On September 21, 2023, a federal court in the Northern District of Texas (the “Court”) dismissed a challenge to the Department of Labor’s 2022 Investment Duties Rule (the “Rule”) allowing fiduciaries plans under the Employee Retirement Income Security Act of 1974 (“ERISA”) to consider environmental, social, and governance factors.[1]
Twenty-six states and other interested parties argued that the Rule is invalid and violates the Administrative Procedure Act because it is arbitrary and capricious and runs afoul of ERISA.[2] After reviewing competing motions for summary judgement, the Court determined that the Rule is a reasonable interpretation of ERISA and is not arbitrary and capricious.[3] Accordingly, the 2022 Rule remains in effect.
For additional information on the Rule, please see Legal Alert: DOL Opens ESG Door: What Does It Mean for Plan Fiduciaries? from our ERISA team. If you have any questions about your fiduciary obligations, please free to contact us.
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By the Investment Management and Broker-Dealer Team at Kilpatrick Townsend & Stockton
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[1] Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights. 87 C.F.R. 73822 (Dec. 1, 2022), available at: https://www.govinfo.gov/content/pkg/FR-2022-12-01/pdf/2022-25783.pdf.
[2] Utah v. Walsh, 2:23-CV-016-Z (N.D. Tex. Sept. 21, 2023), available at https://aboutblaw.com/baCI (“Utah v. Walsh”).
[3] Utah v. Walsh.
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