Corporate lawyers should take note of the derivative lawsuit brought by Boeing shareholders against the commercial jetliner manufacturer in the Delaware Court of Chancery, which in March 2022 approved a landmark $237.5 million settlement.
In re Boeing Company Derivative Litigation stemmed from the tragic and high-profile catastrophic crashes of two 737 MAX jetliners in 2018 and 2019 which claimed 346 lives. Plaintiffs claimed the board breached their oversight duties by not upholding their ESG responsibilities leading to fatal airplane safety issues that ultimately proved fatal.
Environmental, Social and Governance (ESG) initiatives (and failures) are making their way into U.S. courtrooms in the form of precedent-setting lawsuits, aimed at holding boards, directors and officers accountable for the well-being of employees, consumers and society at large.
The Boeing case is a good reminder of the importance of ESG and a professional and engaged board, said Evan Bolla, a partner and general counsel for the law firm of Harris St. Laurent & Wechsler LLP who handles insurance litigation claims and is not involved in the Boeing suit.
“The decision in Boeing did not change the law,” Bolla noted. “A claim based on inaction, commonly referred to as a Caremark claim, is still an extremely difficult burden. In Boeing’s case the allegations, which were drafted with the aid of information from books and records demands, were that the board essentially dismantled the safety system and really took no action in response to red flags. Airlines should assure that does not occur by having professionals with sound judgment and industry experience on the board.”
When The ‘S’ Stands For Safety
Zoe Littlepage of Littlepage Booth Leckman represented the plaintiff in Weiland v. Boeing in Chicago (where the defendant is headquartered), a case that was unrelated to the derivative suit but still resonated beyond the profession. The widow of a pilot claimed in the suit that a toxic air event, which occurred while her husband was in the cockpit of an American Airlines 767 jetliner in 2016, directly contributed to his passing three years later.
Internal Boeing documents were about to be made public in April 2022, but a settlement was reached on the eve of the jury trial, which Littlepage referred to as “bittersweet.”
“On behalf of the widow and the Weiland family, resolution of the case brings them closure,” said Littlepage, who is also a co-founder of Athea Trial Lawyers, which was ranked Tier 1 for Personal Injury Litigation - Plaintiffs in 2022 by U.S. News – Best Lawyers® “Best Law Firms.” “But it also means that the Boeing internal documents which detail Boeing’s knowledge and awareness of the health and safety issues caused by contaminated cabin air events remain confidential, and the public is kept in the dark.”
But federal legislators clearly saw the light in the Weiland case. In late March, Sen. Dianne Feinstein (D-Calif.), Sen. Richard Blumenthal (D-Conn.), Rep. John Garamendi (D-Calif.) and a bipartisan, bicameral group in the Senate introduced the Cabin Air Safety Act, which aims to protect commercial airline passengers and crew from toxic cabin air.
The Cabin Air Safety Act would also create a reporting and investigation system within the Federal Aviation Administration and is endorsed by several aviation and health associations. The House introduced an identical version of the bill.
With the derivatives settlement established and the potential for the Cabin Air Safety Act to be signed into law, corporate lawyers serving all industries can learn from Boeing’s legal challenges. Outside counsel may emphasize the need for clients to consider safety, reputational and ESG-based perspectives as informal guidelines to help their ability to conduct business and avoid litigation.
Justin Smulison is a professional writer who regularly contributes to Best Lawyers. He was previously a reporter for the New York Law Journal and also led content and production for the Custom Projects Group at ALM Media. In addition to his various credited and uncredited writing projects, he has developed global audiences hosting and producing podcasts and audio interviews for professional organizations and music sites. JustinSmulison.contently.com