Boeing has won a Fourth Circuit appeal overturning certification of a shareholder class action alleging that the aerospace group and several former officers misrepresented its commitment to aircraft safety before the Alaska Airlines 737 MAX 9 cabin-panel blowout.
The US Court of Appeals for the Fourth Circuit reversed the certification order on 20 July in In re The Boeing Company and returned the case to US District Judge Leonie Brinkema in the Eastern District of Virginia.
Judge A. Marvin Quattlebaum Jr, writing for a unanimous panel with Judges Julius Richardson and Allison Rushing, found that the shareholders had not provided a sufficiently specific method for calculating damages across the proposed class.
The State of Rhode Island Office of the General Treasurer, acting for the Employees’ Retirement System of Rhode Island, and Local 817 IBT Pension Fund brought claims against Boeing and former officers David Calhoun, Dennis Muilenburg, Brian West and Gregory Smith.
They allege that statements about safety artificially inflated or maintained Boeing’s share price, causing investors to suffer losses when later disclosures allegedly revealed continuing safety and quality problems.
Judge Brinkema certified a class covering investors who acquired Boeing shares between 7 January 2021 and 8 January 2024. The class period ended after a cabin panel blew out aboard Alaska Airlines Flight 1282 on 5 January 2024; Boeing’s share price fell by approximately 8% on the next trading day.
The Fourth Circuit held that describing an established “out-of-pocket” measure of securities damages did not explain how artificial inflation would be calculated on particular days during a period involving numerous statements and changing circumstances.
The appellate court applied Comcast Corp v Behrend, the US Supreme Court’s 2013 ruling requiring evidentiary proof that damages can be measured across a class consistently with the pleaded liability theory. Its decision does not determine whether Boeing or its former officers made misleading statements, nor does it end the underlying securities case. It reverses the certification order and leaves further proceedings to the district court.
Gibson, Dunn & Crutcher argued the appeal for Boeing, with McGuireWoods and Sullivan & Cromwell also acting for the appellants. Gupta Wessler presented the shareholders’ oral argument, with Labaton Keller Sucharow and Robbins Geller Rudman & Dowd among the firms appearing on their brief.
Willkie Farr & Gallagher represented former Securities and Exchange Commission officials and law professors as amici, while Paul Hastings represented the Securities Industry and Financial Markets Association. The Boeing ruling confirms that a general description of damages will not satisfy Rule 23 without evidence showing how artificial inflation can be calculated throughout the class period.
Plaintiffs’ firms will need to connect their methodology to the alleged misstatements and corrective disclosures, while defence teams can challenge models that fail to account for changes in inflation over time. The Fourth Circuit’s application of Comcast Corp v Behrend provides both sides with significant authority in future securities class-certification disputes.