In the wake of a domestic glut in natural gas, claims against at least two U.S.-based global coal companies have been filed, alleging “stock-drop” violations under the Employee Retirement Income Security Act.
Suits against Arch Coal and Peabody Energy, both headquartered in St. Louis, Missouri, were filed in U.S. District Court for the Eastern District of Missouri recently, just days a part.
In the claim against Arch, Douglas Roe, a former employee, alleges that Arch’s Employee Thrift Plan ignored the grim realities facing the company and the coal industry as it more than doubled participants’ holdings in company stock between 2011 and 2013, from 1.9 million shares to 3.9 million.
In February 2011, shares of Arch peaked at more than $36 a share. By July 2013 they had fallen to about $3.65 a share.
The claim against Arch alleges the plan suffered $53 million in losses as a result.
Days later, Lori Lynn, a Peabody employee, filed a similar claim alleging “tens of millions of dollars in losses” to retirement plans sponsored by Peabody that incorporated company stock.
Over the course of the class period named in the Peabody claim, from December 14, 2012 to June 10, 2015, the stock value dropped 88 percent, from $26.56 to $3.21.
That means the 2 million shares held in Peabody plans would be worth about $7 million at the time the claim was filed, compared to more than $53 million at the beginning of the class period.
Several Peabody plans incorporated company stock, including the United Mine Workers Association 401(k) plan and a 401(k) profit-sharing plan, according to court documents.
Both suits name plan trustees and members of the executive management teams as fiduciaries.
In a statement provided to Argus, a London-based publisher of commodity news, a Peabody representative said, “the claims have no merit,” and that they would be vigorously defended.
A recent note to investors published by Zacks, a ratings agency, said the U.S. coal industry is under “immense stress” from reduced demand, primarily driven by the availability of cheaper and cleaner natural gas and increasing stricter environmental standards.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
