American Airlines, Inc. and its affiliated credit union recently defeated an appeal challenging a low-yield investment option in the airline’s 401(k) plan when the Fifth Circuit ruled that the plan participants lacked Article III standing to bring their ERISA claims.

In 2016, the plaintiffs filed suit on behalf of a putative class of nearly 20,000 American Airlines 401(k) plan participants who invested money in American’s Federal Credit Union Option (FCU Option), a demand deposit fund offered under the plan. The plan participants argued, among other things, that American and its Asset Administrative Committee breached their fiduciary duties and engaged in prohibited transactions by selecting and retaining the FCU Option instead of a stable value fund. The plaintiffs’ claims were primarily based on the higher interest rate available from stable value funds, disregarding the increased investment risk of the stable value funds relative to the FCU Option, and that stable value funds would not have had the government-backed guarantee. The participants also brought a claim against FCU, alleging that it breached its fiduciary duty of loyalty by improperly benefitting from the allegedly unreasonable rate of return for the FCU Option.

The Fifth Circuit affirmed the district court’s conclusion that the plaintiffs lacked standing to assert their breach of fiduciary duty claims against American and its Asset Administrative Committee. In so holding, the Fifth Circuit observed that although the plan eventually began offering a stable value fund—the plaintiffs’ preferred type of capital preservation investment—the participants never invested in this option. For that reason, the appellate court concluded that the participants failed to show that the challenged acts of the defendants caused their injury because they “would not have invested in a stable value fund in a counterfactual world since they did not place their money in one when given the opportunity to do so.”

Regarding the plaintiffs’ breach of loyalty claim against FCU, the three-judge panel reversed the district court’s decision that the plan participants had standing to sue FCU, once again concluding that the plaintiffs failed to show causation. Specifically, the court adopted FCU’s contention that there was “no connection between any alleged losses to the plan” and “the statutory claim against FCU.” The appellate court held that the plaintiffs lacked standing to accuse FCU of improperly using the plan assets held by the FCU Option for its own benefit because the plaintiffs presented no evidence “demonstrating that investors in FCU funds other than the FCU Option received higher interest rates generated by investments of Plan assets.”