A U.S. federal judge has denied motions to dismiss most claims in a multistate lawsuit accusing asset managers BlackRock, Vanguard, and State Street of breaching antitrust laws by allegedly using sustainable investment initiatives to manipulate coal markets. This decision allows the case to proceed.
The lawsuit, initiated by Texas Attorney General Ken Paxton and joined by 10 other Republican states, contends that the asset managers acquired significant shareholdings in major U.S. coal producers. It alleges they used this influence to coerce companies into reducing coal production to align with clean energy investment goals, resulting in higher energy costs for consumers. Earlier this year, the U.S. Department of Justice and Federal Trade Commission expressed support for the case.
The suit claims violations of the Clayton Act, which prohibits acquisitions that may substantially lessen competition. It argues the firms formed a syndicate to induce industry-wide output reductions by participating in initiatives like the Net Zero Asset Managers Initiative and Climate Action 100+. Notably, the asset managers have since reduced their involvement in these initiatives.
The asset managers’ motions contended they were passive investors and not liable under the Clayton Act. However, U.S. District Judge Jeremy Kernodle stated the claims were not vague and included specific examples of conduct supporting the theory. He noted that the firms joined climate initiatives committing to action on climate change and emissions reduction.
Kernodle acknowledged that while the states may ultimately fail to prove their claims of decreased coal output or anticompetitive agreements, the circumstantial evidence presented warrants further examination. The ruling highlighted a lack of direct conspiracy evidence, relying instead on the firms’ participation in climate initiatives.
Texas Attorney General Paxton hailed the ruling as a significant victory, asserting that the asset managers formed an investment cartel to control national energy markets.
In their responses, the asset managers expressed their intention to continue contesting the allegations. Vanguard anticipates vigorously defending against the claims, State Street maintains confidence in the legal merits, and BlackRock argues the case lacks factual support, contending that forced divestment undermines American energy independence.
