A Texas judge has dismissed an attempt by American Airlines to dismiss a class action lawsuit brought by one of its own pilots claiming that the Fort Worth-based carrier has violated its fiduciary duties to the members of its 401(k) pension plan by holding ‘woke’ investments that pursue “leftist political agendas”.
Bryan P. Spence, who is also a Lieutenant Colonel in the U.S. Air Force in his 20th year as an F-16 instructor at the Naval Air Station Joint Reserve Base in Fort Worth, brought the lawsuit against his employer last June because he believes so-called ‘Environmental, Social and Governance’ (ESG) investments perform badly.
In particular, Spence has criticized the involvement of the BlackRock investment management company in managing the ESG investments in AA’s pension plan – one of the largest in the United States, with around 100,000 members and $26 billion in assets.
Spence argues that BlackRock focuses on socio-political outcomes from its investments rather than on financial returns, meaning that pension plan members could be losing out.
American Airlines filed a motion to have the lawsuit dismissed back in February, but earlier this month, Texas District Judge Reed O’Connor ruled in a 40-page order that an “factfinder could conclude that Defendants [American Airlines] acted imprudently due to a flawed fiduciary process and imprudent actions regarding ESG investing”.
O’Connor didn’t actually rule that American Airlines had definitely acted imprudently but rather that the lawsuit should go to a full trial so that full factfinding can take place and all the evidence weighed up.
Nowadays, the majority of big businesses have a formal ESG policy which is designed to guide the company’s decision-making on environmental, social, and governance matters.
In his lawsuit, Spence highlights examples of ESG policy, including sustainability efforts, LGBTQ+ interests and racial and gender diversity, as well as executive pay and diversity in leadership.
While some of AA’s investment funds are specifically labelled as ESG-compliant, Spence alleges that many other funds target ESG goals without being labeled as such.
The trial will decide whether American Airlines has violated the Employee Retirement Income Security Act of 1974 which places a duties on pension managers to ensure that all funds managed under a 401(k) plan deliver the best financial results for its members.
American Airlines has denied that its ESG investments underperform compared to other investments and says its employees were made aware of the various investments within the pension plan.
The trial is due to start on Monday.
