U.S. District Judge Reed O’Connor, appointed by President George W. Bush (R), issued a final ruling in Spence v. American Airlines Inc., siding partly with a pilot who sued the airline over ESG-linked retirement investments. O’Connor ruled that American Airlines breached its duty of loyalty under the Employee Retirement Income Security Act (ERISA) because it allowed non-financial goals to influence its 401(k) plan. O’Connor ordered the airline to remove ESG considerations from its retirement plan, appoint independent benefits committee members, and bar non-financial proxy voting. However, he found no breach of the duty of prudence and did not to award monetary damages, saying the plaintiffs showed no financial loss.

Why does it matter?

This case marks the first federal on-the-merits ruling restricting ESG considerations in a company retirement plan. O’Connor’s order underscores how courts may begin treating ESG as a non-financial, and impermissible, investment factor under ERISA. The ruling forces American Airlines to change its plan management even without evidence of financial harm—signaling that fiduciaries can face injunctions, not just monetary liability, for prioritizing social or environmental goals.

What’s the background?

The case was filed in June 2023 and challenged American Airlines’ use of BlackRock as a plan administrator, alleging the firm’s ESG-aligned proxy voting violated fiduciary obligations. O’Connor had issued a similar order in January 2025, finding that American Airlines breached its duty of loyalty when it allowed ESG considerations to influence its retirement plan.

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