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On August 17, 2026, the Eleventh Circuit Court of Appeals, in Johnson v. Royal Caribbean, et al., siding with plaintiff participant, reversed a lower court’s summary judgment in favor of plan fiduciaries in an underperformance case. The court’s decision is interesting because, rather than focusing on whether plaintiff had alleged underperformance relative to a “meaningful benchmark,” its decision turned on “qualitative evidence” for finding the plan’s investment imprudent, including, e.g., “a fund’s widespread unpopularity and negative industry ratings.” And doubly interesting because a nearly identical issue is currently before the Supreme Court in Anderson, Winston, et al. v. Intel Corp. Inv., et al.
In this article we provide a brief note on the court’s decision.
Plaintiff (for herself and as a class representative) sued Royal Caribbean and Russell Investments, claiming that, as fiduciaries of Royal Caribbean’s defined contribution plan, they breached their ERISA duty of prudence by selecting Russell Target Date Funds as the plan’s default investment.
The lower court granted defendants’ motion for summary judgment based on its finding that plaintiff “was obligated to, but did not, submit evidence that the Russell Target Date Funds [were] objectively imprudent compared to another target date fund that had the same investment strategy and risk profile.”
Plaintiff appealed, arguing that “the very features that distinguish the Russell Target Date Funds from otherwise comparable funds are what made the Russell funds an objectively imprudent investment.”
Thus, unlike the typical underperformance case, in which plaintiff argues that a plan fund underperformed relative to an apples-to-apples comparator, in this case plaintiff argued that the Russell TDF series’ “was an objectively bad investment.”
As evidence for this claim, plaintiff pointed to:
The funds’ general underperformance (to other, non-comparable funds): During the period it was in the fund menu (2015-2019) “the Russell TDF underperformed the Vanguard TDF (which it replaced) and the American Funds TDF (which eventually replaced the Russell TDF) [and] also underperformed its composite [custom] benchmark, ranging from 0.38% to 0.97% annual underperformance, for an asset-weighted average underperformance of 0.71%.”
Its “to” glidepath.
Its high fees relative to other TDFs.
The fact that the fund “never had more than 12 clients and had lost [its] two largest clients to the Vanguard TDFs in 2014.”
The (2014) “negative” Morningstar rating of the related Russell LifePoints Target Date Series.
Plaintiff’s expert’s testimony that, at the time of the decision to include the Russell TDF in the fund menu, it “had inferior characteristics with respect to the commonly used risk, return, and risk-adjusted return metrics.”
The Eleventh Circuit reversed the lower court’s decision, remanding the case to the lower court for reconsideration.
In doing so the Eleventh Circuit held that a plaintiff in an underperformance case “is not necessarily required to identify a comparable investment.” Instead, “[t]he objective imprudence of an individual investment turns on whether it falls ‘outside the range of reasonable judgments a fiduciary may make based on her experience and expertise.’” To determine “objective imprudence”:
Qualitatively, a factfinder may look to whether the fund was a “popular option[] offered by other employers’ plans of comparable size and complexity” and whether it “received positive ratings from industry analysts.” … And, quantitatively, a factfinder may weigh the fund’s fees and performance relative to appropriate contemporaneous peers and benchmarks. …. The quantitative evaluation, though, may be applied only to “apples-to-apples comparison[s]” to control for differences across the investments’ risk profiles, strategies, asset allocations, and the like.
Thus, “even when a plaintiff lacks a proper apples-to-apples comparison, he may still point to a fund’s widespread unpopularity and negative industry ratings as evidence of its objective imprudence. After all, some of the most objectively imprudent investments will lack an apples-to-apples comparison precisely because they are such objectively bad fiduciary decisions.”
The court directed the lower court to reconsider its decision based on this holding.
As noted at the top, this issue is before the Supreme Court, in Anderson, Winston, et al. v. Intel Corp. Inv., et al. In that case, the Supreme Court has defined the issue before it as:
Whether, for claims predicated on fund underperformance, pleading that an ERISA fiduciary failed to use the requisite “care, skill, prudence, or diligence” under the circumstances and thus breached ERISA’s duty of prudence when investing plan assets requires alleging a “meaningful benchmark.”
A clearcut decision by the Supreme Court in Intel will (obviously) have an effect on this and similar cases.
We will continue to follow this issue.
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This is a publication of O3 Plan Advisory Services. If you have any comments, or have questions about regulatory developments, please contact your relationship manager or Mike Barry at mbarry@octoberthree.com. The information, analyses and opinions set out herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity. Nothing herein constitutes or should be construed as a legal opinion or advice. You should consult your own attorney, accountant, financial or tax advisor or other planner or consultant with regard to your own situation or that of any entity which you represent or advise. Information set out or referred to above has been obtained from sources believed to be reliable. However, neither O3 Plan Advisory Services nor any of its affiliates has verified the accuracy or completeness of any such information. All information is provided “as is” and O3 Plan Advisory Services and its affiliates expressly disclaim all express and implied warranties regarding the information. Neither O3 Plan Advisory Services nor any of its affiliates shall have any liability for any use of the information set out or referred to herein.