A U.S. appeals court on Monday upheld the dismissal of a lawsuit accusing Boeing (NYSE:BA) supplier Spirit AeroSystems (NYSE:SPR) of misleading investors by withholding information about production cuts on the 737 MAX following two crashes in 2018 and 2019.
A three-judge panel of the Denver-based 10th U.S. Circuit Court of Appeals ruled 2-1 that investors pursuing the proposed class action against Spirit had not met the "stiff burden" required for allegations of fraud.
Spirit AeroSystems said it "appreciates the well-reasoned ruling by the Tenth Circuit of Appeals, upholding the dismissal opinion by the U.S. District Court for the Northern District of Oklahoma."
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The Federal Aviation Administration (FAA) grounded the 737 MAX in March 2019 as did regulators around the world. The plane was not cleared to return to service until November 2020.
After the grounding, Boeing reduced production of the 737 MAX from 52 shipsets per month to 42 but kept purchasing 52 shipsets from Spirit. Shipsets include an aircraft’s fuselage, pylon, wing leading edges, thrust reverser and engine nacelle.
Spirit reassured investors in October 2019 it would continue to produce 52 shipsets for an extended period. In December 2019, Boeing told Spirit to stop delivering shipsets for the 737 MAX.
The plaintiffs alleged Spirit executives made the reassuring statements about production even though Boeing had privately told Spirit about plans to reduce purchases, something the executives deny.
Gilson resigned after a Spirit review in late 2019 concluded its accounting processes did not comply with established procedures.
Spirit said the Securities and Exchange Commission in 2020 closed its inquiry without recommending any enforcement action. (Source)
