The Boeing Company
- Company Name
- The Boeing Company
- Stock Symbol
- Class Period
- January 8, 2019 to March 21, 2019
- Motion Deadline
- June 8, 2019
- Northern District of Illinois
The complaint charges Boeing and certain of its officers with violations of the Securities Exchange Act of 1934. Boeing designs, develops, manufactures, sells, services and supports commercial jetliners, military aircraft, and satellite, missile defense, human space flight and launch systems and services worldwide.
The complaint alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information concerning the Company’s 737 MAX airplanes. Specifically, defendants effectively put profitability and growth ahead of airplane safety and honesty, misleading investors about the sustainability of Boeing’s core operation – its Commercial Airlines segment – by touting its growth prospects and profitability, raising guidance and maintaining that the Boeing 737 MAX was the safest airplane in the skies. Defendants made these statements while concealing the full extent of safety problems caused by the placement of a larger engine on the 737 MAX that changed the handling characteristics of the plane, including increased pitch-up tendency, that required special safety features, some of which Boeing installed only as “extras” or “optional features” in order to keep the price down. In addition, Boeing failed to disclose that it had been delegated authority by the FAA to examine, test and help certify its planes and provide the safety analysis of the Maneuvering Characteristics Augmentation System (“MCAS”), which was installed to compensate for the increased pitch-up tendency of the 737 MAX. Boeing knew that it had a clear conflict of interest and that its certification was undermined by the Company’s desire to rush the 737 MAX to market, despite decreased safety, in order to compete with Airbus. During the Class Period, as a result of this information being concealed from the market, Boeing securities traded at artificially inflated prices of more than $440 per share.
On October 29, 2018, Lion Air Flight 610 crashed shortly after take-off, killing all aboard. The airplane was a 737 MAX. Shortly after the crash, defendants maintained that the 737 MAX was safe and that “[s]afety remains our top priority and is a core value as Boeing.” On March 10, 2019, Ethiopian Airlines Flight 302, another 737 MAX airplane, crashed shortly after take-off, killing all aboard. Widespread reports following the crashes indicated that both planes had experienced problems related to the MCAS affecting the nose angle of the aircrafts.
Then on March 21, 2019, the New York Times reported that the two planes lacked safety features that Boeing sold only as extras. The article stated that both “Boeing and its airline customers have taken pains to keep these options, and prices, out of the public eye” and that “Boeing declined to disclose the full menu of safety features it offers as options on the 737 Max, or how much they cost.” On this news the price of Boeing shares fell 3%, or $10.53 per share.
In contrast to defendants’ safety-related and other statements, reports have since suggested that Boeing and its executives were well aware that some 737 MAX airplanes lacked all available safety features because they were sold separately. As news of the crashes has unfolded, followed by investigations into their causes and the grounding of 737 MAX planes worldwide, the price of Boeing shares has fallen over 17%, from a high of more than $440 per share in February 2019 to $362 per share on March 22, 2019. On April 5, 2019, Boeing announced it planned to cut its monthly production of 737 MAX airplanes by 20% in the wake of the two deadly crashes, signaling it did not believe the FAA would allow the plane to fly again any time soon.