- Case questions legitimacy of socially conscious investing
- Federal judge greenlights ERISA disloyalty, imprudence claims
Pilot Bryan T. Spence can pursue claims that the airline breached its duties under federal benefits law by knowingly offering funds managed by
Spence’s lawsuit, which seeks to represent a proposed class of more than 100,000 people, says American’s $26 billion 401(k) plan improperly favored ESG funds and invested billions with BlackRock, which he describes as a proponent of the investment strategy. It’s one of the first private-sector lawsuits to argue that a retirement plan fiduciary breached its duties by pursuing ESG investments—those aimed at promoting socially conscious goals—at the expense of workers’ financial interests.
O’Connor said the lawsuit “articulates a plausible story: Defendants’ public commitment to ESG initiatives motivated the disloyal decision to invest Plan assets with managers who pursue non-economic ESG objectives through select investments that underperform relative to non-ESG investments, all while failing to faithfully investigate the availability of other investment managers whose exclusive focus would maximize financial benefits for Plan participants.”
These allegations are enough to move forward with claims of fiduciary imprudence and disloyalty under the Employee Retirement Income Security Act, O’Connor said.
O’Connor is a George W. Bush appointee well known for gutting much of the Affordable Care Act in 2015. Last year he blocked an Obamacare requirement for health plans to pay in full for certain preventive health-care services, including PrEP drugs for HIV.
BlackRock isn’t a party to the suit.
O’Melveny & Myers LLP and Kelly Hart & Hallman LLP represent American. Hacker Stephens LLP and Sharp Law LLP represent Spence.
The case is Spence v. Am. Airlines, Inc., N.D. Tex., No. 4:23-cv-00552, 2/21/24.
To contact the reporter on this story:
To contact the editor responsible for this story:
Learn more about Bloomberg Law or Log In to keep reading:
Learn About Bloomberg Law
AI-powered legal analytics, workflow tools and premium legal & business news.
Already a subscriber?
Log in to keep reading or access research tools.