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A Texas federal district court judge entered final judgment in favor of American Airlines in a class action lawsuit filed by workers over alleged violations of the Employee Retirement Income Security Act (ERISA). The workers claimed that the company's investment emphasis on environmental, social, and governance (ESG) factors in its retirement plan breached the duty of loyalty under ERISA.
The case is Spence v. American Airlines et al., case number 4:23-cv-005522, U.S. District Court for the Northern District of Texas.
The judge ruled that the workers had proved that American Airlines and its employee benefits committee were liable for breaching the duty of loyalty by allowing ESG factors to influence the plan. However, the judge found insufficient evidence that the breach caused financial losses to the plan. Instead, the judge said that equitable relief or changes to the airline's 401(k) plan management would adequately remedy the breach, rather than payment of any monetary damages. The judge also denied requests for disgorgement, fee reimbursement, and any other monetary equitable relief.
The judgment includes a permanent injunction against the airline, its benefits committee, and its officers and employees, mandating permanent changes to the management process. Those changes:
- Place restrictions on proxy voting and shareholder proposals, including a prohibition on proxy voting motivated by ESG investment goals;
- Mandate the hiring of two independent members to sit on the employee benefits committee;
- Set annual reporting and certification requirements on the committee;
- Require publication on its website of its membership in any organization principally devoted to DEI, ESG, and climate-focused investment or stewardship; and
- Place restrictions on the airline from using BlackRock or any other asset manager that is a significant shareholder of the public company's stock or holds its fixed debt.
American Airlines pilot Bryan Spence initially sued his employer in 2023. The judge granted class certification in May 2024. The court entered final judgment after a four-day bench trial in June 2024.
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