Jaime Pizarro v. The Home Depot, Inc.
Citation111 F.4th 1165
Date Filed2024-08-02
Docket22-13643
Cited15 times
StatusPublished
Full Opinion (html_with_citations)
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[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-13643
____________________
JAIME PIZARRO,
CRAIG SMITH,
on behalf of themselves
and all others similarly situated,
JERRY MURPHY,
RANDALL IDEISHI,
GLENDA STONE, et al.,
PlaintiďŹs-Appellants,
GARTH TAYLOR,
on behalf of themselves
and all others similarly situated,
PlaintiďŹ,
versus
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2 Opinion of the Court 22-13643
THE HOME DEPOT, INC.,
THE ADMINISTRATIVE COMMITTEE OF THE HOME
DEPOT FUTUREBUILDER 401(K) PLAN,
THE INVESTMENT COMMITTEE OF THE HOME DEPOT
FUTUREBUILDER 401(K) PLAN,
Defendants-Appellees,
FINANCIAL ENGINES ADVISORS, LLC,
Defendants.
____________________
Appeal from the United States District Court
for the Northern District of Georgia
D.C. Docket No. 1:18-cv-01566-SDG
____________________
Before BRANCH, GRANT, and ED CARNES, Circuit Judges.
GRANT, Circuit Judge:
The Employee Retirement Income Security Act of 1974
requires fiduciaries administering employee-benefit plans to
prudently investigate, choose, and monitor investments. 29 U.S.C.
§ 1104(a)(1)(B). Fiduciaries who fall short can be removed.Id.
§ 1109(a). But where a breach of that duty causes monetary losses,
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22-13643 Opinion of the Court 3
fiduciaries also face financial liabilityâthey must âmake good to
such plan any losses to the plan resulting from each such breach.â
Id. Recovery of damages under § 1109 thus hinges on two
showings: a failure to prudently monitor, investigate, and evaluate
investments, and a financial loss caused by that failure.
This case presents two questions: which party has the
burden to show loss causation, and how to meet that burden. The
plaintiffs, a class of current and former Home Depot employees,
argue that the company failed to prudently manage its multi-
billion-dollar 401(k) retirement plan, resulting in excessive fees and
subpar returns. The district court found an issue of material fact
on that duty-of-prudence question for all but one of the plaintiffsâ
claims. But on the second element, loss causation, the answer was
differentâthe court decided that the plaintiffs had not met their
burden for any claims. Even if Home Depot did not appropriately
monitor and evaluate the service providersâ fees and the planâs
investments, the court concluded, the plaintiffs had not shown that
Home Depotâs investment choices were objectively imprudent.
And that, in turn, meant that any losses to the plan were not caused
by Home Depotâs failure to investigate.
The plaintiffs say this approach is not correctâthat the
burden should be flipped, which means ERISA fiduciaries are
required to show that their plansâ losses were caused by something
other than their own failure to investigate and evaluate. In other
words, show that the losses were not caused by their breach.
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4 Opinion of the Court 22-13643
We cannot agree. Our prior precedent forecloses adopting
this burden-shifting framework, as do ordinary principles of civil
liability. Nor does ERISAâs text help the plaintiffsâit offers no
indication that Congress intended to require defendant fiduciaries
to disprove loss causation.
The plaintiffs thus bore the burden, but they did not sustain
it. ERISA requires a prudent process, but it does not guarantee
good results. So to prove that losses were caused by a fiduciaryâs
breach, plaintiffs must show that a hypothetical prudent fiduciary,
armed with the information a proper evaluation would have
yielded, would not have made the same choices. The plaintiffs
here have not done thatâHome Depotâs investment decisions
were objectively prudent, whether or not it used the right process
to evaluate and monitor them. We agree with the district court
that the damages claims fail, and we affirm its well-reasoned order
granting summary judgment to Home Depot.
I.
The Home Depot 401(k) Plan, called FutureBuilder, is a
defined-contribution retirement plan. It is among the largest 401(k)
plans in the United States, with about 230,000 participants and $9.1
billion in assets as of year-end 2019. The plan is headed by two
committeesâthe Investment Committee and the Administrative
Committeeâboth appointed by The Home Depot, Inc. 1 These
1 This opinion refers to The Home Depot, Inc., the Administrative
Committee, and the Investment Committee collectively as âHome Depot.â
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committees have broad duties, including selecting and monitoring
investment options, retaining service providers, and monitoring
expenses and fees.
During the class period, Home Depot engaged a number of
service providers and advisors to help administer the plan. Three
types of providers concern us here. First, Home Depot engaged a
recordkeeper, responsible for administering participantsâ accounts,
maintaining plan records, processing individual transaction
instructions, and sending disclosures. Second, Home Depot
retained an investment consultant, which analyzed the planâs
investments, performance, and fees, and prepared discussion
guides for the Committeesâ meetings. And third, Home Depot
hired a financial advisor to provide plan participants with
investment advisory and managed account services. The identities
of these service providers and their relationships to one another
varied over time. Suffice it for now to state that these companies
included Aon Hewitt, Aon Hewitt Investment Consultants,
Financial Engines, Alight Solutions, and Alight Financial Advisors.
