Unisys Corp. could wind up still saddled with a significant part of more than $1 billion in retiree medical liabilities it is trying to shed.
That's because of recent settlement agreements and still pending lawsuits, as well as a recent ruling in one of the cases giving new judicial authority to mount a renewed challenge against the company.
The separate lawsuits, involving both union and nonunion retirees, in general center around what Unisys said was its right to amend lifetime retiree benefit provisions and what retirees say was a promise by the company to provide 100% company-paid lifetime medical benefits.
In a complex, 95-page decision, a federal judge in June, while denying restitution of benefits, gave new legal grounds for one group of non-union regular retirees to appeal his ruling and to seek restoration of their benefits.
They had argued Unisys might have breached its fiduciary duty. That group involves some 9,900 regular retirees, or employees who retired at the normal age, and their spouses of Sperry Corp. (Sperry and Burroughs Corp. are the two Unisys predecessor companies.) The present value of their retiree medical liability is $166.5 million.
Chief Judge Edward N. Cahn of the U.S. District Court in Philadelphia upheld Unisys, and agreed the company in plan documents reserved the right to amend or terminate the benefits at any time.
But he ruled that in instances involving some of the nonunion retirees, the company made continual reference to lifetime benefits without drawing sufficient attention to its right to amend them. He said the company possibly violated its fiduciary duty under the Employee Retirement Income Security Act.
In the same decision, the judge denied 2,000 early retirees and their spouses their claims and a similar route to appeal. He said such a fiduciary breach did not occur in their regard. The present value of the Unisys early retiree medical liability totals $79.5 million.
As a result of Judge Cahn's decision, two other groups of non-union retirees now will seek to have the judge reconsider his denial of any company-paid benefits after 1995. That decision came last October on the grounds that he found no breach in fiducariy duty, according to Charles Gottlieb, partner in the law firm of Gottlieb and Goren, a Southfield, Mich., law firm representing Burroughs regular retirees, and Alan Sandals, partner, Berger & Montague, a Philadelphia law firm representing Unisys regular retirees.
The present value of the medical liabilities of the Unisys regular retirees is $139.2 million and of the Burroughs regular retirees, $140.8 million.
In his June ruling on the fiduciary duty aspect, the judge reversed his own October decision when he then ruled no fidicuary breach by Unisys occurred.
He reversed his own ruling in part because of a ruling in December in an unrelated case by the 3rd Circuit Court of Appeals in Philadelphia. The judge's June ruling didn't say a breach occurred, only that there may be sound legal grounds for the retirees to pursue this argument on appeal.
The Sperry regular retirees - and possibly the regular Unisys and regular Burroughs retirees, if Judge Cahn reverses their rulings also - can now appeal to the appeals court to ask if the legal grounds for a fiduciary breach are reasonable.
Unisys sparked the lawsuits in 1993, when it began to phase out contributions to all its retiree medical benefits. It planned to cut its contributions to the retiree medical plan - which was not prefunded - entirely by the end of 1995.
After 1995, the company would maintain the plan, but retirees would have to pay all costs - estimated to be $350 a month per person for non-union retirees ineligible for Medicare and $100 for those on Medicare, according to Mr. Sandals.
Estimates for the cost to union retirees varied from zero to $350 per person, according to other attorneys.
Unisys officials declined to comment on any of the litigation, said Joseph M. Barrett, director-corporate public relations in Blue Bell, Pa.
In May, Unisys and two other groups of non-union retirees, who were part of the Philadelphia suit, agreed to settlements totaling $111 million, nearly 65% of the $170 million of the original present value of their benefits, according to Mr. Sandals. In the agreements, some 2,400 Burroughs early retirees accepted a settlement of $38.1 million present value and 5,300 Sperry early retirees accepted a settlement of $72.1 million present value.
In total, the company-paid benefits amounted to a present value liability to Unisys of more than $1 billion. The non-union early and regular retiree medical liabilities total a present value of some $700 million, while the union retiree liabilities are estimated at more than $300 million, although figures for them weren't available.
In addition to the non-union litigation, Unisys faces lawsuits involving union retirees also fighting the termination of the benefits. Federal court cases involving union retirees are pending in Brooklyn, N.Y., and Detroit.
In one of the union cases - involving 2,400 union retirees at various plants and unions around the country - a settlement proposed last month is pending before U.S. District Judge Joanna Seybert of the U.S. District Court in Brooklyn. The settlement has a present value of about $20 million, or close to 70% of the present value of the medical liabilities before Unisys sought to terminate them, said Nicholas Greenwald, partner, Lewis Greenwald Kennedy Lewis Clifford Schwartz, a New York law firm representing the retirees.
As part of the settlement, Unisys would create a $10 million fund to prefund some of the claims. Under the settlement, retirees - depending on their status - would contribute varying amounts to finance the benefits.
In another case in Brooklyn, a group of 700 union retirees and Unisys agreed through the court to arbitrate the suit, appointing John D. Feerick, dean of Fordham University's law school. His decision is expected sometime after September, said Sheldon Engelhard, partner with the New York law firm of Vladeck Waldman Ellias & Engelhard, which represents union retirees. The claims in this case represent a present value of $20 million.