Skip to main content

You are here


The Why, When, and How Behind the ESG Lawsuit: Virginia AG Miyares


A high-profile lawsuit brought by 24 Republican-led states to prevent the Department of Labor’s ESG rule from taking effect threw a wrench into Biden Administration plans. 

Plaintiffs claim the rule, Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, oversteps the DOL’s statutory authority under ERISA, and called it arbitrary and capricious. 

Filing it in Texas with the Fifth Circuit Court of Appeals, which famously struck down the Obama Administration’s fiduciary rule in 2018, wasn’t lost on observers, and part of a deliberate strategy, Jason Miyares, Virginia’s Attorney General, said. 

“Texas is one of the lead states,” Miyares, a party to the suit, explained. “You’ve seen a lot of litigation against the Biden Administration in the Fifth Circuit, and it made strategic sense to start the process there.”

When asked about its genesis and Virginia’s reason for joining (since it’s not considered an oil-producing state), he cited legislation by regulation and a “broken” Washington. 

“One of the reasons it’s broken is that you have the growth of an administrative state with agencies of unelected individuals that promulgate rules and regulations that have the same full force and impact of the law,” Miyares argued. “But your congressman and your senator never vote on them. They allow unelected [officials] to do the work, and it’s easier than having to do what it takes to change the laws. I don’t think that’s healthy for our democracy.”

He claimed the new ESG rule violates an ERISA duty to maximize retirement benefits for plan participants, and instead indulges a variety of social goals determined by the Biden administration that undermine the 142 million participants and $12 trillion in assets the landmark 1974 law covers. 

“When I saw the DOL and Biden Administration say that ‘We will no longer follow what the law said, which is to maximize benefits for our retirees, we’re instead going to have them focus on a variety of social goals,’ that troubled me because I saw at one more example of why democracy is struggling now.”

He disagreed when challenged on whether he and his co-petitioners have standing, given that state pensions are not ERISA-based plans, noting it will negatively impact the Virginia Retirement System (VRS) and is therefore relevant. 

“Statutorily and constitutionally, I represent the citizens of the Commonwealth of Virginia,” he countered. “This is affecting many Virginians. I bring lawsuits on their behalf all the time. I have brought a lawsuit against a lot of these opioid manufacturers that were pushing OxyContin. They were telling Virginians these were not addictive when the reality is they were. And we’ve been able to successfully sue, challenge, and win.”

Responding to the possibility that the suit and similar anti-ESG action might inadvertently impact religious and values-based investing that many red states support, he was definitive in his response. 

“Those religious funds have been in existence for quite some time. That is very different than if I’m a retiree who made an investment and have confidence because I’m protected by federal law for close to 50 years to maximize my benefits. To then suddenly find out that they changed their mission, their goal and their fiduciary duty to something never included in that 1974 law. I think that’s why you have so many individuals troubled by this.”

Ultimately, he suggested it’s not about ESG itself but the age-old legislative/executive branch power struggle and the circumvention of Congress. 

“There is a process to change this,” Miyares concluded. “It is a piece of legislation [that goes] through Congress, the House of Representatives, and the Senate to get to the President’s desk. They have just chosen to bypass that with an unelected body that’s decided to change the rules of the game.”