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

0:00John G. Roberts, Jr. We will hear argument this morning in Case 25-498, Anderson versus Intel Corporation Investment Policy Committee. Mr. Wessler.

0:10Matthew W.H. Wessler Mr. Chief Justice, and may it please the Court: ERISA's duty of prudence is inherently flexible. As a result, this Court has consistently declined to inject judicially crafted bright-line rules into a determination of whether a complaint's allegations plausibly allege imprudence. Categorical rules, as this Court put it colorfully in Dudenhoeffer, do not readily "divide the plausible sheep from the meritless goats" because they are inconsistent with the careful, context-sensitive inquiry that both ERISA and Rule 8 require.

0:42Matthew W.H. Wessler The Ninth Circuit's "meaningful benchmark requirement" is just such a rule. Under it, a court first asks whether a complaint's performance allegations on their own can plausibly demonstrate imprudence by identifying a virtually indistinguishable fund that performed better. If the complaint fails to identify that specific fund, the performance allegations are discarded, and that is true even if the complaint relies on benchmarks selected by the fiduciaries themselves or comparators identified by benchmarking experts.

1:14Matthew W.H. Wessler In the Respondents' view, this rule is consistent with the ordinary pleading framework set forth in Twombly and Iqbal. But, under that framework, courts must assess all non-conclusory allegations together in determining if a complaint plausibly states a claim. The "meaningful benchmark requirement" precludes that assessment.

1:33Matthew W.H. Wessler And the Ninth Circuit's rule isn't even necessary. Everyone agrees that, without more, a complaint merely alleging that one fund performed better than another won't survive a motion to dismiss. The ordinary pleading standards, however, are perfectly capable of weeding out a truly meritorious -- meritless claim like that.

1:52Matthew W.H. Wessler Ultimately, because the meaningful benchmark rule is both out of step with Twombly and Iqbal and an unnecessary solution in search of a problem, it should be rejected. I welcome the Court's questions.

2:04Clarence Thomas So are you saying that you can prove imprudence or demonstrate it by comparing dissimilar funds?

2:14Matthew W.H. Wessler I mean, that is one way that a complaint --

2:17Clarence Thomas So how would you do that?

2:18Matthew W.H. Wessler Sure. So it's context-dependent, and there is no one specific fund that a complaint needs to identify to make performance allegations relevant to support a claim of imprudence. It can run a very wide spectrum of different ways that the complaint could use performance allegations to contribute to the overall plausibility of a complaint.

2:42Matthew W.H. Wessler 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.

3:09Clarence Thomas I think what the Ninth Circuit is saying is you can't compare apples and oranges if you have a fund, an equity fund, that is designed to produce high returns but riskier returns, and you can't compare that to a fund that is to protect against losses.

3:27Matthew W.H. Wessler We -- 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 -- would not survive a motion to dismiss. But the Ninth Circuit, I think, went beyond just a recognition that the performance allegations need to contribute to the theory of imprudence.

3:48Matthew W.H. Wessler 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, it set the bar in a way that would foreclose a complaint from relying on a whole range of different kinds of potential comparisons.

4:15Clarence Thomas So do you agree that you can't compare apples and oranges?

4:19Matthew W.H. Wessler 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 definition that it adopted, requires that a specific comparator be an actually existing fund that shares similar aims, similar risks, similar potential rewards, and similar asset allocations.

4:52Matthew W.H. Wessler But imagine a complaint that 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.

5:24Matthew W.H. Wessler And I think what you can see is that the Ninth Circuit's 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.

5:46Matthew W.H. Wessler 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.

6:18Matthew W.H. Wessler 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.

6:36Matthew W.H. Wessler 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 identify that fund, the performance allegations are out of the holistic analysis because they, on their own, don't demonstrate imprudence.

7:01Ketanji Brown Jackson So can I ask you, what does your complaint rely on? I -- I'm just trying to understand how the argument that you just laid forward applies to your complaint.

7:11Matthew W.H. Wessler Sure.

7:11Ketanji Brown Jackson So you say we don't rely solely on performance allegations, so what do you rely on?

7:17Matthew W.H. Wessler The complaint has paragraphs of non-performance allegations that detail why the fiduciaries' over-allocation of these funds into hedge funds was both risky and also unprecedented, inconsistent with the way other fiduciaries managing similarly sized plans were constructing their investment options.

7:41Ketanji Brown Jackson So do you need a comparator to sustain those kinds of allegations or don't you?

7:45Matthew W.H. Wessler No. They're -- no, you don't --

7:46Ketanji Brown Jackson You don't need one?

7:47Matthew W.H. Wessler - you don't -- you don't -- you --

7:48Elena Kagan Well, Mr. Wessler, I guess I don't understand the relevance of those allegations. I mean, if those allegations get you over the Iqbal line themselves, all well and good. If they don't, then you need something in addition to them. And I think, going back to Justice Thomas's question, the thing that you need in addition is like another apple.

8:09Elena Kagan Now I -- I understand it when you say it can't -- it doesn't have to be, like, precisely the same apple with precisely, you know, the same color and texture and taste and all of that. But it's got to be kind of an apple. And it seems to me that the Ninth Circuit pretty much said exactly that. I mean, you're -- you're -- you're suggesting a kind of caricature of the Ninth Circuit opinion. But the Ninth Circuit opinion doesn't say absolutely everything, including the -- the assets invested in, has to be the same.

8:44Elena Kagan It says, you know, in the end, it can't be a good comparison unless you have a -- a -- a fund with the same general approach and risk/reward profile.

9:00Matthew W.H. Wessler Sure. So a couple of responses to that. I -- I -- I -- I don't think that, in my view, is an accurate reading of what the Ninth Circuit did, and here's why. The Ninth Circuit ruled out all of the proposed comparators in this complaint, okay? It said none of them are "truly comparable" under its definition of what can count.

9:17Matthew W.H. Wessler And what we know is that the complaint identified a range of different kinds of comparators, including, Justice Kagan, the fiduciary's own selected benchmarks, okay? It went into detail about why the fiduciaries identified other funds and said -- and told participants: You can look at these funds and evaluate the performance of our fund against those funds.

9:42Matthew W.H. Wessler Those were ruled out of the -- of -- on front -- in the Ninth Circuit based on this meaningful benchmark standard. We also know that the standard the Ninth Circuit adopted, the definition, allowed it to rule out comparators identified by experts in the benchmarking process. The plaintiffs in this case went out at the pleading stage, retained experts who were investment professionals involved in benchmarking to look at the fiduciaries' funds, and asked them: Can you identify relevant comparators for these funds given the features, what they are, what their objectives are, the asset allocation, everything?

10:21Matthew W.H. Wessler And the experts did that. Those are in the complaint. And they were ruled out under the Ninth Circuit's definition.

10:27John G. Roberts, Jr. Well, that's just -- it seems to me that's just an objection to the application of the rule in your particular case. It -- it doesn't represent a -- a basis for throwing out the basic -- the fundamental approach.

