Last May, we provided a client alert about a recent federal district court case (Spence v. American Airlines, No. 4:23-cv-00552-O, 2025 WL 225127, at *2 (N.D. Tex. Jan. 10, 2025)), in which a plan sponsor and certain plan fiduciaries were found to have breached their ERISA fiduciary duty of loyalty based primarily on conduct related to proxy voting of securities held in certain of the 401(k) plans’ investment funds. At that time, the court left open the question of whether the breach resulted in any damages to the participants.

The court has now answered that open question in a September 30, 2025, court order, and the biggest punchline is this — no monetary damages for the participants. Specifically, the court held that the plaintiffs had “failed to sufficiently establish actual monetary losses” to the plan resulting from the fiduciary breaches identified by the court last January. The court noted that plaintiffs must “establish a causal link between the fiduciary breach and actual economic loss before monetary relief may be awarded,” and that plaintiffs failed to do so in this case.

The court did require certain changes in plan governance practices, including:

• Defendants must provide an annual written report to plan participants identifying any financial transactions or financial relationships between the plan sponsor and the plan’s administrator and other advisors or investment managers.
• Defendants must ensure all plan-related investment and stewardship activities (including proxy voting) are conducted solely for the financial benefit of plan participants, and not for nonfinancial objectives (e.g., ESG, DEI, sustainability).
• The plan sponsor must appoint at least two independent members to the benefits committee, with no ties to certain investment managers or advisors, for five years.
• The benefits committee must annually report and certify to plan participants that all investment decisions and proxy votes are based only on financial criteria, not nonfinancial goals.
• The plan sponsor must publicly disclose on its website any memberships in organizations focused on nonfinancial investment objectives (such as ESG or climate initiatives) for itself and its plan asset managers.
• The plan sponsor must place restrictions on using certain asset managers (e.g., for investment managers that are also significant shareholders) to manage plan assets unless specific conflict-of-interest policies are in place.

However, the absence of monetary damages is potentially a big deal and may take away some of the economic fuel for copycat cases. It remains to be seen if plaintiff or defendants will appeal the court’s ruling. One takeaway, however, is that ERISA plan fiduciaries should continue to ensure that all investment decisions, proxy voting, and shareholder engagement in general are driven by pecuniary objectives in the exclusive interest of plan participants.