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City of Livonia Employees’ Retirement System v. The Boeing Co.
United States Court of Appeals for the Seventh Circuit
711 F.3d 754 (2013)
The Boeing Company (Boeing) (defendant) developed a new plane. It accepted preorders before the plane had actually made its first flight, which was scheduled for June 30, 2009. On April 21, 2009, the new plane’s wings failed a stress test. Despite this, on May 3 Boeing announced that the results of the test had been positive, but that Boeing had at that point not fully analyzed the data. After the wings failed another test later in May, Boeing’s CEO, McNerney (defendant), stated that he thought the plane would fly as planned on June 30. In June, another Boeing executive, Carson (defendant), told a news organization that the plane “definitely” would fly that month. On June 23, 2009, Boeing announced a delay of the plane’s first flight. After the announcement, Boeing stock declined by more than 10 percent. The plane flew for the first time in December 2009. The City of Livonia Employees’ Retirement System and others who had bought Boeing stock between May 4 and June 22, 2009 (plaintiffs) brought a class action suit against Boeing. The plaintiffs alleged that Boeing had committed securities fraud in violation of Section 10(b) of the Securities Act of 1934. The complaint included information from engineer Bishnujee Singh, suggesting that McNerney and Carson knew the plane would not fly as scheduled when they made their statements. The district court rejected Boeing’s motion to dismiss the complaint. However, a Boeing investigation then discovered that many of the complaint’s allegations that relied on Singh’s statements were false or embellished. The district court reconsidered the denial and granted Boeing’s motion to dismiss based on this new information. The plaintiffs appealed, and Boeing cross-appealed for Rule 11 sanctions.
Rule of Law
Holding and Reasoning (Posner, J.)
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