During the class period, the planâs financial advisor
automatically provided all participants with its basic advisory
services, which included retirement investment resources (like
projected total savings based on savings rate and retirement age),
analysis of the planâs investment options, and summaries of each
participantâs account and forecasted value. Participants could also
opt in to a managed account program, where the financial advisor
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used algorithms to directly make investment decisions on each
participantâs behalf.
For these services, the financial advisor charged two types of
fees. The âplan access feeâ was a flat dollar fee charged to all plan
participants for the basic advisory services. The âprofessional
management feeâ was a tiered asset-based fee charged only to
participants enrolled in the managed account program. While the
parties agree on what the fees were during the class period, they
hotly contest how these fees compared to others available in the
marketplace.
Participants in Home Depotâs plan funded their individual
accounts with deductions from their paychecks, plus matching
funds contributed by the company. The participants (or the
financial advisor, if the participant opted in to the managed account
program) then chose from a menu of available funds curated by
Home Depot. Four are at issue here.
The BlackRock family of target date funds, offered
throughout the entire class period, was designed as a set of all-in-
one solutions for retirement investing. Each fund held an asset
portfolio that was diversified based on targeted retirement dates by
year; these funds automatically rebalanced their holdings on
predetermined âglide pathsâ to retirement, becoming less risky as
the participantâs retirement date approached. BlackRockâs suite of
target date funds employed a more conservative glide path than
most peer funds, meaning that they would be comparatively less
risky at the same point in the lifecycle, but could also expect smaller
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returns. The BlackRock funds were popularâmany other Fortune
500 companiesâ 401(k) plans offered the same target date funds
during the class period.
The JPMorgan Stable Value Fund, as the name suggests, was
a fund designed to protect investorsâ principal, earning consistent
yet modest returns that would exceed those available from a
money market account. This fund delivered on its promise,
yielding positive returns to investors during the entire class period.
Finally, Home Depot offered two funds designed to invest
mostly in small-capitalization companies with long-term growth
potential. The TS&W Fund was added to the plan in 2009, and the
Stephens Fund was introduced in 2013. After a rocky period of
fluctuating performance, both plans were removed as options in
2017.
In 2018, the plaintiffs filed a class action lawsuit against
Home Depot, alleging two violations of ERISAâs fiduciary duty of
prudence. First, they claimed that Home Depot failed to
adequately monitor the fees charged by the planâs financial advisor
for its investment advisory and managed account services,
resulting in excessive costs for plan participants. Second, they
alleged that Home Depot failed to prudently evaluate the four
challenged investment options, and that this failure led Home
Depot to keep the funds available despite their subpar
performance. The plaintiffs sought damages, equitable relief, and
attorneyâs fees. The district court certified a class of all participants
in Home Depotâs 401(k) plan who either received advisory services
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8 Opinion of the Court 22-13643
from the planâs financial advisor or who invested in any of the
challenged investment funds between April 12, 2012 and the date
of the courtâs judgment.
Following discovery and cross-motions for summary
judgment, the district court concluded that several genuine
disputes of material fact existedâwhether Home Depot had
complied with its duty of prudence while monitoring plan fees, as
well as whether it had complied with that duty while monitoring
three of the four challenged funds. But the court went on to find
that even if these disputes were resolved in the plaintiffsâ favor,
they could not show that the violations had caused them any
financial loss. And that meant they had no statutory right to
monetary relief. In addition to finding an absence of loss causation,
the district court also found no genuine dispute on whether Home
Depot had prudently monitored the Stephens Fund. Finally, it
ruled that the plaintiffs had forfeited their requests for equitable
relief by failing to mount any arguments on that front at the
summary judgment stage. This is the plaintiffsâ appeal.
II.
We review a district courtâs grant of summary judgment de
novo, viewing the evidence in the light most favorable to the
nonmoving party and drawing all inferences in its favor. Baker v.
Upson Regâl Med. Ctr., 94 F.4th 1312, 1316â17 (11th Cir. 2024).
âSummary judgment is appropriate only when there are no
genuine issues of material fact, and the moving party is entitled to
judgment as a matter of law.â Id. at 1317.
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Allocation of the burden of proof is a legal question
reviewed by this Court de novo. Greenberg v. Commâr, 10 F.4th
1136, 1155 (11th Cir. 2021). âWhen the nonmoving party has the
burden of proof at trial,â the party moving for summary judgment
can proceed in one of two ways. United States v. Four Parcels of Real
Prop., 941 F.2d 1428, 1437â38 (11th Cir. 1991) (en banc) (emphasis
omitted). It âmay showâthat is, point out to the district courtâ
that there is an absence of evidence to support the nonmoving
partyâs case.â Id. at 1438 (alterations adopted and quotation
omitted). âAlternatively, the moving party may support its motion
for summary judgment with affirmative evidence demonstrating
that the nonmoving party will be unable to prove its case at trial.â
Id. âIf the moving party shows the absence of a triable issue of fact
by either method, the burden on summary judgment shifts to the
nonmoving party, who must show that a genuine issue remains for
trial.â Id. If the nonmoving party fails to make this showing, the
moving party is entitled to summary judgment. Id.
III.
