In a significant legal move, eleven states, spearheaded by Texas, have filed a lawsuit against the three largest institutional investors globally. The suit alleges that these investors conspired to acquire stocks in coal companies with the intent to manipulate the market, stifle competition, and breach both federal and state antitrust regulations.
A legal action has been initiated in the U.S. District Court for the Eastern District of Texas Tyler Division, seeking a jury trial. The defendants include prominent financial giants, with a collective management of over $26 trillion in assets.
According to Texas Attorney General Ken Paxton, the companies faced legal action for “acquiring substantial stockholdings in every significant publicly held coal producer in the United States” to gain “power to control the policies of the coal companies.”
The detailed document outlines the ownership stakes held by the defendants in various energy companies, including Peabody Energy at 30.43%, Arch Resources at 34.19%, NACCO Industries at 10.85%, CONSOL Energy at 28.97%, Alpha Metallurgical Resources at 29.7%, Vistra Energy at 24.94%, Hallador Energy at 8.3%, Warrior Met Coal at 31.62%, and Black Hills Corporation at 32.87%.
In the last four years, the actions of coal producers in the country have been influenced not by market prices, but rather by directives from Larry Fink, the chairman and CEO of BlackRock, along with other asset managers, according to the brief. “With the increasing need for electricity to warm homes and energize businesses, the availability of coal for electricity generation has been unnaturally limited, leading to a dramatic rise in prices.” Those accused have enjoyed the benefits of increased returns, elevated fees, and greater profits, while the American public has borne the burden of rising utility bills and escalating expenses.
The lawsuit claims that companies have manipulated their shares to advance a green energy initiative, resulting in increased consumer costs and a significant reduction in coal production by over 50% by 2030. In reaction, coal companies listed on the stock market cut back on production, leading to a surge in energy costs.
The firms progressed their strategies mainly via two initiatives, indicating “their shared goal to decrease thermal coal production, which understandably raised electricity costs for Americans” across the country, Paxton stated.
The companies reportedly misled numerous investors “who chose to put their money into non-ESG funds to enhance their returns,” Paxton stated. “Despite the defendants’ claims to the opposite, these funds continued to follow ESG strategies.” According to the brief, their actions in allegedly limiting competition among the companies they purchased have repercussions that extend throughout the entire industry.
“Texas will not tolerate the illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda. BlackRock, Vanguard, and State Street formed a cartel to rig the coal market, artificially reduce the energy supply, and raise prices,” Paxton said. “Their conspiracy has harmed American energy production and hurt consumers. This is a stunning violation of state and federal law.”
The legal complaint claims that the actions of the companies breached the Clayton Act, which forbids any stock acquisition that could significantly reduce competition, as well as the Sherman Antitrust Act of 1890, 15 U.S.C. § 1, in a conspiracy aimed at restricting trade.
The allegations include violations of state antitrust laws in Texas, Montana, and West Virginia, with claims that Blackrock also breached the Texas Business and Commerce Code through “false, deceptive, or misleading acts.”
The request is for the court to determine that the companies breached federal and state laws, to grant injunctive and equitable relief, and to prevent them from continuing such actions. Civil fines are being sought, with a stipulation for Blackrock to pay $10,000 for each violation.
The lawsuit sees participation from the attorneys general of Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia, and Wyoming alongside Paxton.
Outside counsel is being provided by the Buzbee Law Firm and Cooper & Kirk. Two of the firms have released statements declaring the lawsuit to be without merit.
BlackRock dismissed the claim that they invested in coal producers to cause harm as “groundless and contrary to reason.” This legal action threatens Texas’ standing as a business-friendly state and may deter investments in the essential companies that consumers depend on.
Among the three companies facing legal action, only one is included on Texas’ divestment list.
State Street described the lawsuit as “groundless” and emphasized its commitment to “prioritizing the enhancement of shareholder value.”
A legal action has been initiated after a similar case was brought forth by 25 states, spearheaded by Texas, challenging the Biden administration’s federal ESG policy, which may adversely affect the retirement savings of 152 million Americans.
This follows Texas’s decision to include numerous companies and publicly traded investment funds, such as Blackrock, on its divestment list due to their support for ESG initiatives and opposition to oil and natural gas policies.
