In Re The Boeing Company Derivative Litigation

Related Cases

       IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
    
    IN RE THE BOEING COMPANY               )     C.A. No. 2019-0907-MTZ
    DERIVATIVE LITIGATION                  )
    
    
                            MEMORANDUM OPINION
                            Date Submitted: June 25, 2021
                           Date Decided: September 7, 2021
    
    Joel Friedlander, Jeffrey M. Gorris, and Christopher M. Foulds, FRIEDLANDER &
    GORRIS, P.A., Wilmington, Delaware; Richard M. Heimann and Katherine Lubin
    Benson, LIEFF CABRASER HEIMANN & BERNSTEIN, LLP, San Francisco,
    California; Steven E. Fineman, Nicholas Diamond, Sean Petterson, Rhea Ghosh, and
    Kartik S. Madiraju, LIEFF CABRASER HEIMANN & BERNSTEIN, LLP, New
    York, New York, Attorneys for Co-Lead Plaintiffs.
    
    Blake Rohrbacher, Kevin M. Gallagher, and Ryan D. Konstanzer, RICHARDS,
    LAYTON & FINGER, P.A., Wilmington, Delaware; Joshua Z. Rabinovitz,
    KIRKLAND & ELLIS LLP, Chicago, Illinois, Attorneys for Defendants and
    Nominal Defendant The Boeing Company.
    
    
    
    ZURN, Vice Chancellor.
            A 737 MAX airplane manufactured by The Boeing Company (“Boeing” or
    
    the “Company”) crashed in October 2018, killing everyone onboard; a second one
    
    crashed in March 2019, to the same result. Those tragedies have led to numerous
    
    investigations and proceedings in multiple regulatory and judicial arenas to find out
    
    what went wrong and who is responsible. Those investigations have revealed that
    
    the 737 MAX tended to pitch up due to its engine placement; that a new software
    
    program designed to adjust the plane downward depended on a single faulty sensor
    
    and therefore activated too readily; and that the software program was insufficiently
    
    explained to pilots and regulators. In both crashes, the software directed the plane
    
    down.
    
            The primary victims of the crashes are, of course, the deceased, their families,
    
    and their loved ones. While it may seem callous in the face of their losses, corporate
    
    law recognizes another set of victims: Boeing as an enterprise, and its stockholders.
    
    The crashes caused the Company and its investors to lose billions of dollars in value.
    
    Stockholders have come to this Court claiming Boeing’s directors and officers failed
    
    them in overseeing mission-critical airplane safety to protect enterprise and
    
    stockholder value.
    
            Because the crashes’ second wave of harm affected Boeing as a company, the
    
    claim against its leadership belongs to the Company. In order for the stockholders
    
    to pursue the claim, they must plead with particularity that the board cannot be
    
    
    
                                                1
    entrusted with the claim because a majority of the directors may be liable for
    
    oversight failures. This is extremely difficult to do. The defendants have moved to
    
    dismiss this action, arguing the stockholders have failed to clear this high hurdle.
    
          The narrow question before this Court today is whether Boeing’s stockholders
    
    have alleged that a majority of the Company’s directors face a substantial likelihood
    
    of liability for Boeing’s losses. This may be based on the directors’ complete failure
    
    to establish a reporting system for airplane safety, or on their turning a blind eye to
    
    a red flag representing airplane safety problems. I conclude the stockholders have
    
    pled both sources of board liability. The stockholders may pursue the Company’s
    
    oversight claim against the board. But the stockholders have failed to allege the
    
    board is incapable of maintaining a claim against Boeing’s officers.                  The
    
    stockholders’ other claim against the board, regarding their handling of the chief
    
    executive officer’s retirement and compensation, is also dismissed.
    
          I.     BACKGROUND
    
          I draw the following facts from the Verified Amended Consolidated
    
    Complaint, as well as the documents attached and integral to it.1
    
    
    
    1
      Docket Item (“D.I.”) 131 [hereinafter “Am. Compl]. See, e.g., Himawan v. Cephalon,
    Inc., 2018 WL 6822708, at *2 (Del. Ch. Dec. 28, 2018); In re Gardner Denver, Inc.
    S’holders Litig., 2014 WL 715705, at *2 (Del. Ch. Feb. 21, 2014). Citations in the form
    of “Defs.’ Ex. —” refer to the exhibits in support of Defendants’ Motion, available at D.I.
    147 through D.I. 152 and D.I. 160. Citations in the form of “Pls.’ Ex. —” refer to exhibits
    in support of Plaintiffs’ opposition to the Motion, available at D.I. 155. And citations in
    
