[25-498] Anderson v. Intel Corp. Investment Policy Committee

So y- [clears throat] are you saying that, uh, you can, uh, prove imprudence or demonstrate it, uh, by comparing dissimilar funds?

Uh, I mean, that is one way that a complaint-

So how would you do that?

Sure.

So it's context-dependent, and there is no one specific fund that a complaint needs to identify to make performance allegations relevant, uh, to support a claim of imprudence.

It can run a very wide spectrum of different ways that the complaint could use performance allegations, um, to contribute to the overall plausibility of a complaint, and the way it would do that is it would identify a relevant way of comparing the performance of one fund with other potential comparators, and it would explain why that performance was relevant to the theory of breach alleged in a complaint.

But what the Ninth Circuit has done here is it has attempted to predefine the kind of comparison that will count when a court is asking how the performance allegations contribute to plausibility.

I think what the Ninth Circuit is saying is you can't compare apples and oranges.

If you have a fund, uh, an equity fund that is designed to produce, uh, high returns but riskier returns, uh, and you can't compare that to a fund that is, uh, to protect against losses.

Uh, we, uh, I agree that if that was all the complaint was trying to do to premise a claim of imprudence on, that kind of complaint would be, um, uh, would not survive a motion to dismiss.

But the Ninth Circuit, I think, went beyond just a recognition that the c- performance allegations need to contribute to the theory of imprudence.

What it did was to say the only kind of comparison that will count is one that identifies a specific, materially indistinguishable fund that only differed in performance.

And by attempting to predefine the kind of comparator that counts, um, it set the bar, uh, in a way that would foreclose a complaint from relying on a- a whole range of different kinds of potential comparisons.

So do you agree that you can't compare apples and oranges?

Yes, but I think the question is what is an apple and what is an orange, and that question can't be answered by defining at the outset what can count as a relevant comparator.

And I can, if I can, just give you an example.

So the Ninth Circuit's rule, the meaningful benchmark, uh, uh, definition that it adopted requires that a specific comparator, um, be an actually existing fund that shares similar aims, similar risks, similar potential rewards, and similar asset allocations.

But imagine a complaint that, um, identifies a potentially imprudent fund and says, "This fund is labeled as a growth fund, but it is underperforming another fund that is labeled as a stable value fund." Under the Ninth Circuit's definition, that attempted comparison would fail because the two funds do not share similar aims.

But the point of the allegation is to demonstrate that the growth fund is underperforming even a fund that isn't attempting to maximize returns.

And I think what you can see is that the Ninth Circuit's a, a, a definition of this meaningful benchmark requirement, if you trace it back, what you see is that it came from a series of Eighth Circuit decisions, a trio of Eighth Circuit decisions in which the Eighth Circuit had crafted this rule in which it said, "To state a claim, plaintiffs have to identify a meaningful benchmark." But if you look at those cases, what's going on there is very different from the kind of case you have here.

In those cases, what, what you had was plaintiffs attempting to exclusively rely on performance allegations to state a claim.

There were no Non-performance allegations in the case, and the Eighth Circuit said, "If all you're going to do is look just at performance allegations and try to get through a motion to dismiss, you better have a pretty tight connection between the challenged fund and whatever fund you're saying did better than that fund." But here, the complaint in this case doesn't rely exclusively on performance allegations, and I think that's really the methodological problem of the Ninth Circuit's approach that adopted this Eighth Circuit rule and ported it over into a case in which performance allegations are just a part of the overall picture.

It, it block ported that rule though, and so what it said was, "Not only do you have to identify this actually existing specific fund that must share the same objectives, risks, and rewards, but also if the complaint doesn't i- identify that fund, the performance allegations are out of the holistic analysis because they on their own don't demonstrate imprudence."

So can I ask you, what does your complaint rely on? I, I'm just trying to un- understand how the argument that you just laid forward applies to your complaint.

Sure.