Judge Rules Peabody Energy Bankruptcy Blocks Global-Warming Lawsuits

By Jonathan Randles Features Dow Jones Newswires

A judge has ruled Peabody Energy Corp. is protected by its recent bankruptcy from global-warming lawsuits brought by California coastal communities against fossil-fuel companies.

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Judge Barry Schermer of the U.S. Bankruptcy Court for the Eastern District of Missouri ruled Tuesday that discharge and injunction provisions included in Peabody's chapter 11 plan of reorganization extinguish the lawsuits that were filed months after the coal-mining company left bankruptcy in early April.

The litigation was brought by the counties of San Mateo and Marin and the city of Imperial Beach and seeks damages tied to greenhouse-gas emissions between 1965 and 2015. Peabody sought bankruptcy in 2016. The ruling doesn't affect other companies that are named in the lawsuits, filed in July.

The lawsuits say Peabody for decades has exported substantial amounts of coal from California and claim the company has been linked to groups that have sought to undermine climate science and the connection between emissions and global warming and rising sea levels. Peabody has said the lawsuits lack merit.

Judge Schermer said that the California communities were required to bring claims against Peabody during the bankruptcy but, instead, chose not to participate in the chapter 11. Initiating the lawsuits after Peabody left chapter 11 was intended to give these communities an advantage over other company creditors who went through the bankruptcy process, the judge said.

Lawyers representing San Mateo, Marin and Imperial Beach argued language in the company's bankruptcy plan negotiated by the U.S. Environmental Protection Agency includes exceptions for this type of legal action and should allow litigation to proceed against Peabody. But Judge Schermer said the exception is limited and, instead, designed to ensure the federal government could continue to enforce environmental laws related to Peabody's mining.

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"We are reviewing the court's decision and considering our options," said Vic Sher, a Sher Edling LLP lawyer representing the California communities, on Wednesday. "But it would be a shame if Peabody, the biggest private coal company in the world, can use the bankruptcy laws to avoid defending these cases that call into question their role in damaging our climate, causing sea levels to rise, misleading the public and policy makers about those impacts, and shifting billions of dollars in costs onto coastal communities."

Peabody sought chapter 11 protection last year as low coal prices roiled the industry and drove other coal producers to seek refuge in bankruptcy. The company's chapter 11 plan reduced its debt by $5 billion. Peabody has said its stay in chapter 11 preserved the jobs of 6,700 employees as well as benefits for its retirees.

"We are pleased with the court's decision and believe the best path to lower emissions isn't through litigation or overt regulation," Peabody spokeswoman Beth Sutton said. "We support a path using technology such as high-efficiency low-emission generation and, over time, carbon capture and storage."

The lawsuits allege fossil-fuel companies have known for decades that greenhouse-gas emissions warm the earth's climate but sought to conceal these dangers and undermine public support for regulation to address the problem. A second coal-mining company, Arch Coal, has also argued that its bankruptcy also protects it from the litigation.

The cities of San Francisco and Oakland filed similar lawsuits in September against oil and gas companies, specifically.

Write to Jonathan Randles at Jonathan.Randles@wsj.com

(END) Dow Jones Newswires

October 25, 2017 16:18 ET (20:18 GMT)