Arch, Peabody sued over retirement plans

OREANDA-NEWS. June 18, 2015. Arch Coal and Peabody Energy are being sued by former employees who allege the coal producers breached federal rules when they kept retirement plans invested in their own depreciating shares.

Former Arch employee Douglas Roe filed a lawsuit on 9 June in the US District Court in the Eastern District of Missouri, alleging the company violated "various fiduciary duties to employee participants" imposed by the Employee Retirement Income Security Act of 1974. Former Peabody employee Lori Lynn filed a similar claim in the same court against her employer two days later, saying the company's employee retirement plans "suffered tens of millions of dollars in losses, as the holdings of company stock were devastated."

Arch declined to comment. Peabody told Argus it believes "the claims have no merit" and will "vigorously defend against them."

Both lawsuits seek relief in the form of payments made by the companies to the retirement plans "to make good" on the losses the plans incurred from the breaches of fiduciary duties "in an amount to be proven at trial." The suits also request relief in the form of reasonable attorney fees and expenses.

Roe's lawsuit covers Arch's Employee Thrift Plan from 2012 to the present and cites grim news reports on the declining financial health of the coal industry as well as the company's falling share price. It claims that the plan suffered \\$53mn in losses between the end of 2011 and the end of 2013 as it more than doubled its holding of Arch stock, to 3.9mn shares from 1.9mn shares, even as the share price tumbled to \\$4.45/share from \\$14.51/share.

By continuing to offer Arch stock as an investment option and maintaining the plan's investment "when it was no longer prudent," the plan's managers breached fiduciary duties, Roe's suit claims. The lawsuit also goes after the fiduciaries of the plan and plan trustee Mercer Fiduciary Trust.

Lynn's lawsuit against Peabody addresses multiple company retirement plans, including an employee retirement account, a western United Mine Workers Association 401(k) plan and 401(k) profit sharing plan. It also targets the plans' fiduciaries and certain individual officers and management-level employees of the company.

"Certain defendants failed to avoid or ameliorate inherent conflicts of interests, which crippled their ability to function as independent, ‘single-minded' fiduciaries with only the plans' and their participants' best interests in mind," Lynn's suit claims.

The US coal industry is under pressure from cheap domestic natural gas and an oversupplied global coal market that shows little sign of improvement.

Late last month, the New York Stock Exchange warned Arch that it is in danger of being de-listed because the 30-day average for its share price has fallen below the \\$1 minimum requirement. And Peabody recently laid off about 250 corporate and regional employees, and has reduced operations in Australia.