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Boeing Bylaws Doom 737 Crash Derivative Suit in Illinois

June 9, 2020, 4:20 PM

The Boeing Co. successfully fought off a shareholder derivative suit over problems with its 737 MAX planes after an Illinois federal district judge ruled company bylaws limit such suits to Delaware state courts.

The jetmaker’s shareholder challenged its actions ahead of two plane crashes in a derivative suit filed in the U.S. District Court for the Northern District of Illinois. Boeing moved to dismiss the case because its corporate bylaws include a forum selection clause that restricts derivative filings to Delaware.

The shareholder argued that the clause is unenforceable because it eliminates the substantive right to file derivative suits in federal court, which violates federal securities laws. But Boeing identified a Delaware law that allows derivative claims for “precisely” the conduct alleged in the shareholder’s complaint, Judge Harry D. Leinenweber’s Monday order said.

Although Leinenweber was “sympathetic” to the shareholder’s arguments because it was “denied the right to proceed in federal court under a duly enacted federal law,” the “weight of authority backs Boeing’s position,” the order said.

Another shareholder already filed a derivative suit against Boeing in Delaware state court in October 2019.

Kirkland & Ellis LLP represented Boeing. Cohen Milstein Sellers & Toll PLLC represented the shareholder.

The case is Seafarers Pension Plan v. Bradway, N.D. Ill., No. 19-cv-08095, dismissed 6/8/20.

To contact the reporter on this story: Jennifer Bennett in Washington at jbennett@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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