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Seafarers Pension Plan v. Bradway

Seafarers Pension Plan v. Bradway

United States Court of Appeals for the Seventh Circuit

November 30, 2020, Argued; January 7, 2022, Decided

No. 20-2244

Opinion

 [*717]  Hamilton, Circuit Judge. On October 29, 2018, a Boeing 737 MAX airliner crashed in the sea near Indonesia, killing everyone on board. A few months later, on March 10, 2019, a second 737 MAX crashed in Ethiopia, again killing everyone on board. Within days of the second crash, all 737 MAX airliners around the world were grounded. The United States Federal Aviation Administration kept the planes grounded until November 18, 2020, when it was satisfied that serious problems with the planes' flight control [**2]  systems had been corrected.

In December 2019, plaintiff Seafarers Pension Plan, a shareholder of the Boeing Company, filed this derivative suit on behalf of Boeing under Section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a)(1). The suit alleges that Boeing officers and board members made materially false and misleading public statements about the development and operation of the 737 MAX in Boeing's 2017, 2018, and 2019 proxy materials. The district court dismissed the suit without addressing the merits, applying a Boeing bylaw that gives the company the right to insist that any derivative actions be filed in the Delaware Court of Chancery. We reverse. Because the federal Exchange Act gives federal courts exclusive jurisdiction over actions under it, applying the bylaw to this case would mean that plaintiff's derivative Section 14(a) action may not be heard in any forum. That result would be contrary to Delaware corporation law, which respects the non-waiver provision in Section 29(a) of the federal Exchange Act, 15 U.S.C. § 78cc(a).

I. Factual and Procedural Background

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23 F.4th 714 *; 2022 U.S. App. LEXIS 554 **; 2022 WL 70841

SEAFARERS PENSION PLAN, derivatively on behalf of The Boeing Company, Plaintiff-Appellant, v. ROBERT A. BRADWAY, et al., Defendants-Appellees, and THE BOEING COMPANY, Nominal Defendant-Appellee.

Prior History:  [**1] Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:19-CV-08095 — Harry D. Leinenweber, Judge.

Seafarers Pension Plan v. Bradway, 2020 U.S. Dist. LEXIS 106062, 2020 WL 3246326 (N.D. Ill., June 8, 2020)

CORE TERMS

bylaw, Exchange Act, forum-selection, federal court, courts, provisions, derivative suit, district court, investor, derivative claim, derivative action, remedies, state law, authorize, state court, rights, shareholder, foreclose, clauses, federal securities, federal law, anti-waiver, choice-of-law, colleagues, cases, suits, arbitration, stockholder, violations, exclusive federal jurisdiction

Civil Procedure, Jurisdiction, Jurisdictional Sources, Statutory Sources, Securities Law, Subject Matter Jurisdiction, Postoffering & Secondary Distributions, Federal Jurisdiction, Business & Corporate Law, Corporations, Articles of Incorporation & Bylaws, Amendments to Bylaws, Scope of Provisions, Limitations on Remedies, Interpretations of Bylaws, Appeals, Standards of Review, Abuse of Discretion, Preliminary Considerations, Venue, Forum Non Conveniens, Judicial Officers, Judges, Discretionary Powers, Business & Corporate Compliance, Contracts Law, Contract Conditions & Provisions, Forum Selection Clauses, De Novo Review, Questions of Fact & Law, Meetings & Voting, Voting Shares, Proxy Agreements, Proxies, Materiality, Minimum Disclosure Standards, Actions Against Corporations, Derivative Actions, Enforcement of Corporate Rights, Private Rights of Action, Directors & Officers, Terms in Office, Elections, Shareholder Actions, Internal Corporate Affairs, Governments, Legislation, Interpretation, Interpretation of Articles of Incorporation, Civil Liability Considerations, Securities Litigation Reform & Standards, Removal, Preservation of Remedies & Rights, Releases & Waivers, Securities Act Compliance, Exchange Act Compliance, Void & Voidable Contracts, Constitutional Law, Supremacy Clause, Federal Preemption