In Re The Boeing Co. Derivative Litigation

majority opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE THE BOEING CO. ) Consol. C.A. No. 2024-1210-MTZ DERIVATIVE LITIGATION )

MEMORANDUM OPINION

Date Submitted: May 22, 2026

Date Decided: August 13, 2026

Derrick B. Farrell, Matthew L. Miller, Robert B. Lackey, BLEICHMAR FONTI AND

AULD LLP, Wilmington, Delaware; Javier Bleichmar, Joseph A. Fonti, BLEICHMAR

FONTI AND AULD LLP, New York, New York; Lesley E. Weaver, STRANCH,

JENNINGS & GARVEY, PLLC, Oakland, California; Christine M. Mackintosh, Kelly

L. Tucker, Vivek Upadhya, GRANT & EISENHOFER P.A, Wilmington, Delaware,

Attorneys for Plaintiffs Ohio Public Employees Retirement System and State Teachers

Retirement System of Ohio.

Justin O. Reliford, Elizabeth K. Dragovich, SCOTT+SCOTT ATTORNEYS AT LAW

LLP, Wilmington, Delaware; Donald A. Broggi, Jing-Li Yu, SCOTT+SCOTT

ATTORNEYS AT LAW LLP, New York, New York; Ora L. Lupear. Maxwell R.

Huffman, SCOTT+SCOTT ATTORNEYS AT LAW LLP, San Diego, California,

Attorneys for Plaintiff Oklahoma Firefighters Pension and Retirement System.

Kyle H. Lachmund, Elizabeth J. Freud, Clayton B. Faller, RICHARDS, LAYTON &

FINGER, P.A., Wilmington, Delaware; Sharon L. Nelles, David M.J. Rein, Leonid

Traps, SULLIVAN & CROMWELL LLP, New York, New York, Attorneys for

Defendants Robert A. Bradway, David L. Calhoun, Lynne M. Doughtie, David L. Gitlin,

Lynn J. Good, Stayce D. Harris, Akhil Johri, David L. Joyce, Lawrence W. Kellner,

Steven M. Mollenkopf, John M. Richardson, Sabrina Soussan, Ronald A. Williams,

Douglas Ackerman, Uma M. Amuluru, Edwin J. Clark, Stanley Deal, Michael Delaney,

Mark C. Fava, Thomas Galantowicz, Darrin Hostetler, Elizabeth Lund, Stephanie Pope,

Scott A. Stocker, and Brian J. West, and Nominal Defendant The Boeing Company.

ZURN, Vice Chancellor.1

Sitting by designation under Del. Const. art. IV, § 13(2). Docket item (“D.I.”) 155.

The Boeing Company (“Boeing” or the “Company”) is among “the world’s

largest manufacturers of commercial aircraft.”2 “More than 10,000 Boeing

commercial jetliners are currently in service worldwide.”3 Those planes were built

by a global workforce of over 150,000 Boeing employees.4

After two airplane crashes in 2018 and 2019, Boeing’s safety standards and

board oversight of safety were questioned. Boeing came to agreements with

aggrieved regulators and stockholders by which Boeing made hefty payments and

improvements in manufacturing, safety, and board oversight.

But Boeing would suffer another spectacular mechanical failure. In January

2024, a Boeing jet’s door plug blew off at 15,000 feet. It appears undisputed the

incident was caused by poor manufacturing. Regulators demanded fines, and

stockholders came back to this Court to hold Boeing’s board accountable,

complaining of more oversight failures.

The plaintiffs have failed to plead any source of oversight liability that would

compromise Boeing’s directors’ ability to impartially consider a demand for

derivative litigation. The stockholders themselves tell a story of a board that was

D.I. 87 [hereinafter “Am. Compl.”] ¶ 74.

Id. ¶ 18.

The Boeing Co., Annual Report (Form 10-K) at 2 (Jan. 27, 2023); see Am. Compl. ¶ 1 (defining the relevant time period as “the period from at least 2021 through February 5, 2025”).

attentive to safety, including the risks inherent in running a large manufacturing

company making complicated machines with a post-COVID workforce. The board

received copious reporting on numerous manufacturing and compliance risks, as

well as management’s ongoing efforts to reduce those risks. None of that reporting

put the board on notice of ongoing violations of law or a risk of serious corporate

trauma that triggered a duty to act. Much of the reporting had nothing to do with the

causes of the door plug blowout or subsequent regulatory costs.

Delaware law does not hold corporate fiduciaries liable merely because a

general risk materialized. In the absence of a bad faith dereliction of duty upon

seeing a red flag, the defendants’ motion to dismiss is granted.

I. BACKGROUND5

The facts are drawn from the operative amended complaint, the documents integral to it, and those incorporated by reference. Am. Compl.; see Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 320 (Del. 2004). Further, “[t]he court may take judicial notice of facts publicly available in filings with the SEC.” See Omnicare, Inc. v. NCS Healthcare, Inc., 809 A.2d 1163, 1168 n.3 (Del. Ch. 2002).

Citations in the form of “Defs.’ Ex. —” refer to the exhibits in support of Defendants’ Motion to Dismiss, available at D.I. 95 through D.I. 129 and D.I. 139. Before filing this action, Plaintiffs pursued and received books and records pursuant to 8 Del. C. § 220. The Amended Complaint cites many of those books and records. The parties do not contest that under the incorporation by reference doctrine, I may consider those documents and Defendants’ exhibits in support of the Motion to determine whether the Amended Complaint has accurately referenced their contents in support of its claims and in pleading demand futility. Reiter ex rel. Cap. One Fin. Corp. v. Fairbank, 2016 WL 6081823, at *5–6 (Del. Ch. Oct. 18, 2016).

Plaintiffs Oklahoma Firefighters Pension and Retirement System, Ohio Public

Employees Retirement System, and State Teachers Retirement System of Ohio

(“Plaintiffs”) are Boeing stockholders.6 They seek to bring this action derivatively

against twenty-five current and former Boeing directors and officers

(“Defendants”).7

A. Boeing Recommits To Safety After The 737 MAX Crashes.

In 2018 and 2019, two separate Boeing 737 MAX crashes took 346 lives.8

The tragedies inspired multiple investigations and proceedings in multiple arenas.9

Regulatory authorities assessed civil and criminal penalties,10 and stockholders

turned to this Court to hold Boeing’s fiduciaries accountable for the resulting

corporate trauma.11

In January 2021, Boeing entered into a deferred prosecution agreement

(“DPA”) with the Department of Justice (“DOJ”) to resolve a criminal charge related

to the Federal Aviation Administration’s (“FAA”) evaluation of Boeing’s 737 MAX

Am. Compl. ¶¶ 71–73.

Id. ¶¶ 75–109.

Id. ¶ 155.

Id. ¶¶ 156, 189.

See, e.g., id. ¶¶ 174, 185.

See In re Boeing Co. Deriv. Litig. (“Boeing I”), 2021 WL 4059934, at *20 (Del. Ch. Sept. 7, 2021).

aircraft.12 In exchange, Boeing agreed to pay a $243.6 million criminal monetary

penalty, make over $2 billion in compensation payments, and implement a host of

compliance obligations designed to prevent violations of U.S. fraud laws.13 Those

obligations required Boeing to “foster a culture of ethics and compliance with the

law in its day-to-day operations,” implement controls concerning airworthiness

certifications and manufacturing records, and adjust its compliance program based

on periodic risk assessments.14

In May, Boeing entered into a settlement with the FAA to resolve three open

cases involving supplier oversight problems.15 Boeing agreed to pay an

approximately $27 million civil penalty, “which could be reduced to $17 million if

Boeing completed certain corrective actions.”16 Those corrective actions entailed

“enhanced oversight of parts from suppliers ‘shipped at risk’” to ensure their safety

for installation and operation.17

Am. Compl. ¶¶ 172–79; Am. Compl. Ex. A [hereinafter “DPA”].

DPA ¶¶ 10, 12–13, 21–23.

Am. Compl. Ex. B [hereinafter “Plea Agreement”] at Attachment A-1 ¶ 6; see also DPA at Attachment C.

Am. Compl. ¶ 185.

Id.

Id. ¶ 186.

Boeing stockholders also sued the board for bad faith oversight failures.18 In

November, the parties to that case executed a settlement agreement, which this Court

approved in March 2022.19 It called for a $237.5 million payment to the Company

and sweeping corporate governance reforms.20 Boeing created an independent board

Aerospace Safety Committee to oversee the safety of Boeing’s aerospace products

and services; created a Product and Services Safety Organization that reports to

Boeing’s Chief Engineer and the Aerospace Safety Committee; imposed substantial

Board and Aerospace Safety Committee reporting requirements; committed to

ensuring that at least three directors have “knowledge, experience, and/or expertise

with aviation/aerospace, engineering, and/or product safety oversight”; and

separated the CEO and Board Chair positions.21

B. Boeing’s Corporate Governance And Oversight Of Airplane Safety

And Quality

As of the filing of Plaintiffs’ original complaint, Boeing was managed by a

twelve-member board of directors (the “Board”).22 During the relevant time, the

See Boeing I, 2021 WL 4059934, at *1.

Am. Compl. ¶¶ 199–202; Defs.’ Ex. 1.

Defs.’ Ex. 1 ¶¶ 20–21; see also In re The Boeing Co. Deriv. Litig., C.A. No. 2019-0907-MTZ, at D.I. 193 Ex. A.

