Coal companies obtain dismissal on the merits of complaint challenging corporate spin-off under ERISA
Clients Peabody Holding Company, LLC & Peabody Energy Corporation
On September 27, 2013, the District Court for the Southern District of West Virginia granted a motion to dismiss filed by Jones Day clients Peabody Holding Company, LLC, and Peabody Energy Corporation, rejecting on the merits a complaint alleging that the coal companies had violated the Employee Retirement Income Security Act ("ERISA") by spinning off corporate subsidiaries that were allegedly not financially viable.
The district court adopted Jones Day's argument that the ERISA statute did not protect against corporate transactions that allegedly undermined the financial security of employee benefit plans as a whole, but rather merely prevented employers from taking steps to block employees from becoming eligible for employee benefits. Because the spin-off concededly did not affect any of the employees' eligibility for benefits, but only allegedly "jeopardized the fund's capacity to pay their entitled benefits," the court concluded that ERISA did not allow a challenge to the spin-off.
The court's construction of the ERISA provision at issue is significant, as it prevents plaintiffs from invoking the statute to challenge the countless routine business decisions that might have some effect on the financial integrity of benefit plans or their ability to pay benefits.
Lowe et al. v. Peabody Holding Co., LLC, et al., No. 2:12-CV-6925 (S.D. W. Va.)