                                                2
           Co-Lead Plaintiffs are Boeing stockholders. Co-Lead Plaintiff Thomas P.
    
    DiNapoli is Comptroller of the State of New York, Administrative Head of the New
    
    York State and Local Retirement System, and Trustee of the New York State
    
    
    
    
    the form of “Hr’g Tr. —” refer to the transcript of the June 25, 2021 oral argument on
    Defendants’ Motion, available at D.I. 169.
           Prior to filing this action, Plaintiffs pursued and received books and records pursuant
    to 8 Del. C. § 220. Plaintiffs received over 44,100 documents totaling over 630,000 pages.
    It is reasonable to infer that exculpatory information not reflected in the document
    production does not exist. See Teamsters Local 443 Health Servs. & Ins. Plan v. Chou,
    2020 WL 5028065, at *24 & n.314 (Del. Ch. Aug. 24, 2020).
          The Amended Complaint cites documents Plaintiffs obtained under Section 220.
    The parties do not contest that under the incorporation by reference doctrine, I may
    consider those documents and Defendants’ exhibits in support of the Motion to determine
    whether the Amended Complaint has accurately referenced their contents in support of its
    claims and in pleading demand futility. Reiter on Behalf of Cap. One Fin. Corp. v.
    Fairbank, 2016 WL 6081823, at *5–6 (Del. Ch. Oct. 18, 2016).
            In briefing, Plaintiffs did not assert that any of the exhibits Defendants submitted
    would be improper to consider on the Motion. See D.I. 155 at 1 n.1 & 42–44. At argument,
    Plaintiffs’ counsel suggested that the Court should not consider Dennis Muilenburg’s
    “Lion Air Talking Points” for the Board’s November 23, 2018 call, submitted as
    Defendants’ Exhibit 86. See Hr’g Tr. 125–27. Specifically, Plaintiffs’ counsel argued that
    “it is on its face a draft set of talking points that Mr. Muilenburg had”; and that “it’s not
    incorporated by reference” because Plaintiffs “didn’t plead that they were recited . . . to the
    board,” “it’s not a board meeting,” and “[i]t’s not a presentation,” but “could have been.”
    Id. 125. But Plaintiffs pled that “[t]alking points for the call circulated among Muilenburg
    and other executives expressed skepticism about media accounts of MCAS’s role in the
    crash.” Am. Compl. ¶ 224. Plaintiffs’ brief in opposition to the Motion also relied on the
    talking points. See D.I. 155 at 26. Defendants submitted Exhibit 86 in reply. See Defs.’
    Ex. 86. I therefore consider Defendants’ Exhibit 86 on the Motion.
           At Defendants’ urging, I have considered their proffered exhibits to determine if
    they show that Plaintiffs “misrepresented their contents” or if any inference that Plaintiffs
    seek is unreasonable. Flannery v. Genomic Health, Inc., 2021 WL 3615540, at *8 (Del.
    Ch. Aug. 16, 2021) (citing Voigt v. Metcalf, 2020 WL 614999, at *9 (Del. Ch.
    Feb. 10, 2020)). Through that lens, I find they do no such work for Defendants; in fact,
    Defendants’ exhibits support Plaintiffs’ allegations.
    
    
                                                  3
    Common Retirement Fund (“NYSCRF”). NYSCRF is a public pension fund for
    
    New York State and local government employees. Co-Lead Plaintiff Fire and Police
    
    Pension Association of Colorado (“FPPA”) is the Trustee for the Fire and Police
    
    Members’ Benefit Investment Fund, which contains assets of governmental defined
    
    benefit pension plans for Colorado firefighters, police officers, and their
    
    beneficiaries. As of June 8, 2020, FPPA held approximately 9,165 shares of Boeing
    
    stock, and NYSCRF held approximately 1,186,627 shares of Boeing stock.
    
          Nominal Defendant Boeing is a global aerospace corporation that designs,
    
    manufactures, and sells commercial airplanes and other aviation equipment for the
    
    airline, aerospace, and defense industries. Boeing conducts its business in four
    
    segments. Its Boeing Commercial Airplanes (“BCA” or “Commercial Airplanes”)
    
    segment is by far the most lucrative, generating approximately 61.7% of the
    
    Company’s revenue in 2017 and 45% of its revenue in 2019. That decrease resulted
    
    from two fatal crashes involving Boeing’s 737 MAX airplanes in 2018 (the “Lion
    
    Air Crash”) and 2019 (the “Ethiopian Airlines Crash”). Those tragedies caused
    
    preventable loss of life, as well as the grounding of Boeing’s entire 737 MAX fleet
    
    in March 2019 (the “737 MAX Grounding”) and attendant financial and reputational
    
    harm to the Company.       Plaintiffs seek to hold the defendants in this action
    
    
    
    
                                            4
    accountable for those harms under the principles articulated in In re Caremark
    
    International Inc. Derivative Litigation2 and Marchand v. Barnhill.3
    
             The defendants are current and former Boeing officers (the “Officer
    
    Defendants”) and members of Boing’s Board of Directors (the “Board”) (the
    
    “Director Defendants,” and together with the Officer Defendants, “Defendants”),
    
    who allegedly failed to oversee and monitor airplane safety.           The Director
    
    Defendants include Dennis A. Muilenburg, W. James McNerney Jr., Kenneth M.
    
    Duberstein, David L. Calhoun, Mike S. Zafirovski, Admiral Edmund P.
    