ERISA requires a fiduciary to act âwith the care, skill,
prudence, and diligence under the circumstances then prevailing
that a prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims.â 29 U.S.C. § 1104(a)(1)(B). This duty
of prudence is objective, judged by the information available at the
time of each investment decisionânot by the glow of hindsight.
Sacerdote v. New York Univ., 9 F.4th 95, 107 (2d Cir. 2021). The
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inquiry centers not on the results of an investment, but on a
fiduciaryâs process for choosing that investment. Id.
Once a violation of this duty of prudence is shown, ERISA
imposes a severe consequenceâthe fiduciary is personally liable
for âany losses to the plan resulting fromâ the breach. 29 U.S.C.
§ 1109(a). But the last words in this clause, âresulting from,â
impose an important limit on that liabilityâloss causation. So for
a damages claim to succeed, the breach of fiduciary duty must
proximately cause the plaintiffsâ losses. Willett v. Blue Cross & Blue
Shield of Alabama, 953 F.2d 1335, 1343 (11th Cir. 1992).
This appeal raises two questions. First, who bears the
ultimate burden of proof on loss causation? And second, what must
be proven to establish that element?
A.
We begin with the burden of proof. The plaintiffs, along
with the United States Secretary of Labor as amicus curiae, argue
that once a plaintiff shows that a fiduciary breached the duty of
prudence and that the plan suffered a loss, the burden shifts to the
fiduciary to prove that the loss was not caused by its breach. They
say this shift is necessary because the common law of trusts has an
analogous requirement. For its part, Home Depot responds that
ERISA does nothing to disrupt the ordinary expectation that
plaintiffs must prove each element of their claims.
Our precedent already answers this question. ERISA does
not impose a burden-shifting framework; instead, plaintiffs bear the
ultimate burden of proof on all elements of their claims, including
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loss causation. In Willett v. Blue Cross & Blue Shield of Alabama, we
statedâquite explicitlyâthat if the plaintiffs succeeded in showing
a breach, â[o]n remand, the burden of proof on the issue of
causation will rest on the beneficiaries; they must establish that
their claimed losses were proximately causedâ by that breach. 953
F.2d at 1343. Though it offered little analysis, the case left no
doubtâplaintiffs bear the burden.
The plaintiffs here cannot explain away Willett. They do try,
pointing to a single line of that opinion, which notes that to obtain
âa grant of summary judgment in its favor, [the fiduciary] would
have had to establish the absence of causation by proving that the
beneficiariesâ claimed losses could not have resulted fromâ its
breach. Id. Well, yes. That is an ordinary summary judgment
burdenâshowing that the other side cannot prove its case. To be
fair, the Willett court could have been more artful in pointing out
that a party who does not bear the burden of proof at trial can win
summary judgment in two ways: with affirmative evidence
showing that the other side cannot win, or by pointing out an
absence of evidence supporting the other sideâs claims. Four Parcels
of Real Prop., 941 F.2d at 1437â38. But in context, the sentence
plaintiffs highlight is best understood as noting the ordinary Rule
56 summary judgment standard, that a party moving for summary
judgment has the responsibility to show that the nonmoving
partyâs case cannot succeed at trial. Celotex Corp. v. Catrett, 477 U.S.
317, 323(1986); Clark v. Coats & Clark, Inc.,929 F.2d 604
, 607â08
(11th Cir. 1991). That standard applies no matter who bears the
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ultimate burden of proof. See Fitzpatrick v. City of Atlanta, 2 F.3d
1112, 1115â16 (11th Cir. 1993).
So this Court has already settled the questionâthe burden
of proving loss causation lies with the plaintiff. And though we are
bound by the prior-panel precedent rule to enforce that holding,
we also endorse it, offering here some of the reasoning we elided
there. United States v. Archer, 531 F.3d 1347, 1352 (11th Cir. 2008).
As always, the âtouchstone for determining the burden of
proof under a statutory cause of action is the statute itself.â Thomas
v. George, Hartz, Lundeen, Fulmer, Johnstone, King, & Stevens, P.A.,
525 F.3d 1107, 1110 (11th Cir. 2008). The text of ERISA imposes
personal liability on a fiduciary only for damages âresulting fromâ
its breach of duty. 29 U.S.C. § 1109(a). Proximate causation is the
key link between a breach of duty and a recoverable loss. Willett,
953 F.2d at 1343.
ERISA, like many other statutes, does not explicitly assign
the burden of proof on every issueâincluding loss causation. But
the âordinary default ruleâ is âthat plaintiffs bear the burden of
persuasion regarding the essential aspects of their claims.â Schaffer
ex rel. Schaffer v. Weast, 546 U.S. 49, 56â57 (2005). Congress
legislates against this default, so without any evidence that
Congress intended to vary from it, âwe will conclude that the
burden of persuasion lies where it usually falls, upon the party
seeking relief.â Id. at 57â58.
