Burke v. The Boeing Company

CourtDistrict Court, N.D. Illinois
DecidedNovember 12, 2020
Docket1:19-cv-02203
StatusUnknown

This text of Burke v. The Boeing Company (Burke v. The Boeing Company) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Burke v. The Boeing Company, (N.D. Ill. 2020).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

) DIANE BURKE, ALEX ) PROESTAKIS, MIGUEL A. IBARRA, ) and MOHAMMAD FAROOQ ) MUSTAFA, as participants in and on No. 19 C 2203 ) behalf of the Boeing Voluntary ) Investment Plan, and on behalf of a Judge Virginia M. Kendall ) class of all others who are similarly ) situated, )

Plaintiffs, ) ) v. ) ) THE BOEING COMPANY, DAVID ) A. DOHNALEK, ROBERT E. ) VERBECK, THE BOEING EMPLOYEE BNEEFIT PLANS ) COMMITTEE, THE BOEING ) EMPLOYEE INVESTMEETN ) COMMITTEE, ANDJOHN DOES 1– ) 25, )

Defendants. )

MEMORANDUM OPINION AND ORDER Diane Burke, Alex Proestakis, Miguel A. Ibarra, and Mohammad Farooq Mustafa (collectively, “Plaintiffs”) bring this putative class action on behalf of themselves, on behalf of the Boeing Voluntary Investment Plan (“Plan”), and all other similarly-situated participants in, and beneficiaries of, defined contribution plans (“Plans”) sponsored by The Boeing Company (“Boeing”) who acquired or held securities of Boeing between November 7, 2018, and December 16, 2019 (the “Class Period”). Plaintiffs claim that Boeing, David A. Dohnalek, Robert E. Verbeck, the Employee Benefit Plans Committee (“EBPC”), the Employee Benefit Investment Committee (“EBIC”), and Committee Members John Does 1–25 (“Committee Members”) (collectively, “Defendants”) breached their respective duties of prudence

imposed by the Employee Retirement Income Security Act (“ERISA”). 29 U.S.C. § 1104(a)(1)(B). Presently before the Court is Defendants’ Motion to Dismiss the Second Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Fed. R. Civ. P. 12(b)(6). Defendants’ motion is granted. BACKGROUND The following factual allegations are taken from Plaintiffs’ Second Amended

Complaint (Dkt. 65) and are presumed true for the purposes of this motion. W. Bend Mut. Ins. Co. v. Schumacher, 844 F.3d 670, 675 (7th Cir. 2016). I. The Plan and The Defendants Boeing designs, builds, and sells airplanes, including its flagship 737 MAX airplane. (Dkt. 65 ¶¶ 1, 40). Boeing offers its employees the opportunity to participate in the Plan, a defined contribution “employee pension benefit plan” and an “eligible individual account plan” that creates individual accounts into which

participants may contribute a portion of their compensation. (Dkt. 65 ¶ 35). One of the investment options offered by the Plan is the VIP Stock Fund (“Stock Fund”), an employee stock ownership plan (“ESOP”), which invests in shares of Boeing stock. (Dkt. 65 ¶ 8). As of December 31, 2018, the Plan held $10.8 billion in Boeing stock, accounting for 18.6% of net Plan assets. (Dkt. 65 P¶ 4, 8). The EBPC is the Plan Administrator under ERISA § 1002(16)(A) and comprises Boeing officers and employees. (Dkt. 65 ¶ 41). The EBIC is responsible for overseeing the Plan’s investment options. (Dkt. 65 ¶ 42). During the Class Period,

Dohnalek, Boeing Senior Vice President of Finance and Treasurer, served as Chairman of the EBIC. (Dkt. 65 ¶ 47). Verbeck, Boeing’s Senior Vice President, Finance and Controller, was a member of the EBIC and also signed Boeing’s SEC filings during the Class Period. (Dkt. 65 ¶ 48). II. The 737 MAX Airplane In 2011, Boeing started modifying its 737 series to develop a new airplane, the

737 MAX. (Dkt. 65 ¶ 52). The angle of attack sensors on the 737 MAX, which measure the angle between a reference point on the airplane’s wing and the oncoming airflow, occasionally gave false readings that the angle of attack was too high and the airplane was in danger of stalling out. (Dkt. 65 ¶¶ 59–66). Indications that the angle of attack is too high automatically trigger the Maneuvering Characteristics Augmentation System (“MCAS”), a software in the 737 MAX which pushed the nose of the plane down until the sensors indicated the angle of attack was appropriately

reduced. (Dkt. 65 ¶¶ 60–64). Boeing did not disclose the existence of the MCAS to airlines and pilots, did not warn pilots that they were the back-up to the automated system, did not train pilots on the MCAS, and did not include instructions about the MCAS in the pilot manuals. (Dkt. 65 ¶ 78). Plaintiffs allege that Defendants “knew or should have known” about these safety issues. (Dkt. 81). On October 29, 2018, Lion Air Flight 610 (“Lion Air”), operating a 737 MAX airplane, crashed into the Java Sea, killing all 188 passengers and crew. (Dkt. 65 ¶ 105). The Indonesian National Transportation Safety Committee (“NTSC”)

