John Krauter v. Siemens Corp

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 17-1662
____________
JOHN R. KRAUTER,
Appellant
v.
SIEMENS CORPORATION
____________
On Appeal from the United States District Court
for the District of New Jersey
(2-16-cv-02015)
District Judge: Honorable Jose L. Linares
____________
Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
October 24, 2017
Before: GREENAWAY, JR., NYGAARD and FISHER, Circuit Judges.
(Filed: February 16, 2018)
____________
OPINION *
____________
FISHER, Circuit Judge.
Plaintiff John R. Krauter appeals the District Court’s grant of Defendant Siemens
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does
not constitute binding precedent.
Corporation’s motion to dismiss. We will affirm.
I.
Krauter worked for Siemens for 27 years, ultimately as Senior Vice President and
Chief Financial Officer. He participated in several retirement plans governed by the
Employee Retirement Income Security Act of 1974 (ERISA): two defined benefit plans 1
and two defined contribution, or individual account, plans. 2 After Krauter’s employment
at Siemens concluded, Siemens sold one of its business divisions to Sivantos, Inc. As part
of the sale, Siemens transferred to Sivantos the obligation to pay Krauter’s benefits.
Krauter sued Siemens. Counts One through Five of the complaint, all ERISA
claims, were as follows: (1) breach of fiduciary duty, (2) engaging in a prohibited
transaction, (3) declaratory judgment to enforce rights, (4) declaratory judgment to
recover benefits, and (5) failure to provide information. Count Six was a promissory
estoppel claim based on the allegation that Siemens had promised Krauter it would be
responsible for paying his pension benefits.
Krauter alleged that he was injured because: he would not have invested in the
1
The Siemens Pension Plan was a qualified plan, i.e., one that receives favorable
tax treatment. The Siemens Pension Preservation Plan was a non-qualified plan for
management or highly compensated employees.
2
The 401(k) Plan was qualified, while the Deferred Compensation Plan was not.
For simplicity, this opinion uses the term “Deferred Compensation Plan” to refer to both
that Plan and the Key Employee Retention Plan, a nonqualified plan for management or
highly compensated employees. The liability for the Key Employee Retention Plan was
transferred to the Deferred Compensation Plan before the events at issue in this litigation.
2
plans if he had known they would be transferred; the transfer “substantially increased
[his] risk of loss;” 3 an insurance policy and a trust meant to protect participants in the
event of default were nonexistent or insufficient; some defined-contribution investment
options were no longer available after the transfer; and some of the new investment
options “charged considerably higher management fees” and “generated less return than
the investment vehicles [he] had chosen through Siemens.” 4 Krauter did not allege that
Sivantos had failed to pay him any benefits he was owed.
To redress his alleged injuries, Krauter requested compensatory and statutory
damages for himself, as well as compensation and restitution for the plans. Krauter also
sought a declaratory judgment that would rule the transfer a prohibited transaction and
enforce his rights in a variety of ways: by “enjoin[ing]” the transfer, “render[ing] [it] void
ab initio,” causing the pension plans to be “transferred back to Siemens,” and ordering
that Krauter “shall continue to receive” benefits “according to the prior payment
schedule.” 5
Siemens filed a motion to dismiss, which the District Court granted. It ruled that
Krauter lacked Article III standing to assert all of his claims, and in addition, he had not
exhausted administrative remedies for his claims relating to the defined contribution
plans. While Krauter’s briefing mentioned in passing the possibility of amending his
3
Ohio App. 26.
4
Ohio App. 29.
5
Ohio App. 33-41.
3
complaint, the District Court did not grant leave to amend (or mention amendment).
II.
In his complaint, Krauter invoked the District Court’s federal question jurisdiction
and ERISA’s specific jurisdictional grant. 6 The District Court, like all federal courts,
“always has jurisdiction to determine its own jurisdiction.” 7 We have appellate
jurisdiction to review the District Court’s final order. 8
Our review of a ruling on a motion to dismiss, as well as a standing determination,
is plenary. 9 We review a ruling on amendment of a complaint for abuse of discretion. 10
III.
Krauter makes multiple arguments on appeal. We address them in turn, explaining
where we agree with the District Court and where we will affirm on other grounds.
A.
Krauter first argues that the District Court misapplied the dismissal standard
because it disregarded his allegations, did not assume their truth, and considered facts
outside the complaint. Our review reveals no misapplication of the standard.