The ordinary rule resolves this case. Requiring a defendant
to disprove causation so long as a plaintiff can show a breach and
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some loss would turn the usual principles of civil liability on their
head. If Congress had intended this departure from the norm, it
could have said so; absent any affirmative indication to that end,
we decline to impose it ourselves. 2
To be sure, there are exceptions to this ordinary rule, but
they do not apply here. The burden of proof can be shifted on
specific elements if they can âfairly be characterized as affirmative
defenses or exemptions.â Id. at 57. Such shifts occur because those
who invoke âa special exception to the prohibitions of a statuteâ
ordinarily bear âthe burden of proving justification.â FTC v. Morton
Salt Co., 334 U.S. 37, 44â45 (1948). Here, though, causation is not
an affirmative defense; it is an element of the plaintiffâs claim. It is
no surprise, then, that none of the textual or structural indications
suggesting that an element is an affirmative defense or an
2 The Tenth Circuit also rejects a burden-shifting framework for the element
of loss causation. Pioneer Ctrs. Holding Co. Emp. Stock Ownership Plan & Tr. v.
Alerus Fin., N.A., 858 F.3d 1324, 1337 (10th Cir. 2017). The Sixth, Seventh, and
Ninth Circuits too have stated that plaintiffs bear the burden of proving loss
causation, though without commenting on the burden-shifting argument.
Saumer v. Cliffs Nat. Res. Inc., 853 F.3d 855, 863 (6th Cir. 2017); Peabody v. Davis,
636 F.3d 368, 373(7th Cir. 2011); Wright v. Oregon Metallurgical Corp.,360 F.3d 1090, 1099
(9th Cir. 2004). The First, Fourth, Fifth, and Eighth Circuits, on the
other hand, shift the burden of proof on causation to the defendants.
Brotherston v. Putnam Invs., LLC, 907 F.3d 17, 35â39 (1st Cir. 2018); Tatum v. RJR
Pension Inv. Comm., 761 F.3d 346, 361â63 (4th Cir. 2014); McDonald v. Provident
Indem. Life Ins., 60 F.3d 234, 237 (5th Cir. 1995); Martin v. Feilen,965 F.2d 660, 671
(8th Cir. 1992). Finally, the Second Circuit has published opinions
endorsing both approaches. Compare Silverman v. Mut. Benefit Life Ins., 138 F.3d
98, 104 (2d Cir. 1998), with Sacerdote,9 F.4th at 113
.
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exemption are present here. See United States v. Kloess, 251 F.3d 941,
944â46 (11th Cir. 2001). Indeed, the plaintiffs do not suggest
otherwise. Put simply, it is âimpossible to look at the text and
structure ofâ ERISA and § 1109(a) and conclude loss causation is
anything other than a core element of a plaintiffâs case. Meacham v.
Knolls Atomic Power Labây, 554 U.S. 84, 93 (2008).
Nor does the common law of trusts provide a lifeline for
those who wish to shift the burden. It is trueâin âdetermining the
contours of an ERISA fiduciaryâs duty, courts often must look to
the law of trusts.â Tibble v. Edison Intâl, 575 U.S. 523, 528â29 (2015).
And at least some authorities say that at common law, âwhen a
beneficiary has succeeded in proving that the trustee has
committed a breach of trust and that a related loss has occurred,
the burden shifts to the trustee to prove that the loss would have
occurred in the absence of the breach.â Restatement (Third) of
Trusts § 100 cmt. f (Am. L. Inst. 2012). 3 One justification for this
rule is âthe trusteeâs superior (often, unique) access to information
about the trust and its activities.â Id.
But ERISA is not the common law. It is a complex statutory
scheme, and this Court has long âreject[ed] the unselective
incorporation of trust law rules into ERISA.â Useden v. Acker, 947
F.2d 1563, 1581 (11th Cir. 1991); see also Moore v. Am. Fedân of
3 Home Depot identifies sources from the time of ERISAâs passage that
disagree, rejecting a burden-shifting rule. Because we find that ERISA did not
adopt such a rule, we need not decide whether it existed in the background
common law of trusts to begin with.
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Television & Radio Artists, 216 F.3d 1236, 1244 n.17 (11th Cir. 2000).
Our responsibility is always âto give effect to the plain meaning of
the statuteâ first. Moore, 216 F.3d at 1244 n.17. âERISA is a
comprehensive and reticulated statute, bearing the marks of
circumspect drafters.â Useden, 947 F.2d at 1581 (quotation
omitted). â[W]hile it is obvious that ERISA is informed by trust
law, the statute is, in its contours, meaningfully distinct from the
body of the common law of trusts.â Id. We therefore proceed
carefully, and âonly incorporate a given trust law principle if the
statuteâs text negates an inference that the principle was omitted
deliberately from the statute.â Id.
Here, the statute lacks any language suggesting that
Congressâs omission of trust lawâs burden-shifting framework for
loss causation was anything but deliberate. And the plaintiffsâ
rationale for burden shiftingâthe informational advantages of
trustees over beneficiariesâdoes not cleanly apply to ERISA.
ERISA imposes on fiduciaries a comprehensive scheme of
mandatory disclosure and reporting, both to plan participants and
to the public at large. See 29 U.S.C. §§ 1021â32. The statute itself
thus enforces a suite of requirements mitigating the informational
advantage imputed to the trustee at common law. These
disclosures, combined with the âproper use of discovery tools,â
mean that ERISA fiduciaries lack the informational advantage that
would justify shifting the burden of proof. Thomas, 525 F.3d at
1113â14; see also Schaffer, 546 U.S. at 60â61. So ERISAâs text, if
anything, suggests that Congress dealt with the information
imbalance problem by shrinking the gap, not shifting the burden.
