# Khan v. PTC Inc.

> District Court, D. Massachusetts · April 20, 2021

URL: https://www.frixlaw.com/law-library/cases/10199407

## Case

- **Court:** District Court, D. Massachusetts
- **Decided:** April 20, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

)
KRISTAL M. KHAN, )
MICHELLE R. BALLINGER, )
and GEORGE A. CRAAN, )
individually and on behalf )
of all others similarly situated, )
)
Plaintiffs, )
)
v. ) CIVIL ACTION
) NO. 20-11710-WGY
)
PTC, INC., THE BOARD OF DIRECTORS )
OF PTC, INC., THE INVESTMENT )
COMMITTEE OF PTC, INC., and JOHN )
DOES 1-30, )
)
Defendants. )
)

YOUNG, D.J. April 20, 2021
MEMORANDUM & ORDER
I. INTRODUCTION
Kristal M. Khan, Michelle R. Ballinger, and George A. Craan
(collectively, the “Beneficiaries”) participated in PTC, Inc.’s
401(k) defined-contribution plan (the “Plan”). The
Beneficiaries bring this putative class action pursuant to 29
U.S.C. § 1132 on behalf of a proposed class of similarly
situated participants and beneficiaries, and on behalf of the
Plan itself, asserting breaches of fiduciary duty in violation
of the Employee Retirement Income Security Act (“ERISA”), 29
U.S.C. §§ 1001-1461. In count I, the Beneficiaries claim that
the Investment Committee of PTC, Inc. (the “Investment
Committee”) breached the fiduciary duties of prudence and
loyalty in violation of 29 U.S.C. § 1104(a). In count II, the
Beneficiaries claim that PTC, Inc. and the Board of Directors of
PTC, Inc. (the “Board of Directors”) failed adequately to
monitor the Investment Committee.

Pending before the Court is PTC’s motion to dismiss for
lack of subject-matter jurisdiction. For the reasons stated
below, the motion is DENIED.
A. Factual Allegations
PTC, Inc. is a Boston-based software company. Compl. ¶ 25,
ECF No. 1. PTC, Inc. sponsors the Plan, which “provides for
individual accounts for each participant and for benefits based
solely upon the amount contributed to those accounts, and any
income, expense, gains and losses, and any forfeitures of
accounts of the participants which may be allocated to such
participant’s account.” Id. ¶¶ 25, 42. During their employment

with PTC, Inc., the Beneficiaries “participated in the Plan[,]
investing in the options offered by the Plan and which are the
subject of this lawsuit.” Id. ¶¶ 18-20. The Plan has had more
than $450,000,000 in assets under management since September
2014, qualifying it “as a large plan in the defined contribution
plan marketplace, and among the largest plans in the United
States.” Id. ¶ 10.
According to the complaint, PTC, Inc. is both a “sponsor”
and a “named fiduciary” of the Plan. Id. ¶ 25. PTC, Inc.
allegedly “acted through” the Board of Directors “to perform
Plan-related fiduciary functions . . . .” Id. ¶ 28. These
functions allegedly “includ[ed] appointing and monitoring the
activities of the [Investment] Committee.” Id. ¶ 31. The

Investment Committee, in turn, “had discretionary authority to
select . . . [and] monitor Plan investments.” Id. ¶ 36. The
Beneficiaries then “select[ed] from several investment options,”
including “a common/collective trust, various mutual funds, and
a money market account.” Id. ¶ 51 (quotations omitted).
The Beneficiaries assert that during the proposed Class
Period, defined as September 17, 2014 through the date of
judgment, id. ¶ 1 n.2, PTC, Inc., the Investment Committee, the
Board of Directors, and John Does 1-30 (collectively, “PTC”)
failed to act in the Beneficiaries’ best interest, id. ¶¶ 1-14.1
Specifically, the Beneficiaries allege that PTC: (1) failed

“objectively and adequately [to] review the Plan’s investment
portfolio with due care to ensure that each investment option
was prudent, in terms of cost,” and (2) “maintain[ed] certain
funds in the Plan despite the availability of identical or

