A U.S. District Court judge in St. Louis dismissed claims against Peabody Energy Corp. by participants who claimed corporate and retirement plan executives breached their fiduciary duties by offering Peabody stock as an investment option.
Participants claimed Peabody's stock price was “artificially inflated,” wrote U.S. District Judge Audrey G. Fleissig in her March 30 ruling. They alleged three Peabody retirement plans continued to offer company stock despite “public information about the global decline in coal prices and clear indicia during the class period that Peabody was headed toward bankruptcy,” she wrote. Plaintiffs argued this behavior violated the executives' duties under the Employee Retirement Income Security Act.
However, the judge ruled the plans' purchases of Peabody stock didn't constitute a breach of fiduciary duty. She dismissed the complaint “in light of public information that established such conduct was not unreasonable.”
The suit was filed in June 2015 on behalf of participants who owned Peabody stock in three plans: the Peabody Investments Corp. Employee Retirement Account, the Peabody Western-UMWA 401(k) Plan and the Big Ridge Inc. 401(k) Profit-Sharing Plan. The plans had $769.4 million in combined assets as of Dec. 31, 2015, according to their latest Form 5500 filings.
The lawsuit, which sought class-action status, was Lynn et al. vs. Peabody Energy Corp. et al. An amended complaint was filed in March 2016. Peabody filed for Chapter 11 bankruptcy protection in April 2016 and emerged from bankruptcy protection on April 3, 2017.
Plaintiffs also alleged Peabody executives breached their fiduciary duties by withholding non-public information, “namely that laws and regulations to cut carbon emissions from the combustion of coal would have a detrimental effect on Peabody stock,” the judge wrote. The participants said prudent fiduciaries could have closed the company stock funds or directed that all contributions to the stock funds be held in cash.
Ms. Fleissig ruled plaintiffs failed to show “a prudent fiduciary could not have concluded that the alternative(s) would do more harm than good, nor do they offer facts that would support such an allegation. Thus, plaintiffs' non-public information claim fails.”
Plaintiffs' lawyers could not be reached for comment by press time.