10:39Matthew W.H. Wessler I -- I -- I think it's more than that because, under this definition, this meaningful benchmark definition, not only is the court -- the Ninth Circuit attempting to predefine what can count for relevance in the plausibility analysis, but it's isolating a category of allegation, just the performance allegations. It's asking: Do those performance allegations identify a specific fund that is materially indistinguishable?

11:07Matthew W.H. Wessler If not, those performance allegations are out of the case before you reach the holistic analysis. And I think that that's a function of this meaningful benchmark rule that was initially created in the Eighth Circuit, where all you had were performance allegations. And I think, in some ways, it might be understandable that if that's -- that's all the complaint has, just an attempt to state a claim based exclusively on performance allegations, then, if the performance allegations are incapable of permitting a plausible inference of imprudence, you're out.

11:41Samuel A. Alito, Jr. Well --

11:41Brett M. Kavanaugh Why --

11:42Samuel A. Alito, Jr. - are you saying that you can -- you can state a claim by comparing apples and oranges but supplement that with the suggestion that the strategy was flawed? The question presented concerns underperformance. But there's a lot in your brief about denigrating the strategy, featuring such a heavy reliance on private equity and hedge funds.

12:12Matthew W.H. Wessler Right. So let me be clear about this. The complaint does not challenge, as -- as a category, the ability that fiduciaries have to invest in hedge funds or private equity. What the complaint challenges as the basis for its imprudence claim is the -- is the strategy that -- that the Intel fiduciaries adopted in which they overallocated these target-date funds and a global diversified fund to this kind of asset class.

12:39Samuel A. Alito, Jr. Well, that does sound like strategy and not about -- not underperformance.

12:44Matthew W.H. Wessler I agree with you that the theory is strategy. The performance allegations --

12:48Brett M. Kavanaugh Why is --

12:48Neil Gorsuch How is that in the case? The QP that you presented us with --

12:52Matthew W.H. Wessler Yeah.

12:52Neil Gorsuch - is whether, for claims predicated on fund underperformance, a meaningful benchmark is required.

13:00Matthew W.H. Wessler Right. And --

13:00Neil Gorsuch And the Ninth Circuit also said that Anderson insists that he is not challenging -- that he's challenging the implementation of the strategy as opposed to -- as opposed to the strategy itself.

13:14Matthew W.H. Wessler Yes. So a couple --

13:15Neil Gorsuch So is that --

13:16Matthew W.H. Wessler - a couple --

13:16Neil Gorsuch - that's the case as it comes to us.

13:17Matthew W.H. Wessler - a couple responses to that. The Ninth Circuit's rule -- and I don't think there is any disagreement about this -- is a rule that applies not just to claims that rely exclusively on underperformance but rely on allega- -- on allegations --

13:32Neil Gorsuch Okay. Okay. If that -- what that may -- whatever that may be.

13:35Matthew W.H. Wessler Yeah.

13:35Neil Gorsuch Let's suppose we're going to answer the question presented, and --

13:38Matthew W.H. Wessler I -- but I -- yeah.

13:39Neil Gorsuch - and -- let me just -- let me just finish, counsel.

13:41Matthew W.H. Wessler Sorry.

13:41Neil Gorsuch You'll get all the time you want, I promise. But let's say we answer the question presented and whether -- whether claims for underperformance need -- require a meaningful benchmark. Do you have any objection to saying that's true?

13:56Matthew W.H. Wessler Yes, we have an objection to that, and here's why, because, as the Ninth Circuit defined what counts as a meaningful benchmark, it screens out all manner of potentially relevant ways that a complaint could perform the comparison.

14:10Neil Gorsuch Okay. But -- but do you agree with the general principle that when we're limited to underperformance claims, a benchmark of some kind, a meaningful benchmark of some kind, is required, apples, not oranges?

14:23Matthew W.H. Wessler I think that for -- for performance allegations to be relevant, they -- they -- there is inherent comparison that needs to occur. I think the -- the -- the problem here is the way in which the Ninth Circuit attempted to define, before a court ever considers the allegations, what can count for purposes of that comparison.

14:41Amy Coney Barrett But don't you have to do that to decide if an apple is an apple? Don't you have to say, well, it has to be round, you know, it has to come from a certain kind of tree? I mean, it seems to me that, really, you are agreeing that a meaningful benchmark standard is appropriate. You're fighting a little bit about what is meaningful, right? But there has to be some criteria.

14:59Matthew W.H. Wessler So, yes, but I think what matters is -- is the way in which the complaint connects the dots between the challenged fund and the proposed comparator. So just, for instance, the Ninth Circuit would -- would screen -- the Ninth Circuit's rule would screen out attempts to provide a comparison point of fiduciary's own selected benchmarks if those benchmarks don't meet the specific criteria that the Ninth Circuit said qualify.

15:27Matthew W.H. Wessler And I think that's, again, a function of a view that the way that the court could assess the allegations is to -- in the complaint is to isolate the performance allegations separate and apart from the rest of the allegations in the complaint and ask, based just on those performance allegations, does the complaint demonstrate -- have a --

15:49Amy Coney Barrett So you're shifting. You're putting more weight on your non-performance allegations?

15:54Matthew W.H. Wessler Our view is that they have to be taken together under a holistic analysis. And I think, if I can, if you can give me maybe 30 seconds to walk through why I think that matters in a case like this. The theory of imprudence here is one in which the fiduciaries told participants that the reason they were adding more of these funds into hedge funds was an attempt to mitigate risk. That was the stated objective of this strategy, okay?

16:22Matthew W.H. Wessler And the complaint lays out, outside of the performance allegations, why that strategy couldn't be accomplished through this over- allocation into hedge funds. It explains, hedge funds, contrary to what the fiduciaries said, hedge funds are, in fact, correlated to the market. They are often volatile. They don't provide the kind of risk mitigation that the fiduciaries are saying is their objective.

16:49Matthew W.H. Wessler And the performance allegations in this case corroborate those non-performance allegations. They show specifically that the performance of these funds underperformed other points of comparison in exactly the ways --

17:04Brett M. Kavanaugh Why -- why does performance matter in the sense that half of all the funds are going to underperform or be lower than the median? It seems to me that what your complaint's really about is either the strategy of going low risk or the means to fulfill that strategy, namely, hedge funds. What you just said suggests it's the latter, the means to fulfill that strategy or achieve that strategy. I don't know why underperformance has anything to do with that.

17:42Matthew W.H. Wessler Well, I -- I mean, there -- there are two --

17:45Brett M. Kavanaugh Was that a reasonable, prudent strategy to use hedge funds to achieve a goal of low risk or not?

17:51Matthew W.H. Wessler Right. So --

17:52Brett M. Kavanaugh I'll just ask that question.