Defs.’ Ex. 1 ¶¶ U, W, EE.

Am. Compl. ¶ 75.

Board met at least bimonthly.23 Airplane safety was discussed at every meeting.24

At each Board meeting, management presented a Boeing Commercial Airplanes

(“BCA”) Update reporting on safety and quality risks related to BCA’s operational

performance and production targets.25 Twice a year, the Chief Aerospace Safety

Officer presented a Global Aerospace Safety Update reporting on safety initiatives.26

The Board had two committees that oversaw compliance risks pertinent to

airplane safety and quality.27 The Aerospace Safety Committee was responsible for

oversight of “the safe design, development, manufacture, production, operation,

maintenance, and delivery of the Company’s aerospace products and services.”28 At

all relevant times, it comprised independent directors with extensive engineering,

manufacturing, aerospace, aviation, or safety expertise.29 The Aerospace Safety

Committee met at least twenty-three times between January 2022 and July 2024.30

See Defs.’ Exs. 122–135.

Id.

See, e.g., Am. Compl. ¶ 465(g) (“A June 27, 2023 BCA Update . . . to the Board disclosed various Spirit rework issues.”); id. ¶ 519(d) (referencing a June 27, 2023 BCA Update “explaining that the ‘[s]upply chain [was] driving traveled work’ for the 787 program”). 26

See, e.g., Defs.’ Ex. 88 at -7313; Defs.’ Ex. 89 at -6400; Defs.’ Ex. 90 at -6795; Defs.’ Ex. 91 at 7555; Defs.’ Ex. 92 at -8305.

See, e.g., Am. Compl. ¶¶ 582, 597.

Defs.’ Ex. 1 ¶ U; see Am. Compl. ¶ 200.

See The Boeing Co., Proxy Statement (Schedule DEF14A) at 13–23 (Apr. 5, 2024); The Boeing Co., Proxy Statement (Schedule DEF14A) at 8–14 (Mar. 3, 2023); The Boeing Co., Proxy Statement (Schedule DEF14A) at 10–15 (Mar. 11, 2022).

See Defs.’ Exs. 8–30.

During these meetings, it reviewed key risks and incidents pertaining to airplane

safety through several reporting mechanisms.

1. Safety Management System (“SMS”) Risk Register Reports cover

updates, metrics, and remediation efforts related to various airplane safety and

quality risks. Those risks include recordkeeping noncompliance and foreign

object debris (“FOD”) levels.31

2. In-Service Safety Reports cover recent safety incidents involving

Boeing aircraft, Boeing’s response to the incidents, and its assessment of root

causes.32 These reports aim to ensure the Board or the Aerospace Safety

Committee learns of significant safety incidents or regulatory actions “within

24 hours or as soon as reasonably practicable after Boeing, is notified or made

aware of an event.”33

3. SMS Implementation Reports cover SMS updates, including those

related to the Speak Up platform to encourage employees and others to raise

safety concerns.34

4. Special Attention Reports provide updates on matters requiring the

Aerospace Safety Committee’s attention. Those matters include metrics on

See, e.g., Am. Compl. ¶ 480(e) (quoting June 27, 2022 SMS Risk Register Report referencing “[s]tamping allegations”); id. ¶ 581(a) (quoting February 10, 2022 SMS Risk Register Report referencing the potential need for “[l]ate stage rework” due to FOD). 32

See, e.g., id. ¶ 465(a) (referencing “In-Service Safety Reports that discussed a flaw in the altimeter installed in 787 aircraft, which Boeing traced in part to Spirit”); id. ¶ 597(b) (discussing an “In-Service Safety Report . . . that referenced a potential loose part”); id. ¶¶ 603–04; Defs.’ Ex. 20; Defs.’ Ex. 46.

Am. Compl. ¶ 604 (italics omitted).

See id. ¶ 581(b) (referencing a “SMS Implementation presentation to the [Aerospace Safety Committee] [discussing] a Speak Up report ‘regarding possible incorrect fastener installation on 777-9 wing’”).

rework—i.e., repairs to fix prior defects—and efforts to improve those

metrics.35

The Audit Committee was responsible for oversight of, among other things,

Boeing’s “internal control environment and compliance with legal and regulatory

requirements.”36 Its mandate included monitoring compliance with the DPA and

FAA regulations. Every year, the Audit Committee received a Compliance Risk

Management (“CRM”) Report outlining key compliance risks, including aircraft

certification and stamping noncompliance, and efforts to mitigate those risks.37

These channels presented the Board with information about Boeing’s

manufacturing challenges and efforts to address them. The Amended Complaint

addresses seven topics.

1. Workforce Productivity And Stability.38 Boeing, like many other

companies, laid off and rehired a substantial number of employees due to the

COVID-19 pandemic.39 The Board was aware Boeing had experienced “a

decrease in personnel with prior manufacturing experience and faced “the

Toughest Recruiting Environment in Decades.”40 Management regularly

See, e.g., id. ¶ 581(c) (referencing June 26, 2023 “‘Special Attention’ presentation to the [Aerospace Safety Committee] . . . disclos[ing] that [Boeing Commercial Airlines] experienced a ‘2.4% Increase in Rework % since 2022[.]’”); Defs.’ Ex. 73 at -1612 (June 26, 2023 Special Attention presentation listing “Actions to Improve” to decrease rework levels, including “[c]ontinued focus on training effectiveness and simplifying work instructions”).

The Boeing Co., Proxy Statement (Schedule DEF14A) at 18 (Mar. 3, 2023). 37

See, e.g., Am. Compl. ¶¶ 480(i)–(j) (referencing 2022 and 2023 CRM Reports). 38

Id. ¶¶ 34, 329, 473–76.

Id. ¶¶ 34, 208–11.

Am. Compl. ¶¶ 474(a)–(b).

updated the Board and its committees on efforts to ensure Boeing’s

workforce was appropriately trained.41

2. Supplier Defects.42 Spirit AeroSystems Holdings, Inc. (“Spirit”) was

one of Boeing’s key suppliers, responsible for producing approximately 70%

of each 737 MAX aircraft.43 In part due to exogenous supply chain and

workforce disruptions,44 Spirit allegedly suffered from quality issues

resulting in the supply of defective products.45 Management regularly

updated the Board and its committees on those defects and the rework being

performed to remedy them.46 The updates also addressed management’s

broader initiatives to reduce supplier-side quality escapes, including a “Spirit

One Quality Plan.”47 On top of monitoring management’s initiatives, in

See, e.g., Defs.’ Ex. 6 at -3168; Defs.’ Ex. 136 at -2544; Defs.’ Ex. 121 at -3229; Defs.’ Ex. 122 at -0020.

Am. Compl. ¶¶ 465–72.

Id. ¶¶ 214–15.

See id. ¶¶ 216–17 (describing the effects of the pandemic and a labor strike on Spirit’s operations).

Id. ¶¶ 216–18, 465.

See, e.g., id. ¶ 465(b) (reporting that “Boeing would set up approximately twelve repair stations across Boeing sites to perform rework” on “flaws in fuselages Boeing received from Spirit”); id. ¶ 465(c) (quoting April 18, 2023 BCA Update referencing a “Spirit escape involving a 737 MAX” and “nacelle rework impacts”); id. ¶ 465(d) (quoting April 18, 2023 BCA Update referencing a “737 Spirit Notice of Escapement (NoE) Initial Assessment” and disclosing management’s assumption for a “[m]onthly rework max throughput at ~12 aircraft per month”); id. ¶ 465(e) (quoting April 24, 2023 Audit Committee materials disclosing “Boeing’s need to ‘perform rework’ on 737 MAX fuselages” after Spirit flagged a “non-standard manufacturing process”); id. ¶ 465(f) (quoting April 26, 2023 Audit Committee materials disclosing the “costs of rework” related to “quality issue on certain parts” supplied by Spirit); id. ¶ 465(h) (quoting August 28, 2023 Audit Committee Watch Items list discussing the need for “an assessment of ‘production and delivery impacts as well as inspection/rework requirements’” related to “737 MAX production issue caused by Spirit”); id. ¶ 465(i) (quoting October 16, 2023 Audit Committee Watch Items list disclosing “the Company was ‘performing rework’” on aircraft impacted by a “problem identified by Spirit”).

See, e.g., Defs.’ Ex. 32 at -1027 (June 27, 2022 SMS Risk Register Report presenting metrics for supplier-generated defects and identifying open corrective actions, including a

October 2023, the Board authorized Boeing to invest $100 million into Spirit

to address its liquidity and operational needs.48

3. FOD.49 FOD refers to any item or debris improperly “left in Boeing

aircraft” during the assembly process.50 FOD can damage aircraft.51

Management periodically updated the Board and its committees on FOD-peraircraft data and corrective actions to reduce FOD, including improvements

to tooling and internal inspection processes.52

4. Rework And Traveled Work.53 Rework refers to repairs performed

on prior defects,54 and traveled work refers to production work performed out

of sequence.55 Both are “realistic” features of manufacturing operations:

defects require rework, and delays along the assembly line require traveled

“Spirit One Quality Plan”); id. at -1028 (detailing further “[o]pportunities for supplier oversight, including improvements to Boeing’s “Initial Product and Production System Validation”); Defs.’ Ex. 93 at -7329–31 (April 18, 2023 BCA Update presenting mitigation efforts such as a “Supplier Summit,” a “Supply Chain Engineering Initiatives team to evaluate defect data and proactively implement process changes,” and a “NOE management team to address quality escapes from supply base into Boeing Quality Management System QMS”); Defs.’ Ex. 103 at -7687 (October 17, 2023 BCA Update describing management’s “[c]ontinuous [i]teration [and] [m]onitoring” of “Spirit disruption” and “[u]nderperforming suppliers”).

