Duty of Prudence

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Just a few years ago, ESG was one of the most important themes in the corporate and securities world. Companies were under pressure to demonstrate their sustainability qualifications and otherwise establish their ESG credentials. But then came the ESG backlash, and many companies found (and, indeed, continue to find) themselves attacked for their ESG efforts. The backlash has taken the form both of legislation and litigation. And while the ESG backlash litigation claimants have not always done well, there have also been some notable recent successes.

The most recent ESG backlash litigation success is in the ERISA liability action that an American Airlines pilot filed against American Airlines and its Employee Benefits Committee. In a January 10, 2025, post-trial decision (here), the court ruled, following a four-day evidentiary hearing, that the defendants had violated their duties of loyalty by encouraging employee 401(k) investment in BlackRock ESG funds. The court’s opinion is harsh in its criticism of the airline for advancing its corporate interest in ESG over the interests of the plan participants and for failing to examine and address the company’s conflicted relationship with BlackRock.  Continue Reading Plan Fiduciaries’ ESG Efforts Breached ERISA Duty of Loyalty, Court Holds

I have noted in prior posts on this site the phenomenon of ESG backlash, which has not only taken the form of legislative and other overtly pollical action, but has also taken the form of litigation as well. Though the ESG backlash lawsuits generally have not fared well in the courts, one of these suits recently survived a motion to dismiss.

In a February 21, 2024, ruling, the Northern District of Texas denied the motion to dismiss in a lawsuit filed by an American Airlines pilot alleging that the airline and its employee benefits committee violated their fiduciary duties under ERISA to the company’s 401(k) plan participants in connection with selection and retention of funds whose managers allegedly pursue non-economic ESG objectives rather than maximizing plan participants’ financial benefits. As discussed below, the ruling underscores just how fraught the ESG-related litigation picture has become. A copy of the court’s ruling can be found here.Continue Reading ESG Backlash ERISA Lawsuit Survives Dismissal Motion