Dive Brief:
- BlackRock, Vanguard and State Street — the three largest asset managers in the U.S. — filed a joint motion this week to dismiss a lawsuit from a coalition of Republican-led states over alleged antitrust violations in the coal industry, according to court documents.
- The asset managers said that the states have offered “no plausible facts” to support their claim that the three institutions conspired to collectively cut U.S. coal production through climate activism, the March 17 filing said.
- The filing rebuts the assertions that 10 states, led by Texas Attorney General Ken Paxton, made in the initial lawsuit submitted to the U.S. Eastern District Court of Texas. BlackRock filed an additional motion Tuesday seeking the dismissal of five state claims of deceptive marketing, allegations the firm said in the motion have “fundamental errors.”
Dive Insight:
The lawsuit alleging the three asset managers had conspired to “artificially constrict” the U.S. coal market was first filed in November, claiming the asset managers had made “substantial” investments in public coal companies to get them to drive down their output.
State Street and BlackRock spokespeople called the lawsuit “baseless” in separate statements to ESG Dive at the time, and the Monday motion to dismiss says that the plaintiff states have failed to “plausibly allege an agreement” and have not made a plausible allegation of an “anticompetitive information-sharing scheme.”
“This case spins a farfetched theory: three asset managers conspired (without speaking with each other) to decrease coal output (which increased) by controlling the production decisions of coal companies (in which they each never held more than small minority stakes),” the March 17 joint filing said.
The states of Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia and Wyoming have signed on to the lawsuit with Texas, and have included various state violations of antitrust laws and deceptive marketing practices among their claims.
Paxton accused the asset managers of creating a “cartel to rig the coal market, artificially reduce the energy supply, and raise prices,” in a press release announcing the lawsuit, adding “their conspiracy has harmed American energy production and hurt consumers.”
The asset managers’ lawyers said that for the court to find that the states had presented viable antitrust claims would require “contorting the law in a way that would hurt both coal companies and individual investors.” The allegation that they sought to influence the market through their ownership of coal company shares is in violation of a section of the Clayton Antitrust Act, the firms added. The defendants argued that this particular claim “is a nonstarter,” as that section of the act contains an explicit carve-out for acquisitions “solely for investment,” the joint motion said.
The asset managers argued in their response filing that the states not only fail to directly allege that there was an agreement in place between the firms — instead pointing to various current and former climate memberships and disclosures, in the case of BlackRock’s deceptive marketing claims — but that circumstantial evidence would refute that claim.
The investment firms pointed to the growth of coal output between 2021-22, included in a table in the complaint, as well as BlackRock and State Street’s voting histories when they voted against several company directors who cut production and “often did not vote against directors whose companies produced more coal.” Additionally, the filing said there were several instances when Vanguard engaged with a coal company that then increased its coal production that year.
“There is not the slightest indication that any defendant was prodding the coal companies to reduce output, much less that all of them were doing so in collaboration,” the motion said.
A Vanguard spokesperson told ESG Dive Friday that the filings show that the allegations against the second-largest U.S. investment firm “are unsupported by the facts and the case should be dismissed.”
“Vanguard committed no wrongdoing here and will vigorously defend our long history of safeguarding and promoting long-term investment returns on behalf of Vanguard-advised funds and their investors,” the spokesperson said in an emailed statement.
The states initially requested a jury trial for the case, and the asset managers have asked the court to hear oral arguments on their motions to dismiss, according to court documents.
State Street declined to comment for this story beyond the filings. BlackRock and Ken Paxton’s office did not respond to a request for comment as of press time.
