Last week, U.S. District Judge Reed O’Connor ruled that American Airlines had breached the law by making investment decisions for its employee retirement plans based on non-financial factors like ESG. The airline was sued in 2023 by a pilot, Bryan Spence, via a class action suit that represented over 100,000 participants in the retirement plan.
In the suit, the pilot argued that the airline had infringed the Employee Retirement Income Security Act by not remaining loyal to participants in their 401k plan in overseeing their assets.
In February 2024, O’Connor dismissed claims made by the airline that the suit needed to be dismissed because the pilot couldn’t demonstrate that the retirement plan had underperformed, which led to the trial. The federal judge presided over a 4-day trial with no jury a couple of months later before he made his ruling this year.
In his ruling, the judge explained that the company violated its legal duty to make investment decisions based only on the financial interests of beneficiaries of its 401k plan by allowing BlackRock, a major shareholder and its asset manager, to focus on ESG factors. He added that the evidence had shown that American Airlines’ relationship with BlackRock may have influenced the administration of the retirement plan.
He then noted that he’d decide on whether members had suffered financial harms and if the airline would need to pay them damages. However, he added, the airline’s decisions didn’t breach their duty of prudence as it acted according to current standards in the industry.
O’Connor is known for often ruling in favor of conservative plaintiffs that contest regulations and laws governing healthcare, LGBTQ rights, and guns.
A BlackRock spokesperson stated that the firm always acted independently and was focused solely on the best financial interests of its clients. They added that BlackRock’s sole agenda was maximizing returns for its clients. American Airlines also released a statement noting that it was reviewing the decision.
The decision by the judge may have set a precedent for the ESG space, coming at a time when conservatives are growing more critical of the space and putting pressure on firms to focus more on shareholder value and profitability rather than the adoption of ESG policies that they argue may harm industries and impact the economy negatively.
BlackRock, which wasn’t part of the suit, announced last week that it’d be exiting an environmentally focused investor group as pressure from GOP politicians mounted.
While investment funds like BlackRock are taking flak for championing ESG, individual companies like Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are pressing on with their implementation of sustainability principles since they are convinced that this is beneficial to the company’s bottom line.
NOTE TO INVESTORS: The latest news and updates relating to Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are available in the company’s newsroom at https://ibn.fm/ATBHF
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