On Wednesday, March 18, a U.S. federal judge partially certified a class-action lawsuit against Boeing. The suit was made after shareholders alleged that Boeing made misleading statements about the safety of the B737 MAX aircraft.
Class Certification Approved
Originally, the suit made in 2019 stems from two fatal crashes in 2018 and 2019 that killed 346 people. Their claims are that Boeing executives artificially inflated the companies stock.
In Chicago, U.S. District Judge Franklin Valderrama ruled that shareholders purchasing stock between Nov. 7, 2018 and Oct. 18, 2019, can sue as a group. They must have suffered losses to qualify for the class. The decision was made in case 19-cv-02394, in re: Boeing Company Aircraft Securities Litigation. The judge approved a method to calculate losses based on how the stock price was affected.
Former CEO, Dennis Muilenburg, and ex-CFO, Gregory Smith, are being accused by the plaintiffs of security fraud. Despite this, all claims against Smith were dismissed in September 2024. The lawsuit claims Boeing mislead investors about the safety of MAX’s Manoeuvring Characteristics Augmentation System (MCAS). It also alleges the company downplayed risks following the 2018 Lion Air and 2019 Ethiopian Airlines crashes.
Allegations and Stock Impact
Plaintiffs say Boeing claimed the 737 MAX was safe despite knowing about ongoing problems with the MCAS system. Some flaws can cause the system to activate incorrectly, and pilots can not override this. Additionally, they state Boeing tried to speed up the MAX’s certification by using an existing FAA type certificate. The company allegedly misled regulators about how quickly pilots could respond and reduced required training. Text messages disclosed in a New York Times article on Oct. 18, 2019 from chief technical pilot, Mark Forkner, described MCAS as “running rampant” and boasted he had “Jedi-mind trick[ed]” the FAA. Boeing’s stock fell about 6.8%, 0r $25 a share, that day.
The court shortened the class period, ending Oct. 18, 2019, after finding media reports by mid-November that revealed no major stock drops were tied to the statements made. Despite this, Boeing already faced penalties, including a $200 million SEC fine and a $2.5 billion Department of Justice settlement over B737 MAX issues.
How do you feel about the MAX crashes and investor claims? Join the conversation in the comments!
