More than eight months after finding that American Airlines, Inc. (American) and the American Airlines Employee Benefits Committee (EBC) breached their fiduciary duty of loyalty under the Employee Retirement Income Security Act of 1974 (ERISA) by allowing corporate interests in environmental, social, and governance (ESG) objectives and their investment manager’s ESG interests to influence their management of employee retirement plans, the federal district court for the Northern District of Texas denied the plaintiff’s request for monetary damages. The court concluded that the plaintiff failed to sufficiently establish actual monetary losses to the retirement plans (Plan). The court determined, however, that it was necessary to award equitable relief “to ensure that Defendants and their investment managers act solely for the pecuniary benefit of the [retirement plans] and implement compliance measures to ensure fidelity to ERISA’s fiduciary standards.” The court permanently enjoined the defendants from permitting “any proxy voting, shareholder proposals, or other stewardship activities on behalf of the Plan that are motivated by or directed towards non-pecuniary ends, including but not limited to ESG-oriented investment management and objectives, that are not in the exclusive best financial interest of Plan participants and beneficiaries.” The injunction also required appointment of two independent members of the EBC without any connection to any administrator, advisor, or investment manager of retirement plan assets. The injunctive relief also required annual certification to each retirement plan participant that the EBC and each manager of plan assets “will only and solely pursue investment objectives based on provable financial performance, not DEI, ESG, sustainability, or any other nonfinancial criteria” and will only allow proxy votes to be cast on behalf of plan participants “solely to maximize the long-term financial returns of Plan participants’ investments, and not DEI, ESG, sustainability, or other non-financial criteria.” In addition, American must post information concerning any membership in organizations “principally devoted to achieving DEI, ESG, climate-focused investment or stewardship objectives,” including UN PRI, Net Zero Asset Managers Initiatives, and Ceres Investor Network, and link to the terms and conditions of such memberships.

Class action alleging that American Airlines and related defendants breached their fiduciary duties under ERISA by investing employees' retirement savings with managers and in funds that use ESG strategies.

Spence v. American Airlines, Inc.

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Texas Federal Court Denied Monetary Damages for American Airlines’ ESG-Related Breach of Fiduciary Duty to Retirement Plan Participant but Issued Injunction

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Texas Federal Court Denied Monetary Damages for American Airlines’ ESG-Related Breach of Fiduciary Duty to Retirement Plan Participant but Issued Injunction

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