Pilot alleges that the airlines’ ESG investment strategy violates pension fiduciary duties.
A district judge has granted a pilot’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 Airlines—headquartered in Fort Worth, Texas—violated its fiduciary obligation to the Employee Retirement Income Security Act (ERISA) “by investing millions of dollars of American Airlines employees’ retirement savings with investment managers and investment funds that pursue political agendas” through ESG initiatives.
“By 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 participants’ investments,” the order states.
In addition to being disloyal to the employees, the plaintiff, Bryan Spence, argues that American Airlines’ investments were “imprudent because it is well known that ESG funds are associated with poor performance given the detrimental effects of such activism on stock prices.”
“To remedy these alleged ERISA violations, Plaintiff filed this lawsuit individually and on behalf of a proposed class of Plan participants and beneficiaries,” the order says. “ERISA authorized participants in a qualifying plan to bring an action on behalf of other participants to enforce the statute’s fiduciary obligations and remedial provisions, as well as recover all losses to a plan caused by a breach of a fiduciary duty.”
Texas District Judge Reed O’Conner—a George W. Bush appointee—writes in his order that the case is eligible for class action because of the similarities of ERISA violations.
“Even if the damages are diverse, finding in favor of Plaintiff on his ERISA claims would also resolve the ERISA claims of this class,” he writes.
The remedy for damages would be the same for all plaintiffs in the class-action lawsuit, he says.
‘Underperforms Financially’
According to the complaint, ESG funds are usually more expensive for pension enrollees than non-ESG funds.
They also “underperform financially,” and instead of maximizing “risk-adjusted financial returns” for enrollees, they “engage in shareholder activism to achieve ESG policy agendas.”