17:54Matthew W.H. Wessler - not -- not in the way that the fiduciaries did it. And I think that's really the -- the thrust of this complaint, is that no one -- if -- if risk mitigation was your goal, the complaint alleges, there were other, better-performing ways to accomplish that goal. And the complaint identified -- you asked, I think, this --

18:13Brett M. Kavanaugh Well, the question, I think, that ERISA asks is whether it was an unreasonable means to achieve that goal, namely, use of hedge funds. And you -- that's -- you can just have argument on that question.

18:26Matthew W.H. Wessler Sure. Sure. And that question gets at, I think, a slightly --

18:30Brett M. Kavanaugh And the answer, I guess, is -- is no, is what the Ninth Circuit concludes.

18:35Matthew W.H. Wessler Well, the Ninth Circuit ultimately carved up this complaint in a way that allowed it to isolate just the performance allegations and ask, based only on those allegations, do those allegations demonstrate imprudence? And I think part of the problem here is that the performance allegations help reinforce or corroborate the non-performance-related allegations about the nature of this strategy.

18:59Ketanji Brown Jackson But I guess I don't see that. And I am sort of piggy-backing on Justice Kavanaugh's question. I don't see that in the Ninth Circuit's opinion. I mean, they do have a -- a -- they mention underperformance, but they focus on your argument and they say, for example, "The argument appears to rest on the proposition that the fiduciaries' allocation strategy was imprudent because hedge funds and private equity funds are inherently so risky that no prudent investor with the same aims would have invested in them."

19:29Ketanji Brown Jackson That doesn't bring to mind anything about underperformance. They seem to be focusing on the very part of the complaint that you say they should be focusing on.

19:39Matthew W.H. Wessler So let me -- can I point you to where I think --

19:41Ketanji Brown Jackson Yes.

19:41Matthew W.H. Wessler - you can -- you can look in the complaint. So, if you go to 14a of the Petition Appendix, what you'll see there is that the court says, "To the extent a plaintiff asks a court to infer imprudence based on performance, even in part, must" -- "the plaintiff must compare the performance to funds or investments that are meaningfully similar." That's at 14a.

20:05Matthew W.H. Wessler And then, at 15a, the next page, the court is saying, to accomplish that, to actually permit a plaintiff to rely on performance allegations, those allegations must by themselves demonstrate imprudence. So what's going on in the Ninth Circuit's decision -- and, again, this -- this -- this goes back to the way that the Eighth Circuit's rule evolved -- is that a court first isolates the performance allegations and asks: Is there -- does the complaint identify a specific materially indistinguishable fund that differs only in performance? That's the standard. And if not, then the performance allegations on their own will fail to demonstrate imprudence and so they're out of the case.

20:51Matthew W.H. Wessler And then we might ask: Well, okay, putting the performance allegations to one side, do the rest of the allegations state a claim? And what we submit is that that kind of attempt to isolate a category of allegation and ask do those allegations just on their own permit an inference of imprudence is -- is --

21:12Ketanji Brown Jackson What do you make of the part of the Ninth Circuit's opinion where it says it is possible that a plaintiff could make out an imprudence claim by alleging that a plan invested much more in a particularly risky class of assets than did other comparable plans, even if investing in that asset class is not per se imprudent in smaller amounts?

21:34Ketanji Brown Jackson They do seem to entertain this idea of asset allocation and -- and say, contrary to what you just said, that you could make out an imprudence claim on that basis.

21:43Matthew W.H. Wessler I -- I think that's correct, but they have done that by discarding at the outset the performance -- one category of allegation in this complaint. At its core, I think the problem with the Ninth Circuit's approach is -- is -- is just a pleading one. It's an attempt to sidestep the requirement that this Court has consistently emphasized applies to ERISA claims no less than any other in which a court must take all of the allegations together and ask holistically whether they together are able to state a claim.

22:16Ketanji Brown Jackson Can I just ask --

22:16Samuel A. Alito, Jr. Well, "holistic" is kind of a magic word, but I -- I don't understand how your arguments about your -- your argument about strategy and your argument about underperformance fit together. Whether a particular strategy is reasonable or not cannot be judged based on how that strategy performed in one particular instance. It may be -- it -- it might -- they -- they're just two different things.

22:45Samuel A. Alito, Jr. If you want to analyze whether it's a good strategy to try to -- to convert a fourth down from the one-yard line, you would have to look at a large number of instances where that's done. The fact that it didn't work in a particular case doesn't really show you anything, nor does the fact that it worked in a particular case show you anything.

23:09Samuel A. Alito, Jr. But you seem to be trying to -- you know, you say "holistic" and you want to throw these two seemingly unrelated things together.

23:17Matthew W.H. Wessler Let --

23:17Samuel A. Alito, Jr. Maybe I'm not --

23:17Matthew W.H. Wessler Yeah. Let me --

23:18Samuel A. Alito, Jr. - I don't understand what you're arguing.

23:19Matthew W.H. Wessler - let me try to -- let me -- let me just try to be specific about how it worked in this complaint. So what this complaint did, outside of the performance allegations, is that it explained why the particular strategy that these fiduciaries adopted to achieve the risk mitigation goal was inappropriate for that risk mitigation goal.

23:41Matthew W.H. Wessler It included paragraph after paragraph of allegation explaining why hedge funds are incapable, at least in the allocations that these fiduciaries used, of decoupling themselves sufficiently from equity markets in a way that would have provided downside market protection and how these hedge funds, again, at this allocation level would not have been able to prevent the kind of volatility that the fiduciaries were concerned with.

24:08Matthew W.H. Wessler And then, in the performance allegations, it included specific examples of the kinds of hedge fund investments that the fiduciaries employed that matched up with those volatile approaches --

24:21Neil Gorsuch Let me --

24:22Matthew W.H. Wessler - that were --

24:22Neil Gorsuch - let me come at it --

24:23Matthew W.H. Wessler - alleged outside.

24:23Neil Gorsuch - let me come at the same question a different way. I don't doubt one could have a -- an argument about the strategy being a good or -- or bad one to try to mitigate risk rather than seek more growth or to rely on hedge funds as opposed to other investments tools. But that's not the question you asked us to address in your cert petition. Your cert petition asks us to address, when we're dealing with performance -- underperformance allegations, do apples need to be apples? Does there need to be many -- a meaningful benchmark? That's the question you asked us to address. And the argument I'm hearing today seems to be saying, yeah, that's true, answer the QP yes, but our complaint has a whole lot more.

25:14Neil Gorsuch And I -- I guess I'm just wondering, you know, are -- are you shifting ground on us here?

25:20Matthew W.H. Wessler Yeah, I mean, I -- I don't think we're shifting ground. I think that the question we asked you to decide is whether the Ninth Circuit's rule --

25:27Neil Gorsuch Well, no. No, that's not the question you asked us to decide. I've got the question.

25:30Matthew W.H. Wessler Yeah, I understand. The actual question.

25:31Neil Gorsuch You wrote it. You know it.

25:32Matthew W.H. Wessler Yes.