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In sum, âwhere Congress does not squarely address the
question, where the statuteâs structure and language do not suggest
a shift of the burden to the defendant,â and âwhere plaintiffs are
not peculiarly at a disadvantage in the discovery of necessary facts,
we will not shift the burden of proof, or any element thereof, to
the defendant.â Thomas, 525 F.3d at 1114. As Willett has already
provided, and as we elaborate today, plaintiffs must prove loss
causation for an ERISA breach-of-fiduciary-duty claim under
§ 1109(a).
B.
Now that we know who has the burden of proving loss
causationâthe plaintiffsâthe next question is what will satisfy that
burden. A fiduciaryâs breach of its duty to prudently evaluate and
monitor a planâs investments does not automatically result in a loss
because an imprudent process can sometimes yield a prudent
investment. That may happen, as then-Judge Scalia vividly put it,
âthrough prayer, astrology or just blind luck.â Fink v. Natâl Sav. &
Tr. Co., 772 F.2d 951, 962 (D.C. Cir. 1985) (Scalia, J., concurring in
part and dissenting in part). And even an âobjectively prudentâ
investment can sometimes turn out to be a losing one. Id. So
liability turns not only on an imprudent process, but also on that
process resulting in an imprudent investment. In other words,
losses are only compensable if they are caused by a fiduciaryâs bad
decisions rather than by the usual vagaries of the market.
To recover damages then, plaintiffs must show that the
investments made were not objectively prudent. That means they
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must have fallen outside the ârange of reasonable judgments a
fiduciary may make based on her experience and expertise,â such
that a hypothetical prudent fiduciary in the same circumstances as
the defendant, armed with the information that a proper
evaluation would have yielded, would not (or could not) have
made the same choice. Hughes v. Nw. Univ., 595 U.S. 170, 177
(2022).
Our standard recognizes the fact-laden, judgment-heavy
nature of investment decisions. An ERISA fiduciaryâs management
of an employee-benefit plan does not consist of a series of yes-or-
no, up-or-down choices in a vacuum. In any single set of
circumstances, there might beâindeed, likely will beâmany
objectively prudent choices a fiduciary could make. ERISA
recognizes that managing an employee-benefit plan âwill implicate
difficult tradeoffsâ yielding a range of reasonable options. Id. No
oneânot even the most diligent fiduciaryâcan predict the future.
Different prudent fiduciaries, facing the same set of circumstances,
can exercise their judgment and reach different conclusions in light
of that uncertainty.
The parties spill considerable ink arguing about semanticsâ
whether an objectively prudent investment is one that a
hypothetical prudent fiduciary âwould haveâ also made, or
whether it is one that such a fiduciary âcould haveâ also made. This
mirrors the debate in the Fourth Circuitâs decision in Tatum v. RJR
Pension Investment Committee, 761 F.3d 346 (4th Cir. 2014). There,
the majority said âwould,â while the district court said âcould.â Id.
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18 Opinion of the Court 22-13643
at 363â66. But here, the would-versus-could debate is a sideshow.
See id. at 377 (Wilkinson, J., dissenting) (criticizing the
would/could debate as âsemantics at its worstâ). Thatâs because
Tatum shifted the burden of proving loss causation onto the
fiduciary, while we keep that burden with the plaintiffs. Id. at 363
(majority opinion). There is a real difference between requiring
proof that a reasonable fiduciary âwould haveâ picked the same
investment versus requiring proof that it âcould haveâ done so.4
But that gap does not hold up when plaintiffs have the burdenâif
a plaintiff shows that a hypothetical prudent fiduciary âcould not
haveâ made the same choice as the defendant, she has also shown
that a hypothetical prudent fiduciary âwould not haveâ made the
same choice, and vice versa. It is simply an imprudent choice.
In sum, to succeed on a breach-of-fiduciary-duty claim, a
plaintiff must convince a factfinder that the fiduciaryâs choice was
4 For what it is worth, we agree with Judge Wilkinsonâs dissent that requiring
a defendant to prove that a hypothetical prudent fiduciary would have also
made the same choice âignore[s] the fact that there is not one and only one
âsame decisionâ that qualifies as objectively prudent.â Tatum, 761 F.3d at 378
(Wilkinson, J., dissenting). To illustrate, imagine that, faced with a particular
decision, there are three (and only three) reasonable investment choices: A, B,
and C. By our read, the Tatum majorityâs rule requires a fiduciary who chose
A to show that each and every other prudent fiduciary would have also chosen
A, even though B and C were also prudent choices. Because a fiduciary will
not be able to make that showing, the Tatum rule would impose liability on a
fiduciary even though it made an objectively prudent choiceâcompletely
contrary to ERISAâs loss causation requirement.
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22-13643 Opinion of the Court 19
objectively unreasonableâthat it was not one that a prudent
fiduciary would also have made.
IV.
We now apply that legal standard. The plaintiffs advance
two discrete claims on appeal. First, the planâs financial advisorâ
Financial Engines until 2017, Alight Financial Advisors after thatâ
charged Home Depot excessive fees. 5 And second, Home Depot
should have dropped four funds after they underperformed
alternative investment options and certain market benchmarks.