1 John Does 1-10 are unidentified members of the Board of
Directors, Compl. ¶ 34, John Does 11-20 are unidentified members
of the Investment Committee, id. ¶ 39, and John Does 21-30 are
other unidentified fiduciaries, id. ¶ 40.
similar investment options with lower costs and/or better
performance histories.” Id. ¶ 11. Based on this conduct, the
Beneficiaries seek to recover against the Investment Committee
for breach of the fiduciary duties of prudence and loyalty in
violation of 29 U.S.C. § 1104(a) (count I), id. ¶¶ 116-122, and
against PTC, Inc. and the Board of Directors for failure

adequately to monitor the Investment Committee (count II), id.
¶¶ 123-129.
B. Procedural History
The Beneficiaries filed a complaint against PTC in
September 2020. See generally id. In response, PTC moved to
dismiss for failure to state a claim, see generally Defs.’ Mot.
Dismiss Pls.’ Compl. Failure State Claim Upon Which Relief Can
Be Granted, ECF No. 10; Defs.’ Mem. Law Supp. Defs.’ Mot.
Dismiss Failure State Claim Upon Which Relief Can Be Granted,
ECF No. 14, and for lack of subject-matter jurisdiction, see
generally Defs.’ Mot. Dismiss Pls.’ Compl. Lack Subject-Matter

Jurisdiction Fed. R. Civ. P. 12(b)(1), ECF No. 11; Defs.’ Mem.
Law Supp. Defs.’ Mot. Dismiss Pursuant Fed. R. Civ. P. 12(b)(1)
(“Defs.’ 12(b)(1) Mem.”), ECF No. 15.
The Beneficiaries opposed each motion, see generally Pls.’
Mem. Law Opp’n Defs.’ Mot. Dismiss Pursuant Fed. R. Civ. P.
12(b)(1), ECF No. 21; Pls.’ Mem. Law Opp’n Defs.’ Mot. Dismiss
Failure State Claim Upon Which Relief Can Be Granted, ECF No.
22, and PTC filed replies in support of the motions, see
generally Defs.’ Reply Supp. Defs.’ Mot. Dismiss Pursuant Fed.
R. Civ. P. 12(b)(6), ECF No. 25; Defs.’ Reply Supp. Defs.’ Mot.
Dismiss Pursuant Fed. R. Civ. P. 12(b)(1), ECF No. 26.
The Court held oral argument on March 31, 2021. When
arguments concluded, this Court allowed in part and denied in

part PTC’s motion to dismiss for failure to state a claim, ECF
No. 10. See Elec. Clerk’s Notes, ECF No. 34. With respect to
PTC’s pending motion to dismiss for lack of subject-matter
jurisdiction, ECF No. 11, this memorandum addresses only those
issues of law as to which the First Circuit has not yet spoken
and elucidates this Court’s reasoning.
II. ANALYSIS
PTC’s primary argument in support of its motion to dismiss
for lack of subject-matter jurisdiction is that the
Beneficiaries lack Article III standing because they fail
adequately to plead injury and redressability stemming from

PTC’s alleged mismanagement of the specific funds in which they
invested.2 Defs.’ 12(b)(1) Mem. 3-6. The Beneficiaries respond

2 The Court rejects PTC’s other argument -- that the
Beneficiaries “executed broad releases that prohibit them from
pursuing the ERISA claims they attempt to assert here,” Defs.’
12(b)(1) Mem. 2 -- as premature. See Fed. R. Civ. P. 8(c)(1);
Citibank Glob. Markets, Inc. v. Rodríguez Santana, 573 F.3d 17,
23 (1st Cir. 2009); Bendaoud v. Hodgson, 578 F. Supp. 2d 257,
280 (D. Mass. 2008) (Gertner, J.).
that because they alleged that “they invested in Plan
investments which are the subject of this lawsuit,” they have
Article III standing to bring this action on behalf of the Plan.
Pls.’ Mem. Law Opp’n Defs.’ Mot. Dismiss Pursuant Fed. R. Civ.
P. 12(b)(1) 2 (citing Compl. ¶¶ 18-20). This Court agrees with
the Beneficiaries.

“To establish standing under Article III of the
Constitution, a plaintiff must demonstrate (1) that he or she
suffered an injury in fact that is concrete, particularized, and
actual or imminent, (2) that the injury was caused by the
defendant, and (3) that the injury would likely be redressed by
the requested judicial relief.” Thole v. U.S. Bank N.A., 140 S.
Ct. 1615, 1618 (2020) (citing Lujan v. Defs. of Wildlife, 504
U.S. 555, 560–61 (1992)). At issue here are the first and third
requirements: injury in fact and redressability, respectively.
See Defs.’ 12(b)(1) Mem. 4-6.
A. Injury in Fact