25:32Neil Gorsuch It's -- it's whether -- whether, for claims predicated on fund underperformance, a meaningful benchmark is required.

25:39Matthew W.H. Wessler Right.

25:39Neil Gorsuch I'm paraphrasing, but that's --

25:40Matthew W.H. Wessler Yes.

25:40Neil Gorsuch - that is what you --

25:41Matthew W.H. Wessler Yes, and -- and I -- our claim here is predicated on underperformance in the sense that we need those allegations to get us over the plausibility line. They are part of the claim, but they're not the only part of the claim.

25:54Sonia Sotomayor So tell me how you define "meaningful." I think that's what we're coming down to. You're saying, I provided you with comparators. But you haven't answered Justice Barrett's question, which is what kind of apple is it?

26:09Matthew W.H. Wessler Yep.

26:09Sonia Sotomayor So how do you define what kind of apples should be compared?

26:13Matthew W.H. Wessler Yep. I think it's entirely context-dependent. What does the complaint do to connect the dots between the challenged fund and the proposed comparison? But I -- and it could take --

26:25Sonia Sotomayor But I have a problem, which is we know that the -- the stated aim of this investment was to minimize long-term risk, correct?

26:40Matthew W.H. Wessler Yes.

26:41Sonia Sotomayor All right. That's not the aim of equity funds. So, when I look at an equity fund, they want to make short-term profit, not long-term risk management. So where in the complaint -- and that's what I thought the Ninth Circuit was saying that it couldn't find -- do you say other funds --

27:03Matthew W.H. Wessler Yep.

27:03Sonia Sotomayor - these are them --

27:04Matthew W.H. Wessler Yep.

27:05Sonia Sotomayor - who want to control for long-term risk management --

27:12Matthew W.H. Wessler Yep.

27:13Sonia Sotomayor - don't invest in hedge funds, they invest in something else, they do something else and why?

27:18Matthew W.H. Wessler Yep.

27:19Sonia Sotomayor I don't see that.

27:20Matthew W.H. Wessler Sure. So I'll point you specifically to a couple of examples. If you go to JA 248, as one example, you will see that the complaint attempts to provide a comparison for the global diversified fund to a 60/40 equity/bond fund. And the -- and the complaint says, if you're trying to do risk mitigation, an effective and common way to do that is to invest in 40 percent bonds.

27:48Matthew W.H. Wessler So that's one example of a comparison that the complaint provided that attempted to compare a fund with similar objectives, like risk mitigation, to the approach that the fiduciaries adopted. Now that was screened out under the Ninth Circuit's definition because it didn't include a similar asset allocation. It didn't have the kind of hedge fund allocation that the -- that the -- that the fiduciary funds had.

28:16John G. Roberts, Jr. Thank you, counsel. Justice Thomas, anything? Justice Alito? Anything further, Justice Sotomayor? Justice Kavanaugh? Justice Gorsuch?

28:24Brett M. Kavanaugh Yeah. Just to follow up on Judge Murphy's dissent in the Sixth Circuit, who raises the question about why performance -- underperformance would ever be relevant. You've used the phrase "performance allegations" a number of times. I just want to be clear. You're not suggesting that underperformance alone is a violation, correct?

28:48Matthew W.H. Wessler No. But --

28:49Brett M. Kavanaugh And -- and why does underperformance become relevant then?

28:53Matthew W.H. Wessler Sure. It can become relevant if it corroborates a theory of imprudence that the complaint attempts to allege by showing --

29:02Brett M. Kavanaugh You could have a terrible strategy that -- that is imprudent and nonetheless works, or you could have --

29:09Matthew W.H. Wessler For -- for sure.

29:10Brett M. Kavanaugh - a really good strategy that ends up losing because of the way the market turned.

29:14Matthew W.H. Wessler For sure. And to get back, Justice Kavanaugh, to a point you made earlier, ultimately, the statute focuses on fiduciary decision-making, a process. How did the fiduciaries engage in a decision-making process that led them to adopt a particular strategy?

29:29Brett M. Kavanaugh Right. And this whole case -- I mean, the question presented we're going to decide, but I think, actually, this case, your complaint's really about: Is it reasonable to have hedge funds in a risk-mitigation strategy?

29:43Matthew W.H. Wessler And -- and one thing that plaintiffs don't have access to is direct information about the fiduciaries' decision-making process. So, instead, in most of these cases --

29:52Brett M. Kavanaugh But I think you would have to make a threshold argument that using hedge funds to try to mitigate risk was sufficiently unreasonable to get past the motion-to-dismiss stage.

30:05Matthew W.H. Wessler Yeah, correct. And -- and I think the way that this complaint --

30:08Brett M. Kavanaugh I'm not sure how performance has anything to do with that, but --

30:11Matthew W.H. Wessler Sure. So the way that this complaint tries to do that is it attempts to demonstrate -- and, again, the allegations in the complaint are entitled to -- to be taken as true -- that the hedge funds, by their nature, are in -- are inappropriate kinds of investments to achieve that -- that kind of risk-mitigation goal.

30:30Matthew W.H. Wessler And then the performance allegations demonstrate --

30:33Brett M. Kavanaugh One -- one of the responses to that would be that they were very common.

30:36Matthew W.H. Wessler Sorry?

30:37Brett M. Kavanaugh They were commonly used, correct, hedge funds, by -- by many funds?

30:42Matthew W.H. Wessler Hedge funds are -- are --

30:43Brett M. Kavanaugh Were commonly used by funds seeking to mitigate risk?

30:46Matthew W.H. Wessler Yes, but not in the allocations that the Intel fiduciaries used here. In fact, there is no other example of a fund in a similarly sized plan that was anywhere close to the allocation percentages that the fiduciaries used here, which, if I can, just points up one additional problem with the Ninth Circuit's test because in requiring a comparison to be materially indistinguishable means that you would need to identify another fund that was at the same asset allocation levels as the Intel fiduciaries' fund, and the absence of any such fund would mean that the performance allegations are out of the case.

31:25Brett M. Kavanaugh Thank you.

31:26John G. Roberts, Jr. Justice Barrett? Justice Jackson?

31:28Ketanji Brown Jackson Can I just go back to my initial question to you, which is, if we're focusing on the asset allocation strategy part of your complaint, which I take it is the thrust of your imprudence claim, is it your view that you don't need a meaningful comparator in order to establish or to support that claim or those allegations?

31:57Matthew W.H. Wessler Our view is that if you are attempting to rely on performance allegations as part of that claim, that inherently requires some point of comparison.

32:08Ketanji Brown Jackson If you are attempting to bring in the performance allegations, okay, which you admit that you did in this case --

32:18Matthew W.H. Wessler Yes.

32:18Ketanji Brown Jackson - you have some performance allegations --

32:20Matthew W.H. Wessler Yes.

32:20Ketanji Brown Jackson - could you make out the claim without the performance allegations?

32:23Matthew W.H. Wessler I -- I could -- I could imagine a case where you could -- you wouldn't need to rely on performance allegations.