    Giambastiani Jr., Susan C. Schwab, Caroline B. Kennedy, Arthur D. Collins Jr.,
    
    Edward M. Liddy, Ronald A. Williams, Lynn J. Good, Randall L. Stephenson,
    
    Robert A. Bradway, and Lawrence W. Kellner.4
    
             Many of Boeing’s Board seats were long-term and awarded to political
    
    insiders or executives with financial expertise.    For example, Duberstein, the
    
    longest-tenured Defendant and a lobbyist with “ultimate insider status,” served as a
    
    McDonnell Douglas director from 1989 to 1997, and then as a Boeing director from
    
    1997 through April 2019, including as Lead Director from 2005 through April 2018. 5
    
    
    2
        698 A.2d 959 (Del. Ch. 1996).
    3
        212 A.3d 805 (Del. 2019).
    4
     Plaintiffs allege Defendant Raymond L. Conner was “vice chairman of Boeing” from
    2014 to 2017. Am. Compl. ¶ 39. It is unclear whether Conner was vice chairman of the
    Board. If he was a director, he is included as a “Director Defendant.”
    5
        Am. Compl. ¶ 23.
    
    
                                             5
    Duberstein was succeeded in that role by Defendant David L. Calhoun, a private
    
    equity executive, who has been a Boeing director since 2009; was appointed Board
    
    Chairman in October 2019 in the wake of the 737 MAX crashes; and was appointed
    
    Boeing’s President and CEO in January 2020.
    
          The Officer Defendants have also had extensive tenures at Boeing. They
    
    include the following:
    
          •     McNerney has been with Boeing since at least 2001. He served as
    
                Boeing’s CEO, President, and Chairman of the Board from 2005 until
    
                February 2016.
    
          •     Muilenburg is a career Boeing executive who started with the Company
    
                in 1985. He became Boeing’s Vice Chairman, President, and COO in
    
                December 2013; CEO in July 2015; and CEO and Chairman of the
    
                Board in March 2016, succeeding McNerney. After the 737 MAX
    
                crashes, in October 2019, Muilenburg was removed as Chairman and
    
                ultimately retired from the Company in December 2019.
    
          •     Defendant J. Michael Luttig served as Boeing’s EVP and General
    
                Counsel from May 2006 to May 2019. In May 2019, following the
    
                grounding of the 737 MAX, Luttig was named Counselor and Senior
    
                Advisor to CEO Muilenburg and the Board, but left the Company in
    
                December 2019.
    
    
                                           6
          •      Defendant Raymond L. Conner joined Boeing in 1977. He served as
    
                 Boeing’s Vice Chairman from 2014 until his retirement in 2017, and
    
                 President and CEO of BCA from 2014 until November 2016.
    
          •      Defendant Kevin G. McAllister was Boeing’s Executive Vice President
    
                 and President and CEO of BCA from November 2016 (succeeding
    
                 Conner) until his ouster in October 2019, following the Ethiopian
    
                 Airlines Crash.
    
          •      Defendant Greg Hyslop has been Boeing’s chief engineer since July
    
                 2016, overseeing all aspects of safety and technical integrity of Boeing
    
                 products and services. Hyslop is also a member of Boeing’s Executive
    
                 Council and reports to the Company’s President and CEO.
    
          •      Defendant Diana L. Sands is a member of Boeing’s Executive Council
    
                 and has served as Senior Vice President of Boeing’s Office of Internal
    
                 Governance and Administration since April 2014. As Boeing’s chief
    
                 ethics and compliance officer, she leads Boeing’s ethics, compliance,
    
                 corporate audit and trade controls activities, and reports to Boeing’s
    
                 President and CEO and to Boeing’s Audit Committee, discussed infra.
    
          •      Defendant Greg Smith has served as Boeing’s CFO since 2011.
    
          In these roles, Defendants allegedly failed to carry out their respective duties
    
    to monitor the safety and airworthiness of Boeing’s aircraft, and the extent of those
    
    
                                              7
    alleged failures only surfaced in the wake of corporate trauma.          Rather than
    
    prioritizing safety, Defendants lent their oversight authority to Boeing’s agenda of
    
    rapid production and profit maximization. That misplaced Board focus caused
    
    Boeing to bleed millions of dollars in fees, fines, and lost revenue, yet the Company
    
    rewarded several of the Defendants with hefty compensation and retirement
    
    packages.
    
                    A.     Boeing Shifts Its Focus From Engineering And Safety To
                           Profits And Rapid Production.
    
              Founded in 1916, Boeing thrived as “an association of engineers.” 6 Its
    
    executives were “conversant in engineering requirements.” 7 As a result, Boeing’s
    
    culture emphasized engineering and safety, and Boeing emerged as a leading global
    
    aerospace manufacturer.
    
