American Airlines Motion Argues ESG Funds Theory is “Wrong”

In American Airlines’ latest effort to get a complaint dismissed from federal court, its attorneys last week filed the latest rebuttal to claims made by the plaintiff, former pilot Bryan Spence.

In Spence v. American Airlines et al., the plaintiff alleges that two American Airlines Inc. defined contribution plans defaulted Spence and other participants into underperforming funds that utilize environmental, social and governance factors in investment selection. The two sides have been exchanging motions in U.S. District Court for the Northern District of Texas, Fort Worth Division, arguing for and against dismissal.

In supplementing their motion to dismiss, attorneys for American Airlines replied to additional motions from the complainant by arguing that Spence has not demonstrated he was affected by conditions sufficient to bring the lawsuit because he was never invested in any of the challenged funds.

The amended complaint asserts two theories of liability: the challenged fund theory, which challenges the plans’ alleged inclusion of ESG funds as investment options, and the challenged manager theory, which challenges the plans’ use of managers who allegedly used their proxy voting power to support ESG initiatives.

“[Spence] contends that because he can assert an interest in some grievance that can be framed as a fiduciary breach (his Challenged Manager theory), he can pursue any other supposed breaches, regardless of whether those other breaches have had any effect on him,” American Airlines attorneys wrote. “That contention is as wrong as it sounds, and it runs headlong into the Supreme Court’s instruction that ‘standing is not dispensed in gross,'” cited from TransUnion LLC v. Ramirez, a 9th Circuit Court of Appeals decision reversed and remanded in 2021 by a 5 to 4 decision.

Spence’s challenged manager contention also fails as “also legally groundless,” attorneys for the defendants wrote in the October 13 reply memorandum.

“Despite Plaintiff’s effort to reframe the issue, the critical pleading flaw in this theory is not his failure to allege an injury,” attorneys wrote. “Rather, it is that he has failed to allege facts sufficient to infer a breach.”

The airline and the employee benefits committee criticized additional arguments by Spence presented before the court.

“Defendants have shown that the duty to monitor individual investments does not extend to brokerage windows,” the supplemental motion states. “Plaintiff’s only rejoinder is to argue that the court must credit his contrary allegations, but the rule that a plaintiff’s allegations must be accepted as true does not apply to conclusions of law. As plaintiff offers no response to defendants’ argument that the duty does not apply as a matter of law, he concedes the issue.”

The defendants filed the reply in support of the motion to dismiss following Spence’s legal team referencing another federal court’s decision that the plaintiff claims supports denying the motion to dismiss. American Airlines’ motion to dismiss was filed last month.

Neither attorneys for the defendants nor the plaintiffs returned requests for comment on the lawsuit.