Ortiz v. American Airlines, 5 F.4th 622

Background

AA sponsored a 401(k) “$uper $aver” Plan; the PAAC selected investment options; employees chose allocations. Plaintiffs Ortiz and Scott invested in a demand-deposit “FCU Option” held by American Airlines Federal Credit Union (FCU).
The Plan later added a stable value fund (late 2015). The FCU Option paid very low interest but guaranteed book value and was liquid; the stable value fund had higher returns but contractual liquidity restrictions and insurer-based guarantees.
Plaintiffs sued (putative class) alleging: Count I — AA and PAAC breached ERISA fiduciary duties (should have removed/offered stable value instead of FCU Option); Count II — FCU breached duty of loyalty by using plan assets for its own benefit; Count III — prohibited transaction by AA/PAAC for offering the FCU Option.
Parties negotiated a proposed $8.8 million settlement; the district court denied preliminary approval as inadequate given plaintiffs’ claimed losses and insufficient confirmatory discovery.
After discovery the district court denied class certification, granted defendants’ summary judgment motions, and dismissed the claims. Plaintiffs appealed; the Fifth Circuit affirmed in part, reversed in part, vacated in part, and remanded with instructions to dismiss Count II for lack of jurisdiction.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Standing for Count I (AA/PAAC fiduciary breach)	Ortiz/Scott claim lost investment income from being offered FCU Option instead of a stable value fund; this is concrete and redressable.	Defendants say plaintiffs cannot show they would have chosen the stable value fund, so causation is speculative; thus no Article III standing.	No standing: plaintiffs failed to show it was substantially probable they would have invested in a stable value fund absent the FCU Option. District court dismissal affirmed.
Standing for Count II (FCU loyalty breach)	Plaintiffs say FCU used plan assets to benefit FCU (higher rates to others), causing lower rates to Plan participants; expert quantified losses.	FCU contends plaintiffs offered no evidence linking alleged uses of plan assets to higher rates paid to other FCU customers; causation lacking.	No standing: Fifth Circuit concluded plaintiffs failed to show causation and remanded with instruction to dismiss Count II for lack of jurisdiction.
Forfeiture/abandonment of alternative claims (duty of loyalty against AA/PAAC; co‑fiduciary liability; suing FCU under §1106(a)(1))	Plaintiffs raised these theories in passing or for first time on appeal.	Defendants note plaintiffs did not brief or litigate these theories below, thereby forfeiting them.	Held forfeited/abandoned: court declined to review those theories.
Denial of preliminary settlement approval (abuse of discretion)	Plaintiffs argue district court abused discretion by denying approval and later granting summary judgment.	Defendants: settlement was inadequate; plaintiffs failed to provide confirmatory discovery to justify the low payout.	No abuse of discretion: district court properly required sufficient evidence that $8.8M was adequate; denial affirmed.

Key Cases Cited

Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (standing requires a concrete, particularized injury)
Lujan v. Defenders of Wildlife, 504 U.S. 555 (Article III standing elements)
Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (distinguishing standing analyses for defined‑benefit vs defined‑contribution plans)
Hollingsworth v. Perry, 570 U.S. 693 (plaintiff must establish individualized standing)
Lewis v. Casey, 518 U.S. 343 (standing becomes stricter as litigation proceeds)
In re Katrina Canal Breaches Litig., 628 F.3d 185 (court must ensure settlement provides adequate advantage to class)
Newby v. Enron Corp., 394 F.3d 296 (standard for reviewing district court's settlement decisions)
Pilkington v. Cardinal Health, Inc., 516 F.3d 1095 (sequencing settlement approval and dispositive rulings can matter)
NLRB v. Kentucky River Cmty. Care, Inc., 532 U.S. 706 (affirming correct result though lower court relied on wrong ground)