              As the Company grew, its focus on safety and engineering fell away. In 1997,
    
    Boeing acquired McDonnell Douglas, another airplane manufacturer with a long
    
    history of pushing profits, shirking quality control, and designing products involved
    
    in numerous safety incidents. With former McDonnell Douglas leaders at the helm,
    
    Boeing’s corporate culture shifted from “safety to profits-first” and “focusing on
    
    
    
    
    6
        Am. Compl. ¶ 44.
    7
        Id.
    
    
                                                8
    costs-cutting rather than designing airplanes.”8 As observed by a longtime Boeing
    
    physicist:
    
             If your business model emphasizes productivity, employee
             engagement, and process improvement, costs go down faster. This was
             the essence of the “quality” business model Boeing followed in the mid-
             90s.
    
             The 777 had the best “learning curve” in the business. On the other
             hand, if your industry is mature, and your products are commodity-like,
             business school theory says a cost-cutting model is appropriate.
    
             Wal-Mart perfected its particular version of the cost-cutting business
             model. Amazon adapted that model to its industry. Boeing has adapted
             it to high-end manufacturing.9
    
    As a result, many of Boeing’s engineers felt disenchanted, and in 2000 they staged
    
    a forty-day strike to improve Company culture and regain a voice in decision
    
    making. By 2001, Boeing relocated its headquarters from Seattle to Chicago in order
    
    “to escape the influence of the resident flight engineers.” 10
    
             The internal shift to focus on cost-cutting exacerbated the inherent risks
    
    associated with Boeing’s business. In the early 2000s, Boeing saw a sharp rise in
    
    safety violations imposed by the Federal Aviation Administration (the “FAA”).
    
    
    
    8
        Id. ¶ 47.
    9
     Id. ¶ 55 (quoting Stan Sorscher, a longtime Boeing physicist and negotiator for the Society
    for Professional Engineering Employees in Aerospace).
    10
      Id. ¶ 5; see also id. ¶ 50. As Boeing’s then-CEO Phil Condit explained, “When the
    headquarters is located in proximity to a principal business—as ours was in Seattle—the
    corporate center is inevitably drawn into day-to-day business operations.” Id.
    
    
                                                 9
    Between 2000 and 2020, the FAA flagged twenty airplane safety violations for poor
    
    quality control, poor maintenance, and noncompliant parts, as well as the Company’s
    
    failure to provide its airline clients with crucial safety information. 11 Consequently,
    
    Boeing faced fines ranging between $6,000 and $13 million.
    
             Quality suffered, and the Company was widely criticized, with prosecutors
    
    asking, “Where was the leadership?”12 Management scandals ultimately led to the
    
    ouster of two successive CEOs. Then, in 2005, McNerney was named CEO.
    
    McNerney did not have a technical background, and after his appointment, Boeing
    
    was described as a “weird combination of a distant building with a few hundred
    
    people in it and a non-engineer with no technical skills whatsoever at the helm.” 13
    
             The Company’s safety record in the years that followed was spotty. In 2013,
    
    the new 787 Dreamliner suffered a series of lithium-ion battery fires and was
    
    grounded by the FAA. In 2014, the National Transportation Safety Board (“NTSB”)
    
    directed Boeing to modify its process for developing safety assessments for designs
    
    incorporating new technology, after having determined that (1) Boeing had made
    
    misleading and unfounded claims about the lithium-ion battery system in its safety
    
    assessment reports to the FAA; (2) Boeing’s certification engineers had not properly
    
    
    11
      See id. ¶ 49. In comparison, the FAA cited Boeing’s competitor, Airbus, for only three
    safety violations during the same period. Id.
    12
         Id. ¶ 52.
    13
         Id. ¶ 53.
    
    
                                              10
    tested the lithium-ion battery system; and (3) Boeing’s safety assessment was
    
    insufficient. Al Jazeera also conducted and released an investigative report that
    
    detailed employee reports of ineffective quality control at a Dreamliner plant that
    
    resulted in “foreign object debris” being left in the aircraft, and disclosed that a
    
    Boeing customer was refusing to accept Dreamliners manufactured in that plant due
    
    to quality concerns.14
    
             In addition to the Dreamliner issues, in July 2013, one of Boeing’s 777
    
    airplanes crashed, killing three and seriously injuring dozens. An NTSB report
    
    concluded that the crash was caused, at least in part, by inadequate plane
    
    documentation and training manuals, and recommended improvements in those
    
    areas.
    
             Boeing’s safety woes continued into 2015 as reflected in thirteen separate
    
    pending or potential civil enforcement cases relating to quality control, safety
    
    protocol violations, and manufacturing errors in production lines.         The FAA
    
    investigated these claims and Boeing’s failure to take appropriate corrective actions.
    
