Federal Judge Certifies Class Objecting to ESG Investments by Retirement Fund

On May 22, 2024, Judge O'Connor (N.D. Tex.) ordered that the plaintiffs claiming that investment managers breached their fiduciary duty due to their ESG-focused investing be certified as a class for purposes of the litigation.  This decision is not especially surprising, particularly since the same judge denied the defendant's motion to dismiss in this same case about two months ago, indicating that the allegations had merit (at least from the judge's perspective).  And, as the court itself noted, “[c]lass certification is routine in ERISA cases.”

That said, this ruling by the court is still significant, as it constitutes a continued progression of this case, which is a securities class action based upon the alleged fault of investment managers in relying upon ESG factors when investing.  Thus, the developments in this case have particular resonance for the various pending actions based upon a similar theory (or the converse), and could impact future litigation.  In particular, rulings in this case at the summary judgment stage or later may present useful guidance for plaintiffs considering similar lawsuits, or for defendants confronting the prospect of liability.