Ex-American Airlines Workers Want Class Status in 401(k) Fee Suit

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

Two former American Airlines Inc. workers want a federal court in Texas to let them proceed as a class in their lawsuit challenging how the airline managed their retirement savings.

The workers are seeking class status for at least 20,000 participants in the retirement plan whose accounts were invested in an affiliated credit union fund with very low returns that often failed to keep up with inflation, according to court documents filed April 23 in the U.S. District Court for the Northern District of Texas.

At issue in the case is American’s decision to include in the plan a credit union fund that allegedly performed like a low-interest checking account. American allegedly used more than $1 billion in plan assets invested in the credit union fund as working capital to make investments and provide loans and other services to its customers, for which it earned substantial profits, the workers said.

The class certification request comes five months after Judge John McBryde refused to dismiss the lawsuit, holding that the former workers had sufficiently pleaded their claims. In 2016, McBryde rejected an $8.8 million proposed settlement that would have ended the dispute. The amount may be “inadequate” because the ex-workers may have lost out on as much as $88 million in expected returns over the past six years, he said.

The airline allegedly failed to consider an adequate investment option, such as a stable value fund, that would have provided far higher returns to them with no increase in risk, the ex-workers said. If American had chosen an ordinary stable value fund, plan investors would have earned tens of millions of dollars in additional investment returns over the class period, which runs from February 2010 until the end of 2015, the workers allege.

Schneider Wallace Cottrell Konecky Wotkyns LLP and Friedman Suder & Cooke PC represent the participants. Kelly Hart & Hallman LLP and O’Melveny & Myers LLP represent American.

The case is Ortiz v. Am. Airlines, Inc., N.D. Tex., No. 4:16-cv-00151-A, motion for class certification 4/23/18.

Request Benefits & Executive Compensation News