    In December 2015, Boeing entered into an unprecedented settlement with the FAA
    
    (the “FAA Settlement”) and agreed to pay historic fines of $12 million, with up to
    
    $24 million in additional fines deferred pending Boeing acting on a five-year
    
    implementation of “additional significant systemic initiatives, to strengthen its
    
    14
         Id. ¶¶ 118–21.
    
    
                                             11
    regulatory compliance processes and practices.”15 On February 25, 2021, the FAA
    
    announced in a press release it had assessed an additional $6.6 million in deferred
    
    civil penalties and settlement costs against Boeing.16
    
                       B.   Boeing Lacked Any Formal, Board-Level Process To
                            Oversee Airplane Safety.
    
             Boeing did not implement or prioritize safety oversight at the highest level of
    
    the corporate pyramid. None of Boeing’s Board committees were specifically tasked
    
    with overseeing airplane safety, and every committee charter was silent as to
    
    airplane safety. The Board recognized as much: former director John H. Briggs,
    
    who retired in 2011, observed that the “board doesn’t have any tools to oversee”
    
    safety.17 This stood in contrast to many other companies in the aviation space whose
    
    business relies on the safety and flightworthiness of airplanes. 18
    
             From 2011 until August 2019, the Board had five standing Committees to
    
    monitor and oversee specific aspects of the Company’s business:              (1) Audit,
    
    (2) Finance, (3) Compensation, (4) Special Programs, and (5) Governance,
    
    Organization and Nominating. The Audit Committee was Boeing’s primary arbiter
    
    for risk and compliance. Specifically, it “evaluat[ed] overall risk assessment and
    
    
    15
         Id. ¶ 123.
    16
         Pls.’ Ex 1.
    17
         Am. Compl. ¶ 57.
    18
     Id. ¶ 67 (identifying board-level safety committees and control at Southwest Airlines,
    Delta Airlines, United Airlines, JetBlue, Spirit Airlines, and Alaska Airlines).
    
    
                                                12
    risk management practices”; “perform[ed a] central oversight role with respect to
    
    financial statement, disclosure, and compliance risks”; and “receiv[ed] regular
    
    reports from [Boeing’s] Senior Vice President, Office of Internal Governance and
    
    Administration with respect to compliance with our ethics and risk management
    
    policies.”19
    
             The Audit Committee’s charter identifies its responsibilities as
    
             •       “[o]btain[ing] and review[ing], on an annual basis, a formal written
    
                     report prepared by the independent auditor describing [Boeing’s]
    
                     internal quality-control procedures”;
    
             •       reviewing “[a]ny material issues raised by the most recent internal
    
                     quality-control review, or peer review, of [Boeing], or by any inquiry
    
                     or investigation by governmental or professional authorities, within the
    
                     preceding five years, respecting one or more independent audits carried
    
                     out by [Boeing]”;
    
             •       “[d]iscuss[ing] with management the Company’s policies, practices
    
                     and guidelines with respect to risk assessment and risk management”;
    
             •       “[a]t least annually receiv[ing] reporting by the [Senior Vice President,
    
                     Office of Internal Governance and Administration] on the Company’s
    
    
    
    19
         Id. ¶ 59.
    
    
                                                 13
                     compliance with its risk management processes, and by the General
    
                     Counsel on pending Law Department investigations of alleged or
    
                     potentially significant violations of laws, regulations, or Company
    
                     policies”; and
    
             •       “[m]eet[ing] with the [Senior Vice President, Office of Internal
    
                     Governance and Administration] to review the Company’s ethics and
    
                     business conduct programs and the Company’s compliance with related
    
                     laws and regulations.”20
    
    The Audit Committee was obligated to regularly report to the Board regarding those
    
    topics, including “the Company’s compliance with legal or regulatory
    
    requirements,” and “the implementation and effectiveness of the Company’s ethics
    
    and compliance programs to support the Board’s oversight responsibility.”21
    
             Although the Audit Committee was tasked with handling risk generally, it did
    
    not take on airplane safety specifically. Its yearly updates regarding the Company’s
    
    compliance risk management process did not address airplane safety. For example,
    
    when the Board discussed audit plans in 2014 and 2017, respectively, it did not
    
    mention or address airplane safety. Specifically as to the 737 MAX, from its
    
    development through its grounding in 2019, the Audit Committee never mentioned
    
    
    20
         Id. ¶ 61.
    21
         Id. ¶ 62.
    
    
                                                14
    “safety.” 22     Nor did it address product safety issues related to the design,
    
    development, or production of the 737 MAX, or ask for presentations on the topic.
    
             Rather, consistent with Boeing’s emphasis on rapid production and revenue,
    
    the Audit Committee primarily focused on financial risks to the Company. For
    
    example, its February 2011 audit plan focused on “production rate readiness
    
    activities” and “supplier management rate readiness.” 23 Its presentations centered
    
    on whether Boeing had liquidity, capital, and supply chain resources sufficient to
    
    fund aggressive production of the 737 MAX.24 Even after the Lion Air Crash in
    
    2018, chief compliance officer Sands’s risk management update to the Audit
    
    Committee in December 2018 did not identify product safety as a “compliance risk”
    
    for 2018.25
    
             The Audit Committee also oversaw an Enterprise Risk Visibility (“ERV”)
    
    process.26 The ERV process annually provided senior management and the Board
    
    with a “comprehensive view of key Boeing Risks and the actions taken to address
    
    them,” as curated from “[a]ll business units, major functions, and risk and
    
    
    
    
    22
         Id. ¶¶ 60, 62–64.
    23
         Id. ¶ 64.
    24
         See Defs.’ Ex. 6; Defs.’ Ex. 10; Am. Compl. ¶¶ 60, 63; see also infra note 32.
    25
         Am. Compl. ¶ 65.
    26
         Defs.’ Ex. 7 at -14500; Hr’g Tr. 9.
    