32:29Ketanji Brown Jackson And if you didn't do so, would you need a comparator to establish that non-performance --

32:36Matthew W.H. Wessler No, I don't -- I don't think so.

32:38Ketanji Brown Jackson How -- wouldn't you have to show or wouldn't -- wouldn't --

32:41Matthew W.H. Wessler Imagine --

32:42Ketanji Brown Jackson Yes, please.

32:42Matthew W.H. Wessler - if I can give you a hypothetical.

32:43Ketanji Brown Jackson Please.

32:44Matthew W.H. Wessler Imagine a situation in which the fiduciaries' funds included 50 percent lottery tickets --

32:50Ketanji Brown Jackson Mm-hmm.

32:50Matthew W.H. Wessler - as a -- as a -- as -- as -- as implementing a particular strategic objective. I don't -- in that context, I don't think you would need a comparator to -- to potentially permit a plausible inference of imprudence because, on its face, that strategy would be --

33:06Ketanji Brown Jackson Right. But, in the world that we have --

33:07Matthew W.H. Wessler Yep.

33:08Ketanji Brown Jackson - we're talking about hedge funds and private equity. Justice Kavanaugh says that was pretty common. Wouldn't, in order to make a plausible claim with these facts, you have to demonstrate that there were other funds that did not have -- you know, that had the same aims, risks and reward strategy but did not have that same basket of assets, that did not --

33:32Matthew W.H. Wessler Oh, yes. And -- and --

33:33Ketanji Brown Jackson So isn't that a comparator?

33:34Matthew W.H. Wessler I mean, it is a comparator. The Ninth Circuit does not apply this rule to allegations that are outside of the performance category in a complaint.

33:43Ketanji Brown Jackson I see.

33:44Matthew W.H. Wessler Yes.

33:44Ketanji Brown Jackson All right. Thank you.

33:46John G. Roberts, Jr. Thank you, counsel. Mr. McCloud.

33:55Charles L. McCloud Thank you, Mr. Chief Justice, and may it please the Court: I'd like to start today by noting that much of my friend's arguments had little to do with the question presented. The question presented today is important but narrow: Can a plaintiff state a plausible claim for a breach of the duty of prudence based on a comparison of two funds that aren't meaningfully similar?

34:16Charles L. McCloud And as Judge Miller's opinion explained for the Ninth Circuit below, the answer is no for multiple reasons. You can start with ERISA's text and purpose. ERISA recognizes that fiduciaries can make a wide range of prudent decisions, including the decision that Intel's fiduciaries made here to pursue a more conservative strategy through diversification.

34:37Charles L. McCloud Just because one strategy produces lower returns doesn't make it imprudent. And, in assessing prudence, the statute commands a comparison to a fiduciary with like aims acting in like capacity, not an identical fiduciary and not identical investments but similar enough to make the comparison meaningful.

34:56Charles L. McCloud Requiring meaningful comparisons also follows from well-established federal pleading standards. Again, underperformance standing alone is not a violation of ERISA, as my friend conceded. So the mere existence of a difference in performance between two funds doesn't plausibly suggest any wrongdoing, especially when accounting for the obvious alternative explanation that different funds are designed to perform differently.

35:22Charles L. McCloud To rule out that explanation, a plaintiff needs to allege that the funds being compared had similar aims but performed better or cost less. Mr. Wessler has called this requirement of an apples-to-apples comparison an improper heightened pleading standard. That's not correct. This Court regularly draws clear lines at the pleading stage. Twombly did it for allegations of parallel conduct. Dudenhoeffer did it for allegations based on insider information. Hikma did it most recently for allegations based on inaction.

35:52Charles L. McCloud The meaningful benchmark standard does the same thing for allegations that a fund costs too much or didn't earn enough. I welcome the Court's questions.

36:00Clarence Thomas How would you define a meaningful benchmark?

36:03Charles L. McCloud So, Justice Thomas, the way that most of the courts have looked at it is to start with the aims of the fund, so, for example, are you targeting aggressive growth? Are you trying to track the market? Do you have a more conservative strategy like the Intel fiduciaries? From there, you could look at things like how do you implement that goal, the particular allocation decisions that you're making, the sort of risk/reward tradeoff.

36:26Charles L. McCloud But, to be clear, I don't think the Ninth Circuit required the sort of identicality that Mr. Wessler has suggested. And I think it's also true, when you look at the court decisions that have applied this standard, they're not requiring that you have materially the same investment. I acknowledge that would be an onerous standard. They are requiring enough similarity to make the comparison meaningful, and that's going to vary from case to case.

36:49Clarence Thomas Do you think it's appropriate -- well, you probably do -- but does it seem appropriate to make -- make this determination at the pleading stage on a motion to dismiss?

36:59Charles L. McCloud I do, Your Honor, for this reason: In order to have a plausible inference of wrongdoing, you need a comparison that is itself meaningful. I think, in that respect, it's very similar to the allegations of parallel conduct in Twombly. In Twombly, the Court said those allegations are equally consistent with lawful conduct.

37:19Charles L. McCloud And the same thing is true here. The fact that Fund A underperforms Fund B is equally consistent with those funds either being different because of the vagaries of the market or because of intentional difference in strategy between the two funds.

37:33Amy Coney Barrett Mr. McCloud, can I -- can I ask you, would you be -- or would you be satisfied or would it be a good idea for the Court to simply answer the QP in this way? You know, it asks whether, when allegations are based on underperformance, the plaintiff must allege a meaningful benchmark. Yes, period. Or do you think that we would need, in a rules statement, to say more about what "meaningful" means?

37:58Charles L. McCloud I don't think, Your Honor, this is a case where you need to explain what "meaningful" means. The lower courts have not struggled with that question. They have considered it for a number of years now, and I think they are getting it right more often than not. So this is not a case where I think it's necessary for the Court to provide further guidance.

38:12Amy Coney Barrett What do you make of all of the arguments that your friend on the other side is making about the extra allegations that didn't relate to underperformance that the complaint had that he thinks should have gotten the allegations about underperformance over the edge?

38:26Charles L. McCloud So, Justice Barrett, I would have a harder case if the Ninth Circuit had said your underperformance allegations aren't sufficient and so we're not going to consider anything else in your complaint. That's clearly not what the Ninth Circuit did. I think Mr. Wessler and I just fundamentally disagree about how to read the Ninth Circuit opinion. It went through in detail the allegations about our supposedly outlier strategy and the allegations about hedge funds and private equity being evil, and it found that those failed, but they failed for reasons that are separate and apart from the meaningful benchmark standard.

38:54Amy Coney Barrett Thank you.

38:54Neil Gorsuch Should we also bracket the question that Justice Kavanaugh raised and Judge Murphy have raised about whether underperformance can ever be enough to show imprudence?

