In re Peabody Energy Corp. Securities Litigation

Background

The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The proposed class consists of people who purchased or otherwise acquired Peabody Energy Corporation common stock from April 3, 2017, through October 28, 2019.

The complaint alleges that Peabody Energy and Glenn L. Kellow and Amy B. Schwetz materially misrepresented or omitted information about safety problems at the North Goonyella mine. It alleges that the problems led to a fire and the Australian government’s suspension of mining activity there. It further alleges that, after the shutdown, the defendants misrepresented the steps taken to reopen the mine and the expected reopening timeline. According to the complaint, the alleged misstatements and omissions artificially inflated Peabody’s stock price, which fell when investors learned more about the mine’s problems.

Lead-Plaintiff Motions

Three proposed plaintiffs initially sought appointment as lead plaintiff under the Private Securities Litigation Reform Act of 1995. Oregon Public Employees Retirement Fund reported a claimed loss of $5,446,903. Schultze Asset Management LP reported a claimed loss of $2,238,598.59. SCC/Dunhill Trust reported a claimed loss of $220,000.

SCC withdrew its motion. Schultze filed notice that it did not oppose Oregon PERF’s motion because Oregon PERF claimed a larger financial loss. Peabody took no position on the motions.

The court explained that the statute requires appointment of the person or persons most capable of adequately representing the class. The court considered the proposed plaintiffs’ financial interests and their ability to satisfy Rule 23’s typicality and adequacy requirements. Financial loss was the most important factor in evaluating financial interest.

Court’s Analysis

The court found that Oregon PERF had submitted trading data supporting its claimed losses, which were nearly twice Schultze’s claimed losses and millions of dollars greater than the losses claimed by SCC or the Oklahoma Firefighters Pension and Retirement System, which filed the complaint but did not move for appointment.

The court also found that Oregon PERF made the required preliminary showing of typicality and adequacy. Its claims were considered typical because they alleged the same securities-law violations based on the defendants’ allegedly false and misleading statements. The court found that Oregon PERF had no known conflict with class members, had a sufficient interest in the case, and had selected qualified and experienced counsel.

Lead Counsel

The court approved Labaton Sucharow as lead counsel. It found that the firm had extensive experience litigating shareholder class actions and had served as lead counsel in actions that settled for hundreds of millions of dollars.

Disposition

The court granted Oregon PERF’s motion for appointment as lead plaintiff and denied all other motions for appointment. It also granted Oregon PERF’s application to appoint Labaton Sucharow as lead counsel. The order concerned the organization and representation of the proposed class; it did not decide the underlying securities-fraud claims.