Viewing the evidence in the light most favorable to the plaintiffs,
and drawing all reasonable inferences in their favor, the plaintiffs
have not shown a genuine dispute of material fact on loss causation
for either of their claims.
A.
We start with fees. As we have said, Home Depot paid two
types of fees over the class period, first to Financial Engines and
then to Alight Financial Advisors: plan access fees and professional
management fees. Plaintiffs challenge only the prudence of the
latter. Home Depot negotiated and secured several decreases over
the years in the professional management fee. The fee dropped in
2014 and again in 2017 before a broader overhaul in 2021 resulted
5 In 2017, Alight Financial Advisors became the planâs direct financial advisor.
It took over the managed account services, but Financial Engines continued
to provide investment advice to plan participants as a subcontractor for Alight
Financial Advisors.
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20 Opinion of the Court 22-13643
in new asset thresholds and fees for the tiers. 6 These decreases,
however, are not enough to show that the fees were objectively
prudent throughout the class period. The plaintiffsâ evidence that
they were not falls into three buckets.
The first is that competitors of Financial Engines and Alight
Financial Advisors charged lower fees for comparable services. But
assuming thatâs true, simply showing that there were other
reasonable choices does not mean that retaining Financial Engines
and Alight Financial Advisors was not also reasonable, given the
Home Depot planâs size and goals. In fact, Financial Engines was
the most popular service provider for 401(k) plans of similar size
and complexity to Home Depotâs. That many other sophisticated
investment professionals managing similarly sized plans made the
same choice as Home Depot suggests objective prudence; it is
direct evidence that other fiduciaries âacting in a like capacity and
familiar with such mattersâ made the same choice âin the conduct
of an enterprise of a like character and with like aims.â 29 U.S.C.
§ 1104(a)(1)(B); see Pfeil v. State St. Bank & Tr. Co.,806 F.3d 377, 388
(6th Cir. 2015). Such evidence is not dispositive on its own, of
course, and other evidence can show that a popular choice was still
imprudent. The problem for the plaintiffs is that they cannot make
that showing here.
The plaintiďŹs identify other service providers that compete
with Financial Engines and Alight Financial Advisors, but that
6 We previously granted Home Depotâs unopposed motion to file proprietary
pricing information under seal.
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eďŹort is fundamentally ďŹawed. Though the plaintiďŹsâ chosen
comparators also oďŹer advisory and managed account services,
ERISA requires a more granular analysis tailored to a planâs
âcharacterâ and âaims.â 29 U.S.C. § 1104(a)(1)(B). â[N]othing in
ERISA requires every ďŹduciary to scour the market to ďŹnd and oďŹer
the cheapest possible fund [or service provider] (which might, of
course, be plagued by other problems).â Hecker v. Deere & Co., 556
F.3d 575, 586 (7th Cir. 2009), abrogated on other grounds by Hughes,
595 U.S. 170.
The competitors that have been identiďŹed diďŹer in key
respects that make it impossible for the plaintiďŹs to show at trial
that no prudent ďŹduciary in Home Depotâs shoes would have
chosen the ďŹnancial advisors it did. We have already noted that
Financial Engines was the leading service provider to large plans
like Home Depotâs. It also oďŹered preexisting integration with
Home Depotâs recordkeeper, Aon Hewitt (later rebranded as
Alight Solutions). So did Alight Financial Advisors, a wholly owned
subsidiary of Alight Solutions. Other ďŹrms Home Depot could
have selected were smaller or lacked the seamless integration with
Aon Hewittâs website and services that Financial Engines and
Alight Financial Advisors oďŹered. The plaintiďŹs oďŹer no evidence
that a hypothetical prudent ďŹduciary managing Home Depotâs
401(k) planâamong the largest in the nationâwould have
considered its ďŹnancial advisorsâ fees unreasonable in comparison
to their competitors given their large capacity, experience with
similarly sized plans, and integration with Home Depotâs
recordkeeper.
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The plaintiffsâ next argument is that Financial Engines and
Alight Financial Advisors charged higher fees to Home Depot than
they did to other comparable clients. This point is fiercely
contested by Home Depot, and the parties disagree about whether
Home Depotâs fees should be calculated by dollars per participant
or basis points, as well as which plans served by Financial Engines
and Alight Financial Advisors are an appropriate baseline for
comparison.7 But even taking the plaintiffsâ preferred approach for
both variablesâwhich unsurprisingly produces the worst outcome
for Home Depotâthe record shows that Home Depotâs top-tier
fee, measured in basis points, is by no means an outlier when
compared to other plans with roughly the same assets. The fee the
plaintiffs highlight, charged to more than 90 percent of participants,
was at or better than the median in two years during the class
period, and was never worse than the second quintile. The fees for
half of all plans will, by definition, be worse than the median; a fee
somewhat higher than median in a handful of years during the class
period is a far cry from being such an objectively unreasonable
charge for the providersâ services that a prudent fiduciary would
not have stayed the course.
Every other comparison results in a betterâmuch betterâ
outlook for Home Depot. In terms of dollars per participant,
Home Depot paid lower fees to Financial Engines and Alight
Financial Advisors than 96 percent of all other plans in every year
during the class period. And in terms of basis points, the top-tier
7 A âbasis pointâ is equal to one one-hundredth of one percent (0.01%).
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fee charged to Home Depot was equal to or lower than the top-tier
fee of at least half of all other plans in every year during the class
period. In the end, no matter how the evidence is evaluated, there
is no triable issue of fact on the objective prudence of the fees
charged by Home Depotâs financial advisors.
