Judge Approves Class-Action Lawsuit Against American Airlines Over ESG Pension Investments

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Pilot alleges that the airlinesโ€™ ESG investment strategy violates pension fiduciary duties.

A district judge has granted a pilotโ€™s request for a class-action lawsuit against American Airlines for allegedly investing pension funds into environmental, social, and governance (ESG) funds.

The case revolves around the allegation that American Airlinesโ€”headquartered in Fort Worth, Texasโ€”violated its fiduciary obligation to the Employee Retirement Income Security Act (ERISA) โ€œby investing millions of dollars of American Airlines employeesโ€™ retirement savings with investment managers and investment funds that pursue political agendasโ€ through ESG initiatives. 

โ€œBy pursuing ESG goals, Defendants gave Plan assets to fund managers, such as BlackRock, who allegedly ignored financial returns as the exclusive purpose and lowered the value of Plan participantsโ€™ investments,โ€ the order states.

In addition to being disloyal to the employees, the plaintiff, Bryan Spence, argues that American Airlinesโ€™ investments were โ€œimprudent because it is well known that ESG funds are associated with poor performance given the detrimental effects of such activism on stock prices.โ€

โ€œTo remedy these alleged ERISA violations, Plaintiff filed this lawsuit individually and on behalf of a proposed class of Plan participants and beneficiaries,โ€ the order says. โ€œERISA authorized participants in a qualifying plan to bring an action on behalf of other participants to enforce the statuteโ€™s fiduciary obligations and remedial provisions, as well as recover all losses to a plan caused by a breach of a fiduciary duty.โ€

Texas District Judge Reed Oโ€™Connerโ€”a George W. Bush appointeeโ€”writes in his order that the case is eligible for class action because of the similarities of ERISA violations.

โ€œEven if the damages are diverse, finding in favor of Plaintiff on his ERISA claims would also resolve the ERISA claims of this class,โ€ he writes.

The remedy for damages would be the same for all plaintiffs in the class-action lawsuit, he says.

โ€˜Underperforms Financiallyโ€™

According to the complaint, ESG funds are usually more expensive for pension enrollees than non-ESG funds.

They also โ€œunderperform financially,โ€ and instead of maximizing โ€œrisk-adjusted financial returnsโ€ for enrollees, they โ€œengage in shareholder activism to achieve ESG policy agendas.โ€

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