An American Airlines pilot who filed a lawsuit against his employer for investing in environmental, social, and governance (ESG) funds into his 401(k) is pushing back on a motion to dismiss from the airline.
In an amended complaint, Plaintiff Bryan P. Spence doubled down on his claims that American airlines had selected and included “investment options funds that are managed by investment companies that pursue ESG policy agendas through proxy voting and shareholder activism.”
Spence added that, “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 [Employee Retirement Income Security Act of 1974] violations as those funds that do market themselves as ESG funds.”
Earlier this month, American Airlines had filed a motion to dismiss against Spence’s claims, arguing that Spence was never invested in the ESG funds he listed. The airline also made a note that the investment options recorded in the lawsuit were not offered in the 401(k) plan’s investment menu, but instead through a self-directed brokerage account.
In its motion to dismiss, American Airlines criticized the pilot and veteran of exploiting the recent politicization of sustainable funds to carry out the suit. “Plaintiff seeks to insert himself into the ongoing, politicized debate over the wisdom of ESG-themed investing,” American Airlines’ wrote in its motion to dismiss.
“But this is a case without a controversy. Plaintiff does not allege that he has allocated any portion of his Plan account to the Challenged Funds he lists in the Complaint, or to any non-ESG investment options that happen to be sponsored by Challenged Managers with objectionable proxy-voting policies. Nor could he, as he has never invested either in any of the 25 funds he identifies in the Complaint as ESG Funds or in any investment options sponsored by the Challenged Managers,” the airline further stated.
However, in the amended complaint, Spence maintained that he was invested in some of the ESG funds listed, including nearly 37% in BlackRock’s Target Date 2045 fund. BlackRock, he stated, also manages the majority of investments in the plan.
In the amended complaint, Spence cites multiple news clippings on BlackRock’s past ESG advocacy and activism. “BlackRock’s ESG activism can have a significant effect on companies whose performance is important to the Plan participants’ investments,” he said.
Spence, however, has not provided performance records of the ESG investments listed in the complaint, despite American Airlines challenging him to do so. “Plaintiff does not allege that the options sponsored by these managers have delivered lower returns than other options — or that the options’ performance would have disqualified them on any other financial ground,” the airline stated in its motion to dismiss. “Indeed, he doesn’t even bother to discuss the financial performance of a single investment option sponsored by a challenged manager.”
Spence has also claimed American Airlines chose funds managed by American Beacon Advisors; TCW Group; Loomis, Sayles & Company; Artisan Partners; Thompson, Siegel & Walmsley LLC; Morgan Stanley Investment Management; and State Street Global Advisors, all of whom he said focus on ESG.
Spence further alleged that American Airlines pursued an “ESG agenda” that included “divesting in oil and gas stocks, banning plastic, and requiring ‘net zero’ emissions, which do not contribute to the company’s profitability or increasing shareholders’ returns,” he said. “None of the proposals were supported by management at the targeted companies, and the investment managers’ votes were typically made without the approval, or even the awareness, of Plan participants,” he continued.
The American Airlines pilot filed the lawsuit back in June against his employer in the U.S. District Court for the Northern District of Texas, accusing the airline of choosing investments that he said pursued “leftist political agendas,” and was “flatly inconsistent” with its fiduciary responsibility under ERISA.
Fidelity Investments and Edelman Financial Engines had also been targeted in the original complaint but were dismissed in a court docket released in July. No specific reason for the termination was listed.
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