In Ortiz v. Am. Airlines, Inc., No. 20-10817, __F.4th__, 2021 WL 3030550 (5th Cir. July 19, 2021), Plaintiffs-Appellants Salvadora Ortiz and Thomas Scott sued Defendants-Appellees American Airlines, Inc. (“AA”); American Airlines Pension Asset Administration Committee (the “PAAC”); and American Airlines Federal Credit Union (“FCU”) alleging that they breached their fiduciary duties under ERISA related to AA’s “$uper $aver” 401(k) plan (“Plan”). The PAAC was a fiduciary responsible for selecting investment options for the Plan. Employees were responsible for deciding whether to invest in the Plan and which options to invest. Because the Plan is an ERISA plan, federal regulations urge fiduciaries to offer at least one “safe” investment option. See 29 C.F.R. § 2550.404c-1(b)(1)(ii), (b)(2), (b)(3). Plaintiffs dispute the Plan’s safe offerings, specifically the demand-deposit fund held by FCU, an independent company which set the rate of return offered to Plan members. For several years, the FCU Option’s rate of return averaged under $.57 for every $100 invested. In 2015, the Plan added a stable value fund which had some liquidity restrictions and a contractually limited guarantee that could be eliminated if the insurer of the fund defaults. Plaintiffs both invested in the FCU option but neither moved their investments to the stable fund after it was offered.

The complaint alleged three claims: (1) AA and the PAAC breached their fiduciary duties of loyalty and prudence under 29 U.S.C. § 1104(a)(1)(A)–(B) by failing to remove the FCU Option from the Plan (“Count I”); (2) FCU breached its fiduciary duty of loyalty under 29 U.S.C. § 1106(b)(1) by dealing with plan assets held by the FCU Option for its own benefit (“Count II”) and AA and the PAAC are liable as co-fiduciaries for FCUs breach, and (3) AA and the PAAC engaged in a “prohibited transaction” under 29 U.S.C. § 1106(a)(1) by offering the FCU Option (“Count III”). Five months after filing the complaint, the parties agreed to a class action settlement under Fed. R. Civ. P. 23 for $8.8 million to the proposed class, with about 1/3 of that amount for attorneys’ fees. Because Plaintiffs claimed to have lost between $55 to $88 million, the district court declined to preliminarily approve the settlement absent justification for the low settlement figure, which Plaintiffs did not provide to the district court’s satisfaction. After the parties conducted discovery, the district court declined to certify the case as a class action and then granted summary judgment to Defendants. Plaintiffs appealed.

The Fifth Circuit affirmed in part, reversed in part, and vacated in part. First, the court limited its review to part of Count I and all of Count II because, with respect to Count I, Plaintiffs failed to brief the claim that Defendants breached their duty of loyalty, and with respect to Count III, Plaintiffs argue for the first time on appeal that FCU, rather than AA and the PAAC, is liable for engaging in a prohibited transaction under § 1106(a)(1). The court found that Plaintiffs have forfeited these claims.

Second, the court determined that Plaintiffs lack Article III standing for Counts I and II. For Count I, Plaintiffs did not present any evidence that they would have chosen the stable fund for their investments rather than the FCU Option. This is because neither Plaintiff invested in the stable fund option when it was offered. Thus, the district court did not err in finding that their alleged injuries were speculative, and not concrete. The court also found that Plaintiffs did not demonstrate that Defendants’ actions caused them harm because Plaintiff presented no evidence that absent the FCU Option they would have invested in a stable value fund. “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.”

Third, the court disagreed with the district court that Plaintiffs had standing to sue FCU because they incurred a cognizable injury by receiving a lower interest rate in the FCU Option. Plaintiffs alleged “that FCU used plan assets to provide loans to other FCU members and to make other investments for which it earned substantial income, which in turn permitted it to offer substantially higher interest rates on similar demand deposit accounts to other customers of FCU than it provided to Plan participants.” (cleaned up). The court found that while Plaintiffs alleged injury and redressability, Plaintiffs failed to satisfy the element of causation because they did not supply any evidence showing that investors in FCU funds other than the FCU Option received higher interest rates from investments of Plan assets. Even if the reasoning is wrong, a lower court decision must be affirmed if the result is correct, so the court affirmed the dismissal of Counts I and II.

Lastly, the court found that the district court did not abuse its discretion in denying preliminary approval of the settlement. Even if the terms of the settlement agreement did not provide for further appellate review of the district court’s decision, the court found that Plaintiffs cannot now challenge the district court’s assessment of the settlement itself. Plaintiffs did not provide the district court with information required to assess the adequacy of the settlement. The district court’s rejection of the settlement does not contradict its ultimate grant of summary judgment to Defendants since “the district court had much less information about this case when it assessed the settlement than it did on summary judgment.”