Dive Brief:
- American Airlines pilot Bryan Spence’s lawsuit alleging the company breached fiduciary duties by implementing ESG objectives within its pension fund was certified as a class action suit by Texas’ Northern District Court last week.
- Judge Reed O’Connor ruled May 22 that Spence’s suit will be allowed to cover all participants of both the airline’s retirement plan for its pilots and its pension fund for other employees who were enrolled in the two plans from June 2017 until the ruling date. The suit will exclude any employees who only invested through a self-directed account and any of the executives, directors, officers or employees responsible for managing the plans.
- While deciding whether Spence had met the legal standard to satisfy a class action request, O’Connor was not required to weigh in on the merits of the case. The size of the certified class is expected to exceed 100,000, according to court documents.
Dive Insight:
Spence first filed the lawsuit last June, and sought to get the suit certified as a class action in November. Spence’s claims center around an argument that American Airlines had violated its duties under the Employee Retirement Security Act of 1974 by investing with asset managers who have ESG objectives, particularly through its proxy voting record.
Spence said questions of whether a prudent fiduciary would have stopped certain ESG proxy votes by fund asset managers, like BlackRock, are common to the entire plans’ membership. However, American Airlines argued different plan members would be affected differently by proxy votes, and damages could only be found on a “proxy-vote-by-proxy vote” basis.
Earlier this year O’Connor ruled that — though Spence has yet to factually prove any harm — he would not dismiss the case against the airline because Spence had articulated a plausible enough claim “on its face” to continue. Following that ruling, the airline requested a summary judgment from the court, asking O’Connor to rule solely on the case’s merits. O’Connor has not yet issued a ruling on that motion.
The federal judge said that while American Airlines may be correct in its assertion that different members suffered different damages, “this potential difference does not erase the fact that all class members allegedly suffered the same core injury.” The judge agreed that Spence’s allegation that “the systemic presence of ESG activism in the plan … harmed plan participants and beneficiaries” creates a common question applicable to all members that would allow a single resolution to all claims.
“Here, there are multiple common questions applicable to the proposed class, including the most fundamental questions of whether [American Airlines’] alleged mismanagement of the plan constituted a breach of their fiduciary duties,” O’Connor wrote.
O’Connor also said the claims are typical to the entire class — another prong of the legal test for class action certification — because American Airlines “appear[s] to uniformly manage the plan as a single entity, treating all participants and beneficiaries consistently.”
The judge said that if Spence is able to prove his theory at trial, a finding that concludes the airline breached its fiduciary duty would be applicable to the entire plan.
“In other words, [American Airlines] either breached their fiduciary duties or they did not,” O’Connor said.