6
28 U.S.C. § 1331; 29 U.S.C. § 1132(e)(1).
7
In re Lipitor Antitrust Litig., 855 F.3d 126, 142 (3d Cir. 2017) (quoting United
States v. Ruiz, 536 U.S. 622, 628 (2002)).
8
28 U.S.C. § 1291.
9
Lipitor, 855 F.3d at 142; Santomenno ex rel. John Hancock Tr. v. John Hancock
Life Ins. Co. (U.S.A.), 768 F.3d 284, 290 (3d Cir. 2014).
10
Ramsgate Court Townhome Ass’n v. W. Chester Borough, 313 F.3d 157, 161 (3d
Cir. 2002).
4
The District Court, ruling on Siemens’ motion to dismiss for lack of standing
under Federal Rule of Civil Procedure 12(b)(1), appropriately proceeded in the same way
as for a motion to dismiss for failure to state a claim under Rule 12(b)(6). 11 As required,
it accepted Krauter’s well-pleaded factual allegations as true and drew all reasonable
inferences in his favor. 12 Also as required, the court disregarded “threadbare recitals of
the elements of standing, supported by mere conclusory statements.” 13 On appeal,
Krauter recaps his allegations and says that the District Court overlooked or minimized
them. To the contrary, the court’s opinion shows that it accurately summarized Krauter’s
allegations, assumed they were true, and carefully reviewed them under the controlling
standard.
Krauter also asserts that the court erred in considering facts outside the
complaint—namely, a declaration Siemens filed that included records of Krauter’s
pension payments. However, the court focused on what the complaint lacks, saying it “is
devoid of any allegations of actual harm” because there are no “allegations that any of
the . . . plans have failed to make necessary payments.” 14 The deficiencies in the
complaint support the ruling, regardless of Siemens’ declaration. The court did not
misapply the dismissal standard.
11
In re Horizon Healthcare Servs. Data Breach Litig., 846 F.3d 625, 633 (3d Cir.
2017).
12
Id.
13
Id. (alterations omitted) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
14
Ohio App. 8.
5
B.
We address in three parts Krauter’s arguments that the District Court’s standing
and administrative exhaustion rulings are erroneous.
1.
Counts One through Four (breach of fiduciary duty, prohibited transaction,
declaratory judgment to enforce rights, and declaratory judgment to recover benefits)
pertained to both the defined benefit and defined contribution plans. The District Court
correctly ruled that Krauter lacked standing to assert these claims with regard to the
defined benefit plans.
Standing requires: (1) “an injury in fact,” which is “an ‘invasion of a legally
protected interest’ that is ‘concrete and particularized,’” (2) “a ‘causal connection
between the injury and the conduct complained of,’” and (3) “a likelihood ‘that the injury
will be redressed by a favorable decision.’” 15 The District Court concluded that Krauter
did not allege a concrete injury in fact because Siemens’ actions did not harm him.
Instead, the complaint “simply hypothesizes that he would incur harm in the future if
Sivantos’ actions lead to missed payments,” an injury the court ruled “merely speculative
and not concrete.” 16 On appeal, Krauter fails to show that these conclusions are erroneous
with regard to his defined benefit plan claims.
15
Horizon, 846 F.3d at 633 (alterations omitted) (quoting Lujan v. Defs. of Wildlife,
504 U.S. 555, 560-61 (1992)).
16
Ohio App. 9.
6
Krauter’s first argument, that it is sufficient to allege violations of substantive
ERISA enforcement provisions, runs aground on the shoals of our precedent. We have
ruled that the risk of future negative effects on benefits is too speculative to confer
standing. 17 This conclusion predates the Supreme Court’s standing case, Spokeo, Inc. v.
Robins, 18 but “the Spokeo Court meant to reiterate traditional notions of standing,” and
our pre-Spokeo cases are still good law. 19 Krauter relies on In re Nickelodeon Consumer
Privacy Litigation and In re Horizon Healthcare Services Data Breach Litigation, but
those cases pertained to the particular injuries the plaintiffs alleged: data privacy
violations. 20 Nickelodeon and Horizon did not overrule Perelman’s ERISA-specific
holding. Indeed, in Horizon, we pointed to ERISA violations of the kind alleged here as
an example of what is not an injury in fact. We contrasted data privacy violations, which
are injuries in fact even absent further harm, with ERISA plan management violations,
which (under a Fifth Circuit case we cited approvingly) are not. 21
Krauter’s next argument, that he has pled monetary and non-monetary harms,
consists of a list of his alleged injuries accompanied by his bare assertion that they are
17
Perelman v. Perelman, 793 F.3d 368, 375 (3d Cir. 2015).
