Lynn v. Peabody Energy Corp.

The federal district court for the Eastern District of Missouri dismissed a class action under the Employee Retirement Income Security Act of 1974 (ERISA) that had been brought against the coal company Peabody Energy Corporation (Peabody) and related entities and individuals. The court concluded that the plaintiffs, who were participants in Peabody employee stock option plans, had failed to state a claim that the defendants breached their duty of prudence under ERISA by retaining and continuing to purchase Peabody stock in light of public information that established that doing so was unreasonable. The court also found that the plaintiff’s “nonpublic information” claim—based on Peabody’s allegedly deceptive representations regarding the future of coal—failed because the plaintiffs had not established that a prudent fiduciary could not have concluded that alternatives to continued investment in Peabody stock would do more harm than good.

The court dismissed the action without prejudice against Peabody Energy Corporation, Peabody Holding Co. and Peabody Investment Corporation after they filed for bankruptcy, but the action remained pending against the Peabody Energy board of directors.