Court Awards Zero Damages for Breach of Fiduciary Duty Stemming from Pension Plan's ESG-Focused Investing

Following a bench trial, Judge O'Connor (N.D. Tex.) held that there had been a breach of the fiduciary duty of loyalty based upon a 401(k) retirement plan's investments, which reflected ESG interests rather than strictly financial ones.  However, nearly ten months later, the court nonetheless “denie[d] Plaintiff's request for monetary damages,” although the judgment did award certain equitable relief (e.g., injunctions related to future investing practices and governance).  Notably, since the “Court conclude[d] that Plaintiff failed to sufficiently establish actual monetary losses to the Plan,” then there were no “actual, compensable financial losses as a result of Defendants' breach,” and so no monetary damages were awarded--and the court further held that “monetary equitable relief . . . is not supported by the trial record.”  In other words, despite successfully litigating this case through trial, the plaintiff class--and their attorneys--will receive no money from their courtroom victory. 

This is a highly significant result.  The court's ultimate holding that no damages would be awarded--even after proving a breach of fiduciary duty--means that it is far less likely that there will be many future litigations centering around ESG-focused investing by pension plans.  This decision effectively removes the financial incentive for plaintiffs' firms to seek out and bring this type of case, since the prospect of a significant damages award following the extensive costs of litigation is now far less likely.  Without the possibility of a substantial financial award, the only lawyers likely to pursue this litigation are those acting in furtherance of a particular ideological agenda--while such firms exist, and will likely continue to bring litigation, it is unlikely that there will be significant participation from the plaintiffs' bar as a whole, since these sort of cases will no longer be as economically viable.  (That said, it is altogether possible that a different case, presenting distinct facts, could still lead to a substantial monetary judgment.) 

In other words, the victory obtained by the plaintiff in this case has ultimately proved a hollow one--while a court upheld their legal theory that ESG-focused investing constituted a breach of fiduciary duty, such a breach is effectively meaningless in the absence of a major damages award that would incentivize additional litigation in the future.