Am. Compl. ¶ 468; see Defs.’ Ex. 131 at -0660–61.

Am. Compl. ¶¶ 487–91.

Id. ¶ 43.

Id.

See, e.g., Defs.’ Ex. 31 at -0760–62, -0783 (February 10, 2022 SMS Risk Register Report presenting recent FOD metrics and management’s “[p]ath to [s]tability,” including “[h]eat maps and documentation for chronic repeat findings.”); Defs.’ Ex. 32 at -1024 (June 27, 2022 SMS Risk Register Report presenting “[s]uccessful actions” to reduce FOD, including “[e]nhanced accountability for Clean-As-you-Go,” “[s]trengthening internal inspection by expanding Gold Coin program (i.e., placing FOD intentionally on aircraft for discovery),” and “[i]mprovements to tooling (e.g., lighted vacuums, FODless drill . . . .)”). 53

Am. Compl. ¶¶ 509–23, 579–600.

Id. ¶ 53.

Id. ¶¶ 45, 509–11.

work.56 Management regularly updated the Board and its committees on

rework and traveled work, and their root causes—i.e., supplier-side quality

issues and the presence of FOD.57 Management’s updates regularly

addressed efforts to mitigate those root causes.58

5. Tools And Parts Control.59 Boeing maintains internal controls

ensuring all tools and parts are properly used and accounted for during the

production process. Ineffective tool control can lead to aircraft delivered

with FOD; the use of nonconforming or “scrapped” parts can lead to aircraft

unsafe for operation.60 Management kept the Board and its committees

apprised of nonconformities61 and initiatives to strengthen tools and parts

control.62 Those initiatives included improvements to “tool check in and

Id. ¶ 45 (“When work slated for one workstation was not performed on time, . . . . [the] work [] traveled with the airplane down the assembly line and had to be completed out of the sequence provided in the manufacturing plan.”); id. ¶ 53 (“Jobs that were performed incorrectly had to be redone if defects were discovered.”); NTSB Report at 95–96 (“For a complex manufacturing process such as Boeing’s, where thousands of components are being integrated into a final assembly, it is realistic to expect that predefined plans may need to be adjusted at times to accommodate for manufacturing nonconformances.” (bolding omitted)).

See, e.g., id. ¶ 519(d) (quoting June 27, 2023 BCA Update explaining that the “[s]upply chain [was] driving traveled work” for the 787 program); id. ¶ 581(a). 58

See id.

Id. ¶¶ 554–65.

Id. ¶¶ 554, 595.

See, e.g., id. ¶ 597(b) (quoting April 17, 2023 In-Service Safety Report referencing “a potential loose part because of the use of an improper tool”); id. ¶ 597(c) (quoting June 26, 2023 In-Service Safety Report referencing “a potential loose part because of the use of an improper tool”); id. ¶ 562 (quoting August 28, 2023 Special Attention Report referencing “compliance risk related to unapproved parts installation escapes”).

See, e.g., Defs.’ Ex. 136 at -2546 (2022 CRM Report describing “[m]itigation plans . . . to address tool control across the enterprise”); Defs.’ Ex. 6 at -3170 (2023 CRM Report explaining that “BCA is working to improve ‘Lost tool Report’ processes; tool check in and return processes; tool tracking using Radio Frequency Identification Database capabilities or serialization tools; and employee training and risk awareness”).

return processes,” “tool tracking,” and “risk control plans regarding

unapproved parts.”63

6. ODA Unit Interference and Employee Retaliation.64 After the 737

MAX crashes, and as required under the DPA, Boeing committed to fostering

a “culture of ethics and compliance.”65 To that end, Boeing created its Speak

Up and Ombudsman programs for employees to report on unsafe practices

confidentially, “without a fear of retaliation.”66 The Board and its

committees saw regular updates on the Speak Up program,67 ODA

interference risks,68 and management’s progress on a range of anti-retaliation

initiatives.69

7. Deficient Recordkeeping.70 Boeing relies on complete and accurate

manufacturing records to certify its aircraft as airworthy.71 Fraud and safety

risks can arise when, for instance, employees incorrectly “stamp” a required

Defs.’ Ex. 6 at -3170.

Am. Compl. ¶¶ 524–53.

See id. ¶¶ 25, 57; DPA, Attachment C ¶¶ 9–10.

Am. Compl. ¶ 204.

See, e.g., id. ¶ 550 (citing December 7, 2023 SMS Implementation Update reporting a decrease in the volume of Speak Up reports in 2023 relative to 2022); Defs.’ Ex. 62 at -1823 (December 7, 2023 Implementation Update reporting on “Speak Up Health”); Defs.’ Ex. 67 at -1466 (April 17, 2023 SMS Implementation Update reporting on “actions . . . being implemented to address the process gaps” identified in the Speak Up program). 68

See, e.g., Defs.’ Ex. 77 at -1144 (August 29, 2022 Special Attention Report disclosing the results of a 2022 survey of ODA unit members); Am. Compl. ¶¶ 542–44 (citing Defs.’ Ex. 77 at -1144).

See, e.g., Defs.’ Ex. 136 at -2522, -2536–37 (2022 CRM Report discussing “progress on a new anti-retaliation procedure,” “[t]ailored mitigation strategies[,] and oversight processes”); Defs.’ Ex. 6 at -3156 (2023 CRM Report discussing “a restructured ODA process for interference allegation intake, review, investigation, and FAA disclosure”); Defs.’ Ex. 109 at -2306 (June 27, 2022 DPA Compliance Update reporting on management’s “[r]eview of anti-retaliation program and policies”).

Am. Compl. ¶¶ 479–96.

See id. ¶ 479.

manufacturing step as complete72 or fail to maintain “removal records”

documenting the removal and replacement of parts.73 The Aerospace Safety

and Audit Committees regularly received updates on recordkeeping

compliance.74 Those updates addressed management’s efforts to monitor and

mitigate recordkeeping deficiencies, including “root cause analys[e]s,” “new

mandatory training,” tools “to track certification status,” and “improved data

analytics and dashboard visibility.”75

C. The Door Plug Blowout

On January 5, 2024, a Boeing 737-9 MAX flying as Alaska Airlines Flight

1282 climbed out of Portland, Oregon bound for Ontario, California. 76 Just as it

reached 15,000 feet, the left mid-cabin door plug flew off, leaving a gaping hole in

the aircraft.77 Seven passengers and a crew member sustained minor injuries.78 The

aircraft made a safe emergency landing back in Portland.79

Id.

Id. ¶ 492; NTSB Report at 45, 87.

See, e.g., id. ¶¶ 480(a)–(h) (quoting Aerospace Safety Committee materials reporting on stamping allegations); id. ¶¶ 480(i)–(j) (quoting 2022 and 2023 CRM Reports identifying “Manufacturing Certification and Stamping” as a compliance risk).

Defs.’ Ex. 136 at -2544 (2022 CRM Report); Defs.’ Ex. 6 at -3149, -3168–69 (2023 CRM Report); see also Am. Compl. ¶¶ 480(b)–(c) (quoting Aerospace Safety Committee materials referencing a “corrective action plan entitled ‘Mfg. Discipline: Certifications & Stamping Project’”).

Am. Compl. ¶ 278.

Id. ¶¶ 278–79.

Id. ¶¶ 280, 282; Am. Compl. Ex. D [hereinafter “NTSB Report”] at 6.

Am. Compl. ¶ 283.

An investigation by the National Transportation Security Board (“NTSB”)

revealed the cause: the door plug was missing bolts.80 The jet’s fuselage,

manufactured by Spirit, had arrived at Boeing’s Renton, Washington 737 MAX

factory with defective rivets that needed rework.81 The rework required Boeing

personnel to open the door plug by removing four bolts securing the plug to the

fuselage. Nobody on the job that day was experienced in opening and closing door

plugs.82 The defective rivets were replaced, but the removed bolts were not.83 The

Boeing personnel closed the door plug without conducting a quality assurance

inspection or creating records of the removals.84 The jet was then delivered to

Alaska Airlines.85

D. Regulators Investigate And Boeing Responds.

Within hours of the incident, the FAA announced the NTSB would investigate

and grounded 171 Boeing 737-9 MAX aircraft operated by U.S. airlines or in U.S.

See generally NTSB Report; see also Am. Compl. ¶¶ 289–92.

Am. Compl. ¶ 290.

Id. ¶ 476; NTSB Report at 86–88.

Am. Compl. ¶ 290; NTSB Report at 119.

Am. Compl. ¶ 292; NTSB Report at 120.