18
136 S. Ct. 1540 (2016).
19
Horizon, 846 F.3d at 638; see also In re Nickelodeon Consumer Privacy Litig.,
827 F.3d 262, 273 (3d Cir. 2016).
20
Horizon, 846 F.3d at 636 (using limiting words of “when it comes to laws that
protect privacy” and “in the context of statutes protecting data privacy” (quoting
Nickelodeon, 827 F.3d at 272-73)).
21
Id. at 640 & n.21 (citing Lee v. Verizon Commc’ns, 837 F.3d 523, 529-30 (5th
Cir. 2016)).
7
injuries in fact. However, Krauter cites no authorities supporting his view. His allegation
that he would not have participated in the plans had he known Siemens might transfer
them is, as Siemens points out, just another way of expressing fears about a possible
future default. His allegation that Siemens breached its fiduciary duty by acting “in
furtherance of its own . . . interests, and against [his] interests,” lacks factual specificity
and is conclusory. 22 His allegations about discontinuance of insurance and failure to fund
a rabbi trust (both of which would pay benefits upon a default) are too speculative:
Krauter would only be harmed by their absence if there were to be a default.
Krauter’s third argument is that increased risk of future harm confers standing.
Here again, our precedent is conclusive: a risk of future adverse effects on benefits is not
an injury in fact. 23 Krauter’s out-of-circuit cases are entirely unpersuasive. In one, the
defendant discontinued the plaintiffs’ health care plans—so unlike here, the feared loss of
benefits actually came to pass. 24 Krauter’s other case is even farther afield. It addressed
standing to challenge USDA regulations aimed at preventing mad cow disease and
confined its holding to the “specific context of food and drug safety suits.” 25
22
Ohio App. 33; see Iqbal, 556 U.S. at 678 (explaining that “recitals of [legal] elements
. . . supported by mere conclusory statements” do not suffice).
23
Perelman, 793 F.3d at 375.
24
United Steelworkers v. Textron, Inc., No. 85-4590-MC, 1987 U.S. Dist. LEXIS
14824, at *4, 8 (D. Mass. Feb. 2, 1987).
25
Baur v. Veneman, 352 F.3d 625, 627-28, 634 (2d Cir. 2003).
8
For all these reasons, the District Court correctly ruled that Krauter lacked
standing to bring Counts One through Four insofar as they pertained to the defined
benefit plans.
2.
The District Court also correctly dismissed Counts One through Four insofar as
they pertained to the defined contribution plans. Therefore, we will affirm, but in part for
different reasons than the District Court gave. We discuss first the Deferred
Compensation Plan, where we agree that Krauter lacked standing; we discuss second the
401(k) Plan, where Krauter had standing but failed to state a claim.
Krauter alleged that after the transfer, some Deferred Compensation Plan
investment options were no longer available and fees and costs were higher. Siemens is
correct that Krauter did not allege any injury (i.e., financial loss). The higher fees may
have been accompanied by higher returns. Krauter knew how to plead injury caused by
higher fees and lower returns; he did so on the same page of his complaint with reference
to the 401(k) Plan. Although we draw reasonable inferences in Krauter’s favor, we do not
interpolate allegations that are not in the complaint. On the complaint’s face, Krauter has
not alleged that he was injured by the changes to the Deferred Compensation Plan.
Therefore, he lacked standing to assert Counts One through Four insofar as they pertained
to that Plan.
Krauter’s allegations about the 401(k) Plan differ from his allegations about the
9
Deferred Compensation Plan. Krauter alleged that after the transfer from Siemens to
Sivantos, his 401(k) funds were moved into investments that “charged considerably
higher management fees” and “generated less return.” 26 Diminished returns in a defined
contribution plan are a concrete injury in fact. 27 Siemens argues that even so, Krauter
does not have standing because, with his 401(k) funds rolled into an IRA, his injury
would not be redressed by a favorable decision in this case. We have held, however, that
cashed-out 401(k) participants can sue for mismanagement of plan assets. 28 In addition,
Krauter alleged that the higher fees and lower returns damaged him before his rollover.