39:06Charles L. McCloud So, Justice Gorsuch, I think it is true that, as a general matter, underperformance is going to rarely be indicative of any sort of imprudence. The example that comes to mind where it might be probative is let's say you had two funds that had a similar goal of trying to track the S&P 500, and you see Fund A consistently meets that goal and Fund B consistently fails to meet that goal.

39:28Charles L. McCloud That might suggest the fiduciaries of Fund B were not adequately monitoring to make sure that they were actually trying to hit their goal. That could be indicative of underperformance. It might get you close to the line. I don't know that I would say that that alone would plausibly suggest imprudence.

39:43Neil Gorsuch And so we should take care to bracket that question about the relative importance of underperformance in a prudence -- imprudence claim. We're not going to answer that question. We're just going to answer the question, when you're relying on underperformance, whether a meaningful benchmark --

40:00Charles L. McCloud I think that would be appropriate, Your Honor.

40:01Neil Gorsuch Thank you.

40:01Charles L. McCloud And I want to be clear. Requiring a meaningful benchmark does not prevent plaintiffs from making other sorts of allegations of imprudence.

40:10Neil Gorsuch We should -- we should make sure to take -- take care to say that we're hardly suggesting you have to do this?

40:16Charles L. McCloud Exactly. And I think Judge Berzon's concurrence is exactly on point on these issues. And so, if the Court wanted to endorse the points that Judge Berzon made, we would have no objection to that.

40:24Elena Kagan And, Mr. McCloud, if I could go back to Justice Barrett's first question, I mean, why wouldn't we want to say something about what a meaningful comparator is? You know, if you don't say anything about that, this is -- all this opinion would do is to say something that everybody agrees to and leave a lot of questions open as to how that should be applied.

40:46Elena Kagan And I would think that, you know, this is a case where we have a decision that's actually a pretty reasonable decision when I read it in terms of what meaningfulness is required and how that is different from requiring essentially identical funds. So why wouldn't we want to say some things about that?

41:06Charles L. McCloud So, Justice Kagan, I agree with you this decision is very reasonable. I think the analysis that it endorses is helpful and instructive and, in fact, many district courts in the Ninth Circuit have looked to it and applied it in assessing these allegations.

41:17Elena Kagan Because, when I look at some of the lower court decisions -- and this may be different from what you said to Justice Barrett -- I think that there is a range of ways in which the circuit courts have approached this, and some of them have suggested you sort of need the same asset allocations. So, you know, unless you invest the same percentage in international funds, we're going to strike your comparators. And that seems to me to be going too far.

41:45Elena Kagan So we could do something useful here, couldn't we, by saying: Yeah, it needs to be meaningfully similar. That doesn't mean identical. Here are the kinds of things that you look to, and the kinds of things are actually the kinds of things that you talk about in your brief and, even more, the SG talks about in its brief.

42:05Charles L. McCloud I don't have any objection to that. I will say I think even the narrower version of the opinion that just says you need a meaningful comparison is still helpful because we have the Sixth Circuit in the Parker-Hannifin case that seemed to suggest that you didn't need an apples-to-apples comparison. And so you could bring the Sixth Circuit in line through an opinion that's narrower.

42:23Charles L. McCloud But, again, I have no objection to endorsing the analysis in the Ninth Circuit opinion. I think it's -- it's spot on.

42:29John G. Roberts, Jr. Well, I mean, your -- your friend on the other side spent some time explaining the difficulty of giving some substance to this. And I'm concerned, if we're going to have a meaningful ruling, it -- it -- you can't simply make it sort of everything -- almost everything works in satisfying the test or -- or is required.

42:55John G. Roberts, Jr. In other words, the point -- and I think the Eighth Circuit emphasized this as well -- is that it has to do some meaningful work, and, I mean, there has to be some difference between the discussion of what this means from your friend and what you're saying here.

43:12Charles L. McCloud So, if you want to --

43:12John G. Roberts, Jr. So could you give -- I mean, you've been very accepting of various proposals about what it might mean, but I wonder if you could give us a narrower understanding, or maybe the answer is you can't, in which case maybe the decision we issue won't be much help at all.

43:27Charles L. McCloud Sure. Maybe I can use the facts of this case to illustrate a helpful comparison. So, in this case, as you heard from Mr. Wessler, the argument was that we had an acceptable strategy and we implemented it in a bad way by over-allocating the hedge funds in private equity. To make the comparison meaningful, you need to control for the strategy, keep the strategy the same, but point to someone who they say did it better by using fewer hedge fund and private equity investments.

43:55Charles L. McCloud That's the sort of comparison that might suggest imprudence because it would suggest the difference in performance was really due to our inclusion of hedge funds and private equity. That's not the comparison that they tried to make in this case. In this case, they were saying: You didn't do as well as equity-heavy funds that prioritized more aggressive growth. Well, of course, we didn't do as well because that wasn't our strategy. We told everyone we were trying to be more conservative and to make sure that retirees had lots of money at the end of the day without taking unnecessary risks.

44:28Charles L. McCloud So the obvious explanation for the difference in performance in this case is the difference in strategy.

44:34Samuel A. Alito, Jr. Do --

44:35Elena Kagan Is this --

44:37Samuel A. Alito, Jr. - do experts on portfolio management have analytical tools that measure investment returns on a risk-adjusted basis?

44:45Charles L. McCloud They do.

44:47Samuel A. Alito, Jr. And suppose that a complaint relied on one of those. Would that provide a meaningful comparison?

44:55Charles L. McCloud It could. It could be the -- the basis for allegations of similar -- I would want to know more about the actual allegations in the complaint, but I think that sort of information could be relevant. And there are district court decisions that have credited similar sort of information.

45:12Ketanji Brown Jackson Can I just go back to your response to the Chief Justice? You said that the claim, as you understood it from them, is that there -- that you all have a meaningful strategy but problematically over-allocated the assets in these kinds of risky funds. And so, for you, first of all, would you need a comparator -- comparison in your take on things to make out that claim?

45:36Charles L. McCloud If the argument is you had an okay strategy, but you implemented it poorly, I think you probably do want a comparison. It's not required, but it would be helpful because that's a way to control for the strategy and show a difference. I think you could have attacks on the strategy itself that wouldn't require a comparison. I agree with Mr. Wessler --

45:56Ketanji Brown Jackson But --

45:56Charles L. McCloud - on that.

45:57Ketanji Brown Jackson - but, if we have this case, you're saying they wouldn't -- they might not need to have a comparison, but if they did, it would have to be meaningful, and the meaningful nature of it would be someone with the same strategy who perhaps allocated differently?

46:09Charles L. McCloud Exactly. Exactly. But, again, if you want to attack the strategy itself, if you want to say you can't invest in hedge funds, in private equity, that is an argument you could make. And, in fact, they did make it here. And the Ninth Circuit rejected it, but it rejected it for reasons that are outside of the question presented and don't have anything to do with the meaningful benchmark standard.

