Boeing looks to throw out shareholder lawsuit over 737 Max crashes

Aircraft maker claims the board had a 'robust' oversight of the jet's development

The New York state pension fund and other Boeing shareholders argue in a Delaware lawsuit that the company's board had breached fiduciary duties by failing to properly monitor the safety of the 737 Max. The narrow-body plane was involved in two fatal crashes. Reuters
The New York state pension fund and other Boeing shareholders argue in a Delaware lawsuit that the company's board had breached fiduciary duties by failing to properly monitor the safety of the 737 Max. The narrow-body plane was involved in two fatal crashes. Reuters

Boeing asked a Delaware court to throw out a shareholders' lawsuit over the safety of its 737 Max following fatal crashes, saying the board engaged in "robust and well-established" oversight of the jet's development.

In an amended complaint unsealed in February, New York State Comptroller Thomas DiNapoli, who heads the state pension fund, and other investors argued that Boeing's board breached its fiduciary duties and acted with gross negligence by failing "to monitor the safety of Boeing's 737 Max airplanes".

The lawsuit, filed in Delaware Chancery Court, also alleges that the board did not develop any tools to evaluate and monitor airplane safety until after two 737 Max crashes in Ethiopia and Indonesia killed 346 people in a span of five months, and the fleet was grounded.

It also said the board did not receive a briefing about the basics of airplane safety until the end of April 2019, several weeks after the jet's worldwide grounding.

In its motion to dismiss the complaint, made public on Monday, Boeing said the plaintiffs ignore "the robust systems that had long been in place" to keep the board informed about significant risk issues.

"Boeing's directors maintained this high scrutiny, moreover, during a period in which commercial aircraft, and Boeing's in particular, achieved ever higher levels of safety ... a trend that cannot be squared with [the] plaintiffs' simplistic narrative about a 'safety-engineering culture' that had been 'intentionally dismantled'," Boeing said.

The company had management briefings to the board and an internal corporate audit group to evaluate risks, as well as a mechanism to receive reports on employee ethics and compliance complaints, Boeing said.

A Boeing representative referred to the filing and declined to comment further. A lawyer representing the plaintiffs declined to comment.

Since 2019, Boeing's board has implemented changes to improve oversight of Boeing's engineering and industrial operations as the company navigated the fallout over the grounding of its best-selling 737 Max for nearly two years after the crashes.

Emails and memos released under court orders on March 4 show executives and board members discussing ways of combatting negative press coverage, and one veteran board member suggesting the board elevate its attention to safety and quality at their meetings.

"I believe we should devote the entire board meeting (other than required committee meetings and reports) to a review of quality within Boeing," veteran board member Art Collins wrote to fellow board member Dave Calhoun, now Boeing's chief executive, days after the second crash in 2019.

Boeing later acknowledged, as part of a deferred prosecution agreement with the US Justice Department in January this year, that the company concealed details about a crucial flight control system at the centre of the two crashes from the US Federal Aviation Administration.

Boeing employees also worked to have references to the system, known as MCAS, omitted from flight crew operating manuals as part of the company's goal of avoiding costlier pilot training requirements, according to the agreement.

Published: March 30, 2021 08:30 AM

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