Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—N.D. Tex.: American Airlines not subject to monetary liability for breach of loyalty under ERISA, (Oct 6, 2025)

By Rebecca E. Hoffman, J.D.

The court enjoined the defendants from any activities on behalf of American’s 401(k) plan that are motivated by ESG, DEI, or any other nonpecuniary aim.

In a class action alleging breach of fiduciary duties in retirement plan management, the Northern District of Texas Sept. 30 issued a final judgment imposing an injunction against American Airlines, Inc., and its employee benefits committee, requiring that the defendants refrain from allowing investment decisions motivated by environmental, social, and governance factors rather than the financial interests of the retirement plan (Spence v. American Airlines, Inc., No. 4:23-cv-00552 (N.D. Tex. Sept. 30, 2025)).

However, the court declined to award monetary relief, finding that the plaintiff, representing the class, failed to meet his burden under ERISA to show a causal link between the breach and economic losses from the plan.

On Jan. 10, 2025, the court issued findings of fact and conclusions of law, concluding that the defendants failed to act in the retirement plan’s best financial interests by allowing their corporate interests, as well as BlackRock’s ESG interests, to influence management of the plan. In that opinion, however, the court deferred its decision on remedies pending further briefing of the parties.

ESG Investing. One of the company’s investment managers, BlackRock Institutional Trust Company, Inc., managed investments for the retirement plan’s passively managed index fund tier. American’s Employee Benefits Committee (EBC) oversaw BlackRock and the other investment managers as the plan’s ERISA fiduciary and administrator. The plaintiff alleged that EBC allowed BlackRock’s focus on ESG investing to influence the plan. In the January ruling, the court found that “ESG investing” encompasses investment strategies aimed at bringing about environmental, social, or governance changes, such as minimizing pollution or improving diversity in hiring.

The court also noted in the earlier ruling that ESG investing tends to underperform traditional investing “[b]y focusing on non-pecuniary interests.”

In the final judgment, the court determined that the plaintiff failed to show that the plan lost money. “Under Bussian v. RJR Nabisco, Inc., 223 F.3d 286, 300 (5th Cir. 2000), a plaintiff must establish a causal link between the fiduciary breach and actual economic loss before monetary relief may be awarded.” Because the plaintiff did not establish that link, the court moved to an equitable remedy as authorized by ERISA § 409(a).

AA and EBC enjoined. The injunction prohibits the defendants and their officers, employees, and agents from allowing proxy voting, shareholder proposals, or the like, that are motivated by non-pecuniary interests including but not limited to ESG investing. Further, the EBC is required to have two independent members not connected to BlackRock or any other entity that manages the retirement plan’s assets.

The EBC must also report to plan participants about any transactions between the company and any of its investment managers, advisors, or administrators, and certify each year that “the EBC, and each administrator, advisor, and/or investment 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.” American must reveal on its website any memberships in DEI- or ESG-focused organizations and can no longer use BlackRock as asset manager unless it institutes policies to prevent further financial breaches.

The case is No. 4:23-cv-00552.

Judge: O’Connor, R.

Attorneys: Andrew Bowman Stephens (Hacker Stephens LLP) for Bryan P. Spence. Russell D. Cawyer (Kelly Hart & Hallman LLP) for American Airlines, Inc.

Companies: American Airlines, Inc.

Cases: PensionBenefitPlans TortClaims TexasNews