US Appeals Court Upholds Dismissal of Lawsuit Against Spirit AeroSystems Over Boeing's 737 MAX Production Claims

A U.S. appeals court upheld the dismissal of a lawsuit targeting Spirit AeroSystems Holdings Inc SPR, a supplier to Boeing Co BA. 

The lawsuit accused Spirit of concealing information from investors about 737 MAX production reductions after the tragic crashes in 2018 and 2019.

A trio of judges from the 10th U.S. Circuit Court of Appeals in Denver ruled, in a 2-1 decision, that the investors seeking a proposed class action lawsuit against Spirit AeroSystems did not adequately support their allegations of fraud. 

Reacting to the decision, Spirit AeroSystems stated that they value the "well-reasoned ruling by the Tenth Circuit of Appeals," which supports the earlier dismissal by the U.S. District Court for the Northern District of Oklahoma.

The 737 MAX aircraft was grounded by the Federal Aviation Administration (FAA) in March 2019. Aviation regulators echoed this decision worldwide, with the aircraft not being given the green light to fly again until November 2020.

After the FAA's grounding decision, Boeing decreased its 737 MAX production rate from 52 shipsets monthly to 42. Interestingly, the aerospace giant continued to order 52 shipsets from Spirit AeroSystems. 

Shipsets encompass critical aircraft components such as the fuselage, pylon, wing leading edges, thrust reverser, and engine nacelle. 

Despite the backdrop, in October 2019, Spirit informed its investors that it would maintain its production rate of 52 shipsets for a prolonged duration. However, in December 2019, Boeing directed Spirit to halt the delivery of 737 MAX shipsets.

The crux of the plaintiff's argument was that Spirit's executives had issued these positive affirmations regarding production, despite being informed privately by Boeing about an impending reduction in orders – a claim that the executives rebuff.

Furthermore, after a review in late 2019, Spirit's accounting procedures were deemed not to adhere to standard procedures, leading to the resignation of Gilson. 

On this matter, Spirit AeroSystems highlighted that the Securities and Exchange Commission, in 2020, concluded its inquiry without suggesting any regulatory action.

Price Action: SPR shares are up 1.48% at $21.84 during the premarket session on the last check Tuesday.