S&C obtained a dismissal of a stockholder derivative suit against Boeing’s directors and executives arising out of the January 2024 door-plug blowout on Alaska Airlines Flight 1282. The opinion is a notable reaffirmation of the high bar set by Caremark, which imposes liability for bad faith amounting to a breach of the duty of loyalty, and of the Boeing Board’s commitment to safety oversight following the 737 MAX accidents.
The Boeing Company is one of the world’s largest manufacturers of commercial aircraft with more than 10,000 Boeing commercial jetliners in service worldwide. On January 5, 2024, a door-plug detached from a 737 MAX plane shortly after takeoff. Shortly thereafter, the plaintiffs filed derivative claims against Boeing’s directors and members of Boeing’s management, arguing that the board and management in the years following the 2018 and 2019 737 MAX crashes ignored red flags and pushed unsafe production targets, ultimately leading to the door-plug accident.
The Delaware Chancery Court, agreeing with S&C’s arguments, concluded that the plaintiffs’ allegations showed the opposite: the board regularly monitored safety and quality risks, including receiving detailed reporting on the company’s efforts to manage those risks and production targets were repeatedly adjusted to take into account safety and quality concerns. That the board received copious reporting on manufacturing risks and efforts to reduce them did not put it on notice of serious misconduct or an impending corporate trauma, the court explained, but rather was evidence of an oversight system working as it should. Having failed to plead that demand on the board would have been futile, the court dismissed all claims with prejudice.
The S&C team representing Boeing and the individual defendants included Sharon Nelles, Leonid Traps and Oliver Engebretson-Schooley.