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A U.S. federal court has ruled that American Airlines failed its workers by choosing BlackRock to manage part of its pension plan, with the judge claiming the world’s largest asset manager was tainted by “ESG activities.”
The ruling by Northern Texas District Court Judge Reed O’Connor highlights how American companies face increasing legal risks over their environmental, social, governance, and diversity and inclusion policies.
O’Connor’s ruling comes as a culture war rages in the United States over programs that promote everything from racial diversity to environmental protection. President-elect Donald Trump and allies like Elon Musk have strongly opposed the plan, and some companies have begun to overturn it before the inauguration later this month.
“this [case] said Josh Lichtenstein, partner at law firm Ropes & Gray. He said the case is one of the largest retirement fund lawsuits in the United States. “It seems to me like the same lawsuit could be filed against literally every 401k plan in America.”
Conservative groups have been tracking these kinds of cases in recent years and have tried to handpick judges they believe will side with them. O’Connor, an appointee of President George W. Bush, dismissed the 737 Max conviction last month when Boeing reached a settlement with the U.S. Justice Department on provisions related to diversity, equity and inclusion.
An American Airlines class action lawsuit filed by a pilot in 2023 alleged that the airline violated its fiduciary duty to employees in their 401k plans by hiring investment managers who “pursue a left-wing political agenda through ESG strategies.” The complaint does not mention BlackRock, and the asset manager is not a party to the suit.
But O’Connor seized on BlackRock’s relationship with American Airlines as the largest investment manager in its 401k plan. The savings system consisted of passive index funds and active funds, but did not include ESG-specific strategies.
But he said BlackRock’s 2021 vote in support of the hedge fund engine’s No. 1 proxy battle with energy giant ExxonMobil constitutes “ESG activity.” American Airlines “allowed BlackRock to continue to manage billions of dollars of assets. [401k] We plan assets that pursue non-economic ESG benefits,” O’Connor said.
O’Connor ruled that American Airlines violated its fiduciary duty of loyalty to plan participants by failing to separate “BlackRock’s ESG interests” from its own corporate objectives, “resulting in impermissible cross-pollination.” But he said American Airlines did not breach its duty of care “with respect to the design and implementation of the plan’s monitoring process.”
The judge reserved ruling on whether plan participants suffered losses.
American and BlackRock did not respond to requests for comment.
Additional reporting by Claire Bushey
