Court Opinion

ID: 4246040
Source: CourtListenerOpinion
Date Created: 2018-02-16 21:00:18.609798+00
Date Added: 2024-06-11T14:43:49.162105
License: Public Domain

NOT PRECEDENTIAL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