    
                                                  15
    compliance disciplines.” 27        The Audit Committee annually reviewed the top
    
    strategic, operational, and compliance risks the ERV process identified, and
    
    subsequently reported those risks to the Board, which in turn reviewed
    
    management’s mitigation of those risks. 28 The ERV process also played an
    
    important role in Boeing’s internal Corporate Audit group, which evaluated priority
    
    risk areas within the Company. 29 Based on the results of annual ERV risk
    
    assessments, the Corporate Audit group annually submitted an audit plan to review
    
    top risks.30 But neither the Corporate Audit group nor the ERV process specifically
    
    emphasized airplane safety; they primarily focused on production and financial
    
    risks.31
    
             Airplane safety was not a regular set agenda item or topic at Board meetings.
    
    Audit Committee and ERV materials reveal that airplane safety risks were not
    
    discussed.32 While the Board sometimes discussed production line safety, the Board
    
    
    27
         Defs.’ Ex. 7 at -14501.
    28
         Id. at -14502–04.
    29
         Defs.’ Ex. 9 at -14488; Defs.’ Ex. 10 at -17591; Hr’g Tr. 9.
    30
         Defs.’ Ex. 9 at -14488–89.
    31
      See Defs.’ Ex. 7; Defs.’ Ex. 8 at -11183–84; Defs.’ Ex. 9; Defs.’ Ex. 10 at -17575–92;
    Defs.’ Ex. 23; Defs.’ Ex. 24 at -16424, -16426; Defs.’ Ex. 25 at -16997; see also infra note
    32.
    32
       Defs.’ Ex. 6; Defs.’ Ex. 7 at -14501–04; Defs.’ Ex. 9 at -14489–90, -14495; Defs.’ Ex.
    10; Defs.’ Ex. 13; Defs.’ Ex. 23; Defs.’ Ex. 24 at -16424, -16426; Defs.’ Ex. 25 at -16981;
    see also Am. Compl. ¶¶ 64–66. Discussions or mentions of “safety” are similarly absent
    from the Audit Committee Report and Enterprise Risk Visibility Review sections of the
    Board meeting minutes Defendants submitted. Ex. 8 at -11183–84, -11187; Defs.’ Ex. 11
    
                                                  16
    often met without mentioning or discussing safety at all. 33 The Board did hear
    
    presentations discussing “Environment, Health & Safety,”34 including regarding the
    
    workplace safety program “Go4Zero.” 35 Communications mentioning “safety,”
    
    “quality,” or “risk” do not reflect substantive discussion related to airplane safety. 36
    
    
    
    at -12506; Defs.’ Ex. 12 at -12648–49; Defs.’ Ex. 19 at -11606; Defs.’ Ex. 26 at -13570,
    -13573; Defs.’ Ex. 27 at -11921–23; Defs.’ Ex. 28; Defs.’ Ex. 29; Defs.’ Ex. 34 at -12382–
    83; Defs.’ Ex. 37 at -12972; Defs.’ Ex. 39 at -8135; Defs.’ Ex. 44; see also Am. Compl. ¶
    64. Defendants’ Exhibits 28, 29, 39, and 44 were largely redacted in Defendants’ Section
    220 production.
    33
       Defs.’ Ex. 11; Defs.’ Ex. 12; Defs.’ Ex. 18; Defs.’ Ex. 37; Defs.’ Ex. 38; Defs.’ Ex. 40;
    Defs.’ Ex. 42; Defs.’ Ex. 43; Defs.’ Ex. 44; Defs.’ Ex. 46; Defs.’ Ex. 50; Defs.’ Ex. 51;
    Defs.’ Ex. 52. These documents do not support Defendants’ argument that the Board had
    a reporting structure and processes to oversee airplane safety and the 737 MAX. See Hr’g
    Tr. 8.
    34
      See, e.g., Defs.’ Ex. 9 at -14495 (listing “safety” within “Environment, Health & Safety”
    in the Appendix D Risk Universe); Defs.’ Ex. 10 at -17589 (“Supply Chain Operations
    (SCO) Environment, Health & Safety, Safety Management System Renton 737 Programs
    Governance” and “Evaluate processes for Renton site safety oversight related to ‘Go for
    Zero’ execution to achieve overall relevant Enterprise Safety objectives”); see also Defs.’
    Ex. 7; Defs.’ Ex. 10 at -17572–73, -17583, -17587; Defs.’ Ex. 20 at -13047, -13066; Defs.’
    Ex. 23 at -15866; Defs.’ Ex. 24 at -16426; Defs.’ Ex. 25 at -16981; Defs.’ Ex. 84 at
    -618225, -618235, -618240, -618242, -618248.
    35
      See, e.g., Defs.’ Ex. 19 at -11603 (“Mr. Shanahan then provided a Safety Update. He
    began by reviewing the evolution of the ‘Go for Zero’ safety program since 2007. He next
    reviewed safety performance and workplace injury statistics for operations and non-
    operations activities. Mr. Shanahan then reviewed safety focus areas, including
    improvements in final assembly and structures manufacturing, ongoing prevention
    activities and the roles of data analytics in improving safety performance.”); see also Defs.’
    Ex. 10 at -17589; Defs.’ Ex. 16 at -11076; -11078; Defs.’ Ex. 17 at -11646.
    36
      Defs.’ Ex. 6 at -20519; Defs.; Ex. 8 at -11183; Defs.’ Ex. 16 at -11073, -11077–80; Defs.’
    Ex. 17 at -11646; Defs.’ Ex. 20 at -13057; Defs.’ Ex. 21 at -2692; Defs.’ Ex. 22 at -18837–
    38 (“Model-Based Engineering (MBE) – Progress . . . Improve safety, quality,
    productivity, cost”); Defs.’ Ex. 25 at -16997; Defs.’ Ex. 37 at -12967; Defs.’ Ex. 39 at
    -8133, -8135; Defs.’ Ex. 40 at -8086; Defs.’ Ex. 41 at -8315; Defs.’ Ex. 42 at -12481; Defs.’
    Ex. 43 at -12842; Defs.’ Ex. 44 at -2501; Defs.’ Ex. 45 at -1960; Defs.’ Ex. 50 at -2711;
    
