US court observes Boeing directors must face lawsuit from shareholders over fatal crashes

A Delaware judge on 7 September ruled that Boeing’s board of directors must face a lawsuit from shareholders over two fatal crashes involving 737 Max Plane. According to the court documents, Vice-Chancellor Morgan Zurn said that the first crash was a “red flag” about a key safety system on the aircraft that the board should have “heeded but instead ignored”. Zurn said that the real victims were those who died and their families but investors had also “lost billions of dollars”. 

In his ruling, the judge said, "While it may seem callous in the face of [the families'] losses, corporate law recognises another set of victims: Boeing as an enterprise, and its stockholders."

He added, “Stockholders have come to this court claiming Boeing's directors and officers failed them in overseeing mission-critical airplane safety to protect enterprise and stockholder value”. 

It is imperative to note that the crashes in Indonesia and Ethiopia in 2018 and 2019 killed all 346 people on board, leading to the 737 Max being grounded across the globe. Later, investigators had found a flaw in an automated flight control system, known as MCAS. Then in January, Boeing paid $2.5 billion to settle criminal charges that it concealed information about changes to MCAS from safety officials. However, the company still faced civil lawsuits from victims’ families along with the latest action from shareholders. 

Boeing 'disappointed' in the court's decision

On Tuesday, Zurn dismissed some of the investors’ claims, including one regarding a decision to award former chief executive Dennis Muilenburg a $60 million retirement package after he was fired. But the judge said that another claim about board member oversight could go ahead. In a lengthy summary of the shareholder’s case, the judge said that the board “publically lied" about if and how it monitored the 737 MAX’s safety.

The same day, Boeing in a separate statement said that it was “disappointed” in the court’s decision to allow the plaintiffs’ case to proceed past this preliminary stage of litigation.  According to BBC, a Boeing spokesperson said that the firm will review the opinion closely over the coming days as it considers the next steps. Meanwhile, it is worth noting that the MAX has been cleared to fly in the US in November 2020, and in Europe and Canada in January 2021. 

(Image: Shutterstock/AP)