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A Florida federal judge dismissed a lawsuit Friday accusing Royal Caribbean of mismanaging its $500 million retirement plan by allowing an investment manager to fill it with underperforming proprietary funds. The court found that the plaintiff failed to present sufficient evidence proving the selection process was objectively imprudent.

Judge Rejects Claims of Faulty Investment Strategy

U.S. District Judge Robert N. Scola Jr. granted summary judgment in favor of Royal Caribbean Cruises Ltd. and Russell Investments Trust Co., ruling that plaintiff Ann Johnson's claims under the Employee Retirement Income Security Act (ERISA) lacked objective proof of imprudence.

"Just as no prudent fiduciary would rely on 'prayer, astrology or just blind luck,' such a misguided fiduciary will nonetheless be shielded from liability if a beneficiary is unable to show that the resulting investment is also imprudent," Judge Scola wrote.

Johnson, who filed suit in 2021, alleged that Royal Caribbean selected Russell as its retirement plan investment manager in 2015 and subsequently loaded the 401(k) with poorly performing proprietary funds. In 2019, Royal Caribbean replaced Russell as investment manager.

Comparisons Fail to Prove Imprudence

Johnson argued that the Russell target date funds (TDFs) were a poor investment choice, but the court found her comparisons flawed. She contrasted the Russell TDFs—which combine active and passive investment strategies—with funds that relied exclusively on one strategy. The judge ruled that such "apples-to-oranges" comparisons did not prove that no prudent fiduciary would have chosen the Russell TDFs.

Johnson also attempted to compare the Russell funds to the Vanguard TDFs they had replaced. However, the court rejected this logic, stating that if such a comparison were accepted, any investment that underperformed its successor would be deemed imprudent—an unrealistic standard.

Additionally, the judge dismissed the argument that any level of underperformance should have been detected and addressed, noting that courts require losses to be "consistent" and "substantial" to establish objective imprudence.

Alleged Red Flags Not Enough to Prove Liability

Johnson presented further evidence, claiming that:

• An attorney had advised Royal Caribbean against selecting Russell,
• 80% of the plan’s assets were placed in an unpopular TDF, and
• Russell’s investment management team ranked unfavorably compared to competitors.

However, the court ruled that these issues did not meet the legal threshold to prove the investment itself was objectively imprudent.

"The evidence recounted above simply rehashes Johnson's complaints about Royal Caribbean's allegedly faulty selection and retention process and Russell's alleged internal missteps; none of it establishes that the resulting investment itself was objectively imprudent," Judge Scola stated.

Royal Caribbean Not Liable Under Investment Agreement

The judge also found that Royal Caribbean was shielded from liability due to its investment management agreement with Russell. Under the contract, the cruise line retained ultimate responsibility for selecting and maintaining investment funds in the retirement plan.

Legal Representation and Next Steps

Representatives for Johnson, Royal Caribbean, and Russell did not immediately respond to requests for comment.

Johnson was represented by attorneys from Wenzel Fenton Cabassa PA and Nichols Kaster PLLP. Russell was defended by lawyers from Akerman LLP and Milbank LLP.