The plaintiffsâ last contention is that the fees were excessive
because they were inflated by a kickback paid by Financial Engines
to the planâs recordkeeper, Aon Hewitt. Home Depot, they now
argue, was imprudent for failing to recoup the value of this
payment from Financial Engines. But the plaintiffs never raised
this theory belowâinstead, they argued at summary judgment
only that Home Depot was imprudent for failing to recoup the
alleged kickback from Aon Hewitt. The district court granted Home
Depot summary judgment on this claim, concluding that the
plaintiffs had failed to plead it in their complaint. The plaintiffs do
not challenge that determination on appeal; instead, they try to
sidestep that ruling by recharacterizing the alleged kickback
scheme as evidence that the fees charged by Financial Engines were
excessive. Because they did not make this argument at summary
judgment, we will not consider it for the first time on appeal. T.R.
ex rel. Brock v. Lamar Cnty. Bd. of Educ., 25 F.4th 877, 884â85 (11th
Cir. 2022).
B.
We turn next to the plaintiffsâ claims that Home Depot
should have dropped four specific funds from its 401(k) plan. At
the outset, we note that the plaintiffsâ attacks on the four funds
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suffer from a common flawâthe principal evidence is drawn only
from short time periods during which the funds underperformed
their peers. A few here-and-there years of below-median returns,
however, are not a meaningful way to evaluate a planâs success as
a long-term investment vehicle. The plaintiffs, in other words,
cannot show that a fund is objectively imprudent by just âpointing
to another investment that has performed better in a five-year
snapshot of the lifespan of a fund that is supposed to grow for fifty
years.â Smith v. CommonSpirit Health, 37 F.4th 1160, 1166 (6th Cir.
2022); see also Jenkins v. Yager, 444 F.3d 916, 925â26 (7th Cir. 2006).
In fact, selling a fund too soon because of disappointing short-term
losses âis one of the surest ways to frustrate the long-term growth
of a retirement plan.â Smith, 37 F.4th at 1166.
Getting to the specifics, we start with BlackRock. The
plaintiffs argue that the BlackRock target date funds
underperformed their peers, focusing on the third quarter of 2013.
The first problem is that, qualitatively, these funds were popular
options offered by other employersâ plans of comparable size and
complexity, and consistently received positive ratings from
industry analysts.
Quantitatively, the plaintiffs fare no better. They argue that
the BlackRock funds underperformed both the median target date
fund in the market and the specific target date funds their expert
selected. As the district court found, these are âapples and
oranges.â Target date funds are not all created equalâfunds from
different sponsors may have different glide paths, which means
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they also have different risk-return profiles. In years when the
equity market is hot, a more aggressive target date fund that retains
equities longer will appear to outperform a fund that shifts toward
more conservative assets like bonds sooner. But that snapshot does
not mean it is objectively imprudent to adopt a more conservative
strategyâthe tables turn when the market is down.
When adjusting for these different glide path choices, the
BlackRock target date fundsâ returns matched those of their peers
and market benchmarks almost perfectly. Home Depotâs
investment consultant, Aon Hewitt Investment Consultants,
benchmarked each fund against a custom index created by
BlackRock that weighted the universe of comparison target date
funds against the glide path allocation of BlackRockâs offerings,
creating an apples-to-apples comparison. BlackRockâs target date
fundsâ three- and five-year returns closely matched these custom
indexes throughout the entire class period. 8 ERISA does not
require that fiduciaries choose the maximally aggressive option in
each investment class; the plaintiffs cannot show that a prudent
fiduciary would not have also retained these funds in light of Home
Depotâs investment objectives.
8 Even this comparison slightly underrates the BlackRock target date funds
because the fundsâ actual performance is reported net of investment
management fees, while it is generally not possible to obtain the returns of the
idealized comparison benchmark without paying any transaction or
management fees.
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26 Opinion of the Court 22-13643
The plaintiffsâ arguments about the JPMorgan Stable Value
Fund suffer from a similar problem. That fundâs principal objective
was capital preservationâwhich it achieved by delivering positive
returns in every year during the class period. It outperformed its
benchmark (an index tracking the three-month treasury bill rate)
on a one-, three-, five-, and ten-year basis for the entire class period,
with just a single exception: the one-year return ending in the
fourth quarter of 2019 missed its benchmark by two basis points
(0.02%). With the exception of a handful of quarters at the
beginning of the class period, it also consistently outperformed the
benchmarks selected for it by Aon Hewitt Investment Consultants.
The plaintiffsâ arguments that the JPMorgan fund was
objectively imprudent depend on changing the index against which
the fund was benchmarked. But whether an investment is
objectively imprudent must be assessed against the actions of a
hypothetical prudent fiduciary with âlike aims.â 29 U.S.C.
§ 1104(a)(1)(B). We cannot say âthat a plan fiduciaryâs choice of
benchmark, where such a benchmark is fully disclosed to
participants, can be imprudent by virtue of being too
conservative.â Ellis v. Fid. Mgmt. Tr. Co., 883 F.3d 1, 10 (1st Cir.