                                                 17
             Management’s periodic reports to the Board did not include safety
    
    information.        Muilenburg sent the Board a monthly business summary and
    
    competitor dashboard, and management made occasional presentations at Board
    
    meetings.37 Those management communications focused primarily on the business
    
    impact of airplane safety crises and risks.38
    
             Further, the Board did not have a means of receiving internal complaints about
    
    airplane safety. Before 2019, Boeing’s principal internal safety reporting process
    
    was the Safety Review Board (“SRB”). The SRB was Boeing’s principal internal
    
    safety reporting process, but it had no link to the Board and no Board reporting
    
    mechanism.39 The SRB operated below the level of the most senior officers; the
    
    complaints and concerns fielded by the SRB were handled by Boeing’s mid-level
    
    management like the Program Functional Chief Design Engineer, the Chief Pilot,
    
    the Chief Project Engineer, and the Product Safety Chief Engineer and factory
    
    leaders.       Without a Board-level reporting mechanism, safety issues and
    
    whistleblower complaints reported to the SRB did not come to the Board’s attention.
    
    
    
    
    Defs.’ Ex. 52 at -11401; Defs.’ Ex. 62 at -13680–81; Defs.’ Ex. 63 at -13682; Defs.’ Ex.
    70 at -13684.
    37
         See, e.g., Defs.’ Ex. 62.
    38
      Am. Compl. ¶¶ 7, 8, 14, 17, 18, 57–76; see Defs.’ Ex. 60 at -13677; Defs.’ Ex. 73 at
    -2944; Defs.’ Ex. 74 at -2947; see also supra notes 34-36 and accompanying text.
    39
         Hr’g Tr. 30–33; Am. Compl. ¶¶ 74–76.
    
    
                                                18
    Neither the Audit Committee, nor any other Board committee, reviewed
    
    whistleblower complaints related to product safety.
    
                   C.    Boeing Develops The 737 MAX In An Effort To Outpace Its
                         Competitors.
    
             With the Board so distanced from safety information, and on the heels of
    
    recent safety incidents and inquiries, Boeing continued to push production and
    
    forego implementing meaningful systems to monitor airplane safety. Boeing’s
    
    primary production focus was on its “blockbuster” 737 MAX, which became one of
    
    the Company’s key revenue sources.40
    
             By 2008, Boeing was falling behind on production and sales as compared to
    
    its primary competitor, Airbus.      In 2010, Airbus announced its fuel-efficient
    
    A320neo, which sold well and quickly gained ground on Boeing’s 737, which had
    
    not been updated since the late 1990s. As Boeing clients began considering Airbus’s
    
    fuel-efficient jets, Boeing felt production and sales pressure.
    
