In what is one of the largest derivative lawsuit settlements ever, and — according to the statement from one of the co-lead plaintiffs in the case — the largest settlement ever in Delaware of a Caremark/breach of the duty of oversight case, the parties to the Boeing 737 Max Crash shareholder derivative suit in Delaware Chancery Court have agreed to settle the case for a payment of $237.5 million, all of which is to be funded by D&O insurance. As part of the settlement, the company also agreed to adopt several safety and oversight protocols and other corporate governance measures. The settlement is subject to court approval. A copy of the November 5, 2021 statement of the co-lead plaintiff, New York State Comptroller Thomas DiNapoli, about the settlement can be found here. A copy of the parties’ settlement stipulation can be found here.



This lawsuit relates to the two high-profile airline crashes involving Boeing Max 737 aircraft – the October 2018 Lion Air 610 crash and the March 2019 Ethiopian Air 302 crash. As I detailed in a recent post about this case (here), the plaintiffs’ consolidated complaint alleges that the company’s board breached its oversight obligations by failing to establish safety oversight mechanisms prior to the Lion Air crash and ignoring red flags about safety issues after the Lion Air crash and before the Ethiopian Airlines crash.


The breach of the duty of oversight claims that the plaintiffs asserted are often referred to as Caremark claims in reference to the 1996 Delaware Court of Chancery decision that articulated the legal theory behind this type of claim. Caremark cases are notoriously difficult to sustain; in the words of a much-quoted statement about these kinds of claims, breach of the duty of oversight is “possibly the most difficult theory in corporation law upon which plaintiff might hope to win a judgment.” Nevertheless, as discussed here, in a September 7, 2021, Delaware Vice Chancellor Morgan Zurn denied the defendants’ motion to dismiss the plaintiffs’ claims.


In September and October 2021, the parties to the action pursued mediation of this dispute, as a result of which the parties agreed to settle the case.


The Settlement

The settlement is memorialized in the parties’ stipulation of settlement, which provides among other things that “No later than twenty (20) Business Days after the Effective Date, the Monetary Settlement Amount of $237.5 million, less any Fee and Expense Award, shall be paid by the Insurers on behalf of Defendants to Boeing. Neither Named Defendants, Boeing, nor any Person other than the Insurers shall have any obligation to pay the Monetary Settlement Amount, in whole or in part.” The Effective Date is the first business day after following final court approval of the settlement. The term “Insurers” is defined in the stipulation of settlement to mean the defendants’ directors’ and officers’ liability insurers. (The specific insurers on Boeing’s D&O insurance program do not appear to be identified by name in the settlement stipulation.)


The settlement agreement also includes the company’s agreement to adopt a number of corporate therapeutics, which are detailed in Exhibit A to the settlement stipulation. As described in the New York Comptroller’s press release about the settlement, among other things, Boeing agreed to “adopt enhanced safety and oversight protocols including, among other measures, implementing an ombudsman program that will provide a channel for Boeing employees to raise work-related concerns, and adding an additional director with aviation, engineering, or product-safety oversight experience.”


In the settlement stipulation, the defendants also agree that they will not object to the plaintiffs’ Fee and Expense Application. The settlement stipulation provides that the fee petition will not be for an amount greater than 12.5% of the monetary settlement amount (i.e., approximately $29.7 million).



As I noted at the outset, this settlement is one of the largest derivative lawsuit settlements ever. Depending on how you value several other recent large derivative lawsuit settlements, this settlement would appear to be the sixth largest derivative settlement of all time. My updated running list of the largest derivative settlements can be found here.


In addition, according to the New York Comptroller’s press release about the settlement, this settlement, if approved by the court, would be “the largest monetary recovery in a suit filed in the Delaware Courts alleging that directors failed to protect against the risk of harm to the company, which is known as a ‘Caremark action.’”


This massive settlement is noteworthy in and of itself of course, but it is also noteworthy in the context of several other recent very large derivative lawsuit settlements. This settlement follows closely on the heels of the October 2021 $300 million Renren derivative settlement (discussed here), as well as the September 2020 $310 million settlement in the Alphabet/Google #MeToo derivative suit (discussed here), and the $175 million McKesson opioid derivative settlement (also settled entirely with D&O insurance funds, discussed here). There have of course been other jumbo derivative settlements before, as is detailed on my list of large derivative lawsuit settlements. However, the occurrence of a significant number of these settlements in a short time is noteworthy – particularly where D&O insurance funds are making such a significant contribution to these settlements.


There was a time when shareholder derivative suit settlements typically did not involve any cash payment at all (other than an agreement to pay the plaintiff’s legal fees). The usual settlement involved only an agreement to adopt corporate therapeutics. However, starting several years ago, derivative settlements involving large cash payments began to appear. As this Boeing settlement and the other recent settlements show, these kinds of jumbo settlements are becoming a regular feature of the corporate and securities litigation landscape. The advent of these kinds of settlements has very important implications for companies and for their D&O Insurers.


Among other things, these large settlements could have important implications for company’s limits selection – that is, in deciding how much insurance to buy. In thinking about these issues, it is important to keep in mind that the total amount of insurance expenditure in this Boeing case will when al is said and done amount to significantly more than just the $237.5 million settlement amount. The consolidated shareholder derivative litigation has been fiercely contested and the defendants undoubtedly incurred millions of dollars in defense fees, all of which (in excess of the applicable self-insured retention) were bourn by the D&O insurers. The total insurance hit from this case, inclusive of both defense fees and settlement amount, in technical terms, “ginormous.”


It is significant, as the New York comptroller’s press release underscored, that this settlement involves a Caremark/breach of the duty of oversight case. The denial of the motion to dismiss in this action, along with a series of similar recent decisions in which breach of the duty of oversight claims were sustained, had already raised alarm bells about the possible proliferation of further Caremark claims against corporate boards. There is no getting around the fact that in recent months a number of breach of the duty of oversight claims have survived. This massive settlement in the Boeing case will reinforce the view that potential allegations of breach of the duty of oversight represents an increasing risk for corporate boards. These developments clearly represent significant concerns for corporate boards and for their insurers.


There are important takeaways for corporate boards from this settlement and other recent judicial developments relating to boards’ Caremark duties. Among other things, well-advised boards seeking to put themselves in a position to defend against breach of the duty of oversight will institute board procedures constantly seeking to identify “mission critical” risks that their companies face; seeking to put monitoring mechanisms in place to monitor the organization’s critical risks; instituting procedures to ensure that the risk monitors are regularly screened at the board level; and putting in place procedures to ensure that “red flags” are communicated up to the board and that the board has processes to address red flag developments. The recent massive Boeing settlement simply underscores how important these measures are and will continue to be for corporate boards.