2018). Home Depot offered the stable value fund because it was
conservative, advertised it as conservative, and benchmarked it
against a conservative metric. Because the fund met the
expectations set for it, the plaintiffsâ breach-of-fiduciary-duty claim
relying on comparisons to other, more aggressive benchmarks fail.
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As for the TS&W Small Cap Value Fund, the plaintiffs
marshalled no evidence beyond a few years of underperformance
to show that retaining these funds was not objectively prudent.
Again, short periods of relative underperformance alone do not
meet a plaintiffâs burden to establish objective imprudence. The
TS&W fund serves as an object lesson in why: the plaintiffs criticize
Home Depot for not removing that fund in the second quarter of
2012. At that point, its three- and five-year returns had
underperformed the fundâs peers for a handful of quarters, with its
three-year returns ranking as low as the 99th percentile in its peer
group. Its three-year return (though not its five-year return) had
also consistently trailed its benchmark index. By the first quarter
of 2015, however, the fundâs three- and five-year returns had
dramatically reboundedâafter that, it significantly outperformed
its benchmark and ranked among the very top funds in its peer
group. Later, the fundâs performance declined again relative to its
peers before Home Depot dropped it from the plan. Plaintiffs
argue that any data past the second quarter of 2012 is irrelevant,
but these metrics show that the objective prudence of a long-term
retirement option cannot be measured only by referencing short-
term shifts in the market.
Lastly, the Stephens Fund. Here too the plaintiffs attack the
fund using only a few years of underperformance, but unlike for
the other three funds, the district court found no genuine dispute
of material fact about the prudence of Home Depotâs monitoring
process. We affirm that conclusion too.
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ERISA fiduciaries must give âappropriate consideration to
those facts and circumstances thatâ they âknow[] or should know
are relevant to the particular investment or investment course of
action involved.â 29 C.F.R. § 2550.404a-1(b)(1)(i). And they must
âconduct their own independent evaluation to determine which
investments may be prudently included in the planâs menu of
options.â Hughes, 595 U.S. at 176. âIf the fiduciaries fail to remove
an imprudent investment from the plan within a reasonable time,
they breach their duty.â Id.; see also GIW Indus., Inc. v. Trevor,
Stewart, Burton & Jacobsen, Inc., 895 F.2d 729, 732â33 (11th Cir.
1990). The âcontent of the duty of prudence turns on the
circumstances prevailing at the time the fiduciary acts,â so the
inquiry is necessarily âcontext specific.â Fifth Third Bancorp v.
Dudenhoeffer, 573 U.S. 409, 425 (2014) (alteration adopted and
quotation omitted).
Home Depot added the Stephens Fund to its plan in late-
2013 and removed it about four years later. Throughout this
period, Home Depot scrutinized the fundâs performanceâthe
Investment Committeeâs meeting minutes show that it received
briefings on the fundâs performance from Aon Hewitt Investment
Consultants as well as directly from the fundâs managers. The
plaintiffs complain that Home Depot should not get off the hook
for âpassively accept[ing]â Aon Hewittâs advice, but the record
shows that Home Depot did anything but. It asked Aon Hewitt
several times whether the fundâs disappointing returns in the short
term justified its continued inclusion in the plan. While Aon
Hewitt counseled continued patience, Home Depot removed the
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fund. On this record, there is no genuine dispute of material fact
on the prudence of Home Depotâs monitoring process for the
Stephens Fund.
In sum, the plaintiffs failed to offer enough evidence to show
that the four challenged funds were objectively imprudent
investments, or that Home Depot violated its duty of prudence
while monitoring the Stephens Fund. They thus cannot succeed
on their breach-of-fiduciary-duty claims.
V.
Finally, we agree with the district court that the plaintiffs
forfeited their claims for equitable relief. The district court is not
required to âdistill every potential argument that could be made
based upon the materials before it on summary judgment.â Resol.
Tr. Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th Cir. 1995) (en
banc). Instead, it is up to the parties to formulate their
argumentsâgrounds not relied on at summary judgment are
abandoned. Id.; see also Rd. Sprinkler Fitters Loc. Union No. 669 v.
Indep. Sprinkler Corp., 10 F.3d 1563, 1568 (11th Cir. 1994).
Home Depotâs motion put the plaintiffs on notice that the
company sought summary judgment on âall claims asserted by
Plaintiffs.â Had the plaintiffs contended that Home Depotâs
arguments did not defeat their entitlement to equitable relief, the
district court would have had the opportunity to evaluate those
arguments in the first instanceâand we would have a reasoned
decision to review.
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But that is not what happened. The plaintiffs did not make
any equitable relief arguments below; the only mention of
equitable relief in any of their summary judgment papers was a
perfunctory reference to its availability in the legal standard section
of the opposition brief. The plaintiffs therefore forfeited any such
claims.
* * *
ERISA tasks fiduciaries with prudently administering the
employee-benefit plans under their charge. Here, the plaintiffs
cannot show that a prudent fiduciary in the same position as Home
Depot would have made different choices on either the planâs
service providers or the four challenged funds. We therefore
AFFIRM the district courtâs grant of summary judgment to Home
Depot.