Summary
**Ortiz v. American Airlines, 5th Cir. 2021** – ERISA fiduciary duty claims arising from a 401(k) plan’s capital preservation options. The Fifth Circuit held that plan participants lacked Article III standing for breach-of-prudence claims (Count I) because they failed to show they would have invested in a stable value fund had the plan not offered a low-yield demand deposit fund; causation was not established. Participants also lacked standing for a prohibited-transaction claim against the credit union (Count II) because they did not connect the credit union’s use of plan assets to lower interest rates. The court affirmed summary judgment for defendants and held the district court did not abuse its discretion in denying preliminary approval of a class settlement.
Topics
Practice areas
Questions Presented
- Whether Plaintiffs have Article III standing for their claims under ERISA against AA and PAAC and against FCU.
- Whether the district court abused its discretion in denying preliminary approval of the class action settlement.
Holdings
- Plaintiffs lack standing because they failed to show that their alleged injury (lost investment income) was caused by the defendants' conduct; they did not provide evidence that they would have invested in a stable value fund had the FCU Option not been offered.
- Plaintiffs lack standing because they failed to show that the lower interest rate on the FCU Option was caused by FCU's use of plan assets for its own benefit; no evidence that other FCU customers received higher rates from those investments.
- The district court did not abuse its discretion because Plaintiffs failed to provide adequate justification for the settlement amount, which was significantly less than the claimed losses, and the court gave multiple opportunities to supplement the record.
Key quotations
“Plaintiffs could have submitted a declaration, affidavit, or testimony to the effect that they would have invested in a stable value fund absent the [FCU Option]. But they offered no such evidence. That is the end of the matter.” (at 9)
“It is a 'settled rule that, in reviewing the decision of a lower court, it must be affirmed if the result is correct although the lower court relied upon a wrong ground or gave a wrong reason.'” (at 11)
“The district court did not abuse its discretion in doing so [denying preliminary approval of the settlement].” (at 13)
Factual background
AA offered a $uper $aver 401(k) plan with a demand-deposit fund (FCU Option) and later a stable value fund. Plaintiffs invested in the FCU Option. They claimed that the FCU Option had lower returns than a stable value fund and that Defendants breached fiduciary duties by offering it. The district court denied preliminary approval of a settlement and later granted summary judgment.
Procedural history
Plaintiffs sued Defendants for breach of ERISA fiduciary duties. The district court denied preliminary approval of a class action settlement, then granted summary judgment for Defendants. Plaintiffs appealed.
Remand instructions
Remanded with instructions to dismiss Plaintiffs' claim against FCU (Count II) for lack of jurisdiction.