46:28Amy Coney Barrett So, Mr. McCloud, do you think it would be helpful then in defining "meaningful" to say that the comparator must have like aims and strategies? Does that give enough guidance, or does that risk having lower courts look for a twin?

46:40Charles L. McCloud I think that you could say like aims and strategies, but "like" simply means similar, not identical. I think that would clear up, to the extent there's confusion in the lower courts, some of that confusion. And, again, from my read of the cases, all of the courts seem to agree that like aims, the goals of the investments, is the most important consideration.

46:57Sonia Sotomayor That is. But your opposing counsel seems to suggest that courts are looking for exact asset allocations when the challenge here is that the asset allocation here was imprudent. So how do we address that?

47:14Charles L. McCloud I think you can simply say you don't need an identical asset allocation. And, in fact, in many cases, a difference in asset allocation will be probative of whether there's imprudence, especially where, as here, you're saying the asset allocation was the problem. And the Ninth Circuit, to be clear, I don't think, required a similar asset allocation.

47:34Sonia Sotomayor Neither do I, and that's what I find interesting, because I think what they were saying is that Intel didn't identify anybody specifically whose intent was risk management over the long term, correct?

47:50Charles L. McCloud That the allegation was that there were no similarly situated --

47:53Sonia Sotomayor Yes. That they didn't even allege --

47:55Charles L. McCloud Oh, that the plaintiffs didn't allege?

47:56Sonia Sotomayor Yes, that the plaintiffs.

47:57Charles L. McCloud Yes, absolutely. They -- they never even tried to allege that there was another fund that had a similar goal that they were trying to compare us to. They wanted to compare us to things like the S&P 500, which isn't even a -- an investment strategy. It is just the agglomerated strategies of 500 different companies.

48:14Charles L. McCloud The other thing they could have done -- and I disagree with Mr. Wessler about this too -- is they could have tried to compare us to our own disclosed benchmarks. We had a benchmark that we told participants -- participants about. Mr. Wessler suggested they did that comparison. The Ninth Circuit was very clear and the district court was very clear that the things that they called our benchmarks were not our benchmarks. But I think that is an available option for plaintiffs in these cases.

48:41Charles L. McCloud And there are a number of cases that have found, if you make allegations against a fund's own benchmarks, that can be probative of imprudence.

48:53John G. Roberts, Jr. Justice Thomas, anything further? Anything else?

49:00Neil Gorsuch Sorry.

49:00John G. Roberts, Jr. Okay.

49:01Neil Gorsuch Do you think -- (Laughter.) - do you -- do you think that under -- in an underperformance claim, you always have to have a benchmark?

49:08Charles L. McCloud I think you do because the premise --

49:10Neil Gorsuch That's -- that's enough. Thank you.

49:12John G. Roberts, Jr. Justice Kavanaugh?

49:15Amy Coney Barrett I'm confused. You do always have to have a benchmark? Because I thought that before -- maybe I misheard Justice -- I think it was Justice Gorsuch who asked you a question. I mean, what if, to use Mr. Wessler's example, you have a fund that's 50 percent lottery tickets? I mean, couldn't there be some kind of res ipsa where you didn't need a benchmark?

49:33Charles L. McCloud I don't view that as an underperformance claim, Your Honor. That would just be you had a --

49:38Amy Coney Barrett Bad strategy?

49:38Charles L. McCloud - bad strategy.

49:39Amy Coney Barrett Okay. Thanks.

49:40Charles L. McCloud But, to the extent you are premising your underperformance on saying A did worse than B, I do think that comparison has to be meaningful.

49:47Amy Coney Barrett Got it. Thanks.

49:48John G. Roberts, Jr. Justice Jackson? Thank you, counsel.

49:56Charles L. McCloud Thank you.

50:05John G. Roberts, Jr. Ms. Brown.

50:06Aimee Brown Thank you, Mr. Chief Justice, and may it please the Court: ERISA allows prudent fiduciaries to make a range of reasonable judgments when adopting investment objectives. They can pursue varying degrees of exposure to market upside and varying degrees of protection from market downside. When different objectives lead to different results, that does not suggest imprudence.

50:26Aimee Brown In this case, Intel's fiduciaries had the objective of reducing exposure to losses at the acknowledged expense of some potential upside. Petitioners have not challenged the prudence of that objective. Instead, they have asked the lower courts to infer that the fiduciaries imprudently implemented that objective based on the fact that Intel's funds underperformed other funds.

50:46Aimee Brown But, to create that inference, Petitioners have to compare Intel's funds to other funds with similar objectives. Otherwise, the obvious alternative explanation for the difference in results is the difference in objectives. That common-sense understanding does not mean that plaintiffs in every case need to plead a comparator. There are myriad ways of pleading imprudence without relying on performance at all. But, when a claim is premised on underperformance, the comparator has to be similar to make the comparison probative of the claim.

51:13Aimee Brown I welcome the Court's questions.

51:17Clarence Thomas Do you have any disagreement with the argument of Mr. McCloud?

51:21Aimee Brown I don't. I think we're -- we're well-aligned on the instances in which a comparator is necessary, the work that it's doing in these kinds of cases.

51:29Samuel A. Alito, Jr. Well, Mr. McCloud, representing his client, I think, would be satisfied with an affirmance in any opinion. I certainly would if I were in his position. But you're in a different position. So how much guidance do you think it would be prudent for us to give in this case?

51:49Aimee Brown I do think that it would be helpful to suggest some parameters for what the meaningful benchmark here, the meaningful comparator, needs to be. I think the easiest way to do that is to assess it within the confines of what we're doing with the duty of prudence. Prudence is about process and not about performance.

52:04Aimee Brown And so the plaintiff does have to connect the dots back from the performance to the process. In a case like this, that's going to mean that the plaintiff is essentially alleging that if its fiduciaries were acting prudently, they would have selected the better-performing fund. But, again, in order for that to be the correct inference, you have to hold constant the things that go into that decision that the Petitioners are not challenging as imprudent themselves.

52:29Aimee Brown And, here, that is the goals, the objectives, the aims, sometimes it's been called the strategy, of the funds to -- to mitigate against potential down -- down -- downturns in the market. And when you hold those constant and you provide two, you know, different funds, one of which performed better than the other, then maybe you have an indication of some imprudence in selecting kind of the worst-performing of the funds. But, without that kind of comparison that holds constant the factors that go into the decision, the -- the implication just isn't there.

53:01Aimee Brown And it might be helpful to actually apply that to this case and to show how the Ninth Circuit, I think, did that correctly because, here, the plaintiffs identified funds that had different objectives entirely from Intel's objective. They were these equity-heavy retail funds that wanted more exposure to the potential market upside.

53:18Aimee Brown And, you know, they were not challenging, again, that Intel could have prudently decided that that was not the right strategy for them. The comparator funds did end up overperforming Intel's funds. That's not very surprising. The market ended up doing pretty well during this relevant time period. But that doesn't suggest that Intel's fiduciaries were imprudent for wanting to protect against potential downside, even if that didn't end up materializing during the relevant period here.

