(CN) – In the aftermath of the fatal Ethiopian Airlines crash, Boeing investors filed a class action against the aerospace company for allegedly failing to update a proxy statement filed with the Securities Exchange Commission with any details of the disaster that ultimately grounded every single Boeing 737 Max 8 jet.
Lead plaintiff Jeweltex Manufacturing Inc. Retirement Plan filed suit in the U.S. District Court for Eastern New York on behalf of investors who owned Boeing stock at the close of business on Feb. 28, 2019. Numerous executives and directors of the Chicago-based company, including CEO Dennis Muilenburg, are named as defendants.
Flight ET302, involving a Boeing 737 Max 8, departed from Addis Ababa, Ethiopia to Nairobi, Kenya on March 10 and crashed minutes after takeoff, killing all 157 passengers onboard. According to the class action, on Oct. 29, 2018, the first airline crash involving a 737 Max 8 was Lion Air Flight 610 that plummeted into the Java Sea after departing Jakarta, Indonesia, killing all 189 passengers.
Reports following the Ethiopian Airlines crash purported that the common factor in both calamities was Boeing’s Maneuvering Characteristics Augmentation System (MCAS). “In those next few days following the crash and prior to March 15, 2019, numerous countries around the world, including the United States, grounded the Boeing 737 Max 8,” the lawsuit states.
Boeing also announced a cut in production of the jet by more than 20 percent rather than the previously announced increase of 10 percent.
The class claims that five days after the Ethiopia Airlines crash, Boeing issued its 2019 proxy statement with the SEC, completely omitting any mention of the crash, and the only mention of the Lion Air Flight crash was in an investor proposal in a text from the investor.
Boeing allegedly filed a false proxy statement with the SEC by failing to disclose the “recent crippling events and circumstances that have shaken the company to its core.”
Moreover, Boeing is now subjected to “virtually unlimited civil and criminal prosecution and investigation,” leaving the company scrambling to fix its most advanced systems and controls on one its most profitable fleet of jets.
Among other revelations, the lawsuit alleges that MCAS was “defective and unreliable” and that Boeing executives knew this but rushed the introduction of the jet, “putting money ahead of safety.”
Boeing is now under investigation by regulators nationally and internationally, and so far suffered a loss of about $30 billion in market value, in addition to having to reimburse airlines for the grounded jets at a cost of roughly $2 billion and counting.
The class is represented by Mark D. Smilow, Joseph H. Weiss, David C. Katz and Joshua M. Rubin of Weislaw LLP in New York and Stuart J. Guber with Alex B. Heller of Faruqi & Faruqi LLP in Philadelphia.