For these reasons, Krauter pled concrete injury in fact with regard to Counts One through
Four, insofar as those claims related to the 401(k) Plan.
The District Court ruled that, besides the lack of standing, Krauter’s claims could
also be dismissed because he did not plead administrative exhaustion. The parties hotly
dispute whether, in fact, Krauter administratively exhausted his claims. We decline to
wade into these potentially fact-intensive waters. We also decline to affirm dismissal on a
“nonjurisdictional affirmative defense” such as ERISA’s exhaustion requirement. 29
26
Ohio App. 29.
27
See Santomenno, 768 F.3d at 292 n.2 (plaintiffs had standing to assert claim that
defendant breached ERISA fiduciary duty by providing 401(k) investment options with
excessively high fees; injury in fact was alleged “monetary loss . . . caused by . . . excessive
fees”); cf. Renfro v. Unisys Corp., 671 F.3d 314, 317-18 (3d Cir. 2011).
28
Graden v. Conexant Sys. Inc., 496 F.3d 291, 296-97 (3d Cir. 2007) (citing
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 118 (1989)).
29
Metro. Life Ins. Co. v. Price, 501 F.3d 271, 282-83 (3d Cir. 2007).
10
Krauter’s injury in fact notwithstanding, we conclude—after plenary review of the
record and the law—that he did not properly state a claim. 30 Therefore, Counts One
through Four were subject to dismissal under Rule 12(b)(6) insofar as they pertained to
the 401(k) Plan.
In Renfro v. Unisys Corp., the plaintiffs alleged that the defendants breached their
fiduciary duty under ERISA because they “inadequately selected a mix and range of
[401(k)] investment options.” 31 That is essentially what Krauter alleges here. As we
explained in Renfro:
An ERISA defined contribution plan is designed to offer participants
meaningful choices about how to invest their retirement savings.
Accordingly, we hold the range of investment options and the characteristics
of those included options—including the risk profiles, investment strategies,
and associated fees—are highly relevant and readily ascertainable facts
against which the plausibility of claims challenging the overall composition
of a plan’s mix and range of investment options should be measured. 32
The Renfro plaintiffs pleaded facts including the kinds of options available and the funds’
risk and fee profiles. 33 Yet despite that specificity, we concluded that the range of
investment options was “reasonable” and therefore the “plaintiffs’ factual allegations . . .
[did] not plausibly support their claims.” 34
30
Hassen v. Gov’t of V.I., 861 F.3d 108, 114 (3d Cir. 2017) (“[B]ecause our review
is plenary, ‘we may affirm on any grounds supported by the record.’”) (quoting Maher
Terminals, LLC v. Port Auth. of N.Y. & N.J., 805 F.3d 98, 105 n.4 (3d Cir. 2015)).
31
671 F.3d at 318.
32
Id. at 327.
33
Id. at 326.
34
Id. at 327.
11
Unlike the Renfro plaintiffs, Krauter did not allege what investment options were
available after the transfer or what fees they charged. Nor did he allege how, specifically,
the pre- and post-transfer options differed. Renfro provides the road map for how to plead
his claims, but Krauter “provided nothing more than conclusory assertions that [the
fiduciary] breached its duty to prudently and loyally select and maintain the plan’s . . .
investment options.” 35 Thus, he failed to state a claim in Counts One through Four with
regard to the 401(k) Plan. 36
For these reasons, we will affirm the dismissal of Counts One through Four insofar
as these claims related to the defined contribution plans.
3.
Having disposed of Counts One through Four, we now consider the final two
counts, Count Five (failure to provide information) and Count Six (promissory estoppel).
The District Court also correctly dismissed these claims for lack of standing.
35
Id. at 328.
36
In Renfro, the plaintiffs asserted a breach of fiduciary duty claim and a claim for
equitable relief, whereas here, Krauter asserted those claims plus a prohibited transaction
claim. But the logic of Renfro applies to each of Krauter’s claims. The only injuries Krauter
pled with regard to the 401(k) Plan—for all of his claims—were the higher fees and
diminished returns. As Renfro shows, he failed to properly plead the facts that would be
necessary to prove those injuries. That failure dooms Counts One through Four as they
pertain to the 401(k) Plan. In other words, these claims withstand dismissal under Rule
12(b)(1) for lack of standing because Krauter “allege[d] some specific, identifiable trifle
of injury.” Horizon, 846 F.3d at 633 (quoting Blunt v. Lower Merion Sch. Dist., 767 F.3d
247, 278 (3d Cir. 2014)). But they do not withstand dismissal under Rule 12(b)(6) because
without the type of specific factual allegations discussed in Renfro, Krauter has failed to
state a claim.
