By: Patrick Paulsen

“Carelessness and overconfidence are usually more dangerous than deliberately accepted risks” – Wilbur Wright

The risks of carelessness and overconfidence in air travel and manufacturing were on full display for on January 5^th, when part of the fuselage of Alaska Airlines flight AS1282 fell off of the plane only seven minutes into the flight. While luckily no one was injured due to the accident (the two seats closest to the fuselage hole were empty), the event will have far reaching legal implications on Boeing and other relevant parties. This blog post will roadmap the variety of legal repercussions Boeing is facing because of the recent failures in its technology, including passenger suits, shareholder suits, and agency enforcements.

What happened?

On January 5^th, a Boeing 737 Max 9, which had been deemed airworthy three months prior, left from Portland, Oregon, on its way to Ontario, California. Only minutes after taking off, a plug (a removable section of the fuselage where an emergency exit could have been installed) flew off the plane, which rapidly depressurized the cabin. Oxygen masks were deployed, and the plane immediately turned back and began preparations for landing.  All 171 passengers and 6 crew members survived the flight, which landed a mere 20 minutes after departure. This incident occurred less than a week after Boeing urged airlines to check for “loose bolts” in the rudder systems of its 737 Max models. 

Preliminary reports from the National Transportation Safety Board (NTSB) suggest that the door plug that flew off had been installed to the plane’s fuselage on August 20, 2023, with five damaged rivets. Boeing’s records showed that on September 1, 2023, the rivets were repaired on the door, which required the removal of four bolts. The NTSB’s findings suggest that the door then was reinstalled without the bolts on, and whistleblowers have suggested that Boeing has a “process failure” due to using two separate methods to record completed work. The findings suggest that a discrepancy between the two quality assurance methods caused the missing bolts to be unaccounted for.  This accident is just one in a series of incidents caused by technological and manufacturing problems with Boeing’s 737 model. 

Passenger suits

Less than a week after the “blowout incident,” passengers on board the plane filed a class action suit against Boeing in King County Superior Court on January 11^th. The complaint contains causes of action for product liability under RCW 7.72.030(2)(a) and seeks class relief for Boeing’s collective breach of its duties to passengers. In addition, plaintiffs alleged damages including physical harms such as concussions, seizures, and difficulty breathing, as well as emotional distress with manifestations including “crying, impaired and/or abnormal breathing, seizure, and insomnia”. A second complaint was filed by other passengers, alleging negligence against both Boeing and Alaska Airlines on January 16^th. The second suit alleged “one count of Negligence against both Boeing, one count of Strict Product Liability against Boeing under Washington’s Product Liability Act, and one count of Negligence against Alaska Airlines.” 

More lawsuits are expected, as there has been no class certification yet in the initial lawsuits. While the passenger lawsuits facing Boeing are certainly of the utmost significance, they represent only one theatre of legal problems facing Boeing in the wake of its most recent technical problem. 

Securities Suits.

Personal injury and product liability suits are only a few of the legal problems to befall Boeing in the Wake of the “blowout incident.” Boeing also is facing suits from its shareholders following the January 5^th incident. The lawsuit, which was filed on January 30^th in the Eastern District of Virginia (where Boeing’s corporate headquarters is located), was spearheaded by the Attorney General of Rhode Island, who argued the manufacturer “betrayed the trust of Rhode Island pensioners,” through misrepresentations in violation of securities laws. 

Specifically, the lawsuit alleges that Boeing’s executives violated sections 10(b) and 20(a) of the Exchange Act by making statements such as that they were “making steady progress” on their “top priority… the safe return to service of the 737 MAX.” The complaint alleges that “[u]nbeknownst to investors, statements such as those above were false and misleading because Boeing failed to disclose that it had been prioritizing its profits over safety, which led to poor quality control standards in the production of its commercial aircrafts” leading to a “heightened risk” of manufacturing flaws. 

With Boeing’s stock price plummeting just shy of 20% since the beginning of the year, it is easy  to see why investors have taken such swift action. Furthermore, there is reason to believe such suits can be successful. Boeing settled similar claims (stemming from technical errors with the 737 MAX flight systems that resulted in two plane crashes) with its shareholders for $237.5 million in 2022. As commentators noted at that time, the suit was expected to portend a trend in ESG-related litigation, which aims to hold directors accountable for corporate failures, and to incentivize corporate leadership to better identify and address oversight and reporting issue. With the recent lawsuit and continued critiques of its corporate culture, the future for Boeing presents uncertainty and far reaching effects.

Governmental Action and Greater Impact. 

Consumer and shareholder lawsuits may only be the beginning of the consequences facing Boeing after the January 5^th incident. After crashes in 2018 and 2019 stemming from failures in Boeing 737 MAX’s flight systems, Boeing was estimated to have lost $20 billion in non-litigation costs. While no criminal action is currently pending for the January 5^th incident, Boeing faced criminal charges in 2023 stemming from allegedly fraudulent statements concerning the 737 MAX’s safety. Furthermore, Boeing has become the focus of new regulatory action due to the events of January 5^th. The Federal Aviation Administration (FAA) has sent about two dozen inspectors to Boeing’s Renton plant to perform audits and reviews. The FAA has also capped Boeing’s production of new 737s as part of increased oversight. Additionally, the FAA has adopted more stringent approval standards, which it has referred to as “audit plus.” The new standard includes on the ground inspections, an increased focus on surveillance, and double checking paperwork. These changes affect other manufacturers than Boeing, such as Gulfstream, and other domestic manufacturers. 

The fallout from Boeing’s most recent high profile manufacturing defect has had effects outside of the airline industry as well. As noted by some commentators, the January 5^th incident has empowered critics of Diversity, Equity, and Inclusion (DEI). Despite other factors, such as technological and staffing problems, explaining recent safety issues, critics allege that Boeing’s and Alaska Airlines’ focus on DEI rather than safety have caused the issue. Elon Musk went so far as to ask “[d]o you want to fly in an airplane where they prioritized DEI hiring over your safety? That is actually happening.” Such accusations are misplaced, as Boeing’s DEI initiatives are designed to help transform the corporate culture of the company which has, as the recent securities lawsuit alleged, prioritized “profits over safety.”

In conclusion, when a door falls off of a place, the impact extends far beyond the ground where it lands. While there is a clear impact on consumer, shareholders, regulators, market competitors, and corporate governance at large, the final cost of Boeing’s carelessness and overconfidence remains to be seen. While Boeing may be prepared for the legal challenges ahead (after all, their chief legal officer makes $6.2 million a year), we, as flyers, shareholders, regulators, or just as members of the concerned public, must demand greater accountability and oversight in order to create a safer, better world.