A federal judge in Texas largely denied a request by the world’s largest asset managers to dismiss a lawsuit brought by Republican state attorneys general claiming they colluded to reduce coal output, in a case that threatens how the U.S. firms oversee trillions of dollars.
U.S. District Judge Jeremy Kernodle in Texas said most of the claims brought by the states can proceed, including allegations that BlackRock Inc., Vanguard Group Inc. and the asset management arm of State Street Corp. collectively used their stock to attempt to substantially lessen competition.
Kernodle dismissed part of the lawsuit that was based on alleged violations of state law.
In his Friday ruling, Kernodle said the states “have identified enough circumstantial evidence to suggest that defendants agreed to collectively pressure coal companies to reduce the output of coal in the relevant markets and disclose future output information.”
In a statement, BlackRock said the case “is based on an absurd theory that coal companies conspired with their shareholders to reduce coal production. This case is not supported by the facts, and we will demonstrate that.”
State Street said the case seeks to advance a “new and dangerous antitrust theory.”
“It poses unnecessary risk to investors and energy markets,” the firm said in a statement. “There is no collusion here, and we remain confident that the facts and legal substance are on our side.”
Vanguard said it’s disappointed in the court’s decision and welcomes the “opportunity to vigorously defend against plaintiffs’ claims.”
Texas Lawsuit
In their lawsuit, Texas and other Republican-led states claimed the asset managers colluded to pressure coal producers to reduce their production under the guise of pursuing environmental goals.
The states cite the firms’ participation in carbon-reduction alliances as evidence of a “syndicate.”
Texas Attorney General Ken Paxton celebrated the ruling as a key win in his legal fight against the companies.
“BlackRock, State Street, and Vanguard — three of the most powerful financial corporations in the world — created an investment cartel to illegally control national energy markets and squeeze more money out of hardworking Americans,” he said in a statement.
BlackRock, State Street and Vanguard hold major stakes in coal producers and profited when energy prices soared, according to the suit.
More recently, the firms have pulled back from ESG in the US and participation in groups such as Climate Action 100+ and Net Zero Asset Managers Initiative. Texas even removed BlackRock from its blacklist of companies that boycott fossil fuels.
Antitrust Law
But the lawsuit, filed in November, said that formal withdrawal from Climate 100+ “does not change the reality that defendants’ holdings threaten to substantially reduce competition in violation” of U.S. antitrust law.
Lawyers for the three firms argued at a hearing in June that the firms did nothing to influence coal companies.
“The antitrust claims in this case are unprecedented, they’re unsound and they’re unsupported,” said Gregg Costa, a lawyer representing BlackRock. “The claims just don’t add up."
(Credit: AP)
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