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08 May 2019
It is hard to open a newspaper without seeing the two horrific crashes involving the brand new Boeing 737 MAX that occurred on a Lion Air flight on 28 October 2018 and an Ethiopian Airlines flight on 10 March 2019. As a result of more than 300 fatalities, virtually every airline flying this aircraft has grounded it at substantial cost and inconvenience to the airlines. A number of airlines have recently extended the grounding for several months and cut orders for future purchases.
Recent news reports point to a problem with the software of the manoeuvring characteristics augmentation system (MCAS), which is suggested to have caused, or at least played a role, in these terrible incidents. Essentially, MCAS was a new system installed on all 737 MAX aircrafts to compensate for a design issue that arose when Boeing fitted them with newer, larger engines. The MCAS is meant to compensate for the aircraft's possible stalling of the aircraft due to the increased size of the engines and their more forward placement by automatically lowering the angle of attack (AOA). This results in the nose being lowered, which, it is speculated, may have caused the aircrafts to dive since the pilots were unable to compensate for or disable the MCAS in order to raise the nose angle to a safe level. In one case, reports suggest that the pilots disabled the system but that it switched back on.
Again, this theory is speculative and there will be significant additional information provided once the investigations are completed.
However, Boeing has released a software fix to the MCAS that is intended to be activated by two AOA sensors (rather than just one on the earlier version of the system) and, if these sensors disagree by more than 5.5 degrees, the MCAS system will be disabled and will not push the aircraft's nose lower. Further, Boeing intends to add an indicator to the flight control display to alert pilots when the AOA sensors disagree. There has also been discussion of a more user-friendly method to disable the system entirely.
With this in mind, what potential theories of civil liability could Boeing face from passengers and airlines which have suffered significant losses, including losses of revenue or tragic loss of life as a result of what appears to be a design flaw in the software, if not the MCAS itself? Further, what theories allow for criminal liability?
There are numerous theories of civil liability that could be asserted against Boeing and possibly other vendors, assuming that the cause of the crashes is identified to be at least, in part, related to the design of the software and MCAS system. These would include:
Many of these theories are based on state law, but the ones that appear to be significant involve strict product liability and a failure to warn. The basic categories of a product liability claim are threefold:
With regard to a manufacturing defect in the software, the plaintiffs would have to prove that the product did not meet the intended specifications set by the manufacturer. In other words, it contained an unintended defect. That is probably an unlikely basis for a product liability claim. However, it is much more likely that exposure may exist for a design defect, which requires proof that the product was designed in a dangerous manner, meaning that it was "dangerous to an extent beyond that which would be contemplated by the ordinary consumer who purchases it".(1)
A court might also apply what the Restatement of Torts terms the risk utility test that essentially balances the foreseeable risk of harm of the product, which could be reduced or avoided by adopting a reasonable alternative design and, failing to adopt such a design, "renders the product not reasonably safe…".(2)
This test would appear to be most applicable to the Boeing exposure based on what appears to be a design defect in the MCAS, which could perhaps have been designed in a safer manner or with more fail-safe features.
Another strong predicate for potential liability would be a failure-to-warn claim, which would probably be most effective if brought by an airline who was leasing or purchasing the 737 MAX. In a failure-to-warn case, the plaintiff must show that the defendant knew about the danger of the product and had a duty to warn of the danger but was negligent in its duty to do so, which caused injury and the warning was not visible. It would seem that if Boeing was aware of an inherent defect or issue with respect to the MCAS system, the failure to advise the purchaser of this danger could clearly create liability on Boeing's part. This claim could be coupled with one for inadequate or defective training and shortcomings in the manuals describing the system and its risks. It could also be claimed that a safety or fail-safe system was available, but was an option that had to be purchased. Rendering a safety system optional could be considered highly unreasonable, even reckless. However, it would be difficult for the estate of a passenger who was killed as a result of the defective system to make a failure-to-warn claim, since it is not expected that passengers would be aware of or concerned with issues relating to aircraft systems.
As far as economic loss claims are concerned, it is likely that the purchase or lease agreements with the airlines limit remedies to the cost of repair or replacement and exclude pure economic loss claims. However, a close review of the actual agreements is required to fully evaluate this category of claims.
