American Airlines (AA) is facing a class-action lawsuit filed by pilot Bryan Spence, who alleges that the airline violated its fiduciary obligation to the Employee Retirement Income Security Act (ERISA) by investing pension funds in environmental, social, and corporate governance (ESG) funds. The case is set to be heard on June 24 after a Texas district judge denied a request for dismissal.
The lawsuit argues that AA invested millions of dollars of its employees’ retirement savings with investment managers and funds that pursue political agendas through ESG initiatives. The plaintiffs claim that AA disregarded the welfare of its employees by investing in poorly performing ESG funds managed by firms like BlackRock, which are known for their pervasive ESG agendas. BlackRock owns more than 5 percent of stock in American Airlines and has approximately $400 million of AA’s fixed income debt.
The class-action lawsuit, which represents around 100,000 participants, asserts that AA’s investment in ESG funds harmed the financial interests of its employees. It alleges that these funds are more expensive for plan participants to own compared to similar non-ESG investment funds and underperform financially. Additionally, it claims that the ESG funds engage in shareholder activism to achieve ESG policy agendas rather than prioritize maximizing risk-adjusted financial returns for plan participants.
The complaint further states that AA violated the Employee Retirement Income Security Act regulations by choosing investment options that focus on nonfinancial objectives instead of exclusively maximizing financial returns for investors. It argues that a prudent fiduciary would have removed these funds, costing plan participants millions of dollars in lost earnings.
In response to the allegations, AA disputes the definition of ESG investing and claims that it can be viewed as encompassing various investment approaches with different objectives. It also disputes the claim that ESG investing underperforms and states that this assertion is irrelevant and unsupported by evidence. Additionally, AA disputes the claim that BlackRock was its largest investment manager, calling the phrase vague. It argues that it did not fail to monitor BlackRock’s management of funds and asserts that its financial investments were made with employee knowledge.
Regarding the allegation that AA is “fully committed to ESG strategy as a company,” AA argues that this claim is vague and unsupported by evidence. It states that while it pursues certain ESG-related initiatives in a corporate capacity, such as reducing emissions and maintaining a diverse workforce, these initiatives did not influence the pension fund investment plans.
In conclusion, the class-action lawsuit against American Airlines highlights allegations that the airline violated its fiduciary obligation by investing in ESG funds, which the plaintiffs claim have harmed the financial interests of its employees. AA disputes these claims and asserts that the definition and performance of ESG investing are subject to debate. The case will proceed to court on June 24, where further arguments and evidence will be presented to determine the outcome.
 funds. The lawsuit claims that these funds underperformed and harmed the financial interests of employees. American Airlines disputes these claims and argues that the definition and performance of ESG investing are debatable. The case is set to be heard on June 24.){kind=link}