Two years ago I wrote that the real victims in the Boeing 737 MAX crashes weren’t the passengers or crew, they were the investors. Not really, but that seemed to be what was going to happen in the courts with the strongest legal claims and greatest compensation coming from shareholder lawsuits for securities fraud.
- Boeing made false claims about safety
- Investors were misled
- And they lost money when the stock fell
A class action has now been certified. Seeks v. The Boeing Company, No. 1:19-cv-02394 (N.D. Ill.) was filed on April 9, 2019. It became the main consolidated 737 MAX securities case (In re The Boeing Company Aircraft Securities Litigation). Mississippi’s public employees retirement system was appointed lead plaintiff, and the consolidated complaint was filed on February 14, 2020.
The theory is Boeing allegedly misled the market about the 737 MAX’s safety, pilot procedures and training, dealings with the FAA, and return-to-service timeline. This allegedly kept Boeing’s stock price artificially inflated until the truth came out. This is consistent with the Justice Department’s claim that Boeing employees deceived the FAA about MCAS and pilot-training.
- Boeing knew after Lion Air that MCAS was a serious problem.
- Boeing also knew it had previously minimized or concealed MCAS’s scope and training implications to avoid simulator training requirements and preserve the MAX’s sales pitch.
- Instead of telling investors the plane had a serious certification and training problem, Boeing publicly said the MAX was safe, existing pilot procedures were adequate, the FAA process had no real problem, and recertification was on track.
- The market price stayed too high because of those statements.
- Ultimately as these claims proved wrong, investors lost money.
Statements like “safety is a core value” and “we’re confident” aren’t really actionable. They’re puffery. And even if the FAA was misled, some certification-side FAA officials knew more, so their claims were technically true or at least not totally false. Proving that Boeing engineers misled regulators is easierto prove than that their CEO made investor-facing statements with fraudulent intent.
Furthermore, the stock fell because two planes crashed, fleets were grounded, production got disrupted, regulators worldwide reacted, and the business deteriorated. That’s different than the stock dropping because the market learned Boeing wasn’t telling the truth about how bad the MAX situation was. But since the case is still progressing after Boeing’s attempt to knock it out, they probably settle is my guess.
More broadly, though, it’s at least a littlke odd that “the victims” here are shareholders rather than passengers and their families. And are shareholders even the ones made better off by the suit? Lawyers get fees, but when Boeing pays $1, the firm’s value falls $1 (net of insurance and tax effects). Shareholders are paying for a transfer to shreholders. That’s somewhat circular.
Not literally because these are different investors! The lawsuit covers people who allegedly bought at fraud-inflated prices and may have sold long ago. The cost is borne by whoever owns the company today. Those overlap but they aren’t the same. Plus, not everyone getting paid is actually an owner since the suit covers call-option buyers and put writers in addition to shareholders.
The real victims were the passengers. The lawsuit’s claimed victims are market participants who say they overpaid because Boeing lied. And any payouts from the suit are partly circular, making the company’s shareholders pay shareholders for misconduct.
Shareholder derivative lawsuits are the worst and attorneys that pursue them deserve a special place in hell. I love how whenever stick goes down these cockroaches crawl out to file a suit.
Keep in mind that it will likely be resolved with some nominal compensation or, even better, a change in policy or procedure to avoid it happening again. Of course the ambulance chaser gets their fees and expenses paid. They are only in it for themselves. Thankfully there are many courts that toss these suits on a regular basis.
Stock prices indicate value not gain or loss. You must trade the stock to realize one or the other. If someone buys high and sells low, that’s their loss. I did quite well with Boeing by buying low and selling high, so although there may in fact be misleading or illegal comments presented by senior management, it’s what YOU choose to do with that information that matters most in the balance sheet!
USA… USA… USA… /s *sigh* I know, TDS, but if he wasn’t re-elected in 2024, this DOJ would not have dropped the criminal case against Boeing.
Breaking news: Class Action lawsuits mainly benefit law firms who specialize in Class Action lawsuits.
They do little for the members of the class. While they purport to benefit society and the people allegedly damaged, most of the economic benefit goes to the law firms and the parasitic industry that has been created around them. It’s often difficult to submit claims and most claims net a few dollars.
So Boeing is being sued because stockholders made bad decisions on holding Boeing stock. It is interesting that Boeing stock peaked after the Lion Air crash. Institutional investors probably took a hit on stock bought near the peak due to their buy and hold almost forever policies. Now they are trying to get a payout due to their policies. If they bought stock before the runup in price started at the end of 2016, they are still ahead. If they win, the result may rewrite how the whole stock market works.
