Boeing Faces Slew of Class-Action Suits over 737 MAX Crashes

Shareholder lawsuits accuse plane maker of concealing safety problems.

Lawyers are having a field day with Boeing’s 737 MAX problems as the airplane maker is facing a slew of class-action lawsuits on behalf of shareholders over the company’s handling of the defective planes.

No fewer than half a dozen law firms have filed class-action lawsuits on behalf of shareholders who purchased shares of The Boeing Company from Jan. 8 through March 21. The lawsuits seek to recover damages for Boeing investors under federal securities laws.

The class action suits stem from two Boeing 737 MAX crashes that occurred within five months of each other. The first was Lion Air Flight 610, which crashed in late October of 2018, killing everyone on board, and the second was Ethiopian Airlines Flight 302, which also left no survivors when it crashed in March. Federal criminal and other investigations soon followed and Boeing shares plunged from their high of about $440 to about $372 on March 21.

The lawsuits accuse Boeing of concealing the full extent of safety problems caused by the placement of larger engines on the 737 MAX that changed the handling characteristics from previous models. These handling characteristics included the danger of the increased pitch-up tendency of the aircraft, which required special safety features, some of which Boeing installed only as “extras.”

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The suits claim Boeing quietly installed a new flight control system to compensate for the increased pitch-up tendency, rather than taking the more costly approach of properly designing a new aircraft as Boeing had originally planned.

Boeing allegedly made false and misleading statements, and failed to disclose that its 737 MAX airplanes were not as safe as previous models, say the lawsuits. They also say that Boeing included undisclosed “hacks” created by engineering compromises and the lack of safety features which Boeing sold as “optional” add-ons that were designed to help address the safety concerns. The suits note that most airlines did not purchase these safety options.

The lawsuits also lay some of the blame with the US Federal Aviation Administration (FAA) for granting Boeing oversight and certification of its new flight control system, which they say “was a clear conflict of interest as Boeing was rushing the 737 MAX airplanes to market.” The suits say that Boeing’s public statements were materially false and misleading “at all relevant times.” The lawsuit claims that when the true details became known to the public, investors suffered damages.

According to one of the lawsuits’ complaints, Boeing “effectively put profitability and growth ahead of airplane safety and honesty,” adding that the company “misled investors about the sustainability of Boeing’s core operation – its commercial airplanes segment—by touting its growth prospects and profitability, raising guidance, and maintaining that the Boeing 737 MAX was the safest airplane to fly the skies.”

The largest institutional investors in Boeing are Vanguard Group, which as of the end of March owned more than 39.9 million shares, followed by Blackrock, with over 33.8 million shares, T. Rowe Price, which owns approximately 33.1 million shares, and Newport Trust, and State Street, which own nearly 30.4 million and 26.3 million shares respectively.

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