in the plan,
          neither the plan administrator nor a court is
          free to deviate from the terms of the
          original plan.").

However, as the district court in Haberern observed, Haberern's
claim (with respect to her bonus) was brought pursuant to section
502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B) and not under
section 1132(a)(3)(B), the provision of ERISA pursuant to which
the retirees' claims are brought here.
claim of a fiduciary breach.   Here the district court found that

virtually the entire company management had consistently

misrepresented the plan, not just on one occasion or to one

employee, but over a period of many years and both orally (in

group meetings) and in writing (in newsletters) as well.   Under

these circumstances, we do not find a conflict with our policy

against informal plan modification.28

28
 .        Finally, Unisys attempts to distinguish Bixler from
this case "because in Bixler, the information which allegedly was
not supplied to the participant involved current facts which if
brought to the attention of the participant, would have avoided a
current loss of benefits under the plan." Unisys thus urges us
to limit Bixler's application to a breach of fiduciary duty based
upon a failure to disclose present circumstances that may affect
an employee's present right to specific benefits under the terms
of a plan. Unisys maintains that there is no evidence that at
the time of the oral and written communications regarding retiree
medical benefit coverage, anyone within the company knew that
Unisys would be terminating its retiree medical benefit plans in
November, 1992. (See Appellants' brief at pp. 35-36: "at the time
the lifetime benefits were provided to retirees the company was
not anticipating discontinuing them.")

          We have previously held that ERISA does not "impose a
duty of clairvoyance" under which employers would be required to
advise participants and beneficiaries of the risk of plan changes
not even being contemplated. See 

, n. 7. See also 

(an ERISA
fiduciary is under no obligation to offer precise predictions
about future changes to its plan). Our holding today should not
be interpreted as creating a fiduciary obligation to predict and
disclose future possibilities or potentialities to plan
participants.

          We accept Unisys' contention that at the time lifetime
benefits were promised, no one at Sperry ever intended or
anticipated that there would one day be the need to reduce or
eliminate retiree medical benefits. Nonetheless, an ERISA
fiduciary does have an obligation to "answer participants'
questions forthrightly," 

, and "a duty to
communicate complete and accurate information about a
beneficiary's status." Eddy v. Colonial Life Insurance, 

, 751 (D.C. Cir. 1990). This was the obligation that was
          We turn now to the evidence adduced at trial on the

breach of contract claim to see if sufficient evidence would

support the other elements of the breach of fiduciary duty claim,

specifically, Unisys' knowledge that its employees were mislead

by Unisys' misrepresentations and Unisys' knowledge that its

misrepresentations were material to the beneficiaries'

circumstance because the misrepresentations influenced their

decisions to retire.




(..continued)
breached in this case. The district court found that the
retirees had presented credible testimony that some individuals
specifically asked if their benefits would continue for life and
were told they would, without any mention of the reservation of
rights clauses. (A 2290 n.69). Employees were told, "Once you
retire and take your first pension check from the company . . .
that's it." (A 2534). Thus, while Unisys may not have
anticipated ending the plans, it knew that it had the ability to
do so and it knew that its employees were receiving answers to
their specific inquiries that were vague, misleading and
contradictory.

          Unisys' situation was not completely unanticipated.
Indeed, the company had the foresight to draft and incorporate
reservation of rights clauses into its retiree medical plans,
which expressly gave the company the right to terminate the plans
if they became onerous. Unisys was aware of the retirees'
confusion regarding the applicability of these clauses to their
benefits and the retirees' mistaken belief that their benefits
could not be terminated once an employee retired. Under these
circumstances, we find a duty to convey complete and accurate
information arose.
                                III.