First, with respect to injury in fact, “[a]lthough in
certain types of matters[] courts have found that a plaintiff
cannot suffer an injury from an investment that he or she did
not purchase, ‘courts have declined to apply the above bright-
line rule when addressing ERISA claims for breach of fiduciary
duties.’” Hay v. Gucci Am., Inc., Civil Action No.: 17-cv-
07148, 2018 WL 4815558, at *4 (D.N.J. Oct. 3, 2018) (quoting
Urakhchin v. Allianz Asset Mgmt. of Am., L.P., Case No. SACV 15-
1614-JLS (JCGx), 2016 WL 4507117, at *4 (C.D. Cal. Aug. 5, 2016)
(collecting cases)). “Rather, courts look to the nature of the
claims and allegations to determine whether the pleaded injury
relates to the defendants’ management of the Plan as a whole.”
Urakhchin, 2016 WL 4507117, at *4.

Against this backdrop, most courts hold that “plaintiffs
need not prove individualized damages in an ERISA class action
case; rather, an injury to the Plan[] suffices.” Sacerdote v.
N.Y. Univ., 16-cv-6284 (KBF), 2018 WL 840364, at *7 (S.D.N.Y.
Feb. 13, 2018); see Cunningham v. Cornell Univ., 16-cv-6525
(PKC), 2019 WL 275827, at *3 (S.D.N.Y. Jan. 22, 2019) (stating
that “[p]laintiffs do not need to make a showing of investment
in each fund to demonstrate standing” in 29 U.S.C. § 1132(a)(2)
action brought on behalf of defined-contribution plan). But see
Patterson v. Morgan Stanley, No. 16-cv-6568 (RJS), 2019 WL
4934834, at *5 (S.D.N.Y. Oct. 7, 2019) (“Losses incurred by

funds in which Plaintiffs did not invest cannot have impaired
the value of Plaintiffs’ individual accounts. Therefore,
Plaintiffs have not been injured as to those funds.” (internal
citation omitted)); Wilcox v. Georgetown Univ., Civil Action No.
18-422 (RMC), 2019 WL 132281, at *9 (D.D.C. Jan. 8, 2019)
(holding that plaintiffs lacked standing to advance ERISA claims
based “an investment option neither Plaintiff selected”).3
Specifically, the injury in fact stems from the “alleged
foregone opportunities from funds that were not included and the
alleged reduction in choice that resulted.” Sacerdote, 2018 WL
840364, at *7 (citing Ross v. Bank of Am., N.A., 524 F.3d 217,

223 (2d Cir. 2008) (ruling that antitrust plaintiffs had pled an
injury in fact by alleging that “reduced choice and diminished
quality result[ed] directly from the defendants’ illegal
collusion to constrict the options available” (brackets and
ellipsis omitted))); see Urakhchin, 2016 WL 4507117, at *4
(ruling that plaintiffs in ERISA breach of fiduciary duty action
brought on behalf of defined-contribution plan had pled an
injury in fact by alleging that they “were unable to select low-
cost options when investing in the Plan,” an “injury rooted in

3 Less than a year after Patterson v. Morgan Stanley issued,
another session of that court recognized that “Patterson is an
outlier; the majority of courts considering similar cases both
in this district and elsewhere are consistent with Leber [v.
Citigroup 401(k) Plan Investment Committee, 323 F.R.D. 145
(S.D.N.Y. 2017)].” Falberg v. Goldman Sachs Grp., Inc., 19 Civ.
9910 (ER), 2020 WL 3893285, at *8 (S.D.N.Y. July 9, 2020).
Leber held that “plaintiffs do not need to point to
individualized injuries with respect to each Plan investment in
order to establish constitutional standing in a derivative suit
brought pursuant to 29 U.S.C. § 1132(a)(2).” 323 F.R.D. at 155.
Wilcox v. Georgetown University is similarly at odds with the
weight of authority.
Defendants’ conduct in managing all the funds as a group”
(brackets, ellipsis, and quotations omitted)).
Here, the Beneficiaries plead that while acting in a
fiduciary capacity, Compl. ¶¶ 61-71, PTC failed to investigate
and select lower-cost alternative funds, id. ¶¶ 72-80, failed to
utilize lower-cost share classes, id. ¶¶ 81-90, failed to

