U.S. Markets closed

Boeing Expected to Face Legal Troubles Over 737 Max 8

Wreckage is piled at the crash scene of an Ethiopian Airlines flight crash near Bishoftu, or Debre Zeit, south of Addis Ababa, Ethiopia, on March 11, 2019. AP Photo/Mulugeta Ayene

Boeing’s legal troubles could soar following decisions by several countries, including the United States, to ground its newest model of commercial aircraft following a March 10 crash in Ethiopia that killed 157 people.

On Wednesday, the Federal Aviation Administration issued an emergency order temporarily grounding the entire 737 Max series of aircraft in the United States. The circumstances of the Ethiopian Air flight’s crash bore resemblances to that of another 737 Max 8 aircraft owned by Lion Air that crashed Oct. 29, killing 189 people—although the cause of both crashes remains unknown.

Boeing faces lawsuits from passengers, particularly since eight of them on the Ethiopian Air flight were Americans. But airlines also could bring legal actions over revenue losses incurred due to the grounding, according to lawyers who specialize in aviation. On Wednesday, Norwegian Air CEO Bjørn Kjos told customers that the airline would seek compensation from Boeing.

“This will be a large financial loss,” said Pete Flowers, of Chicago’s Meyers & Flowers, who has filed a lawsuit against Boeing on behalf of a Lion Air passenger’s family and plans to sue over the Ethiopian Air crash in the coming days. “The claims against Boeing are going to be enormous overall. There’s going to be a lot at stake here.”

Boeing spokesman Paul Bergman said in a statement: “Boeing extends our heartfelt condolences and sympathies to the families and loved ones of those onboard Lion Air Flight 610 and Ethiopian Airlines Flight 302. As the investigation continues, Boeing is cooperating fully with the investigating authorities. We won’t comment on lawsuits directly.”

The FAA’s move comes after regulators in 22 countries, including China, Canada and the entire European Union, had grounded their 737 Max 8 fleets earlier this week. The grounding of flights would have a “significant impact” on airlines, such as American Airlines and Southwest Airlines, said Mark Dombroff of LeClairRyan in Alexandria, Virginia, who represents airlines.

“The insurers, Boeing, everyone, is reading insurance policies, warranties,” he said. “Everyone is reading everything now because all of a sudden an entire fleet worldwide has been grounded. All airlines operating this airplane are, or were, impacted to a greater or lesser degree, either canceling flights or covering flights. These airlines are high-usage pieces of equipment. They’re flying them seven days a week.”

He doubted the airlines would drag Boeing into court, given their business relationship with the manufacturer. Instead, they would review their warranties with Boeing, which are “tightly drawn,” or make claims for grounding insurance, which applies when the government grounds planes.

“They could have potentially significant damages,” he said of the airlines.

Boeing already faces lawsuits on behalf of dozens of passengers of the Lion Air flight, none of whom were Americans. A suit filed in King County Superior Court in Seattle names relatives of 17 passengers, but most of the cases are in Illinois, where Boeing, represented by Perkins Coie partner Bates Larson, has removed some from Cook County Circuit Court to the Northern District of Illinois. Boeing also has sought to limit discovery in the Lion Air cases to forum non conveniens, which it plans to argue in moving to dismiss.

But the Ethiopian Air crash could thwart those plans, Flowers said.

“It’s a clear sign that there’s a definite problem with this particular aircraft,” he said. “It may expand the discovery that we end up doing because of the similarities between the two crashes.”

Those similarities indicate the same alleged product defect—in particular, the Maneuvering Characteristics Augmentation System, or MCAS, an automated safety mechanism designed to prevent stalling that may, under certain circumstances, push the aircraft into a nosedive. Boeing has made plans to complete a software upgrade to the aircraft by April, but Charles Herrmann, of Herrmann Law Group in Seattle, who filed the King County lawsuit over the Lion Air crash, emphasized that the negligence claims are two-fold: the defect itself, and the failure of Boeing to inform pilots about it in training manuals. That left the Lion Air pilots "fighting a ghost," he said.

The same might be true of the Ethiopian Air pilots, he said.

“Both encounter problems immediately, both dip, and actually descend for a period of time, before rising,” he said. “Both pilots requested permission to return to base for identical reasons, which was a flight control problem. There are some remarkable similarities that certainly raise questions.”