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Boeing Directors Sued Over Missed Warning Signs on 737 Max 8

Jef Feeley

(Bloomberg) -- Boeing Co. directors were careless in their oversight of the flawed 737 Max 8 airliner and failed to react promptly after two crashes killed more than 300 people, according to a shareholder lawsuit seeking to hold company board members accountable.The directors missed repeated red flags during development of the 737 Max’s automated flight-control systems and then waited months to investigate the role of design flaws in a fatal Lion Air crash late last year in Indonesia, according the suit filed Monday in Delaware Chancery Court by the Kirby Family Partnership LP. In March, an Ethiopian Airlines 737 Max crashed in Africa.In its rush to get the 737 Max to market, Boeing didn’t property test the new system or adequately train pilots, the lawsuit alleges. Along with the subsequent grounding of all 737 Max aircraft, the board’s actions hurt the company “through loss of credibility in the marketplace, a damaged reputation and billions in potential business costs and liability,” according to Kirby, which says it has owned Boeing shares since 2018.

While Boeing already faces dozens of claims from victims’ families, the Delaware suit may be the first to target directors for their role in the controversy over the crashes.

Most of the lawsuits by family members -- for the October 2018 Lion Air crash and the Ethiopian Airlines crash -- have been consolidated in federal court in Chicago. The parents of Samya Stumo, a 24-year-old American aboard the Ethiopian Air flight, sued in April accusing Boeing of rushing the airliner to market while hiding flight-control defects.

Read More: When Will Boeing 737 Max Fly Again and More Questions

Peter Pedraza, a Boeing spokesman, declined to comment on the suit. The company is seeking to correct flight-control flaws and get the 737 Max back in operation.

Regulators grounded the plane globally in March after the second of two fatal crashes. The groundings and the failure to get many new orders for new planes has cut at least $225 million from the airline’s operating income and caused tens of thousands of flight cancellations.The company also has been sued by the union for Southwest Airlines Co.’s pilots, who are seeking lost pay due to the 737 Max’s grounding. Southwest is the biggest operator of such planes.The case is Kirby Family Partnership LP v. Dennis Muilenburg, 2019-0907, Delaware Chancery Court (Wilmington)

(Updates with company comment in sixth paragraph.)

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Steve Stroth

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