Supreme Court seems poised to deliver win to ERISA fiduciaries – but how big?

On October 6, the U.S. Supreme Court heard oral argument in the case of Anderson v. Intel Corp. Investment Policy Committee, addressing what plaintiffs must plead to survive a motion to dismiss when asserting claims of imprudence against ERISA plan fiduciaries based on alleged under-performance of plan investments.  

From the Justices’ questions and comments during the argument, it appears very likely that the Ninth Circuit’s decision in Intel’s favor will be affirmed, and that the Supreme Court will agree with the appeals court that a meaningful comparator is required to plead plausible claims of imprudence based on underperformance.  In other words, a plaintiff must compare the performance of the challenged investment to the performance of some other investment that is sufficiently similar in its characteristics to allow a plausible inference that the challenged investment was an imprudent selection by the fiduciaries.  

Plaintiffs’ counsel, seeing the handwriting on the wall, tried to reframe the question somewhat (suggesting that the Ninth Circuit used the meaningful-comparator standard to reject other types of allegations, such as imprudent execution of the selected strategy), but the Justices swiftly rebuked the attempt to pivot away from the question presented in plaintiffs’ own cert petition – which was focused specifically on underperformance allegations.   

During the arguments of Intel’s counsel and the Solicitor General (which were generally very aligned), the Justices’ questions did not press back on the assertion that a meaningful comparator was required to make out plausible underperformance allegations.  Instead, the Justices were primarily focused on whether their decision, to be helpful to lower courts, should go the next step of providing guidance on what a “meaningful” comparator is.

Intel’s counsel said flatly no, the lower courts have been doing perfectly well without that guidance, and they could continue to do so in assessing what makes a meaningful comparator.  The Solicitor General’s representative was more open to the idea that such guidance would be useful, with everyone taking as a given that the comparator fund need not be identical to the challenged fund – and likewise agreeing that plausible imprudence claims could be alleged on theories other than underperformance (and thus not require a meaningful comparator).  

Bottom line, it seems quite likely that the decision will be a welcomed win for plan fiduciaries, and that the extent of the win will turn on whether and how the Court expresses a view on what a “meaningful” comparator is at the pleading stage.  It is not difficult to imagine the conservative and liberal Justices having some differences of views on those more granular questions that could significantly affect how much protection against claims will be provided by the decision.

If the Court adopts the kind of framing discussed during argument, a private equity or private credit investment option would not necessarily be benchmarked against other private-markets exposure. It could be benchmarked against conventional portfolios that share the private-market option’s stated purpose. In effect, the stated rationale for the allocation (diversification, risk mitigation, income, inflation protection) could be key to defining the plaintiff’s comparator universe.

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