Am. Compl. ¶ 30.

territory.86 “The FAA also issued an Emergency Airworthiness Directive requiring

operators to inspect aircraft before further flight.”87

Within a day of the incident, the Aerospace Safety Committee met to discuss

the known facts, the Company’s initial response, and immediate next steps. 88 On

January 8, in cooperation with the FAA, Boeing issued a Multi-Operator Message

(“MOM”) with instructions for inspecting the grounded 737-9 MAX fleet before

returning the aircraft to service.89 The Aerospace Safety Committee met again on

January 10 and 12 to discuss preliminary inspection findings and to consider whether

they presented broader production quality issues.90 The Aerospace Safety

Committee planned to have some of its members participate in an onsite inspection

of the Washington factory responsible for manufacturing the jet.91 That inspection

took place on January 18.92

In the meantime, the FAA launched a formal investigation into the incident

and into Boeing’s compliance with FAA regulations (the “Special Audit”). 93 On

Id. ¶ 297.

Id.

Defs.’ Ex. 23.

Am. Compl. ¶ 298; Defs.’ Ex. 133 at -0676.

Defs.’ Ex. 24; Defs.’ Ex. 133.

Defs.’ Ex. 24.

Defs.’ Ex. 25 at -8044.

Am. Compl. ¶ 301; see also Am. Compl. Ex. L.

January 24, the FAA froze Boeing’s planned 737 MAX production expansion and

effectively capped production rates at thirty-eight planes per month.94 The next day,

the Renton factory temporarily paused production as part of a quality stand-down.95

Over the next few months, Boeing held quality stand-downs across all of its BCA

production lines.96

The same month as the door plug blowout, senior Boeing management

discussed an acquisition of Spirit—a move intended to “improve the safety and

quality of Boeing airplanes” and “promote supply chain stability.”97 Negotiations

proceeded throughout the spring.98 Negotiations focused on Spirit’s need to divest

certain assets involved in producing aircraft for Airbus SE (“Airbus”), a Boeing

competitor.99 Airbus would not “pay anything to acquire its parts of Spirit” because

“the deal was engineered largely to fit Boeing’s needs.”100 Spirit would end up

paying $439 million in connection with the divestiture.101 On June 26, Boeing made

its final, all-stock offer to acquire Spirit for $37.25 per share in Boeing common

Am. Compl. ¶ 316.

Id. ¶ 619.

Id. ¶ 625.

Id. ¶ 390.

Id. ¶¶ 391–412.

Id. ¶ 402.

100

Id. ¶ 421.

101

Id. ¶ 425(g).

stock, subject to an exchange ratio collar.102 The boards of both parties approved

the merger on June 30.103 Spirit stockholders approved the merger on January 31,

2025.104

E. Regulatory Findings

On March 4, 2024, the FAA announced the Special Audit was complete.105

The FAA identified ninety-seven alleged instances of noncompliance, including

“multiple instances where [Boeing and Spirit] allegedly failed to comply with

manufacturing quality control requirements.”106 The FAA gave Boeing ninety days

from March 4 to submit a corrective action plan107 and expressed it would not lift

Boeing’s production cap until it was satisfied.108 On April 29, management

presented the first iteration of a “Comprehensive Product Safety & Quality Plan” to

the Aerospace Safety Committee.109 Boeing submitted a proposed correction action

plan to the FAA a month later.110

102

Id. ¶ 412.

103

Id. ¶¶ 413–14.

104

Id. ¶ 419.

105

Id. ¶ 335.

106

Id. ¶¶ 336–38.

107

Id. ¶ 336.

108

Id.

109

Id. ¶¶ 642–43.

110

Id. ¶ 356.

The DOJ performed its own investigation into the door plug blowout incident

and concluded Boeing had breached the DPA.111 In July, Boeing and the DOJ filed

a plea agreement (the “Plea Agreement”) in federal court, under which Boeing

would plead guilty to a felony charge.112 The court rejected the Plea Agreement,

observing that the “Government has monitored Boeing for three years now” and “it

is not clear what all Boeing has done to breach the [DPA].”113

On May 29, 2025, Boeing and the DOJ entered into a two-year NonProsecution Agreement (the “NPA”).114 Among other things, the NPA required

Boeing to pay another $444.5 million to the families and beneficiaries of the victims

of the 2018 and 2019 crashes.115

On June 24, the NTSB issued its final report on the door plug blowout

incident.116 The final report documented the probable cause of the incident as a

series of production mishaps symptomatic of “systemic nonconformance issues.”117

F. The Door Plug Blowout Incident Inspires Lawsuits.

111

Id. ¶¶ 429–430.

112

Id. ¶ 430; see Plea Agreement.

113

Id. ¶ 441; Defs.’ Ex. 148 at 11.

114

Am. Compl. ¶ 444; see Am. Compl. Ex. F [hereinafter “NPA”].

115

NPA ¶ 11.

116

Am. Compl. ¶¶ 426–27; see NTSB Report.

117

Am. Compl. ¶ 428; NTSB Report at 122; see also Am. Compl. Ex. K.

While those events unfolded, on May 22, 2024, several Boeing stockholders

filed a class action complaint in the United States District Court for the Eastern

District of Virginia alleging federal securities violations (the “Federal Securities

Action”).118 On September 6, that court denied the defendants’ motion to dismiss.119

The Federal Securities Action remains pending.

On October 21, 2024, Plaintiffs filed a joint amended verified stockholder

derivative complaint in the Eastern District of Virginia (the “Federal Derivative

Action”), asserting four counts.120 Counts I and II are bad faith oversight claims.121

Counts III and IV challenge the directors’ roles in causing the Company to violate

Sections 14(a) and 10(b) of the Securities and Exchange Act.122 On December 20,

the Eastern District of Virginia dismissed Counts I and II in the Federal Derivative

Action, noting this Court “is a more appropriate venue to resolve [the] Caremark

claims.”123

So told, Plaintiffs turned to this Court. On February 5, 2025, Plaintiffs filed

a verified shareholder derivative complaint in this action reasserting their Caremark

118

Am. Compl. ¶ 448.

119

Id. ¶ 453.

120

Id. ¶ 449.

121

Id.

122

Id.

123

Id. ¶ 455 (italics added).

claims.124 This action was consolidated with another oversight action filed on

November 25, 2024, and I appointed Plaintiffs as lead plaintiffs on March 20.125

Plaintiffs filed the Amended Complaint on August 15, 2025, asserting three

counts.126 Count I is a breach of fiduciary duty claim against ten of the twelve

members of the Board (the “Director Defendants”) pressing two bad faith oversight

failures under Caremark.127 They point to the failure “to respond in good faith to

red flags showing potential deficiencies in the mission-critical areas of airplane

safety and regulatory compliance,” and the implementation of “a production

schedule that . . . could not be met safely and in compliance with the law.”128 Count

II asserts the same claim against thirteen officers (the “Officer Defendants”).129

Count III is an unjust enrichment claim alleging Director Defendants and Officer

Defendants “wrongfully received” incentive-based compensation tied to unsafe

production targets and illusory commitments to safety.130

124

D.I. 26.

125

D.I. 1; D.I. 25; D.I. 39; D.I. 50.

126

See generally Am. Compl.

127

In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959 (Del. Ch. 1996); Am. Compl. ¶¶ 717–21.

128

Am. Compl. ¶ 719.

129

Id. ¶¶ 107, 724.

130

Id. ¶¶ 728–30.

On September 24, Defendants moved to dismiss under Court of Chancery

Rules 12(b)(2), 12(b)(6), and 23.1.131 The parties briefed the motion by November

24.132 I heard argument on May 22, 2026, and took the motion under advisement.133

II. ANALYSIS

My analysis begins and ends with “the gating question of demand futility.”134

Under Rule 23.1, a derivative complaint must “state with particularity . . . any effort

made by the plaintiff to obtain the desired action from the entity” and “the reasons

for not obtaining the action or not making the effort.”135 Having failed to make a

demand, Plaintiffs must plead particularized facts supporting an inference that

“demand is excused because the directors are incapable of making an impartial

decision regarding the litigation.”136 Otherwise, the derivative action must be

dismissed. Demand futility is conducted claim by claim, director by director.137

131

D.I. 93.

132

D.I. 94; D.I. 131; D.I. 138.

133

D.I. 151.

134

Conte ex rel. Skechers U.S.A., Inc. v. Greenberg, 2024 WL 413430, at *5 (Del. Ch. Feb. 2, 2024), aff’d, 338 A.3d 1289 (Del. 2025).

135

Ct. Ch. R. 23.1; see Brehm v. Eisner, 746 A.2d 244, 254 (Del. 2000) (“Rule 23.1 is not satisfied by conclusory statements or mere notice pleading.”).

136

United Food & Com. Workers Union & Participating Food Indus. Empls. Tri-State Pension Fund v. Zuckerberg, 262 A.3d 1034, 1054 n.146 (Del. 2021) (citing Wood v. Baum, 953 A.2d 136, 140 (Del. 2008)).

137

In re Vaxart, Inc. S’holder Litig., 2021 WL 5858696, at *15 (Del. Ch. Dec. 1, 2021) (quoting Cambridge Ret. Sys. v. Bosnjak, 2014 WL 2930869, at *4 (Del. Ch. June 26, 2014)); see also Zuckerberg, 262 A.3d at 1059.

Plaintiffs contend demand is futile because more than half of the Board faces

a substantial likelihood of liability on the claims asserted both here and in the Federal

Derivative Action.138 The claims here are premised on oversight failures sounding

in the “fiduciary duty of loyalty, and specifically its subsidiary element of bad

faith.”139 The claims in the Federal Derivative Action are premised on disclosurerelated federal securities violations. I conclude neither set of claims impugns the

Board’s ability to impartially consider a demand for the Caremark claims here.

