Case: 1:19-cv-02394 Document #: 144 Filed: 02/14/20 Page 1 of 170 PageID #:2859 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS IN RE THE BOEING COMPANY Case No. 1:19-cv-02394 AIRCRAFT SECURITIES LITIGATION Honorable John J. Tharp Jr. CONSOLIDATED CLASS ACTION COMPLAINT BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP Avi Josefson John C. Browne (admitted pro hac vice) 875 North Michigan Avenue, Suite 3100 Katie M. Sinderson (admitted pro hac vice) Chicago, IL 60601 Adam D. Hollander (admitted pro hac vice) Telephone: (312) 373-3800 Abe Alexander (admitted pro hac vice) Facsimile: (312) 794-7801 James M. Fee (admitted pro hac vice) [email protected] 1251 Avenue of the Americas, 44th Floor New York, New York 10020 Telephone: (212) 554-1400 Facsimile: (212) 554-1444 [email protected] [email protected] [email protected] [email protected] [email protected] Dated: February 14, 2020 Case: 1:19-cv-02394 Document #: 144 Filed: 02/14/20 Page 2 of 170 PageID #:2859 TABLE OF CONTENTS I. PRELIMINARY STATEMENT ........................................................................................ 1 II. JURISDICTION AND VENUE ......................................................................................... 9 III. PARTIES ............................................................................................................................ 9 A. Lead Plaintiff .......................................................................................................... 9 B. Named Plaintiffs ................................................................................................... 10 C. Defendants ............................................................................................................ 11 IV. FACTUAL BACKGROUND ........................................................................................... 12 A. Boeing Rushed The 737 MAX To Market In Order To Compete With Airbus’s New Fuel-Efficient A320neo ................................................................. 12 1. Boeing’s Background And Its Duopoly With Airbus ............................... 12 2. Boeing And Airbus Competed To Develop The Next Generation Of Fuel-Efficient Commercial Jetliners .................................................... 12 3. As Sales Of Airbus’s A320neo Accelerated, Boeing Abandoned Its Plans To Design A New Aircraft And Decided To Upgrade The Engines On Its 737 .................................................................................... 13 4. Boeing Sought Regulatory Approval Of The MAX Under The Old 737 Type Certificate And Pressured Employees To Speed The Plane To Market ........................................................................................ 15 5. Boeing Insisted That The 737 MAX Not Require Any New Flight Simulator Training .................................................................................... 16 6. Boeing’s Culture Of Profits Over Safety .................................................. 20 B. Boeing Learned That The MAX Had An Inherent Aerodynamic Instability And Installed A Software “Fix” To Paper Over The Problem ............................. 22 1. Boeing’s Initial Tests Revealed That The MAX’s New Engines Caused The Plane’s Nose To Pitch Upward In Flight .............................. 22 2. The MCAS Automated Flight Control System: Boeing’s “Band- Aid” Solution To The Pitch Problem ........................................................ 24 C. Boeing Knowingly Or Recklessly Ignored Multiple Safety Failings With The MCAS Design ................................................................................................ 25 Case: 1:19-cv-02394 Document #: 144 Filed: 02/14/20 Page 3 of 170 PageID #:2859 MCAS’s Use Of A Single Point Of Failure Was Contrary To Boeing’s Own Standards And Industry Practice ...................................... 26 a. A Single Point Of Failure Violated Boeing’s Policies, Its Historical Practice, And Industry Standards ................................. 28 b. Boeing’s Employees Warned Of The Dangers Of A Single Point Of Failure............................................................................. 30 c. Boeing Submitted A Specious “Functional Hazard Analysis” To Regulators In An Effort To Justify Its Use Of A Single Point Of Failure ............................................................. 31 i. Boeing Used Multiple False Assumptions To Conduct Its Functional Hazard Analysis .......................... 32 ii. Even With False Assumptions, MCAS Failed The Functional Hazard Analysis, So Boeing Concocted An Impermissible “Risk Discount” .................................. 37 2. In November 2016, The MAX’s Chief Test Pilot Identified That MCAS Was “Running Rampant” And That The Situation Was “Egregious” ............................................................................................... 