Arch Coal Inc. has won a legal victory over former employees who sued the coal producer for including holdings in its own stock in staff retirement savings plans.
Douglas Roe, a former Arch employee, filed a class action lawsuit along with others against the company in 2015 in the U.S. District Court for the Eastern District of Missouri. Roe's complaint argued that Arch had breached the Employee Retirement Income Security Act, or ERISA, when it continued to offer its own stock as an investment option even though it was "imprudent," and that it maintained significant investment in Arch stock even when it was no longer a "prudent investment."
According to an amended complaint by Roe and others, the Employee Thrift Plan and its participants lost tens of millions of dollars while Arch stock fell from about $680 a share on July 27, 2012, to $1.42 on Nov. 12, 2015, at which point the plan's investment in the Arch stock fund was forcibly liquidated. Arch filed for Chapter 11 bankruptcy in January 2016.
The plaintiffs alleged that before and during that period, "massive amounts of publicly available information" was generated about the collapse of Arch and the coal industry in general.
"Plaintiffs claim that the defendants failed to protect the interests of the plan's participants and beneficiaries, in violation of the defendants' legal obligations under ERISA," court documents said.
U.S. District Judge Carol Jackson ultimately decided that, among other things, Arch and the thrift plan's trustee adequately disclosed warnings about the risks involved in investing in Arch stock rather than in a diversified mutual fund. The judge dismissed the case on Aug. 4.
Arch did not respond to a request for comment.