immediately opened an investigation into the Lion Air crash. (Dkt. 65 ¶ 12). The NTSC’s initial report, published on November 7, 2018, and based on the black box recovered from Lion Air, indicated that a faulty angle of attack sensor triggered the MCAS repeatedly throughout the flight, pushing the nose of the airplane down until it crashed. (Dkt. 65 ¶¶ 106, 111). In January 2019, the Lion Air airplane cockpit voice recorders were recovered, “a crucial development in determining exactly what

went wrong.” (Dkt. 65 ¶ 140). The cockpit voice recorders confirmed that the pilots were struggling with the MCAS system. (Dkt. 65 ¶ 140). In the wake of the Lion Air crash, Boeing defended the 737 MAX’s safety features and resisted calls to alter its systems or pilot training. (Dkt. 65 ¶¶ 123, 125, 128, 130–32). On November 6, 2018, Boeing issued a statement to all 737 MAX operators cautioning them that a sensor failure could cause the airplane’s nose to pitch down and the flight crew might have enough difficulty controlling the airplane to result in a crash. (Dkt. 65 ¶¶ 118–19).

On March 10, 2019, Ethiopian Flight 302 (“Ethiopian Flight”), operating a 737 MAX airplane, crashed six minutes after takeoff, killing all 157 passengers and crew aboard. (Dkt. 65 ¶¶ 160, 163). The angle of attack sensor recorded an erroneous value and triggered the MCAS, forcing the nose of the airplane down. (Dkt. 65 ¶¶ 160–61). Similar to the Lion Air crash, Ethiopian officials quickly opened an investigation into the Ethiopian Flight crash, the preliminary results of which pointed to the MCAS. (Dkt. 65 ¶ 167–68). The Ethiopian Civil Aviation Authority published a follow-up Interim Investigation Report on March 9, 2020, which confirmed that the crash was attributable to issues with the MCAS. (Dkt. 65 ¶¶ 171–

72). At this point, a slew of American entities opened investigations into the 737 MAX as well. On March 17, 2019, The Seattle Times released an investigative report on the 737 MAX safety and the MCAS. (Dkt. 65 ¶ 164). On March 18, 2019, U.S. federal authorities began exploring a criminal investigation into the certification process of the 737 MAX. (Dkt. 65 ¶ 165). The U.S. Transportation Department also

opened an investigation into the MCAS approval process related to the 737 MAX certification. (Dkt. 65 ¶ 170). The House of Representatives, the Senate, and the Securities and Exchange Commission all opened investigations into various aspects of the 737 MAX’s safety as well. (Dkt. 65 ¶ 191). Finally, in the wake of the Ethiopian Flight crash, the FAA—along with almost every country in the world—grounded the entire 737 MAX fleet. (Dkt. 65 ¶ 173–74). Boeing resisted the grounding of the 737 MAX fleet and questioned the role of the MCAS in the recent crashes. (Dkt. 65 ¶ 177–

80, 183). By January 2020, Boeing halted production of 737 MAX airplanes. (Dkt. 65 ¶ 188). Plaintiffs filed their initial complaint on March 31, 2019. (Dkt. 1).

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Pegram v. Herdrich
530 U.S. 211 (Supreme Court, 2000)
Bell Atlantic Corp. v. Twombly
550 U.S. 544 (Supreme Court, 2007)
Ashcroft v. Iqbal
556 U.S. 662 (Supreme Court, 2009)
Swanson v. Citibank, N.A.
614 F.3d 400 (Seventh Circuit, 2010)
Brewster McCauley v. City of Chicag
671 F.3d 611 (Seventh Circuit, 2011)
Pugh v. Tribune Co.
521 F.3d 686 (Seventh Circuit, 2008)
Hecker v. Deere & Co.
556 F.3d 575 (Seventh Circuit, 2009)
Ronald Olson v. Champaign County, Illinois
784 F.3d 1093 (Seventh Circuit, 2015)
Amgen Inc. v. Harris
136 S. Ct. 758 (Supreme Court, 2016)
Ralph Whitley v. BP, P.L.C.
838 F.3d 523 (Fifth Circuit, 2016)
Paul Saumer v. Cliffs Natural Resources
853 F.3d 855 (Sixth Circuit, 2017)
Manoj Singh v. RadioShack Corporation, et a
882 F.3d 137 (Fifth Circuit, 2018)
Thomas Martone v. Walter Robb, III
902 F.3d 519 (Fifth Circuit, 2018)
Jander v. International
962 F.3d 85 (Second Circuit, 2018)
Holly Vanzant v. Hill's Pet Nutrition, Incorpo
934 F.3d 730 (Seventh Circuit, 2019)
Francesca Allen v. Wells Fargo & Company
967 F.3d 767 (Eighth Circuit, 2020)
Ann Dormani v. Target Corporation
970 F.3d 910 (Eighth Circuit, 2020)
West Bend Mutual Insurance Co. v. Schumacher
844 F.3d 670 (Seventh Circuit, 2016)
Jander v. Ret. Plans Comm. Ibm
910 F.3d 620 (Second Circuit, 2018)

Cite This Page — Counsel Stack

Bluebook (online)
Burke v. The Boeing Company, Counsel Stack Legal Research, https://law.counselstack.com/opinion/burke-v-the-boeing-company-ilnd-2020.