Lieff Cabraser serves as Court-appointed Co-Lead Counsel representing Co-Lead Plaintiffs the New York State Comptroller Thomas P. DiNapoli, as trustee of the New York State Common Retirement Fund, and the Fire and Police Pension Association of Colorado in shareholder derivative litigation against current and former officers and directors of The Boeing Company, alleging breach of fiduciary duties in connection with their oversight of the 737 MAX’s design and development. In re The Boeing Company Derivative Litigation, Consol. C.A. No. 2019-0907-MTZ (Del. Ch.).
On November 5, 2021, the parties filed a settlement agreement with Vice Chancellor Morgan T. Zurn of the Delaware Chancery Court. The proposed settlement includes a $237.5 million cash payment and corporate governance reforms. It is the second largest insurer-funded derivative settlement in history and largest ever in Delaware Chancery Court.
In their January 2021 amended complaint, Co-Lead Plaintiffs alleged that Boeing’s officers and directors breached their fiduciary duties to the company by dismantling Boeing’s lauded safety-engineering corporate culture in favor of what became a financial-engineering corporate culture. The Complaint pled that despite numerous safety-related red flags, Boeing’s directors and officers failed to monitor the safety of Boeing’s aircraft. As the Complaint concluded, the directors’ and officers’ consistent disregard for safety resulted in the flawed design of Boeing’s 737 MAX, leading to the tragic deaths of 346 passengers and the grounding of all 737 MAX aircraft. On September 7, 2021, Vice Chancellor Zurn denied Boeing’s motion to dismiss Co-Lead Plaintiffs’ claim for breach of fiduciary duties against the Director Defendants.
Under the proposed settlement agreement, Boeing agreed to undertake significant corporate governance measures. Boeing will establish a five-year Ombudsperson Program that provides Boeing employees with a channel for raising internal safety issues. The Ombudsperson, who will report to Boeing’s Chief Aerospace Safety Officer, will also weigh any concerns about interference or transparency related to a Federal Aviation Administration delegation program. Boeing also agreed as part of the settlement to: (1) elect an additional board director with aviation, engineering or product-safety oversight experience; (2) codify separation of the chief executive officer and Board chairperson roles in its bylaws; (3) ensure at least three Board directors have “knowledge, experience and/or expertise with aviation/aerospace, engineering and/or product safety oversight”; (4) implement mandatory reporting from Boeing’s Chief Aerospace Safety Officer and Chief Compliance Officer to its Aerospace Safety Committee; and (5) ensure public disclosure of Boeing’s safety enhancement programs.
A final approval hearing is scheduled for February 23, 2022 at 1:30 p.m. to be held by the Court of Chancery of the State of Delaware, at the Leonard L. Williams Justice Center, 500 North King Street, Wilmington, Delaware 19801.