WASHINGTON: A Delaware judge ruled Tuesday that Boeing’s board of directors will have to face shareholders’ lawsuit over two fatal 737 MAX crashes that killed 346 people less than six months later.
Vice-Chancellor Morgan Zern said Boeing shareholders could make some claims against the board, but rejected others.
Zern’s decision in the Court of Chancery held that the first of the two fatal 737 MAX crashes was a “red flag” about a key safety system known as MCAS, which the Board should have paid attention to, but instead It should have been ignored.
Boeing did not immediately respond to requests for comment.
The US Federal Aviation Administration lifted the https://www.reuters.com/article/us-boeing-737max-idUSKBN27Y0FU flight ban on the 737 MAX in November after a 20-month review following fatal crashes in 2018 and 2019. In January, Boeing was charged by the Department of Justice https://www.reuters.com/article/boeing-737max-justice-int-idUSKBN29D07Q 737 MAX with conspiracy to fraud and with over $2.5 billion in deferred prosecution agreements and agreed to the settlement.
The Zern ruling found that some of the evidence presented by Boeing supports the shareholders’ allegations. The ruling said, “The Board deliberately fell short, also clear, about the Board taking specific action to oversee safety in a public crowd that did not actually perform.”
In a lengthy summary of the shareholder’s case, Zern said the board “lyed publicly about whether and how it oversaw the security of the 737 Max.”
Rae also cited comments from then-Boeing director Dave Calhoun, who became Boeing’s chief executive in January 2020 after ousting CEO Dennis Muilenburg from the board.
It cited Calhoun’s comments that “the Board was ‘immediately, comprehensively notified as a Board’ following the Lion Air crash and met ‘very, very quickly’ thereafter.”
It said that following the second crash of the Ethiopian Airlines 737 MAX in March 2019, Calhoun represented that the board met within 24 hours of the accident and discussed potentially grounding the 737 MAX.
“Each representation of Calhoun was false,” said Zern’s decision.
Boeing has lost about $ 20 billion in these accidents.
Brian Quinn, a professor at Boston College Law School, said the ruling clears the way for additional searches and potentially a trial, though he deemed it highly improbable.
“Everything is lined up right now where the board of directors is telling their lawyers that I don’t want to go to trial. You need to pay them, whatever it’s worth and I can’t accept liability as a director ,” They said.
In that scenario, the directors’ insurance would pay any settlement, he said.
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