Southwest Airlines Co. Class Action Lawsuit
- Company Name
- Southwest Airlines Co.
- Stock Symbol
- Class Period
- February 7, 2017 to June 25, 2019
- Northern District of Texas
On February 19, 2020, the Southwest Airlines Co. securities class action lawsuit was filed charging Southwest and certain of its officers with violations of the Securities Exchange Act of 1934. The Southwest securities class action lawsuit was commenced in the Northern District of Texas on behalf of purchasers of Southwest securities between February 7, 2017 and June 25, 2019 (the “Class Period”) and is captioned Linenweber v. Southwest Airlines Co., et al., No. 20-cv-00408.
Southwest operates a passenger airline that provides scheduled air transportation services in the United States and near-international markets. Southwest is regulated by, among other government entities, the Federal Aviation Administration (“FAA”), a sub-agency of the U.S. Department of Transportation (“DOT”) that regulates civil aviation in the United States and its surrounding international waters.
Southwest’s operations have been plagued by non-compliance and maintenance issues for years, including a controversy over a decade ago when local agency managers allowed Southwest to continue flying tens of thousands of passengers on nearly two dozen aircraft without completing mandatory structural inspections and Southwest paying $7.5 million in penalties to settle claims that it operated 45 aircraft on 60,000 flights without completing mandatory maintenance checks for potential fuselage cracks. Notwithstanding these widely reported issues, Southwest has continually denied any wrongdoing and has insisted that it remains in compliance with government maintenance and safety regulations.
The Southwest securities class action lawsuit alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose adverse information regarding Southwest’s business and operations. Specifically, defendants failed to disclose that: (i) Southwest’s operations were non-compliant with government maintenance and safety regulations; (ii) the foregoing issues were exacerbated by Southwest’s undue influence over FAA officials and, consequently, lax regulatory oversight of Southwest’s operations; and (iii) all of the foregoing significantly increased the safety risks to passengers traveling on Southwest flights and heightened governmental scrutiny of Southwest. As a result of this information being withheld from the market, Southwest securities traded at artificially inflated prices during the Class Period, with Southwest’s stock price reaching a high of more than $65 per share.
On April 17, 2018, a Southwest plane blew an engine, which caused the engine to explode and shrapnel to strike the plane. The explosion resulted in the death of one passenger and injuries to seven others. According to the Chairman of the National Transportation Safety Board (“NTSB”), the incident marked “the first passenger fatality in a U.S. airline accident since 2009.” In addition, the NTSB announced that, out of twenty-four fan blades in the engine at issue, one was missing. On April 19, 2018, the FAA announced that it would “order inspections of at least 220 aircraft engines as investigators are focusing on a broken fan blade in an engine that exploded.” According to news sources, the order was initially proposed in August 2016, following an earlier incident in which engine failure had also resulted from a broken fan blade. On this news, the price of Southwest stock fell $1.02 per share, or 1.83%, to close at $54.80 per share on April 19, 2018. On June 21, 2018, news sources reported that eight passengers were suing Southwest in connection with the engine explosion in April 2018. On this news, the price of Southwest stock fell 2.33% to close at $51.91 per share on June 22, 2018.
Finally, on June 25, 2019, after the market closed, The Wall Street Journal reported that the FAA had “removed three senior managers in the office overseeing Southwest Airlines Co., amid allegations of lax safety enforcement raised by agency whistleblowers and various resulting government inquiries.” The article also noted that “[t]he [DOT]’s inspector-general has been looking into some of the safety issues for many months . . . including lapses by the airline in documenting maintenance for more than 100 of its jets,” as well as “failures to reliably compute the weight of checked baggage and hazardous landing incidents in which one aircraft smacked a wingtip on the tarmac and another ran off the strip in stormy weather.” On this news, the price of Southwest stock fell to a close at $50.70 per share on June 26, 2019.
Robbins Geller Rudman & Dowd LLP is one of the world’s leading law firms representing investors in securities class action litigation. With 200 lawyers in 9 offices, Robbins Geller has obtained many of the largest securities class action recoveries in history. For seven consecutive years, ISS Securities Class Action Services has ranked the Firm in its annual SCAS Top 50 Report as one of the top law firms in the world in both amount recovered for shareholders and total number of class action settlements. Robbins Geller attorneys have helped shape the securities laws and have recovered tens of billions of dollars on behalf of aggrieved victims. Beyond securing financial recoveries for defrauded investors, Robbins Geller also specializes in implementing corporate governance reforms, helping to improve the financial markets for investors worldwide. Robbins Geller attorneys are consistently recognized by courts, professional organizations and the media as leading lawyers in the industry.