Judge Denies Boeing Motion to Dismiss Class Action; Case Alleging Boeing Misled Shareholders Will Proceed

09/08/1998

SEATTLE – In a 31-page order issued late today, US District Judge Thomas S. Zilly denied a motion brought by The Boeing Company to dismiss a pending class action suit filed against the company on October 31, 1997 by Seattle attorney Steve Berman on behalf of investors in Boeing stock. The judge also ruled that other portions of the complaint did not meet a sufficient burden of proof, but could be filed again with the court.

The original suit alleges, among other claims, that Boeing executives Phil Condit, Boyd E. Givan and former Boeing executive Ron Woodard knowingly made false and misleading statements to the public about Boeing's production problems in order to effect a merger with McDonnell Douglas Corp.

In today's order Judge Zilly concluded that investors have sufficiently plead that Boeing executives knew or should have known their statements were false. Zilly also ruled that the portions of the complaint dealing with Boeing's accounting methods were not sufficient, and ordered them dismissed, but left the door open for refiling.

"Obviously, we are pleased with the ruling," Berman said. "We are very eager to more forward with discovery and prove what we believed all along, that Boeing misled shareholders. We are very much looking forward to reviewing the production records and deposing those involved."

"The ruling means that Boeing can't hide from what they've said on the record," Berman said.

According to the complaint, Boeing failed to disclose critical production problems that were documented internally, including the following:

  • Contracts bid at dangerously low margins.
  • Manufacturing plagued with serious deficiencies stemming from production flaws.
  • Chronic failure to order parts and internal under-reporting of parts shortages due to corporate procedures.
  • Persistent problems in the parts supply chain that could not be remedied in time to prevent huge losses.

Berman said he expects to augment the claims involving the accounting practices and re-file those sections of the complaint in the future.

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