          In detailed and well-supported findings, the district

court found that Unisys had knowledge that its employees believed

the assurances of lifetime benefits they had been given and were

making retirement decisions based on their understanding that

when they retired, the benefits that they had at the time they

retired would continue for life.   Uncontroverted evidence

established that Unisys' executives were aware that the lifetime

medical benefit was an important consideration for employees who

were considering when to retire.   This evidence established that

the company knew that employees accelerated their retirement

plans because of the belief that by retiring at a certain point

in time, they would "lock in" the lifetime coverage that they had

under the current plan.29   Further, the district court found that

once Unisys was aware of the fact that retirees were electing to

retire based on this understanding, Unisys failed to do anything

to correct the misinformation, and instead reinforced the

misunderstanding by continuing to repeat the same assurances that

upon retirement a retiree's benefits would continue for life.
29
 .        The district court quoted testimony from Sperry's
former Senior Vice President for Personnel, Frank Sweeten, who
acknowledged that the lifetime promises made by Unisys to
retiring employees was an influence in retirement decisions:

          We said that this is yours for life. You
          have got it for life. And people made
          decisions on that. They decided whether to
          go [i.e., retire] or not go on the basis that
          they were told this is for life.


(A 2230 n.19).
          The district court found that the company, both

actively and affirmatively, systematically misinformed its

employees about the duration of their benefits by stating over

and over again, without qualification, that their benefits would

continue for life:
          There is no question that the defendant
          routinely spoke of the medical benefits as
          continuing "for life". This message was
          conveyed time and time again throughout
          informal communications that were sent out to
          retirees, and by oral statements that were
          made to these individuals both at private
          exit interviews and in group retirement
          sessions.


(A 2281-82).   In addition to these communications in individual

correspondence and company newsletters, the district court also

cited examples of evidence that Unisys consistently responded to

specific inquiries about whether a retiree's benefits could

change by telling employees that they could not.   (A 2290).

          Given these findings, we hold that the district court

did not err as a matter of law in concluding that the duty to

convey complete and accurate information that was material to its

employees' circumstance arose from these facts since the trustees

had to know that their silence might cause harm.   The district

court's findings that the 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,

clearly support a claim for breach of fiduciary duty under ERISA.
          We turn now to the remaining issue in this appeal,

whether relief is available to individual plan participants under

ERISA.



                               IV.

          In Bixler v. Central Pa. Teamsters Health-Welfare Fund,

(3d Cir. 1993), we held that where a fiduciary

breach causes harm to a beneficiary, that beneficiary has a claim

for equitable relief pursuant to section 502(a)(3) of ERISA,

which authorizes suits by participants for "appropriate equitable

relief" to redress violations of ERISA.30    Relying on our

30
 .        Section 502 of ERISA provides:

          (a) Persons empowered to bring a civil
          action

          A civil action may be brought --

          (1)   by a participant or beneficiary --

                (A) for the relief provided for in
                subsection (c) of this section, or

                (B) to recover benefits due to him
                under the terms of his plan, to
                enforce his rights under the terms
                of the plan, or to clarify his
                rights to future benefits under the
                terms of the plan;

          (2) by the Secretary, or by a participant,
          beneficiary or fiduciary for appropriate
          relief under section 1109 of this title;

          (3) by a participant, beneficiary, or
          fiduciary (A) to enjoin any act or practice
          which violates any provision of this
          subchapter or the terms of the plan, or (B)
          to obtain other appropriate equitable relief
decision in Bixler, the district court concluded that equitable

relief was available to individual plan participants for breach

of fiduciary duty under section 502(a)(3)(B).

          In Bixler, we considered both the source and the scope

of an ERISA fiduciary's duty to one of its beneficiaries and held

that a direct action for breach of fiduciary duty exists in the

"other appropriate equitable relief" clause of section

502(a)(3)(B) of ERISA, 29 U.S.C. § 1132(a)(3)(B).    Recognizing

that "undoubtedly there will be instances in which a fiduciary's

actions harm an individual beneficiary, but do not harm the

plan," we adopted the approach of Justice Brennan's concurrence

in Massachusetts Mutual Life Ins. Co. v. Russell, 

(1985) to hold that "section 502(a)(3) authorizes the award of

`appropriate equitable relief' directly to a participant or

beneficiary to `redress' any act or practice which violates any

provision of this title including a breach of the statutorily

created fiduciary duty of an administrator."    

