American Airlines must face lawsuit over ESG retirement investing

By Thomson Reuters Feb 22, 2024 | 1:57 PM

By Jody Godoy

(Reuters) – American Airlines must face a lawsuit claiming it failed to prudently oversee employee retirement funds because it used asset managers that pursued sustainable investment strategies, a federal judge in Fort Worth, Texas ruled.

U.S. District Judge Reed O’Connor said pilot Bryan Spence can move forward with his lawsuit claiming the airline breached its duties to plan participants by choosing investment managers focused on “nonfinancial” issues of environmental, social and governance.

“These specific actions — selecting, including, and retaining ESG oriented investment managers — allow the court to reasonably infer that defendants’ process is flawed because it allowed plan assets to be used to support ESG strategies,” O’Connor wrote.

A spokesperson for American Airlines declined to comment on Thursday.

Spence sued the airline last year, saying it had violated the Employee Retirement Income Security Act (ERISA), which governs how retirement funds are administered in the U.S.

He claimed that American failed its duties to remain loyal to retirees and prudently oversee their assets by engaging investment advisors who “pursue political agendas” through ESG strategies and voting at shareholder meetings.

American Airlines asked O’Connor to dismiss the case, saying Spence had failed to allege that the funds in the plan had financially underperformed.

O’Connor, an appointee of Republican former President George W. Bush, is known for frequently ruling in favor of conservative litigants challenging laws and regulations governing guns, LGBTQ rights and health care.

The U.S. Department of Labor implemented a rule last year allowing employee retirement plans to consider environmental, social and governance (ESG) issues in investment decisions.

Texas is one of 25 Republican-led states appealing a decision rejecting their bid to block the rule.

(Reporting by Jody Godoy in New York; Editing by Alistair Bell)