Overview
On October 1, 2025, the US District Court for the Northern District of Texas entered a final judgment in the widely-followed ERISA class action against the fiduciaries of American Airlines' 401(k) plan, after having held in January of this year that the defendant fiduciaries breached their duty of loyalty by allowing BlackRock to pursue "non-pecuniary" ESG (environmental, social and governance) objectives in managing certain passively-managed collective trusts on the 401(k) plan's investment menu. Although the court's final judgment ordered significant injunctive relief, it declined to award any monetary relief, explaining that the plaintiff had failed to establish that the 401(k) plan had suffered any loss as result of the breach.
Following a bench trial, the court found in January that the defendants' investment monitoring process met or exceeded the industry standard of care. The court also found, however, that BlackRock had a policy of pursuing ESG objectives in voting proxies and dealing with management of corporations in which the collective trusts were invested, and that the defendants breached their duty of loyalty by failing to monitor and/or dissuade BlackRock from pursuing ESG objectives through proxy voting and shareholder activism. In assessing the defendants' loyalty, the court engaged in an extended discussion of what it found to be a suspicious overlap between BlackRock's "ESG Activism" and American Airlines' own public stance on ESG climate-related initiatives, as well as the corporate business relationship between American Airlines and BlackRock. According to the opinion, "BlackRock owned more than 5% of American stock and approximately $400 million of American's fixed income debt." The opinion did not indicate, however, whether these investments were made by BlackRock in a fiduciary capacity (i.e., as a manager of someone else's money) or in BlackRock's corporate capacity.
Because the collective trusts were passively-managed, BlackRock's pursuit of ESG objectives clearly would have had no impact on the selection of investments in the trusts' portfolios. After months of further briefing on the issue of remedies, the court concluded in its final judgment that the plaintiff had failed to establish a prima facie case of "loss" resulting from the breach, and declined to award any monetary relief to the plan. Nonetheless, the court awarded considerable injunctive relief, including the following:
- American Airlines is prohibited from permitting any plan activities that are directed towards non-pecuniary ends and not in the exclusive financial interest of plan participants, such as ESG.
- American Airlines must hire two independent members of the Employee Benefits Committee (EBC) for a five-year term. These members must have no relationship to any plan investment manager or administrator.
- The new Employee Benefits Committee must provide an annual written report to plan participants 1) identifying any transactions between American Airlines and any manager of plan assets; 2) certifying that the EBC will only pursue investments "based on provable financial performance, not DEI, ESG, sustainability, or any other nonfinancial criteria"; and 3) certifying that proxy votes on behalf of plan participants will seek only to maximize financial results and not "DEI, ESG, sustainability, or other non-financial criteria."
- American Airlines must publish information concerning membership of American Airlines and each plan administrator or manager in any organization "principally devoted to achieving DEI, ESG, climate-focused" investment objectives on its website.
- American Airlines is enjoined from using BlackRock or any other asset manager that owns 3% or more of American Airlines' shares, unless there is a policy preventing those who maintain the corporate relationship with the asset manager from serving as a plan fiduciary.
Key Takeaway:
The case will almost certainly focus more attention on the proxy voting policies and procedures of ERISA plans, and the extent to which the managers of funds in which ERISA plans invest are attempting to pursue ESG objectives through proxy voting and other types of shareholder activism. However, it appears unlikely that the case will prompt a wave of ERISA class actions by plaintiffs' attorneys in the absence of a coherent nexus between a fund manager's consideration of ESG factors and a loss to the plan.