A. The Breach Of Fiduciary Duty Claims

I begin with whether the Director Defendants face a substantial likelihood of

liability on Plaintiffs’ Caremark claims. Plaintiffs allege the Board saw “dozens of

red flags” warning of systemic airplane manufacturing issues leading up to the door

plug blowout incident.140 They allege the Board ignored these red flags and, to make

matters worse, implemented a production schedule that pushed profits over safety.141

Delaware law presumes directors perform their duties, including their

oversight responsibilities, “in good faith and with reasonable care, even if their

actions turn out poorly in hindsight.”142 That includes their responses to reporting

138

See Zuckerberg, 262 A.3d at 1059; Am. Compl. ¶ 17.

139

Bricklayers Pension Fund of W. Pa. ex rel. Centene Corp. v. Brinkley, 2024 WL 3384823, at *13 (Del. Ch. July 12, 2024).

140

D.I. 131 [hereinafter “PAB”] 9.

141

PAB 40.

142

In re Transunion Deriv. S’holder Litig., 324 A.3d 869, 884 (Del. Ch. 2024).

of significant legal and compliance risks: those responses are “presumed to [have

been made] loyally, in good faith.”143

Caremark imposes liability for bad faith amounting to a breach of the duty of

loyalty.144 “Caremark liability centers on a particular type of bad faith: ‘intentional

dereliction of duty’ or ‘conscious disregard for one’s responsibilities’.”145 “Only ‘a

sustained or systematic failure of the board to exercise oversight . . . will establish

the lack of good faith that is a necessary condition to liability.’”146 The directors

must know that they were not discharging their fiduciary obligations.147

Caremark’s scienter requirement differentiates disloyal bad faith from gross

negligence that breaches the duty of care. “[A] failure to act in good faith requires

143

In re McDonald’s Corp. S’holder Deriv. Litig., 291 A.3d 652, 679 (Del. Ch. 2023); accord Clem v. Skinner, 2024 WL 668523, at *8 (Del. Ch. Feb. 19, 2024) (explaining “the court’s role is not to second-guess a board’s response to a red flag,” and further stating that “[c]laims that quibble with the timing or success of corrective action necessarily fail”). 144

Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 369–70 (Del. 2006); see also Marchand v. Barnhill, 212 A.3d 805, 824 (Del. 2019) (“If Caremark means anything, it is that a corporate board must make a good faith effort to exercise its duty of care. A failure to make that effort constitutes a breach of the duty of loyalty.”); Guttman v. Huang, 823 A.2d 492, 506 n.34 (Del. Ch. 2003) (“A director cannot act loyally towards the corporation unless she acts in the good faith belief that her actions are in the corporation’s best interest.”).

145

Skechers, 2024 WL 413430, at *7 (internal quotation marks omitted) (quoting In re Walt Disney Co. Deriv. Litig., 906 A.2d 27, 66 (Del. 2006)); see also Lyondell Chemical Co. v. Ryan, 970 A.2d 235, 243 (Del. 2009) (“[T]here is a vast difference between an inadequate or flawed effort to carry out fiduciary duties and a conscious disregard for those duties.”).

146

Clem, 2024 WL 668523, at *7 (quoting Caremark, 698 A.2d at 971).

147

Stone, 911 A.2d at 370.

conduct that is qualitatively different from, and more culpable than, the conduct

giving rise to a violation of the fiduciary duty of care (i.e., gross negligence).”148 In

the corporate context, “gross negligence has acquired its own, special meaning and

requires conduct akin to recklessness.”149 “[D]irector gross negligence with respect

to a corporate trauma is insufficient to establish director liability.”150 Fiduciaries

“who ‘try’ to implement and attend to a ‘reasonable board-level system of

monitoring and reporting’ have met their baseline duty.”151 Even in the context of

“mission critical” operations, “Caremark does not demand omniscience.”152 The

Court does not imply bad faith retroactively to a director who, when evaluating a

legal risk, believed in good faith that she was acting lawfully and taking good faith

148

In re Goldman Sachs Gp., Inc. S’holder Litig., 2011 WL 4826104, at *13 (Del. Ch. Oct. 12, 2011) (citing Stone, 911 A.2d at 369).

149

PJT Holdings, LLC v. Costanzo, 339 A.3d 1231, 1249 (Del. Ch. 2025) (further clarifying that “[b]y statute, Delaware has defined recklessness as a situation where ‘the person is aware of and consciously disregards a substantial and unjustifiable risk that the element exists or will result from the conduct’”).

150

Constr. Indus. Laborers Pension Fund v. Bingle, 2022 WL 4102492, at *8 (Del. Ch. Sept. 6, 2022), aff'd, 297 A.3d 1083 (Del. 2023); see also Off. Comm. of Unsecured Creditors of Integrated Health Servs. v. Elkins, 2004 WL 1949290, at *12 (Del.Ch. Aug. 24, 2004) (“[I]t is important to highlight yet again that the [Disney] standard moves beyond gross negligence. To survive a motion to dismiss based on this standard, where the charter contains a § 102(b)(7) provision, a plaintiff must plead facts that, if true, would imply that a Board ‘consciously and intentionally disregarded [its] responsibilities.’” (referencing In re Walt Disney Co. Deriv. Litig., 825 A.2d 275, 289 (Del. Ch. 2003))). 151

Transunion, 324 A.3d at 884 (quoting Marchand, 212 A.3d at 821).

152

In re Clovis Oncology, Inc. Deriv. Litig., 2019 WL 4850188, at *13 (Del. Ch. Oct. 1, 2019) (quoting Marchand, 212 A.3d at 824).

steps to remedy noncompliance.153 “[T]here is a vast difference between an

inadequate or flawed effort to carry out fiduciary duties and a conscious disregard

for those duties. There is an even wider gulph between imperfect compliance and

purposeful lawbreaking.”154 In other words, directors do not face oversight liability

if they believed they were reasonably performing their duties in stockholders’ best

interests.

Bad faith manifests along a spectrum.155 Directors might have “utterly failed

to implement any reporting or information system or controls” or, “having

implemented such a system or controls, consciously failed to monitor or oversee its

operations thus disabling themselves from being informed of risks or problems

requiring their attention.”156 In their most extreme form, Caremark claims can allege

153

See McDonald’s, 291 A.3d at 680 (“The decision about what to do in response to a red flag is one that an officer or director is presumed to make loyally, in good faith, and on an informed basis, so unless one of those presumptions is rebutted, the response is protected by the business judgment rule.”).

154

Transunion, 324 A.3d at 895 (citations omitted); see also Firemen’s Ret. Sys. of St. Louis ex rel. Marriott Int’l, Inc. v. Sorenson, 2021 WL 4593777, at *16 (Del. Ch. Oct. 5, 2021) (“An attempted yet failed remediation effort generally cannot implicate bad faith.”); see also Wayne Cnty. Empls.’ Ret. Sys. v. Corti, 2009 WL 2219260, at *14 (Del. Ch. July 24, 2009) (“Bad faith cannot be shown by merely showing that the directors failed to do all they should have done under the circumstances.” (citing Lyondell, 970 A.2d at 243 )); see also In re Qualcomm Inc. FCPA S’holder Deriv. Litig., 2017 WL 2608723, at *3 (Del. Ch. June 16, 2017) (“Further, ‘[s]imply alleging that a board incorrectly exercised its business judgment and made a ‘wrong’ decision in response to red flags . . . is insufficient to plead bad faith.’” (citing Citigroup Inc. S’holder Deriv. Litig., 964 A.2d 106, 131 (Del. Ch. 2009)).

155

See Transunion, 324 A.3d at 886.

156

Stone, 911 A.2d at 370.

that directors “purposely caused the corporation to break the law in pursuit of greater

profits.”157

Another distinction is relevant here. “[A]s relates to Caremark liability, it is

appropriate to distinguish the board’s oversight of the company’s management of

business risk that is inherent in its business plan from the board’s oversight of the

company’s compliance with positive law—including regulatory mandates.”158 For

example, “absent statutory or regulatory obligations, how much effort to expend to

prevent criminal activities by third parties against the corporate interest requires an

evaluation of business risk, the quintessential board function.”159 “Business risks

157

Transunion, 324 A.3d at 886; see In re Massey Energy Co., 2011 WL 2176479, at *20 (Del. Ch. May 31, 2011) (“[A] fiduciary of a Delaware corporation cannot be loyal to a Delaware corporation by knowingly causing it to seek profit by violating the law.” (citations omitted)).

158

Clovis, 2019 WL 4850188, at *12; see also Citigroup, 964 A.2d at 131 (“While it may be tempting to say that directors have the same duties to monitor and oversee business risk, imposing Caremark-type duties on directors to monitor business risk is fundamentally different.”)