Trump did not ground the 737 Max after the second plane crashed until days after the rest of the world grounded them.
There are blatent mispelings in your article. Lol.
@Jon Biedermann — The lady doth protest too much, me thinks…
Maybe such a lawsuit will actually an accurate story out, not the MSM snippets and all the self-designated ‘expert’ commentators who claim to know exactly what engineers ans executives were thinking. Such as ones who claim airplane manufacturers don’t involve the FAA until after first flight, which is flat-out innaccurate.
The flight crew procedures are essentially unchanged – stab runaway – cut the stab trim (two prominent switches with red guards on the pedestal).
I’d also expect WN to make a guest appearance if there is a trial. They certainly influenced the chain of events.
What is interesting today is that the FAA is now demanding changes for some upcoming derivative model designs and certifications that will take those models farther away from ‘common type ratings’ at thebflight crew interfaces. I can’t fathom why they think that is a good idea – they seem to be ‘fixing’ problems that don’t exist.
The ONlY ones who make money in a class actio lawsuit are the attorneys. Ask me how I know? I’ve been deposed three different times in one suit that was filed in 2012. Guess how many attorneys were at each of the depositions? Seventeen the first time, 28 the second and 8 the last one. And, ultimately, guess who pays those fees? Yes, you the consumer through an increase in prices.
I’m not a fan of many of the tactics of American liability lawyers. However, there is an argument for such suits being good. If a firm fears such suits and acts in an ethical manner because kf that, we do have a good. The actual suit isn’t a good, I’d argue, but the threat of a suit can do good. Thrre’s a broader parallel. Companies might make there products more idiot proof out of fear some idiot will do something a sue. Thus the label on your shirt: “do not iron while wearing.”
“USA… USA… USA… /s *sigh* I know, TDS, but if he wasn’t re-elected in 2024, this DOJ would not have dropped the criminal case against Boeing.”
@1990, let’s actually look at the timeline and eliminate your own self-admitted TDS, m’kay? From the AP…
“March 23, 2022: A jury in Texas finds Boeing’s chief technical pilot for the 737 Max not guilty on four counts of wire fraud for allegedly misleading regulators about MCAS.
Sept. 22, 2022: Boeing agrees to pay $200 million and former CEO Muilenburg agrees to pay $1 million to settle Securities and Exchange Commission charges that they misled investors by saying one month after the Lion Air crash the 737 Max was “as safe as any airplane that has ever flown the skies,” even though the company had determined MCAS posed a safety risk in need of repair.
Oct. 22, 2022: A federal judge in Texas rules the Justice Department violated the rights of relatives of the Indonesia and Ethiopia crash victims by not consulting them before approving the deal with Boeing. The families want the settlement nullified.
Feb. 9, 2023: Judge Reed O’Connor rules that despite “Boeing’s egregious criminal conduct,” federal law doesn’t allow him to overturn the settlement.”
March 25, 2025: After granting multiple extensions, O’Connor sets a June 23 trial date for the criminal case (EDIT: this could be the conspiracy charge).
May 23, 2025: The Justice Department says further negotiations resulted in an agreement under which Boeing would pay or invest more than $1.1 billion in exchange for prosecutors moving to dismiss the conspiracy charge.
So @1990, what does this tell us? MAX flights resumed during the Biden Years. The DOJ chose to NOT PROSECUTE Boeing during the Biden Years. Merrick Garland, anyone? The settlement that the DOJ and Being agreed to was negotiated during the Biden Years. Again, Merrick Garland, anyone? That settlement violated the rights of the victims’ families. Who did that? Yes, Merrick Garland, anyone? And, Judge Reed O’Connor admitted that it did, but that legally he had no basis to overturn the settlement.
It’s really easy to blame Trump for literally EVERYTHING. However, he has pretty clean hands on this one. He grounded the MAX before another plane crashed. Some may argue he should have grounded the MAX sooner; fine, but the point is that he did. The investigation and settlement occurred under Biden’s DOJ, not Trump’s. The Biden DOJ crafted a “settlement” that violated the rights of the victims’ families, not Trump. That only thing that happened under Trump was the final $1.1 billion dollar exchange to eliminate the conspiracy charge. I wasn’t in favor of that, for the record, but it’s pretty minor compared to what Biden’s DOJ did victimizing the families for a second time. But hey, ‘ol Joe Biden’s administration never did anything wrong, right?
Again, let’s look at the entire timeline before going all Orange Man Bad.