An Illinois federal judge gave preliminary approval to a $6.25 million settlement between Boeing and shareholders who alleged in both federal court and the Delaware Court of Chancery that the company failed to properly disclose issues with its 737 Max jet.
U.S. District Judge Harry D. Leinenweber on Thursday signed off on the deal, pending further consideration at a final approval hearing later this year. In addition to the funds, the settlement would see Boeing modify its bylaws to allow federal derivative claims from stockholders to be brought in venues other than the Delaware Chancery Court.
The settlement must be approved in both Delaware and Illinois, and Boeing's board of directors will have to amend its forum-selection bylaw to allow federal derivative claims in either the District of Delaware or the District of Virginia, where Boeing is moving its headquarters.
"The federal settlement is fair, reasonable, adequate and in the best interests of Boeing and its stockholders," Judge Leinenweber wrote in his nine-page order.
According to the preliminary approval motion filed earlier this month, Boeing's executive and board director insurance will pay the company $6.25 million if the settlement is finalized. Attorneys for the Seafarers Pension Plan, which sued on the company's behalf, are seeking up to $4.25 million of that in fees and expenses.
A final federal court approval hearing for the deal is set for Dec. 14.
The 737 Max was involved in two fatal crashes in five months between October 2018 and March 2019, which led to an unprecedented 20-month global grounding of the jets, multiple investigations and scores of lawsuits accusing Boeing of shortcutting safety in its pursuit of profits. The Federal Aviation Administration cleared the 737 Max to return to service in November 2020.
Seafarers alleged in its Illinois suit, filed in December 2019, that the company board never implemented a system to ensure that the products in its commercial airline business complied with federal and international laws. That failure exposed Boeing to an undue amount of risk the company "repeatedly concealed" in its annual proxy statements, which deprived stockholders of information they should have received before voting on significant issues such as director reelections and executive compensation, according to the suit.
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Cohen Milstein Sellers & Toll PLLC, the firm representing Seafarers, said in a statement to Law360 that a critical part of the proposed settlement is that federal derivative claims can be brought in Delaware federal court as well as where Boeing is headquartered, an analogy other courts may rely on.
"The bylaw change in Boeing that the Seafarers has achieved through this proposed settlement is an important milestone for shareholder rights and corporate governance," Cohen Milstein said.
A spokesperson for Boeing declined to comment.
Seafarers Pension Plan is represented by Carol V. Gilden, Steven J. Toll, Richard A. Speirs and Amy Miller of Cohen Milstein Sellers & Toll PLLC.
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