53:43Elena Kagan If you were to flyspeck the Ninth Circuit's opinion and not -- I'm not asking for things you think are wrong with it such that it would change the result because you've clearly said you think it should be affirmed. But consistent with that disposition, if I asked you to flyspeck the circuit court's decision, would you have said anything different? Would you have added things? Would you have subtracted things? Is there anything?

54:09Aimee Brown So I think, at various points -- I would have to go back and look at the very, very precise language that they used. Sometimes the courts in these cases have said that it has to have the same objectives, the same risk/reward profile, and the same strategy. It's used an "and" instead of an "or," and sometimes asset allocation is thrown into some of those decisions. I agree that the Ninth Circuit certainly didn't do that here. We -- we think that's correct. It does not have to be the same asset allocation.

54:33Aimee Brown I think where some confusion could happen is how you define what the strategy is. So I've been using kind of objectives and aims as this broader goal of we want to reduce downside. We want to have kind of a risk-mitigating approach. The strategy in some cases is going to be the way that you implement that objective. And so, here, that would have been allocating assets to the hedge funds and the private equity funds. Obviously, we don't think you have to hold that constant because that would then have some of the problems that Petitioners have suggested.

55:02Aimee Brown But I think that the Ninth Circuit generally did the right thing. And -- and we read the opinion the same way that -- that Mr. McCloud does.

55:08Elena Kagan And on this asset allocation point, I mean, your brief says -- this is -- I'm reading from page 25, "Where two funds seek to achieve similar levels of risk using different asset allocation strategies, the challenged fund may be compared to a fund with more conventional assets that bear the same level of risk."

55:26Aimee Brown Exactly.

55:26Elena Kagan If you didn't allow that, you would be essentially foreclosing these claims from the outset.

55:31Aimee Brown Exactly. And we think that Petitioners were perfectly capable of doing that here. There are many different assets that have the kind of downside protection that Intel said it was using the private equity funds and the hedge funds here to accomplish. And so they could have compared this to a fund that had more allocations to bonds or to high-yield savings accounts or something like that. Intel -- or the -- the plaintiffs here just chose not to do so. Instead, they were comparing these to these kind of equity-heavy funds that wanted to have more -- more exposure to the potential for the upside.

56:01Aimee Brown And I -- I don't think that the correct kind of implication to draw from that is that there weren't those kinds of funds available. I think, more likely, the case is that if they had tried to draw those kinds of comparisons, Intel's funds just wouldn't really have underperformed to any significant degree.

56:16Aimee Brown That's consistent with the way the Ninth Circuit kind of understood the -- the complaint here. Some of the charts in the complaint tend to just suggest that Intel's funds performed pretty much exactly as they anticipated they would.

56:26Ketanji Brown Jackson On this question of the Ninth Circuit's opinion, do -- do you -- how do you respond to Petitioners' reading of the opinion as isolating the underperformance allegations and treating them in a certain way before dealing with the others or however he characterized it? Do you -- does the -- do you agree with that view?

56:49Aimee Brown I think it's correct that the Ninth Circuit first looked at the underperformance allegations and determined whether those under -- whether those allegations were going to be probative at all in the analysis, and it held that they were not. I don't think that that's incorrect to -- to do that that way. I think that's very consistent with Twombly, for example. In order for those allegations to do any work, they have to be tied to a meaningful comparator because, otherwise, they are equally consistent with the lawful alternative explanation here that these just had different objectives, and so the different results don't tell you anything. That's not enough to take the complaint outside of neutral territory, is the term that Twombly uses at one point.

57:26Aimee Brown But then I think the Ninth Circuit did continue on to look at all of the rest of the allegations in the complaint and assess them on their own merit to see if those allegations moved the complaint outside of neutral territory. They were insufficient on their own for reasons that had nothing to do with underperformance, as Mr. McCloud was saying.

57:46Aimee Brown I do want to reiterate, though, that we agree that there is going to be circumstances in which it's very possible to plead these kinds of complaints without any need for underperformance allegations at all. And that can be the case when you are challenging both, you know, the overall objective that the fund is adopting, or it could be the case even when you're challenging the implementation of that objective.

58:06Aimee Brown So, if you had a fund, for example, that stated that its objective was be -- to be quite conservative and to not have a lot of exposure to market downside, and then they -- they turned around and invested, you know, 45 percent of their assets in the biotech industry alone, that on its face is just inconsistent with the -- with the objective that they have announced. I don't think you need to find a comparator in order to make that kind of claim.

58:29Aimee Brown And I think the same thing is going to be true for allegations that go to the strategy itself. You're not necessarily -- or go to the overall objective itself. You don't necessarily need a comparator. The cases in which a comparator has generally been more useful is when you're challenging fees because it can be helpful to see kind of what else is on the market fees-wise. Even in those cases, you know, if you -- if you made some kind of allegation that the -- the -- the fees you're paying are for duplicative services or something like that, that can be a situation in which you don't need a comparator too.

58:58Aimee Brown So it really all depends on whether the Petitioner or the plaintiff in this case has decided to put that comparison in the complaint. That's when this kind of benchmark analysis is going to come into play.

59:09John G. Roberts, Jr. Thank you, counsel. Anything further down on this end?

59:13Clarence Thomas No.

59:14John G. Roberts, Jr. Thank you. Rebuttal, Mr. Wessler?

59:19Matthew W.H. Wessler Thank you. Just a few quick points in rebuttal. You just heard the government agree that the Ninth Circuit's approach requires isolating a specific subset of allegations and asking, separate and apart from the rest of the allegations, whether those isolated allegations are sufficient to permit an inference of imprudence.

59:40Matthew W.H. Wessler That is flatly inconsistent with Rule 8 and the approach that this Court has said time and again applies to ERISA as it does everywhere else, that all of the allegations have to be taken together and assessed holistically. I think that matters in a case like this, where you have an allegation about an imprudent either strategy or implementation of that strategy that then turns out badly.

1:00:02Matthew W.H. Wessler The performance allegations play a significant role in allowing a court to assess whether, taken together, they permit a plausible inference of imprudence, but that kind of holistic analysis is foreclosed under the Ninth Circuit's approach. I also would caution this Court against attempting to define at the outset what can count as meaningful in this context. It's ultimately a project doomed to fail because it doesn't take account of the broad range of contexts in which some kind of comparator could be relevant. Is it aims? Is it asset allocations? Is it risks? All of that could be relevant, or none of it could be relevant. And a -- and an attempt to provide a comparator could be pointing to a dissimilar fund that is different in the kinds of aims or objectives that the challenged fund has.

1:00:50Matthew W.H. Wessler That's why Rule 8 contemplates -- and ERISA as well -- a context-specific inquiry that doesn't rely on the kind of bright-line rules that the Ninth Circuit embraced here. Thank you.

1:01:00John G. Roberts, Jr. Thank you, counsel. The case is submitted.