In a case sure to be closely watched by the retirement industry, a senior American Airlines pilot is suing his employer, arguing that the company’s 401(k) plan—one of the largest in the country—picks investments that pursue “leftist political agendas.”
The class action lawsuit was filed last Friday in U.S. District Court for the Northern District of Texas by Bryan P. Spence individually and as a representative of a class of similarly situated persons. It argues that over the past 6 years, the plan has underperformed from the airline choosing to invest in and recommend funds that meet ESG goals, causing him financial harm.
Spence claims the company’s approach is “flatly inconsistent” with its fiduciary responsibility under the Employee Retirement Income Security Act (ERISA).
The lawsuit starts by quoting the opening paragraph from a May 15 editorial in The Wall Street Journal written by Marlo Oaks and Todd Russ—state treasurers of Utah and Oklahoma—which says:
Many American workers don’t realize that their hard-earned money is being used against them. Firms whose job is to deliver investment returns are instead weaponizing retirement funds, public pensions and other investments in pursuit of nakedly ideological goals. It is perhaps the most severe breach of the fiduciary standard in American history.
Spence, who is a veteran American Airlines pilot and 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, Texas, claims American Airlines breached its fiduciary duties in violation of ERISA “by investing millions of dollars of American Airlines employees’ retirement savings with investment managers and investment funds that pursue leftist political agendas through environmental, social and governance (“ESG”) strategies, proxy voting, and shareholder activism—activities which fail to satisfy these fiduciaries’ statutory duties to maximize financial benefits in the sole interest of the Plan participants.”
The lawsuit highlights what Spence says are examples of ESG policy, including sustainability efforts, LGBTQ+ interests and racial and gender diversity, as well as executive pay and diversity in leadership.
If allowed to proceed to trial, Spence will call on the court to rule that American Airlines has breached its fiduciary duties under ERISA, and demand that the airline “make good to the Plan all losses that the Plan incurred as a result of their breaches of fiduciary duties, and to restore the Plan to the position it would have been in but for this unlawful conduct,” and further demands injunctive relief to prevent further violations and mismanagement of the plan.
American Airlines’ 401(k) includes approximately 100,000 participants, making it one of the largest in the U.S. with around $26 billion assets, according to the lawsuit.
The case was filed in Texas Northern District Court under case number: 4:2023cv00552.
Gallup finds Americans unmoved by ESG movement
Efforts to promote adoption of ESG framework in investing have gained traction in recent years and have become the subject of pro- and anti-ESG legislation, yet a new Gallup poll finds the general public is no more familiar with ESG today than two years ago.
Thirty-seven percent of Americans currently report being “very” or “somewhat familiar” with ESG, unchanged from 36% in 2021. Another 22% today are “not too familiar,” while 40% are “not familiar at all.”
The findings are from a Gallup poll conducted April 3-25, in which respondents were told that ESG “includes factors like the record of a business on human rights, the environment, diversity or other social values” and that some people take these factors “into account when making decisions about buying products and services or investing.”
Underscoring the public’s lack of familiarity with ESG, nearly six in 10 Americans (59%) take the “no opinion” option when asked if they view “the movement to promote the use of environmental, social and governance, or ESG, factors in business and investing” as a positive or negative development.
When asked whether retirement fund managers should only take financial factors into account when making investment decisions or also consider ESG factors, the public leans toward the former (48% vs. 41%, respectively).
SEE ALSO:
• ‘No ESG in TSP Act’ Reintroduced in Congress
• House GOP Fails to Override Biden ESG Veto
• Coalition of 25 States Sue Biden Administration on ESG Final Rule