"Federal judge rules against American Airlines in 401(k) ESG lawsuit", 15 January 2025

A federal judge ruled Friday that American Airlines violated its fiduciary duty to loyalty in a class-action lawsuit brought by one of its pilots over the company’s retirement plans’ alleged ESG considerations, according to court documents… 

Throughout the lawsuit, Spence has alleged that American Airlines violated its duty to prudence by failing to monitor the proxy voting of its investment managers, including BlackRock. Additionally, he argued American Airlines’ ESG goals created a corporate conflict of interest when combined with ESG considerations made by BlackRock and others.

Judge Reed O’Connor found American Airlines fulfilled its duty of prudence and the airlines’ processes were “consistent with and, in many aspects, exceeded the processes of other fiduciaries.” 

However, O’Connor said American Airlines acted disloyally “by failing to keep American’s own corporate interests separate from their fiduciary responsibilities, resulting in impermissible cross-pollination of interests and influence on the management of the Plan.”

American Airlines’ motion to dismiss the case was denied last February, and a similar motion for summary judgment also failed. The case was later certified as a class-action lawsuit in May, covering all participants of American Airlines’ pilot retirement plan and employee pension fund...

Legal experts and investment managers have since expressed concerns that the ruling will open a floodgate to more lawsuits questioning corporations’ fiduciary duties with respect to ESG…

O’Connor’s ruling introduces a definition of ESG that he summarizes by saying, “ESG investing is a strategy that considers or pursues a non-pecuniary interest as an end itself rather than as a means to some financial end.” …