(citing Massachusetts 

).31   We held

(..continued)
          (i) to redress such violations or (ii) to
          enforce any provisions of this subchapter or
          the terms of the plan. . . .
31
 .        In Massachusetts Mutual, the Supreme Court addressed
the question whether an ERISA fiduciary could be held personally
liable to a participant or beneficiary for extra contractual
damages caused by the improper or untimely processing of benefits
claims. The plaintiff had sued only under ERISA's fiduciary duty
section, section 409(a), and its civil enforcement section,
section 502(a)(2); thus the court's holding was similarly
limited. After examining the statutory language of these
provisions, Justice Stevens, speaking for the majority,
concluded: "The entire text of section 409 persuades us that
Congress did not intend that section to authorize any relief [for
that the principles of section 404(a), which serve as the

touchstone for understanding the scope and object of an ERISA

fiduciary's duties, are given effect by section 502(a)(3) which,

in the language of the statute, authorizes the award of

"appropriate equitable relief" directly to a participant or

beneficiary to redress any act or practice which violates the

provision of ERISA.   We observed, of course, that this relief is

independent of that established in section 409, authorizing

recovery for breach of fiduciary duty on behalf of the plan.

          Unisys suggests that our conclusion in Bixler is called

into question by the Supreme Court's decision in Mertens v.

Hewitt Assoc., ___ U.S. ___, 

(1993), in which the

Supreme Court held that money damages are not available under
(..continued)
breach of fiduciary duty] except for the plan itself."
Massachusetts 

.

          Justice Brennan, joined by Justices White, Marshall and
Blackmun, wrote separately to emphasize the limited reach of the
majority opinion and to outline the proper approach for courts to
take in construing other ERISA provisions. In full agreement
with the majority that section 409 did not authorize recovery to
an individual, Justice Brennan explained that individual recovery
for breach of fiduciary duty is available elsewhere in the
statute, in the "other appropriate equitable relief" clause of
section 502(a)(3), reasoning that allowing an injured beneficiary
recourse through the courts is essential to fulfilling the
purpose of ERISA. Explaining that Congress intended this result,
Justice Brennan found the fundamental purpose of the statute was
the "enforcement of strict fiduciary standards of care in the
administration of all aspects of pension plans and promotion of
the best interests of participants and 

. See also 

citing H.R. Conf. Rep. No. 1280,
93rd Cong., 2d Sess., reprinted in 1974 U.S.C.C.A.N. 5030, 5106
(emphasizing that section 502 permits beneficiaries to bring a
"civil action to recover benefits due under the plan, to clarify
rights to receive future benefits under the plan, and for relief
from breach of fiduciary responsibility") (emphasis added).
section 502(a)(3), which, by its very terms, authorizes only

equitable relief.   Although Unisys acknowledges that the Supreme

Court in Mertens never addressed the question of whether, in the

event of a breach of fiduciary duty, a plan participant could

seek equitable relief on his own behalf (rather than on behalf of

a plan), Unisys maintains that the Supreme Court in Mertens

expressed an unwillingness to infer causes of action in the ERISA

context.   See 

           We do not read Mertens as precluding the retirees'

claim for equitable relief.     In a post-Mertens decision, the

Court of Appeals for the Seventh Circuit reached the same

conclusion and reversed the district court's holding that

individual relief was not available under section 502(a)(3),

holding instead, based on Mertens, that section 502(a)(3)

authorized such relief.   Anweiler v. Amer. Elec. Power Serv.

Corp., 

, 993 (7th Cir. 1994).
          In Mertens, the Court held that the
          "appropriate equitable relief" in section
          [502(a)(3)] included only typical remedies
          available in equity and not "legal remedies"
          like compensatory damages or monetary relief.
          The court limited its holding to the "narrow

32
 .        Unisys observes that we did not mention Mertens in our
opinion in Bixler, and that two other courts since Mertens have
held that only the plan, and not individual plan participants or
beneficiaries, are entitled to relief for a breach of a fiduciary
duty based on their conclusion that the sole and exclusive bases
for such relief are sections 409 and 502(a)(2) of ERISA, 29
U.S.C. §§ 1109 and 1132(a)(2). See Richards v. General Motors
Corp., 

