A Delaware judge has dismissed a shareholder lawsuit accusing executives at Boeing of ignoring safety concerns before the blowout of a door plug on an B737-9 operated by Alaska Airlines (AS, Seattle Tacoma International) in January 2024, Bloomberg reported.
Judge Morgan Zurn concluded that the directors did not act in bad faith in overseeing management efforts to address safety issues. According to her, nothing reported to the board of directors put them “on notice of ongoing violations of law or a risk of serious corporate trauma that triggered a duty to act.”
The lawsuit was filed in November 2024 by pension funds holding Boeing shares, which alleged that directors breached their fiduciary duties by failing to respond to warning signs regarding aircraft safety and regulatory compliance. The plaintiffs also claimed the board approved a production schedule it knew could not be implemented safely or in compliance with the law, resulting in substantial losses for Boeing.
Attorneys for the directors argued that the company had undertaken “extensive efforts to remake and enhance oversight procedures” following the two B737-8 disasters in 2018 and 2019. They said the case stemming from the B737-9 blowout differed from the earlier litigation because Boeing had since made significant changes, including replacing management, adding new board members, and strengthening its safety oversight procedures.
Zurn agreed that the board's actions did not amount to bad faith, noting that Delaware law does not hold corporate directors liable simply because a general risk ultimately materialises. The judge also found that much of the information reported to the board was unrelated to the causes of the door plug blowout or the regulatory costs that followed.
Safety or profit
In separate litigation, a federal appeals court recently decertified a shareholder class action accusing Boeing of prioritising profit over safety and making misleading statements about its safety practices before the 2024 incident. The court found that shareholders had failed to demonstrate how damages could be calculated on a classwide basis or determine how much the company's alleged misrepresentations had artificially inflated its share price.
Boeing and the US Department of Justice (DOJ) reached an agreement in 2021 to defer prosecution on a charge that the company deceived regulators about design flaws linked to the two crashes in 2018 and 2019. Following the Alaska Airlines incident, the DOJ said Boeing had breached that agreement, ultimately leading to a new USD1.1 billion settlement allowing the manufacturer to avoid prosecution.
The earlier shareholder litigation stemming from the two crashes was settled for USD237.5 million. Boeing's directors denied wrongdoing, saying they had agreed to settle because of the expense, uncertainty, and risks associated with the litigation.
