Judge Lets Boeing Shareholder Suit Go Forward

A federal judge Tuesday rejected a request by Boeing Co. to dismiss a shareholder lawsuit alleging that the company covered up the extent of its aircraft production problems last year.

In a 30-page ruling, U.S. District Judge Thomas Zilly in Seattle dismissed claims of accounting fraud but said shareholders could continue to press their allegations that certain Boeing news releases, financial statements and executive comments were “false and misleading.”

Zilly did not make any finding on the merits of the lawsuit, saying merely that the shareholders “have alleged sufficient facts to avoid dismissal.”

The lawsuit, seeking unspecified damages, was brought on behalf of thousands of shareholders who bought Boeing stock in the three months before Oct. 22, 1997, when the company shocked Wall Street with the announcement that its aircraft production problems would cost more than $1.6 billion in write-offs.

The plaintiffs allege that Boeing covered up the extent of the problems to maintain a high stock price and ensure the successful completion of its merger with McDonnell Douglas Corp.

Boeing had contended that its financial statements, news releases and comments by its executives were protected by cautionary disclosures and a new law meant to deter frivolous shareholder lawsuits.

But Zilly disagreed.

The ruling frees the shareholders to formally seek class-action status and begin examining Boeing documents and taking depositions in preparation for a trial scheduled for February 2000.