(E.D. Mich. 1994), and Kaiser Permanente
Employees Pension Plan v. Bertozzi, 

, 700 (N.D.
Cal. 1994) (concluding that recovery under section 502(a)(3) is
limited to "relief that inures to the benefit of the plan as a
whole").
           battleground" chosen by the parties and
           decided the issue of "what forms of relief
           are available" under section 1132(a)(3), not
           to whom the relief can go or whether a
           remedial wrong had even been alleged.
           Nevertheless, Mertens clearly indicates the
           importance and availability of equitable
           relief. Moreover, the Secretary of Labor in
           an amicus curiae brief argues [that] Mertens
           dictates the availability of relief to an
           individual under section 1132(a)(3) for a
           fiduciary's breach of duty. Therefore, in
           light of Mertens and in deference to the
           Secretary's interpretation of the law which
           he is authorized to enforce, we hold that an
           individual may seek equitable relief from a
           breach of fiduciary duty under Section
           1132(a)(3).

  The Court of Appeals for the Eighth

Circuit reached the same result in Howe v. Varity Corp., 

(8th Cir. 1994), cert. granted, 

(April 24,

1995).33   Thus, our decision in Bixler is consistent with the
33
 .        Interestingly, the Court of Appeals in Howe relied on
Mertens to vacate the district court's award of punitive and
compensatory damages, but upheld its equitable remedies in the
form of monetary restitution for back benefits and an injunction
restoring future benefits under the plaintiffs' former medical
plan. With respect to Mertens, the court of appeals opined:

           Mertens simply holds that only "equitable
           relief" is available under section 502(a)(3),
           29 U.S.C. § 1132(a)(3), and that this phrase
           does not include the collection of damages
           from persons who are not fiduciaries but act
           in concert with those who are fiduciaries.
           Nothing in Mertens precludes an award of
           traditional equitable relief, including an
           injunction, restitution, and the like. As
           plaintiffs now concede . . . after Mertens,
           compensatory damages are not recoverable
           under section 1132(a)(3). But the case by no
           means bars equitable relief for individual
           participants who have suffered a breach of
           trust.
decisions of the Courts of Appeal for the Seventh and Eighth

Circuits.34   Accordingly, we reaffirm our conclusion in Bixler

that equitable relief running to an individual falls within the

scope both of section 1132(a)(3)'s language and of ERISA's broad

remedial purpose.   See 29 U.S.C. § 1001(b).

          A question left unanswered by Bixler is the form of

equitable relief available under section 502(a)(3).     Both the

district court and the Sperry retirees agree that the retirees

are not entitled to money damages for a breach of fiduciary duty.

Instead, the retirees seek an injunction ordering specific

performance of the assurances Unisys made, restitutionary

reimbursement for back benefits, and restoration of the status

quo ante for the Sperry early retirees by rescinding their

retirement agreements.   These are remedies which are

restitutionary in nature and thus equitable.   See 

("[W]e hold that Mrs. Curcio's alternate argument [that

Capital Health breached its fiduciary duty] provides additional

support for our conclusion that Capital Health is liable to Mrs.

Curcio for the $150,000 in supplemental AD&D", representing full

enforcement of the promise that had been made); Howe v. Varity

(award of monies plaintiffs would have

received if they had remained members of the M-F plan could not

properly be characterized as damages; rather, the payments were

34
 .        The Court of Appeals for the Ninth Circuit, in a pre-
Mertens decision, held to the contrary. Sokol v. Bernstein, 

(9th Cir. 1986) (beneficiary was not entitled to recover
extra contractual damages for emotional distress caused by
arbitrary and capricious acts of plan trustee).
restitution).   It will be for the district court to determine

which of these remedies are appropriate under the circumstances

of these individual claims.



                                 V.

            For the foregoing reasons, the order of the district

court dated June 23, 1994, reinstating the retirees' claims for

breach of fiduciary duty which was certified for appeal pursuant

to 28 U.S.C. § 1292(b) by order entered July 12, 1994, will be

affirmed.   This cause is remanded to the district court for

further proceedings.