City of Livonia Emps’ Ret. Sys. v. Boeing Co.
Plaintiffs filed a class action on behalf of stock purchasers, alleging that Boeing committed securities fraud under the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and SEC Rule 10b-5. The suit related to statements concerning the new 787-8 Dreamliner, which had not yet flown, and did not specify a damages figure. At argument the plaintiffs’ lawyer indicated that the class was seeking hundreds of millions of dollars. The district court dismissed the suit under Rule 12(b)(6) before deciding whether to certify a class. Plaintiffs appealed the dismissal; Boeing cross-appealed denial of sanctions on the plaintiffs’ lawyers for violating Fed. R. Civ. P. 11. The Seventh Circuit affirmed dismissal with prejudice, but remanded for consideration under 15 U.S.C. 78u-4(c)(1), (2), of Rule 11 sanctions on the plaintiffs’ lawyers. No one who made optimistic public statements about the timing of the first flight knew that their optimism was unfounded; there is no securities fraud by hindsight. Plaintiffs’ lawyers had made confident assurances in their complaints about a confidential source, their only barrier to dismissal of their suit, even though none of them had spoken to the source and their investigator had acknowledged that she could not verify what he had told her. View "City of Livonia Emps' Ret. Sys. v. Boeing Co." on Justia Law