Utah, et al. v. Su

Docket No.: 22-0016 (N.D. Tex.)
Appellate Docket No.: 23-11097 (5th Cir.)

On January 26, 2023, the Hamilton Lincoln Law Institute filed suit challenging the Department of Labor’s revised Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights regulation. HLLI joins 25 states, Western Energy Alliance, and Liberty Energy, Inc., in challenging the new rule as contrary to the ERISA statute and an arbitrary and capricious exercise of the Department’s regulatory authority. This new rule undermines key protections for retirement savings of 152 million workers in the name of promoting environmental, social, and governance (“ESG”) factors in investing.

On February 21, the plaintiffs filed a motion for a preliminary injunction to halt implementation of the rule while the suit proceeds.

HLLI represents James R. Copland, a Manhattan Institute scholar who previously filed comments opposing the proposed rule, and a participant in an ERISA retirement plan adversely affected by the new rule, and Alex Fairly, owner of a business that sponsors a 401(k) defined contribution plan subject to ERISA and a participant of that 401(k) plan. HLLI itself also filed a letter opposing the ill-conceived rule.

Congress’s intent when it passed ERISA was to provide a safe and secure retirement for workers and it thus created a rigid duty of loyalty and prudence for plan fiduciaries, but the new rule formally introduces ESG considerations into the management of ERISA plan assets. It was prompted by the Biden Administration’s stated desire to address climate change.

ESG factors are subjective and ill-defined, and ESG investing typically results in lower investment returns and higher costs. The rule also eliminates enhanced documentation and monitoring requirements in effect so as to undermine fiduciary accountability. The practical effect will be to loosen the statutory restraints on plan fiduciaries and investment managers, allowing them greater latitude to incorporate vague and ill-defined ESG factors into investment decisions for ERISA plan assets, rather than prioritizing the financial or pecuniary benefits to plan participants. This is not what Congress intended when it passed ERISA.

If allowed to stand the rule jeopardizes the financial security of millions of American workers.

On March 28, 2023, the court denied DOJ’s motion to transfer venue. On May 16, plaintiffs filed a motion for summary judgment asking the court to vacate the rule and declare it unlawful.

On September 21, 2023, the district court issued a memorandum opinion and order denying summary judgment to the plaintiffs, and granting it to the DOJ. The court found that the rule only allows ESG considerations as a “tiebreaker,” and so conforms with the ERISA statute. Copland, Fairly, and the other plaintiffs appealed to the U.S. Court of Appeals for the Fifth Circuit.

On January 18, 2024, HLLI filed an opening brief in the Fifth Circuit on behalf of Copland and Fairly, along with the coalition of 25 states, Western Energy Alliance, and Liberty Energy, Inc.

Case Documents