12
To support his promissory estoppel claim, Krauter alleged that Siemens promised
to be responsible for paying his benefits, that Krauter changed his position in reliance on
that promise, and that Siemens breached the promise. The allegedly breached promise did
not injure Krauter because, as discussed, he does not allege that he failed to receive
payments he was owed. 37
Krauter also lacks standing on his failure to provide information claim, and his
request for injunctive relief does not cure the problem. As Krauter points out, we did
observe in Perelman that “[w]ith respect to claims for injunctive relief, [injury in fact]
may exist simply by virtue of the defendant’s violation of an ERISA statutory duty, such
as failure to comply with disclosure requirements.” 38 However, Krauter has not properly
pled a violation of an ERISA statutory duty, and Perelman does not relieve him of the
obligation to plead his claim with specificity. Krauter brings his claim under 29 U.S.C.
§ 1132(c), alleging that Siemens did not provide him with documents relating to the
transfer. Section 1132(c) does not itself require any disclosures, though; instead, it
affords a remedy for failure to provide documentation required by other ERISA
provisions. 39 Krauter does not specify what provision requires Siemens to provide him
37
Lujan, 504 U.S. at 560 (defining injury in fact as “an invasion of a legally
protected interest which is (a) concrete and particularized, and (b) actual or imminent”
(citing Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)).
38
793 F.3d at 373.
39
29 U.S.C. § 1132(c) (providing that a participant may sue for failure to provide
information under 29 U.S.C. §§ 1166, 1021(e)(1), 1021(f), 1025(a), or “any information
which such administrator is required by this subchapter to furnish”).
13
with its purchase and sale agreement with Sivantos, documents it relied on leading up to
the sale, or documents demonstrating compliance with unspecified “safeguards.” 40
Krauter was not injured by Siemens’ decision not to provide documents that ERISA did
not require it to provide.
Moreover, we also said in Perelman that “[c]laims demanding a monetary
equitable remedy, by contrast [with claims for injunctive relief], require the plaintiff to
allege an individualized financial harm.” 41 Krauter’s claims are substantially similar to
the Perelman plaintiff’s: that mismanagement of a defined benefit plan has left him at
greater risk of future default. His demands for relief are also similar—in Perelman,
“disgorgement or restitution,” 42 and here, “[t]hat Siemens compensate the applicable
plans for losses” and “restore to the applicable plans any profits Siemens made.” 43
Therefore, Krauter’s efforts to distinguish Perelman fail.
C.
Finally, Krauter fails to show that the District Court abused its discretion in
denying leave to amend his complaint. To determine if leave has been requested properly,
courts consider whether a plaintiff filed a motion to amend or provided a proposed
amended complaint. 44 Where neither have been offered, a district court cannot abuse its
40
Ohio App. 39.
41
793 F.3d at 373.
42
Id. at 372.
43
Ohio App. 33-37.
44
Ramsgate, 313 F.3d at 161.
14
discretion, having “had nothing upon which to exercise [that] discretion.” 45 Krauter
mentioned amendment only in passing, using language and form paralleling requests we
have deemed insufficient in the past. He made three cursory references in his opposition
to the motion to dismiss, stating that if Siemens was correct, he should be granted leave
to amend. That he repeated his request is not determinative, as it still “lack[ed] a
statement [of] the grounds for amendment and . . . did not rise to the level of a motion.” 46
“Because a motion for leave to amend was never properly before it, the [D]istrict [C]ourt
did not abuse its discretion in failing to address [Krauter’s] request for leave to cure
deficiencies in [his complaint].” 47
IV.
For the reasons set forth above, we will affirm.
45
Id.
46
Id. (quoting Calderon v. Kansas Dep’t of Soc. & Rehab. Servs., 181 F.3d 1180,
1187 (10th Cir. 1999)).
47
Id. (quoting Calderon, 181 F.3d at 1187).
15