Shareholders can file 737 MAX claims against Boeing’s board, according to court rules

WASHINGTON, Sept. 7 (Reuters) – A Delaware judge ruled Tuesday that Boeing (BA.N) board should face shareholder lawsuit over two fatal 737 MAX crashes that killed 346 people in less than six months.

Vice President Morgan Zurn ruled that Boeing shareholders could file some claims against the board, but dismissed others.

Zurn’s ruling in the chancellery court said the first of the 737 MAX’s two fatal crashes was a “red flag” over a key security system known as MCAS “that the board should have considered but ignored “.

Boeing said Tuesday afternoon that it was “disappointed by the court’s decision to allow the plaintiffs’ case to pass after this preliminary phase of litigation. We will review the opinion closely over the next few days as we consider the following steps.” “.

The U.S. Federal Aviation Administration lifted the 737 MAX flight ban in November after a 20-month review following the 2018 and 2019 fatal crashes. In January, Boeing was indicted by the Justice Department. of 737 MAX fraud conspiracy and agreed to a deferral agreement and processing agreement worth more than $ 2.5 billion.

Zurn’s ruling found some evidence presented by Boeing to support shareholders’ allegations. “The fact that the board fell short is also evident in the board’s public outcry about taking specific actions to control security that it didn’t really perform,” the ruling said.

In a lengthy summary of the shareholder case, Zurn said the board “publicly lied about whether and how it controlled the safety of the 737 MAX.”

The opinion also cited comments from Dave Calhoun, then director of Boeing, who became chief executive of Boeing in January 2020 after the board of directors fired CEO Dennis Muilenburg.

He cited Calhoun’s comments that “the board had been” notified immediately, as a general meeting “after the Lion Air crash, and met” very, very quickly “afterwards.

He added that after the second crash of an Ethiopian Airlines 737 MAX in March 2019, Calhoun represented that the board met within 24 hours of the crash to discuss the possibility of landing the 737 MAX.

“Each of Calhoun’s representations was false,” Zurn’s sentence said.

The crashes have cost Boeing about $ 20 billion.

Brian Quinn, a professor at Boston College Law School, said the ruling paves the way for further discovery and potentially for a trial, though he considers it highly unlikely.

“Right now everything is aligning where the board of directors is telling their lawyers that I don’t want to go to trial. They have to be paid whatever it costs and, as a director, I can’t admit any responsibility,” he said.

In that scenario, executives ’insurance would likely pay for any deal, he said.

Reports by David Shepardson in Washington, Tom Hals in Wilmington, Delaware, and Jonathan Stempel in New York; edited by Richard Pullin

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