38 3. In August 2017, Boeing Learned That A Critical Safety Alert Warning Of Faulty AoA Sensors Was Not Operational On Most Of The MAX Fleet ......................................................................................... 40 4. Boeing Made Deadly Changes To The MAX Before The Plane Was Certified And Without Informing The FAA ..................................... 43 5. Boeing “Jedi-Mind Trick[ed]” Regulators Into Deleting References To MCAS From Flight Operating Manuals .............................................. 46 6. Boeing’s June 2018 Coordination Sheet Further Demonstrated That The MAX Failed To Meet The Company’s Own Requirements ............................................................................................ 51 7. In June 2018, A Boeing Senior Manager Reported Severe Problems In The MAX’s Development And Production To Defendant Muilenburg And Other Boeing Executives ............................. 52 In the Months Leading Up To The Lion Air Crash, Boeing Employees Repeatedly Discussed The Fact That The MAX Was Unsafe ....................................................................................................... 56 By The Start Of The Class Period, The MAX Had Become The Best-Selling Aircraft In Boeing’s History And The Largest Single Product Driver Of the Company’s Revenue ............................................. 57 ii Case: 1:19-cv-02394 Document #: 144 Filed: 02/14/20 Page 4 of 170 PageID #:2859 D. On October 29, 2018, Lion Air Flight JT 610 Crashed, Killing All 189 Passengers And Crew ........................................................................................... 58 E. Following The Lion Air Crash, Defendants Immediately And Falsely Blamed The Pilots And Assured The Public That The MAX Was Safe .............. 61 F. Throughout The Class Period, Defendants Misleadingly Reassured The Public, Even As Evidence Continued To Mount Internally That The MAX Was Dangerously Unsafe ...................................................................................... 67 V. THE TRUTH EMERGES AS INVESTORS LEARN BOEING CUT CORNERS IN DESIGNING THE MAX, DECEIVED REGULATORS, AND RUSHED THE DEADLY 737 MAX TO MARKET................................................................................. 74 A. March 10, 2019: Ethiopian Airlines Flight ET 302 Crashed Shortly After Takeoff .................................................................................................................. 74 B. March 17, 2019: The Seattle Times Published A Report Revealing Flaws And Deception In The Certification Process For The 737 MAX ......................... 79 C. March 21, 2019: The New York Times Reported That Both The Lion Air And Ethiopian Airlines Planes Did Not Have Safety Features Related To MCAS, Because Boeing Sold Them As Optional Upgrades ................................ 82 D. April 5, 2019: Boeing Announced A Pullback In The 737 MAX Production Rate ..................................................................................................... 83 E. June 2019 Paris Air Show: Unbeknownst To Investors, Then-Acting FAA Administrator Elwell Told Defendant Muilenburg To “Slow Down” Public Statements About The MAX’s Return-To-Service Timeline .................... 85 F. June 26, 2019: The FAA Announced It Discovered A Software Flaw During Testing ...................................................................................................... 86 G. July 24, 2019: Boeing Disclosed The Possibility That 737 MAX Production Could Be Halted ................................................................................. 87 H. August 2019: The FAA And Representatives From Aviation Regulators In Europe, Brazil, And Canada Traveled To Seattle to Meet With Boeing Officials................................................................................................................. 89 I. October 11, 2019: Defendant Muilenburg Stripped Of Role As Chairman Of The Board ........................................................................................................ 90 J. October 18 and 21, 2019: The New York Times Published A Series Of 2016 Text Messages Between 737 MAX Test Pilots Revealing That Defendants Hid MCAS Problems From Regulators ............................................. 90 iii Case: 1:19-cv-02394 Document #: 144 Filed: 02/14/20 Page 5 of 170 PageID #:2859 K. October 29-30, 2019: Defendants Were Rebuked By Congress For Telling The Public “Half-Truths” About The MAX’s Safety And Withholding The Forkner Emails From Congress ............................................................................ 95 L. Early November 2019: Defendants Placed Undue Pressure On The FAA