Another aspect of Boeing's exposure relates to the subsequent efforts and attempts to remedy the claimed defect, which, it is understood, are underway by way of a software patch. Federal Rule of Evidence 407 generally precludes the admission of subsequent remedial measures to prove negligence, a defect in the product or its design or a need for a warning or further training, all of which are theories on which a claim could be brought. However, subsequent measures can be admitted into evidence to impeach, or for providing proof of control or feasibility of precautionary measures. The attempts to solve the software problem may be shown to convince a jury that the defect could have been avoided.
In sum, there are numerous common law theories on which Boeing could be subject to significant exposure. As of 17 April 2019, 25 lawsuits have been consolidated in the Federal Court in Chicago on behalf of the survivors of passengers killed in both crashes. There have also been reports of a class action on behalf of shareholders due to the loss in value of Boeing stock as a result of the crashes. It is highly likely that numerous other suits will follow.
Civil liability is not the only problem facing Boeing; multiple press reports state that the Department of Justice is undertaking a criminal investigation that began immediately after the Lion Air crash. One focus of this investigation is the company's certifications to the Federal Aviation Administration (FAA). Materially false statements in these certifications would be prosecutable under several federal criminal statutes. For example, 49 USC Section 46310 imposes a fine or a term of imprisonment for up to five years, or both, on an air carrier or its officers, agents or employees, who:
Other potentially relevant federal statutes include 18 USC Section 1001, which imposes a fine and a term of imprisonment for up to five years to an individual who knowingly and wilfully makes false statements or conceals a material fact to any branch of the US government. There are also, more ominously, the mail and wire fraud statutes 18 USC Sections 1341 and 1343, which allow for sentences up to 30 years, thus earning their reputation that one commentator famously described as federal prosecutors' "Stradivarius, our Colt 45".(3)
The aircraft certification process proceeds in two stages – the aircraft's design phase and post-production. Because the 737 MAX 8 was considered to be an upgrade of an existing series, particular attention is likely to be paid to the second phase, wherein Boeing would have been required to receive an approved airworthiness certification for each of its individual planes. Among other matters, that certification requires an aircraft producer to disclose any necessary restrictions required for safe operation of the aircraft and any reasons why the aircraft does not meet applicable FAA airworthiness requirements. FAA Order 8130.2J contains the policies and procedures for issuing airworthiness certificates and sheds some light on the FAA's definition of 'airworthiness'.(4) Aircraft manufacturers who make major modifications or repairs to an existing type certified aircraft or its parts must apply for and receive an FAA-approved supplemental type certificate.
The FAA's decision to allow airline manufacturers to hire qualified designated representatives (either Boeing employees or third parties) to determine compliance with aircraft certification regulations came under severe criticism both in the press and an inspector general's report issued in 2011.(5) Regardless of the merits of that controversy, it is likely that materially false statements or omissions in the certifications would provide the basis for potential criminal prosecution under any or all of the statutes enumerated above. Notwithstanding, the burden of showing falsification or misrepresentations by Boeing on the part of the Department of Justice is high and it would be unlikely that Boeing intentionally made false statements or falsified records, given how serious the consequences of doing so would be. However, what is clear is that pending the outcome of the civil and criminal investigations, Boeing will continue to be the subject of intense scrutiny for some time.
For further information on this topic please contact Christopher B Kende or J Bruce Maffeo at Cozen O'Connor's New York office by telephone (+1 212 509 9400 or +1 212 833 4951) or email (firstname.lastname@example.org or email@example.com). Alternatively, please contact Dina Moussa at Cozen O'Connor's Washington DC office by telephone (+1 212 912 4873) or email (firstname.lastname@example.org).The Cozen O'Connor website can be accessed at www.cozen.com.
(5) See US Department of Transportation, AV-2011-136, Office of Inspector General Audit Report: FAA Needs to Strengthen its Risk Assessment and Oversight Approach for Organisation Designation Authorisation and Risk-Based Resource Targeting Programmes, at 3 (29 June 2011).
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