Boeing asks Delaware court to throw out investors’ 737 MAX lawsuit

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FILE PHOTO: A Boeing 737 MAX 8 sits outside the hangar during a media tour of the Boeing 737 MAX at the Boeing plant in Renton, Washington

By Eric M. Johnson

SEATTLE (Reuters) – Boeing Co 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 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,” Boeing said, “a trend that cannot be squared with Plaintiffs’ simplistic narrative about a ‘safety-engineering culture’ that had been ‘intentionally dismantled.'”

Boeing had management briefings at 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 further comment. 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 fallout over the nearly two-year grounding of the best-selling 737 MAX after the crashes.

Emails and memos released under court order on March 4 show executives and board members discussing combating 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 U.S. Justice Department in January this year, that the company concealed details about a crucial flight control system at the center of the two crashes from the U.S. 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.

(Reporting by Eric M. Johnson in Seattle; Editing by Lisa Shumaker)

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