159

Bingle, 2022 WL 4102492, at *1, *7 (“While no case in this jurisdiction has imposed oversight liability based solely on failure to monitor business risk, it is possible, I think, to envision an extreme hypothetical involving liability for bad faith actions of directors leading to such liability.”); see Citigroup, 964 A.2d at 126 (“To the extent the Court allows shareholder plaintiffs to succeed on a theory that a director is liable for a failure to monitor business risk, the Court risks undermining the well settled policy of Delaware law by inviting Courts to perform a hindsight evaluation of the reasonableness or prudence of directors’ business decisions.”); see also Marchand, 212 A.3d at 821 (noting that directors have “great discretion to design context- and industry-specific approaches tailored to their companies’ businesses and resources”).

are shades of gray; legal compliance risks are black and white.”160 Business matters

are often complex, without a clear correct answer; so “[i]t is almost impossible for a

court, in hindsight, to determine whether the directors of a company properly

evaluated risk and thus made the ‘right’ business decision.” 161 By contrast,

regulations and statutory obligations provide clear guidance for directors overseeing

legal risk; “[d]irectors lack the discretion ‘to consciously cause the corporation to

act unlawfully.’”162

Against the presumption of good faith, Caremark’s scienter requirement, and

the distinction between business risk and legal risk, Plaintiffs try to plead Boeing’s

directors should face liability for their oversight of Boeing’s manufacturing risks as

realized in the door plug incident. Even reading with a plaintiff-friendly eye,

Plaintiffs have failed to plead the crux of Caremark: bad faith.

1. Plaintiffs Fail To Plead Red Flags Supporting An Inference Of

Bad Faith.

160

In re ProAssurance Corp. S’holder Deriv. Litig., 2023 WL 6426294, at *14 (Del. Ch. Oct. 2, 2023); see also Transunion, 324 A.3d at 887 (“For liability to attach, the risks identified and ignored cannot be business matters on which deference to the directors’ decision-making is owed. They must be legal violations so obvious and material that disregarding them amounts to bad faith.” (footnotes omitted)).

161

Citigroup, 964 A.2d at 126; see Segway Inc. v. Cai, 349 A.3d 628, 634 (Del. Ch. 2023) (“The Caremark doctrine is not a tool to hold fiduciaries liable for everyday business problems.”).

162

ProAssurance, 2023 WL 6426294, at *14 (quoting Desimone v. Barrows, 924 A.2d 908, 934–35 (Del. Ch. 2007)).

Plaintiffs’ Caremark theory is premised on the Board’s inaction upon receipt

of “dozens” of alleged “red flags” concerning systemic manufacturing issues.163 As

the Amended Complaint details, Boeing elevated airplane safety into a standing item

discussed at every Board and Aerospace Safety Committee meeting.164 The Audit

Committee, too, monitored Boeing’s compliance with the DPA and FAA

regulations.165 Each of these bodies received routine reports on airplane safety. And

each of those routine reports kept the Board abreast of virtually every key operational

risk, including: (1) workforce productivity and stability;166 (2) risks related to

“rework” and “traveled work” during Boeing’s manufacturing process;167 (3) foreign

object debris left inside aircraft;168 (4) supply chain issues;169 (5) allegations of

163

PAB 9, 35.

164

See Am. Compl. ¶ 697.

165

See, e.g., id. ¶¶ 497, 699–701.

166

Id. ¶¶ 473–76; see, e.g., Defs.’ Ex. 6 at -3168; Defs.’ Ex. 136 at -2544; Defs.’ Ex. 121 at -3229; Defs.’ Ex. 122 at -0020.

167

Am. Compl. ¶¶ 509–23, 579–600; Defs.’ Ex. 101 at -7446; Defs.’ Ex. 105 at -7911. 168

Am. Compl. ¶¶ 487–91; see, e.g., Defs.’ Ex. 31 at -0760–62; -0783, Defs.’ Ex. 32 at -1024.

169

Am. Compl. ¶¶ 465–72; see, e.g., Defs.’ Ex. 93 at -7321; Defs.’ Ex. 101 at -7446; Defs.’ Ex. 103 at -7681.

retaliation against whistleblowers and quality inspectors;170 (6) mismanagement of

tools and parts;171 and (7) deficient recordkeeping.172

From that reporting, Plaintiffs present ninety-five pages of allegations

reciting routine board and committee reports, presentations, and updates delivered

over a three-year period. 173 According to Plaintiffs, those ninety-five pages are not

exhaustive.174 Plaintiffs contend nearly every update the Director Defendants

received about Boeing’s manufacturing risks amounted to a red flag.

The breadth of Plaintiffs’ theory risks recasting the volume and depth of

Boeing’s reporting from a best practice into evidence of disloyalty.175 Caremark “is

rightly seen as a prod towards the greater exercise of care by directors in monitoring

their corporations’ compliance with legal standards.”176 It sets a baseline

requirement for “boards to take corporate compliance seriously.”177 It is not an

170

Am. Compl. ¶¶ 524–53. The Amended Complaint details several anecdotal accounts of alleged retaliation against whistleblowers. Id. ¶¶ 524–40. Plaintiffs do not plead the Board knew of those accounts; nor do they plead bad faith in failing to implement reporting or information systems or controls that would have informed the Board. I do not consider those accounts as part of Plaintiffs’ red flags claim.

171

Id. ¶¶ 554–65; see, e.g., Defs.’Ex. 101 at -7439, Defs.’ Ex. 6 at -3170. 172

Am. Compl. ¶¶ 479–81; see, e.g., Defs.’ Ex. 136 at -2544–45; Defs.’ Ex. 150. 173

PAB 10 n.2; see Am. Compl. ¶¶ 463–610.

174

PAB 10 n.2.

175

See Guttman, 823 A.2d at 506.

176

Id. (footnote omitted).

177

Transunion, 324 A.3d at 884.

avenue to hold corporate fiduciaries personally liable for doing what Caremark

requires them to do—to make a “good faith effort to implement an oversight system

and then monitor it.”178 And as Defendants point out, “if everything is a red flag,

then nothing is.”179

More fundamentally, under a Caremark red-flag claim, liability will not attach

unless the plaintiffs plead warning signs bright enough to put the board on notice

that “the corporation was violating the law or otherwise headed for a corporate

trauma.”180 A “red flag” is not a catch-all for every risk faced by a company and

reported to its fiduciaries.181 An alleged red flag must inspire “a need to act so clear

178

Marchand, 212 A.3d at 821.

179

D.I. 138 at 1.

180

Ontario Provincial Council of Carpenters’ Pension Tr. Fund v. Walton, 2023 WL 3093500, at *32 (Del. Ch. Apr. 26, 2023); see also Bingle, 2022 WL 4102492, at *10 (explaining that the plaintiffs must plead “red flags so vibrant that scienter is implied”); Transunion, 324 A.3d at 887 (explaining that “the risks identified . . . must be legal violations so obvious and material that disregarding them amounts to bad faith.” (citation omitted)); Rich ex rel. Fuqi Int’l, Inc. v. Yu Kwai Chong, 66 A.3d 963, 983 (Del. Ch. 2013) (describing “red flags” as “obvious and problematic occurrences”).

181

See, e.g., Reiter, 2016 WL 6081823, at *9 (rejecting a “diffuse” theory of liability contending “the numerous reports that were provided regularly to the Capital One directors from June 2011 to January 2015 constituted a series of red flags that should have triggered a duty for the board to act”); see also Marriott, 2021 WL 4593777, at *1 (rejecting a theory of liability contending “updates to the Board about aspects of Starwood’s cybersecurity measures that needed improvement” were “red flags”).

that to ignore it implies a conscious disregard of duty.”182 And the red flags must

imply misconduct similar to that which caused the corporate trauma.183

Here, many of the purported “red flags” spoke to business risk, not legal

risk.184 The Board knew Boeing emerged from the pandemic with a “[n]ew and

inexperienced workforce” and had faced the “Toughest Recruiting Environment in

Decades.”185 The Board also knew unforeseen defects discovered along the supply

chain required rework,186 and unpredictable delays in the manufacturing process

182

In re MetLife Inc. Deriv. Litig., 2020 WL 4746635, at *18 (Del. Ch. Aug. 17, 2020). 183

Melbourne Mun. Firefighters’ Pension Tr. Fund ex rel. Qualcomm, Inc. v. Jacobs, 2016 WL 4076369, at *8 (Del. Ch. Aug. 1, 2016) (“The subsequent complained-of ‘corporate trauma,’ however, must be sufficiently similar to the misconduct implied by the ‘red flags’.” (citation omitted)); see In re Dow Chem. Co. Deriv. Litig., 2010 WL 66769, at *13 (Del. Ch. Jan. 11, 2010) (stating that the relationship between the red flag and the corporate trauma cannot be “too attenuated); see also Clem, 2024 WL 668523, at *9 (dismissing purported red flags “untethered from the particular wrongdoing at issue”); In re Clovis, 2019 WL 4850188, at *15 n.217 (noting “Plaintiffs may have difficulty connecting the oversight failure(s) to the corporate trauma”); see also City of Detroit Police & Fire Ret. Sys. v. Hamrock, 2022 WL 2387653, at *20 (Del. Ch. June 30, 2022) (“For a red-flag theory to work, the red flag must be sufficiently connected to the corporate trauma at issue to elevate the board’s inaction in the face of the red flag to the level of bad faith.”). 184

See Reiter, 2016 WL 6081823, at *13 (dismissing Caremark claim where “the core factual allegations of the Complaint do not amount to red flags of illegal conduct”); Goldman Sachs, 2011 WL 4826104, at *20 (“Legal, if risky, actions that are within management’s discretion to pursue are not ‘red flags’ that would put a board on notice of unlawful conduct.”).

