Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—9th Cir.: Employee fails to revive claims Intel breached fiduciary duty of prudence, loyalty, (May 27, 2025)

By Todd Harrison, J.D.

Because prudence is evaluated prospectively, rather than retrospectively, it was not enough to allege that the fiduciaries could have obtained better results.

Affirming a district court’s dismissal of an employee’s putative class action under ERISA alleging that trustees of Intel’s proprietary retirement funds breached their fiduciary duty of prudence and duty of loyalty, the Ninth Circuit agreed that the employee had failed to state a claim. When a plaintiff relies on a theory that a prudent fiduciary in like circumstances would have selected a different fund, the plaintiff must provide a sound basis for comparison, which the employee here failed to do. He also failed to state a claim that Intel’s fiduciaries breached their duty of loyalty because he did not plausibly allege a real conflict of interest rather than the mere potential thereof (Anderson v. Intel Corp. Investment Policy Committee, No. 22-16268 (9th Cir. May 22, 2025)).

From 2000 to 2015, the plaintiff was an Intel employee who participated in the company’s employee retirement plans, including its 401(k) savings plan and its retirement contribution plan. Both plans are employee pension benefit plans subject to ERISA.

2008 crash. In response to the 2008 market crash and ensuing recession, Intel redesigned its funds so that they included not just stocks and bonds but also hedge funds and private equity funds. Plan participants were told that Intel’s new strategy was aimed at decreasing volatility and reducing the risk of large losses during a market downturn. Intel also disclosed that the price for this risk mitigation was that the funds would not compare favorably with equity-heavy funds during bull markets.

Lawsuit. In 2019, the employee brought this action against the managers of the plans. He alleged that they had breached their duty of prudence because their large allocations to hedge funds and private equity funds had “drastically departed from prevailing standards of professional asset managers.” He also alleged that they had breached their duty of loyalty by improperly favoring investments that had benefited Intel Capital—Intel’s venture capital arm—at the expense of plan participants.

The district court dismissed the action for failure to state a claim. It concluded that the employee had not identified a “meaningful benchmark” against which to compare the performance of Intel’s funds, explaining that “simply labeling funds as comparable or as in the same category as the Intel [target-date funds] and Intel [global diversified funds] is insufficient to establish that those funds are meaningful benchmarks.”

As to the duty-of-loyalty claim, the court determined that the complaint was devoid of plausible allegations that could show a conflict of interest or self-dealing. This appeal followed.

Underperformance? First addressing the breach of the duty of prudence claim, the court noted that the employee made no direct allegation about Intel’s investment-selection methods and instead relied on circumstantial claims. Specifically, he argued that the decision to invest in hedge funds and private equity funds caused Intel’s funds to underperform other funds and incur higher fees. The court was not moved.

Intel, explained the court, clearly disclosed the aims of its funds and its risk mitigation objective. Further, Intel developed its own customized benchmarks, made up of a “composite of the underlying... benchmarks” for each asset class included in the Intel funds, which it disclosed to plan participants and beneficiaries.

Comparisons. Rather than presenting a comparison to Intel’s composite benchmarks or to available funds with similar risk mitigation strategies and objectives, the employee sought to compare Intel’s funds to equity-heavy retail funds that pursued different objectives. As such, these putative comparators could not be said to be truly comparable, observed the court.

Although a plaintiff does not necessarily need to identify comparable funds or investments, particularly when making direct allegations of a breach of ERISA’s duty of prudence, the court went on to explain that it did not hold that a plaintiff must always identify a comparator when relying on circumstantial allegations of a breach of the duty of prudence. However, to the extent a plaintiff asks a court to infer that a fiduciary used improper methods based on the performance of the investments, as the employee did in part here, he must compare that performance to funds or investments that are meaningfully similar.

Risk minimization strategy. Next, the employee argued that he was challenging the implementation of Intel’s risk minimization strategy, as opposed to the strategy itself, appearing 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, or at least not in the proportions the fiduciaries selected.

This challenge to hedge funds and private equity investments overlooks that the prudence of each investment must not be addressed in isolation but rather as it relates to the investment portfolio as a whole, said the court. In this instance, the court found that the employee failed to plausibly allege that Intel’s specific investments were imprudent at the scale at which it made them.

“Risk-adjusted.” Turning to the employee’s “risk-adjusted” argument, wherein he contended that that the Intel funds had a greater “risk per unit of return” than did other target-date funds, the court explained that an ERISA plaintiff cannot make incomparable funds comparable simply by using a ratio. Accordingly, the appellate court found that the district court correctly held that the employee had failed to state a claim for breach of ERISA’s duty of prudence.

Duty of loyalty. As to the employee’s breach of the duty of loyalty claim, he argued that the Intel fiduciaries’ investment in certain hedge funds and private equity funds “had the potential to benefit” Intel Capital “by allowing Intel Capital to invest in technology startups more effectively and with reduced risk.” However, the court observed that nowhere in the complaint did the employee allege that the Intel fiduciaries had any influence over any investment firm’s decision “to invest in one of the startups in which Intel [had already] invested.”

In addition, the court noted that the mere fact that members of senior management at Intel Capital also served as members of Intel’s Investment Policy Committee did not, on its own, support an inference that such individuals acted disloyally while discharging their fiduciary duties.

All the employee presented was the potential for conflicts of interest. With nothing more, the appellate court determined that the district court was correct in holding that the employee did not adequately plead a claim of breach of the duty of loyalty.

Concurrence. In a concurrence, Judge Berzon wrote separately to clarify the role of comparisons and circumstantial allegations in duty-of-prudence claims, stating that any set of allegations which, taken as true and viewed in the plaintiff’s favor, plausibly support an inference that a fiduciary acted imprudently is sufficient at the pleading stage. The ultimate question, absent direct allegations, is not how other plans were managed or what other investments were available, but whether the facts alleged—comparative or not—lead to the plausible inference that the actual process used by the fiduciary was flawed.

Here, with appropriate evidence, the employee could have stated a claim by pleading a true benchmark comparison, by providing other circumstantial allegations that plausibly suggested imprudence, or by directly showing that the specific investments the Intel fiduciaries selected or the general methodologies they used were imprudent. Nonetheless, Judge Berzon agreed with the majority’s conclusion that the employee failed to plead facts that support his claim either directly or inferentially, and thus concurred in full with the majority’s opinion.

The case is No. 22-16268.

Judge: Miller, E.

Attorneys: Robert Joseph Barton (Law Offices of Robert Joseph Barton) for Winston R. Anderson. Scott P. Cooper (Proskauer Rose) for Intel Corp. Investment Policy Committee.

Companies: Intel Corp. Investment Policy Committee

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