The argument yesterday in Anderson v. Intel Corp Investment Policy Committee showed a bench skeptical of claims that the investment choices of employee retirement funds should form an easy basis for litigation in federal court.
The employer in the case is Intel, and the complaint is that Intel’s fiduciaries have bucked traditional practices by investing the funds for their employees’ retirements largely in hedge funds and private equity. Because the Employee Retirement Income Security Act imposes a fiduciary duty of prudence on those fiduciaries, lackluster returns formed the foundation of a suit against them. The question for the justices is whether those suits can proceed absent some evidence of better performance by other funds with similar investment strategies. The likely answer is that they cannot.
From beginning to end, the argument focused on a fruit-based metaphor, founded on the opening question of Justice Clarence Thomas suggesting that all the lower court had said was that “you can’t compare apples and oranges,” which is to say, he explained, that “if you have a fund … that is designed to produce high returns but riskier returns, … you can’t compare that to a fund that is to protect against losses.”
As the argument proceeded, it quickly became clear that most of the bench viewed the case through that lens – and that it is a lens through which the employees have little chance of prevailing. Justice Elena Kagan, for example, seemed to find ancillary contentions irrelevant, commenting that “the thing that you need … is another apple.” Justice Samuel Alito challenged Matthew Wessler (arguing for the employees) to deny that “you can state a claim by comparing apples and oranges,” while Justice Neil Gorsuch asked him to “agree with the general principle that when we’re limited to underperformance claims, … a meaningful benchmark of some kind, is required, apples, not oranges.” And Justice Amy Coney Barrett suggested that “you have … to decide if an apple is an apple? Don’t you have to say, well, it has to be round [and] it has to come from a certain kind of tree?”
To the court, the problem, at bottom, appeared to be that Wessler’s complaint did not include allegations about the performance of other funds that used hedge funds to implement Intel-like investment strategies but rather argued that the use of hedge funds in general was imprudent. Wessler repeatedly tried to argue that the allegations “holistically” were more effective than the bare allegations of underperformance, but for the justices the absence of any “benchmark” vitiated his complaints that the fiduciaries’ investment choices resulted in poor performance.
Perhaps Luke McCloud, representing the Intel fiduciaries, had an easy time of it, as much of the questions posed to him involved soliciting his agreement that the lower court correctly decided the questions before the justices. By the second part of the argument, especially the appearance by Aimee Brown from the government (which supported the Intel fiduciaries), the justices were only asking counsel for advice on the best ways to craft an opinion affirming the U.S. Court of Appeals for the 9th Circuit. For example, they debated with her whether it would, or would not be useful, to say much about what kinds of “benchmarks” for comparison would be helpful – a discussion that matters only if they’ve already decided (as they seem to have) that a benchmark is required at all. When the justices are asking opposing counsel to pick and choose among the approaches to use in an opinion, it usually is a safe bet that they are not going to vote for you.
I’d expect a pretty brisk and likely unanimous affirmance of the lower court here before the cherry blossoms start to turn in the spring.
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[ H/T SCOTUSblog ]
