U.S. court rules Boeing board to face shareholder lawsuit over two fatal 737 MAX crashes

©Boeing 737 MAX

A Delaware, U.S. judge has ruled that certain shareholder claims against Boeing can be pursued, while dismissing others, in relation to the two 737 MAX crashes which killed 346 passengers and crew. In the ruling in the Court of Chancery, Vice Chancellor Morgan Zurn said that the first of the two crashes was a “red flag” concerning the MCAS safety system “that the board should have heeded but instead ignored.” Commenting on the court’s decision, Boeing said it was: “disappointed in the court’s decision to allow the plaintiffs’ case to proceed past this preliminary stage of litigation. We will review the opinion closely over the coming days as we consider next steps.”

Back in January this year the U.S. Justice Department charged Boeing with 737 MAX fraud conspiracy and agreed to a deferred prosecution agreement along with a settlement in excess of US$2.5 billion. Zurn’s ruling included the following in response to shareholder allegations: “That the board knowingly fell short is also evident in the board’s public crowing about taking specific actions to monitor safety that it did not actually perform.” Zurn also stated that the board “publicly lied about if and how it monitored the 737 MAX’s safety.”

The ruling referred to two particular comments made by Dave Calhoun, who took over from Denis Muilenburg in January 2020 as Boeing’s CEO. First, that “the board had been ‘notified immediately, as a board broadly,’ after the Lion Air crash and met ‘very, very quickly’ thereafter.” Second, when referring to the second 737 MAX crash, this time involving an Ethiopian Airlines in March 2019, the ruling highlighted that Calhoun had represented that the board met within 24 hours of the crash to discuss potentially grounding the 737 MAX, “Each of Calhoun’s representations was false,” Zurn’s ruling said. So far, the two crashes are estimated to have cost Boeing in the region of US$20 billion.

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