185

Am. Compl. ¶¶ 234, 273; see also id. ¶¶ 474(e)–(f) (discussing reports from Deloitte to the Audit Committee identifying “‘workforce productivity’ as a challenge to Boeing management’s financial estimates”).

186

See, e.g., id. ¶ 465(b) (board report explaining that “Boeing would set up approximately twelve repair stations across Boeing sites to perform rework” on “flaws in fuselages Boeing received from Spirit”); id. ¶ 465(c) (BCA Update disclosing management’s assessment of

sometimes required out-of-sequence traveled work.187 Plaintiffs allege those issues

may invite human and manufacturing error.188 Updates addressing such “[g]eneral

risks” may be “evidence that the reporting system is working as it should.”189

Some of the purported “red flags” were not “waved in front of the

Defendants.”190 Plaintiffs allege the Board “received numerous red flags”

concerning employee failures to maintain FAA-mandated removal records.191 The

only identified “red flags” for that issue are the 2022 and 2023 CRM Reports stating

Boeing had received “Letters of Investigation,” “notices of Formal Compliance

Actions,” and “notices of Formal Corrective Action from the FAA.”192 Plaintiffs

do not plead the Board was “aware of the exact subject” of those compliance

a “Spirit escape involving a 737 MAX” and “nacelle rework impacts”); id. ¶ 465(d); id. ¶ 465(e) (Audit Committee presentation disclosing “Boeing’s need to ‘perform rework’ on 737 MAX fuselages” after Spirit flagged a “non-standard manufacturing process”). 187

See NTSB Report at 95–96 (“For a complex manufacturing process such as Boeing’s, where thousands of components are being integrated into final assembly, it is realistic to expect that predefined plans may need to be adjusted at times to accommodate for manufacturing nonconformances.”).

188

See Am. Compl. ¶¶ 45–46, 53, 476.

189

Hamrock, 2022 WL 2387653, at *25.

190

Oklahoma Firefighters Pension & Ret. Sys. v. Corbat, 2017 WL 6452240, at *21 (Del. Ch. Dec. 18, 2017); see also Wood, 953 A.2d at 143 (“Under Delaware law, red flags ‘are only useful when they are either waved in one’s face or displayed so that they are visible to the careful observer.’” (quoting In re Citigroup Inc. S’holders Litig., 2003 WL 21384599, at *2 (Del. Ch. June 5, 2003))).

191

See Am. Compl. ¶¶ 494–95.

192

Id. ¶ 495.

actions.193 Instead, Plaintiffs draw that inference in hindsight from language in the

Plea Agreement—namely, that “[s]ince 2019, the FAA has issued numerous formal

or informal actions to Boeing related to Boeing’s policy governing removals.”194

Nothing in that language implies the Board knew of those particular actions, what

they were about, or that Boeing’s policy governing removals was inadequate.195

Nor were Defendants shown red flags concerning noncompliant stamping—

incorrectly certifying a required step or inspection as completed in conformance with

requirements. Plaintiffs fashion a red flag out of the 2022 and 2023 CRM reports

identifying “Production & Quality” as a high-priority risk, with “Manufacturing

Certification and Stamping” as part of that category, and disclosing the problem was

ongoing.196 But those materials also report management was extremely attentive to

the issue: the reports did not disclose a need for board action. As Plaintiffs allege,

the 2022 CRM Report followed months of reports identifying “stamping allegations”

193

Centene, 2024 WL 3384823, at *18.

194

See Am. Compl. ¶ 494.

195

See Centene, 2024 WL 3384823, at *17–18 (“Indeed, nothing in the record suggests that the directors knew of the . . . conduct the Ohio attorney general was investigating.”); id. at *18 (“Plaintiff does not allege the Board was aware of the exact subject of those inquiries.”).

196

Am. Compl. ¶¶ 480(i)–(j) (citing Defs.’ Ex. 136 at -2053, -2056, -2544–45; Defs.’ Ex. 6 at -3143, -3146).

as a “[m]oderate” risk197 subject to ongoing “corrective action plan[s].”198

Management informed the Aerospace Safety Committee about the company’s two

open corrective action plans: the Process Noncompliance and Stamping Project Plan

and the Mfg. Discipline: Certifications & Stamping Project.199 The 2022 CRM

Report detailed Boeing’s work on the issue “throughout 2022:” “extensive root

cause analysis,” “new mandatory training,” “tools to enhance production floor

visibility,” “simplified work process instructions and change processes,” and

“prioritized stamping-related messaging.”200 Still, as the 2023 CRM materials

reported, stamping noncompliance remained “steady” from 2021 through 2023, and

that those efforts had “not yet show[n] meaningful improvement.”201 The 2023

CRM Report explained Boeing had “devoted considerable attention to identifying

root causes and implementing improvements,” that “extensive” work had revealed a

considerable contributing factor was “employee confusion and misunderstanding

and processes,” and so Boeing had “significantly increased communications and

training” and enhanced visibility.202 Even with a plaintiff-friendly eye, the Board

197

Id. ¶¶ 480(b)–(e).

198

Id. ¶¶ 480(a)–(e).

199

Id. ¶¶ 480(a)–(b).

200

Defs.’ Ex. 136 at -2544–45.

201

Defs.’ Ex. 6 at -3168.

202

Id.

received reporting on an ongoing risk that management was working up and

iteratively addressing, not a red flag of persistent noncompliance requiring board

action to avoid illegality and traumatic consequences.

Finally, some of the purported “red flags” are insufficiently tethered to the

corporate trauma at issue. Red flags must be “sufficiently similar” to “the corporate

trauma in question” such that the board’s conscious inaction “proximately caused

that trauma.”203 “General risks are not ‘red flags’ of a specific corporate trauma.”204

The Board regularly received updates on a swathe of potential noncompliance

risks that Boeing monitors every day. Those updates disclosed FOD levels above

Boeing’s internal control line,205 compliance risks related to the installation of

“unapproved parts,”206 internal audit findings indicating deficient “tool inventory

control[s],”207 and allegations of retaliation against ODA unit members.208 Plaintiffs

203

Hamrock, 2022 WL 2387653, at *20 (internal quotation marks omitted); see Clem, 2024 WL 668523, at *9–10 (dismissing a Caremark claim premised in part on purported red flags “untethered from the particular wrongdoing at issue”).

204

Hamrock, 2022 WL 2387653, at *25 (citations omitted).

205

See Am. Compl. ¶¶ 488–489 (discussing Board presentations disclosing foreign object debris levels on storage and newly produced aircraft).

206

Id. ¶ 562.

207

Id. ¶ 597(a).

208

See id. ¶¶ 542–45; see also id. ¶ 546 (referencing 2023 CRM Report identifying “interference with ODA Unit members” as a “risk” and explaining the risk rating “reflects ongoing regulatory developments that impose new or modified compliance burdens on Boeing, as well as a sustained level of compliance escapes, including allegations of interference against ODA unit members” (italics omitted)).

do not plead any of these risks contributed to the door plug incident, or any recent

safety incident for that matter. At best, they plead that each of those underlying

issues can pose safety risks generally. That is not enough to plead they amounted to

red flags warning of the door plug blowout, the DPA breach, or any fallout

therefrom.

Even drawing all reasonable inferences in Plaintiffs’ favor, the Amended

Complaint pleads yellow flags concerning general operational risks, yellow flags

coupled with management’s responses, and reporting on risks that had nothing to do

with the door plug incident or the DPA violations.209 It offers no grounds to infer a

bad faith dereliction of duty upon receipt of information requiring board action.

2. Plaintiffs Fail To Plead Boeing’s Production Targets Were

Implemented In Bad Faith.

Plaintiffs half-heartedly press a bad faith claim styled after In re Massey

Energy Co.210 They see bad faith in the Board’s approval of “aggressive production

schedules that Boeing could not safely or legally meet.”211 Plaintiffs’ theory is that

Boeing consciously “shirk[ed] regulatory compliance in favor of higher profits.”212

209

See Reiter, 2016 WL 6081823, at *13 (holding that the numerous reports were “at most flags of a different hue, namely yellow flags of caution”).

210

2011 WL 2176479, at *1.

211

PAB 1.

212

Am. Compl. ¶ 706.

Plaintiffs seem to know this case is not Massey. Massey’s facts were extreme.

The plaintiffs there pled the company’s board was dominated by a CEO who

“knowingly flouted applicable miner safety laws,” caused the company “to take an

openly aggressive attitude with [its regulators],” and “made the conscious choice to

put miners at risk in order to cut cost-corners.”213 On those facts, the Court found it

reasonably conceivable that the company’s fiduciaries, in bad faith, “made a

business out of breaking the law.”214

Plaintiffs do not plead any “defiant and adversarial relationship to the law.”215

They do not assert the production targets broke the law at all. They simply ask the

Court to infer bad faith from the Board’s choice to maintain Boeing’s production

targets despite the information they received.216 But monthly airplane production

goals, and how to oversee general operational risks associated with those targets, are

business decisions afforded a presumption of good faith.217 As explained, Plaintiffs

did not plead red flags displacing that presumption.218 It is unreasonable, and against

213

Massey, 2011 WL 2176479, at *19.

214

Hamrock, 2022 WL 2387653, at *19 (discussing Massey).

215

Corbat, 2017 WL 6452240, at *24.

216

PAB 40–41.

