Judge Approves Class-Action Lawsuit Against American Airlines Over ESG Pension Investments

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by Tyler Durden
Monday, May 27, 2024 - 01:35 AM

Authored by Matt McGregor via The Epoch Times (emphasis ours),A district judge has granted a pilot’s request for a class-action lawsuit against American Airlines for allegedly investing pension funds into environmental, social, and governance (ESG) funds.

An American Airlines flight takes off from Ronald Reagan Washington National Airport in Washington, D.C., on July 10, 2023. (Alex Wong/Getty Images)

The case revolves around the allegation that American Airlines—headquartered in Fort Worth, Texas—violated its fiduciary obligation to the Employee Retirement Income Security Act (ERISA) “by investing millions of dollars of American Airlines employees’ retirement savings with investment managers and investment funds that pursue political agendas” through ESG initiatives. 

“By pursuing ESG goals, Defendants gave Plan assets to fund managers, such as BlackRock, who allegedly ignored financial returns as the exclusive purpose and lowered the value of Plan participants’ investments,” the order states.

In addition to being disloyal to the employees, the plaintiff, Bryan Spence, argues that American Airlines’ investments were “imprudent because it is well known that ESG funds are associated with poor performance given the detrimental effects of such activism on stock prices.”

“To remedy these alleged ERISA violations, Plaintiff filed this lawsuit individually and on behalf of a proposed class of Plan participants and beneficiaries,” the order says. “ERISA authorized participants in a qualifying plan to bring an action on behalf of other participants to enforce the statute’s fiduciary obligations and remedial provisions, as well as recover all losses to a plan caused by a breach of a fiduciary duty.”

Texas District Judge Reed O’Conner—a George W. Bush appointee—writes in his order that the case is eligible for class action because of the similarities of ERISA violations.

“Even if the damages are diverse, finding in favor of Plaintiff on his ERISA claims would also resolve the ERISA claims of this class,” he writes.

The remedy for damages would be the same for all plaintiffs in the class-action lawsuit, he says.

‘Underperforms Financially’

According to the complaint, ESG funds are usually more expensive for pension enrollees than non-ESG funds.

They also “underperform financially,” and instead of maximizing “risk-adjusted financial returns” for enrollees, they “engage in shareholder activism to achieve ESG policy agendas.”

“Defendants have also selected and included as investment options funds that are managed by investment companies that pursue ESG policy agendas through proxy voting and shareholding activism,” the complaint says. “Many of these funds are not branded or marketed as ESG funds; however, the actions of their investment advisors and managers give rise to the same ERISA violations as those funds that do market themselves as ESG funds.”

The complaint states that Mr. Spence, an American Airlines pilot and Lt. Col. in the U.S. Air Force, “has suffered specific financial damages” as a result of American Airlines’ “unlawful conduct.”

The pension plan itself “has suffered millions of dollars in losses because of the Defendants’ fiduciary breaches and the Plan remains vulnerable to continuing harm.”

The complaint defines ESG as an investment strategy “aimed at influencing societal changes.”

“Generally, three criteria are used to evaluate companies for ESG investing,” the complaint says.

‘Aggressive Climate Goals’

Among the criteria are environmental commitments to reduce a company’s carbon footprint and a pledge to support Diversity, Equity, and Inclusion (DEI) agendas.

“American Airlines is fully committed to ESG strategy as a company,” the complaint says. “According to its annual ESG Report, American Airlines views its ESG efforts as a ‘key part of American’s success,’ and ‘an important part of American’s long-term strategy,’' the complaint says. “It sets DEI goals and strives to achieve net zero emissions by 2050.”

On its ESG webpage, American Airlines declares its commitment to “aggressive climate goals.”

American Airlines states on its DEI webpage that it strives for diversity in hiring and that its employees “work to make American a place where people of all generations, races, ethnicities, genders, sexual orientations, gender identity, disabilities, religious affiliations and backgrounds feel welcome and valued.”

The Human Rights Campaign awarded American Airlines a “Best Places to Work for LGBTQ Equality” in 2021, according to the webpage.

The Epoch Times contacted American Airlines for comment.

Sacrificing Safety for Ideology

Currently, the airline industry is under scrutiny for what critics say is sacrificing safety and performance for DEI ideology.

The airline has faced several complications this year, including an “anomaly” in the braking system on one of its aircraft to run past the end of a runway, The Associated Press reported, and another mechanical issue in one of its planes while in flight.

In January, one of its flights landed hard, putting five flight attendants and one passenger in the hospital.

In January, SpaceX and Tesla CEO Elon Musk criticized the airline industry’s emphasis on DEI initiatives in a post on X.

“Do you want to fly in an airplane where they prioritized DEI hiring over your safety? That is actually happening,” he said.