utilize lower-cost passively managed and actively managed funds,
id. ¶¶ 91-99, and failed to monitor and control the Plan’s
recordkeeping expenses, id. ¶¶ 100-115. Consequently, the Plan
allegedly “suffered millions of dollars of losses due to
excessive costs and lower net investment returns.” Id. ¶ 120.
These allegations are sufficient to plead that the Plan suffered
an injury in fact and, under the majority approach limned above,
to permit the Beneficiaries to pursue their claims on behalf of
the Plan pursuant to 29 U.S.C. § 1132(a)(2).
B. Redressability
Second, PTC contends that the Beneficiaries cannot

demonstrate redressability in light of the Supreme Court’s
recent decision in Thole v. U.S. Bank N.A., 140 S. Ct. 1615,
1618 (2020). Defs.’ 12(b)(1) Mem. 5-6. Specifically, according
to PTC, if the Beneficiaries “were to win this lawsuit, any
recovery would inure to those accounts that held the investment
options on which they prevailed, and if they were to lose this
lawsuit, it would have no bearing on [the Beneficiaries’]
benefits.” Id. 5 (citing Thole, 140 S. Ct. at 1622).
This Court is unconvinced. As an initial matter, Thole
concerned the injury-in-fact requirement of Article III
standing, not the redressability requirement. See generally 140
S. Ct. 1615 (mentioning redressability only once in the majority

opinion, when stating the three requirements of Article III
standing). Moreover, to the extent that Thole could be read to
concern redressability, it supports the Beneficiaries’ position.
In Thole, the Supreme Court recognized that in ERISA actions,
the type of plan is “[o]f decisive importance” to the Article
III standing inquiry. Id. at 1618. “In a defined-benefit plan,
retirees receive a fixed payment each month, and the payments do
not fluctuate with the value of the plan or because of the plan
fiduciaries’ good or bad investment decisions.” Id. “By
contrast, in a defined-contribution plan, such as a 401(k) plan,
the retirees’ benefits are typically tied to the value of their

accounts, and the benefits can turn on the plan fiduciaries’
particular investment decisions.” Id. In that “private trust
context, the value of the trust property and the ultimate amount
of money received by the beneficiaries will typically depend on
how well the trust is managed, so every penny of gain or loss is
at the beneficiaries’ risk.” Id. at 1619. Accordingly,
defined-contribution plan participants properly may plead a
redressable injury to the Plan based on alleged plan
mismanagement. See id. at 1618-19; Boley v. Universal Health
Servs., Inc., Civil Action No. 20-2644, 2020 WL 6381395, at *2-6
(E.D. Pa. Oct. 30, 2020) (rejecting argument that plaintiffs
lacked Article III standing to bring 29 U.S.C. § 1132(a)(2)
claims on behalf of defined-contribution plan under Thole);

Parmer v. Land O’Lakes, Inc., Civil No. 20-1253(DSD/HB), 2021 WL
464382, at *3-4 (D. Minn. Feb. 9, 2021) (same). Recovery for
that redressable injury would inure to the benefit of the plan,
and thereafter the plan’s fiduciaries would reallocate the
recovery “to the individual accounts injured by the breach.”
Evans v. Akers, 534 F.3d 65, 74 (1st Cir. 2008). Thus an
“allegation of fiduciary mismanagement, which at this stage in
the proceedings we assume to be true, identifies a concrete
injury that is redressable by a court and falls within the scope
of Article III standing.” See id. at 75.
Here, seeking “to restore to the Plan all losses caused by”

PTC’s alleged mismanagement, Compl. ¶¶ 121, 129, the
Beneficiaries bring this action on behalf of the defined-
contribution Plan, id. ¶¶ 11-14, 25, 42, 121, 129. Under Thole,
the Beneficiaries’ allegations suffice to plead a redressable
injury to the Plan. See Parmer, 2021 WL 464382, at *3-4; Boley,
2020 WL 6381395, at *2-6. Recovery would inure to the Plan
generally, not just to the “accounts that held the investment
options on which the[] [Beneficiaries] prevail[],” Defs.’
12(b)(1) Mem. 5, though the Plan’s beneficiaries would later
reallocate that recovery “to the individual accounts injured by
the breach,” Evans, 534 F.3d at 74. That sequence of events
nevertheless identifies a redressable injury to the Plan. See
id. at 75.

III. CONCLUSION
For the foregoing reasons, PTC’s motion to dismiss for lack
of subject-matter jurisdiction, ECF No. 11, is DENIED.

SO ORDERED.
/s/ William G. Young
WILLIAM G. YOUNG
DISTRICT JUDGE

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10199407. Public record. Not legal advice.