217

See Corbat, 2017 WL 6452240, at *18 (“[E]valuation of risk is a core function of the exercise of business judgment.” (citing Citigroup, 964 A.2d at 126)).

218

See Ritchie ex rel. Corcept Therapeutics, Inc. v. Baker, 2025 WL 2048014, at *13 (Del. Ch. July 22, 2025) (finding no substantial likelihood of liability for bad faith oversight failures where “the Complaint [fell] short of alleging red flags that should have alerted the

Delaware’s good faith presumption, to infer that because the Board knew Boeing

faced general safety risks, and because those risks materialized in loss, the Board

“knew [Boeing’s production targets] could not be met safely and in compliance with

the law.”219

And in any case, the pleading-stage record precludes the inference Plaintiffs

seek. Boeing keyed its production to informed assessments of risk and feasibility.

For instance, the Amended Complaint pleads that in December 2022, management

presented “Staffing,” “Quality,” “Supply Chain,” and “Factory Health” as yellowand red-coded risks for Boeing’s 737 MAX production rate.220 The same

presentation then noted management decided to push back its 2023 long-range plan

target deadlines by months.221 In April 2023, management presented “Supplier

disruptions,” “Delivery performance,” and “Rate ramp execution” as yellow-coded

risks.222 The same presentation then explained management’s efforts to achieve

Director Defendants to an illegal scheme, let alone that the Director Defendants knew about and purposely caused the violations”).

219

Am. Compl. ¶ 691 (emphasis added).

220

Id. ¶ 235.

221

Compare id. (December 2022 presentation forecasting 737 MAX production rate of thirty-eight planes per month by mid-2023), with id. ¶ 229 (April 2022 presentation forecasting 737 MAX production rate of thirty-eight planes per month by the end of 2022). 222

Id. ¶ 240.

“production stability”223 and concluded Boeing’s target production rate was

“proceeding with manageable risk.”224

Plaintiffs’ allegations also demonstrate Boeing’s production targets were

flexible.225 Plaintiffs allege management made “[m]inor updates” to Boeing’s 2023

long-range plan in view of the Company’s “inability to keep its proposed production

schedule.”226 And they allege “Boeing sometimes delayed a [production] rate

increase” when “defect[s] or regulatory order[s]” so required.227 Occasional delays

in production ramp-ups, in Plaintiffs’ words, “became a theme.”228 These

allegations support, rather than refute, the presumption that the Board exercised

good faith business judgment in setting production targets and delaying them when

necessary. Plaintiffs have failed to plead particularized facts supporting an inference

of bad faith.

223

Defs.’ Ex. 93 at -7331 (explaining that Boeing “[e]stablished Supply Chain Engineering Initiatives team to evaluate defect data and proactively implement process changes” and “[d]eveloped [notice of escapement] management team to address quality escapes from supply base into Boeing Quality Management System QMS”).

224

Id. at -7330.

225

See, e.g., Am. Compl. ¶¶ 236–37; Defs.’ Ex. 96 at -6507 (noting “3 [737] production pauses in 2022, 19 airplanes behind master schedule at rollout”); Defs.’ Ex. 97 at -6692 (noting “[d]elay[] [in] 737 rate 38 to May 2023”); Defs.’ Ex. 99 at -6892 (noting “Spirit performance may require small adjustments to . . . 737 rates 42 and above”). 226

Am. Compl. ¶ 236.

227

Id. ¶ 237.

228

Id.

B. The Unjust Enrichment Claim

Plaintiffs’ unjust enrichment claim centers on Defendants’ compensation

during the relevant time period. They allege Defendants took home millions in

incentive-based compensation tied to untenable production and financial targets, and

illusory commitments to safety.229 Plaintiffs concede the unjust enrichment claim

rises and falls with the breach of fiduciary duty claims.230 Given their failure to

plead a substantial likelihood of liability on the latter, the former must also fail.

C. The Federal Derivative Action Claims

Plaintiffs’ final attempt at pleading demand futility looks to the remaining

claims in the Federal Derivative Action, which alleges violations of Sections 10(b)

and 14(a) of the Exchange Act. Both claims survived a motion to dismiss in

December 2024.231 Plaintiffs contend that given the Exchange Act claims survived

dismissal and share “common facts” with the claims in this action, the Director

229

Id. ¶¶ 458–60, 728.

230

PAB 59; see Fisher ex rel. LendingClub Corp. v. Sanborn, 2021 WL 1197577, at *21 (Del. Ch. Mar. 30, 2021) (finding that the unjust enrichment claim “[fell] with the viability of the breach of fiduciary duty claim”); MetLife, 2020 WL 4746635, at *18 (dismissing an unjust enrichment claim “premised on the unjustness of compensation in light of the Director Defendants’ bad-faith failure of oversight” where the Caremark claim failed as well).

231

Am. Compl. ¶ 711; Am. Compl. Ex. P.

Defendants’ exposure to liability in the Federal Derivative Action compromises their

ability to impartially consider a demand here.232 Not so.

To be sure, Delaware jurisprudence contains examples of sustained federal

claims that support a substantial likelihood of liability on breach of fiduciary duty

claims. In Pfeiffer v. Toll, a federal court concluded a securities action sufficiently

alleged securities fraud not only in disclosure violations, but also in “insider trading

of the individual defendants [that] . . . raised a ‘powerful and cogent inference of

scienter’ and was ‘unusual in scope and timing.’”233 Then this Court considered

“essentially the same trades” in a Brophy claim.234 Given the federal court’s specific

adjudication of bad faith in those trades, this Court concluded it was “not possible”

for the federal defendants, who comprised a majority of the demand board, to

impartially consider a demand on the Brophy claim.235

That same two-step played out in In re Fitbit, Inc. Stockholder Derivative

Litigation.236 This Court was evaluating whether a majority of the board faced a

substantial likelihood of liability on Brophy claims based on their knowledge that

232

PAB 54–56; see Pfeiffer v. Toll, 989 A.2d 683, 689–90 (Del. Ch. 2010), abrogated on other grounds by Kahn v. Kolberg Kravis Roberts & Co., L.P., 23 A.3d 831 (Del. 2011). 233

989 A.2d at 690 (quoting City of Hialeah Empls. Ret. Sys. & Laborers Pension Tr. Funds v. Toll Bros., Inc., 2008 WL 4058690, at *5 (E.D. Pa. Aug. 29, 2008)). 234

Pfeiffer, 989 A.2d at 690–95.

235

Id. at 690.

236

2018 WL 6587159, at *16–17.

the company’s product did not work nearly as well as the company’s disclosures said

it did.237 The Court took judicial notice of the fact that a federal court “twice”

sustained securities claims, specifically concluding the plaintiffs’ allegations were

“‘sufficient to establish scienter’ . . . regarding [the defendants’] knowledge of [the

product’s] inaccuracy.”238 Against that backdrop, this Court was satisfied that

demand was futile.239

Here, the Eastern District of Virginia’s decision not to dismiss the Exchange

Act claims does not “speak to the main ground in this case”—whether the Board

failed in bad faith to oversee safety and compliance risks.240 The Federal Derivative

Action challenges the Board’s role in alleged misstatements about the Company’s

safety oversight.241 In denying the motion to dismiss, the Eastern District of Virginia

must have found the allegations satisfied the Exchange Act’s scienter requirements,

but its order does not contain the sort of detailed scienter findings present in Pfeiffer

and Fitbit; it does not “discuss the allegations on which [the court] relied or the

237

Id. at *11–17.

238

Id. at *16.

239

Id. at *17.

240

LendingClub, 2019 WL 5678578, at *16.

241

See Am. Compl. Ex. G.

rationale for [the court’s] conclusions.”242 And the scienter inquiries are not the

same; rather than addressing the very same wrongdoing, they address disclosure

about oversight, and then oversight itself. Liability under Sections 10(b) and 14(a)

“would not, in and of itself, have gotten to the heart of whether the directors acted

in bad faith” in exercising their oversight duties.243 Mindful of demand futility’s

particularity requirement, which exists to preserve director primacy over derivative

claims,244 I do not believe the outcome on the Federal Derivative Action’s motion to

dismiss supports an inference of bad faith under Caremark sufficient to excuse

demand.

***

Plaintiffs failed to plead a majority of the Board faces a substantial likelihood

of liability for their Caremark claim. Count I is dismissed. The Board is therefore

capable of considering whether to bring Count II against the Officer Defendants

242

In re TrueCar, Inc. S’holder Deriv. Litig., 2020 WL 5816761, at *22 (Del. Ch. Sept. 30, 2020) (rejecting the argument that exposure to liability in a companion federal securities action rendered demand futile on a nearly identical disclosure claim). 243

LendingClub, 2019 WL 5678578, at *15 (further explaining that the case’s Section 10(b) and Rule 10b-5 violations “required a showing of scienter,” but the Section 11 claim would not, so Section 11 would not “have gotten to the heart of whether the directors acted in bad faith”).

244

Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984).

based on the same Caremark theories,245 and Count III against all Defendants based

on their compensation. Those counts are likewise dismissed.

III. CONCLUSION

Plaintiffs have failed to plead that demand is futile under Court of Chancery

Rule 23.1. Defendants’ motion is GRANTED.

245

See PAB 53–54 (“There is no daylight between the oversight failures of Boeing’s directors and officers.”).

In Re The Boeing Co. Derivative Litigation

Authorities cited

Opinion · public domain