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Boeing crash payout to depend partly on victims' minutes of terror
THE amount of money Boeing Co and its insurers will pay to the families of those who perished aboard two doomed jets will be dictated in part by one particularly grim calculation: How long did the victims know they were plunging to their deaths.
That measure is just one part of an expanding legal fight to determine financial liability after Boeing 737 Max crashes in Ethiopia and Indonesia that killed 346 people in the span of five months. The passengers' families also could win damages for grief, sorrow, loss of companionship - and salaries that will never be earned.
While settling all those claims could cost US$1 billion, according to a Bloomberg Intelligence estimate based on prior cases, legal experts agree that the payouts could be even higher if evidence shows Boeing knew about flaws in the planes before the tragedies. That's already prompted investor lawsuits claiming the company hid safety risks.
"The bottom line is Boeing's exposure is much more substantial than in any other case that I've been a part of in my quarter-century of representing families'' in plane-crash cases, said Brian Alexander, a New York aviation lawyer for victims of the Ethiopian Airlines jet that went down on March 10. "You get into 'What did you know and when did you know it'."
The Ethiopian disaster, following the October crash of a Lion Air flight, led to the worldwide grounding of the 737 Max, the revamped version of a plane model that accounts for a third of Boeing's operating profit.
Among multiple investigations is a US Justice Department probe of how American regulators certified a flawed part of the plane's flight-control system.
While the precise causes of the crashes are still being determined, the preliminary evidence is raising the liability risk for Boeing, said Robert Rabin, a Stanford University law professor. "It would be in Boeing's best interest to settle,'' he said.
That's because it could be considerably more expensive to go to trial. Cases involving airliner crashes rarely are decided by juries because companies want to avoid the risk of big damage awards as well as the bad publicity of fighting claims by multiple victims.
"There is a tendency for defendants to settle and get on with their business," Mr Rabin said.
A Boeing spokesman, Peter Pedraza, declined to comment on the company's legal strategy.
Most of the lawsuits have been filed in Chicago, where Boeing is headquartered. Juries in the city have been generous to plaintiffs.
Last year, two of the largest US personal-injury verdicts were in Chicago: a US$50 million obstetric medical malpractice award and a US$45 million verdict over the death of a child.
For Boeing, there's also the risk of unpredictably large jury awards related to the length of time that victims were in fear before the crash, a form of compensation permitted under Illinois law.
In New York, an appellate court approved a US$2.5 million award in a case involving a crane operator who plunged 61 metres to his death.
However, such claims are no guarantee of a windfall for victims' families. In a case against Pan Am in the early 1980s, parents of a crash victim were awarded just US$15,000 for the anguish their son suffered when the plane rolled, with the wing hitting a tree before impact.
The Ethiopian flight crashed six minutes after takeoff, and Lion Air went down in the Java Sea about 11 minutes into flight.
In both instances, preliminary reports show the pilots struggled for several minutes to regain control of planes that were in uncontrolled dives and reached speeds of almost 966 kmh. That suggests the victims knew their fate, some of their lawyers contend.
"There's a better chance of recovery if it took minutes rather than seconds for the plane to crash,'' said Joe Power, a personal-injury lawyer in Chicago representing some Ethiopian victims.
Damages assessed against Boeing would be paid out by its insurers, except for what amounts to a large deductible common for major manufacturers. Already, some defendants are offering cash settlements in exchange for a pledge not to pursue legal claims. Some families in Indonesia have been approached by Lion Air with an offer of more than one billion rupiahs (S$95,131), according to plaintiffs' attorney Brian Kabateck, who provided a copy of the release form. The average annual income in the country is about US$3,400.
"It's unconscionable that someone would take advantage of these poor people who have just lost loved ones," Mr Power said. "The problem is when you're going to these third world countries, you don't have much of a justice system. Power dominates. Not the individual."
In the Lion Air crash litigation, where so far 40 cases are pending in federal court in Chicago, Boeing has indicated it plans to ask the judge to move the case to Indonesia under the argument that the victims lived and died there.
Plaintiffs lawyers say the strategy would be unfair to their clients. There are no jury trials and the system takes "years and years, so Boeing would be able to delay" any resolution until long after publicity has died down, Mr Kabateck said. Also, "Boeing would have a much better chance of limiting their liability", he said.
The bid to move the case may not prevail because Boeing is headquartered in Chicago, Mr Rabin said. "Most of the questions will be technical questions and the experts on both sides will be based in the US.''
But Mark Dombroff, an aviation lawyer who has represented defendants in other crash cases, said it's not unreasonable to seek a venue change, given that the crash occurred in Indonesia, all the victims were Indonesian, and Indonesia transportation officials are investigating.
Investors also are suing Boeing. They allege the company artificially inflated the value of the stock by withholding knowledge of safety problems. The shareholders are seeking as much as US$4.76 billion for losses from January to March 21. But that amount may be increased, according to plaintiffs' attorney Reid Kathrein.
His firm, which filed the first shareholder lawsuit, is investigating whether to expand the size of the class, given the recent public disclosures about Boeing missteps related to the 737 Max. That would add another US$1.2 billion in losses claimed, he said in an interview.
Investors wouldn't collect anything near that in a settlement, if there is one, based on prior recoveries in such lawsuits.
But the newer revelations, even if the class isn't widened, helps the shareholders' claims, Mr Kathrein said. "Now they've admitted they knew before the crash, it strengthens our position tremendously,'' he said. BLOOMBERG