             In 2010 and early 2011, Boeing considered two options for updating its
    
    existing 737 Next Generation (“737 NG”) model: either develop an entirely new
    
    airplane, which could take a decade, or redesign the current model with larger, more
    
    efficient engines in six years. In an effort to regain competitive ground, and amid
    
    concerns about production cost and timing, Boeing elected to update the 737 NG. If
    
    
    
    40
         See Am. Compl. ¶ 6.
    
    
                                              19
    developed as a “derivative plane,” Boeing would only need to secure FAA
    
    certification for those changes between the 737 NG and the new plane.41 The FAA
    
    assesses the minimum level of “differences training” required for a pilot to fly a new
    
    airplane by evaluating the similarity between the new and prior versions of the
    
    airplane.42
    
               At a June 2011 Board meeting, the Board and senior management considered
    
    the potential redesign of the 737 NG. Jim Albaugh, Head of BCA, pressed the
    
    production and sales benefits of the 737 NG’s potential “re-engine”: gains in fuel
    
    efficiency, non-recurring investment costs, capital costs, and expedited re-design
    
    schedules.43 The Board concluded the reconfigured airplane would have larger and
    
    more fuel-efficient engines intended to “restore[] competitive advantage over
    
    [Airbus’s] NEO.”44
    
               So at an August 2011 Board meeting, the Board approved development of
    
    Boeing’s next generation of narrow-body commercial aircraft: the 737 MAX, which
    
    would be a reconfigured version of the 737 NG that “incorporat[ed] new engine
    
    technology and such other modifications and upgrades as are deemed appropriate in
    
    
    
    
    41
         Id. ¶ 138.
    42
         Id. ¶ 163.
    43
         Id. ¶ 133.
    44
         Id.
    
    
                                              20
    light of prevailing market conditions.”45 The August 2011 Board minutes describe
    
    the “strategy and objectives associated with a re-designed 737 airplane, including
    
    increasing customer value, maintaining market share and a competitive advantage
    
    over the Airbus 320neo, reducing risk and enabling wide body product
    
    investment.”46 According to three people present at the August Board meeting, no
    
    Board member asked about the safety implications of reconfiguring the 737 NG with
    
    larger engines. Rather, the Board inquired about engine options, program personnel,
    
    development schedule contingencies, and customer contract provisions regarding
    
    performance and penalties; the Board’s primary concern was “how quickly and
    
    inexpensively the Company could develop the 737 MAX model to compete with
    
    Airbus’s A320neo.” 47 The Board delegated to McNerney all authority over the
    
    multi-year effort to approve the 737 MAX’s final specifications, and deliver and
    
    build it, without having to return to the Board.
    
                            1.     Boeing Implements The “MCAS” System In The
                                   737 MAX.
    
             In developing and marketing the 737 MAX, Boeing prioritized (1) expediting
    
    regulatory approval and (2) limiting expensive pilot training required to fly the new
    
    model. As explained by a former Boeing engineer who worked on the 737 MAX’s
    
    
    45
         Id. ¶ 135; see id. ¶¶ 6, 133–34.
    46
         Id. ¶ 267.
    47
         Id. ¶ 134.
    
    
                                               21
    flight controls, Boeing “wanted to A, save money and B, to minimize the
    
    certification and flight-test costs.”48
    
             Because the Company was months behind Airbus in developing a new
    
    airplane, Boeing set a “frenetic” pace for the 737 MAX program, resulting in hastily
    
    delivered technical drawings and sloppy, deficient blueprints.49 Boeing’s engineers
    
    were instructed to maintain “commonality” with the 737 NG in order to expedite
    
    FAA certification.50 But maintaining commonality posed unique design issues.
    
             In particular, the 737 MAX’s larger engine needed to be situated differently
    
    on the airplane’s wings, shifting its center of gravity. Because of that engine
    
    placement, the 737 MAX tended to tilt too far upwards, or “pitch up,” in flight.51
    
    Initial attempts to resolve the issue with aerodynamic solutions failed. So Boeing
    
    addressed the issue with new software: the Maneuvering Characteristics
    
    Augmentation System, or “MCAS.”52 MCAS moved the leading edge of the plane’s
    
    entire horizontal tail, known as the “horizontal stabilizer,” to push the airplane’s tail
    
    up and its nose down.53
    
    
    48
         Id. ¶ 138.
    49
         Id. ¶ 137.
    50
      Id. ¶ 138 (explaining that “commonality” is “an industry term that evaluates how similar
    one model is to its predecessor”).
    51
         Id. ¶ 150.
    52
         Id. ¶¶ 9, 152–53, 155.
    53
         Id. ¶ 152.
    
    
                                               22
             As originally designed, MCAS would activate only if the plane pitched up at
    
    both a high angle of attack (or “AOA”) and a high G-force (the plane’s acceleration
    
    in a vertical direction). During 2016 flight testing, Boeing changed MCAS to allow
    
    it to activate at low speeds; as such, it “could be automatically triggered simply by a
    
    high AOA.”54
    
             The external sensor for AOA was highly vulnerable to false readings or failure
    
    for numerous reasons, such as general weather, lightning, freezing temperatures,
    
    software malfunctions, or birds. The AOA’s sensor’s vulnerability was well-known:
    
    between 2004 and 2019, failed AOA sensors were flagged to the FAA in more than
    
    216 incident reports, including instances that required emergency landings. MCAS
    
    had only one AOA sensor, creating a “single point of failure” that violated the
    
    fundamental engineering principle requiring redundancy “so that one single error in
    
    a complex system does not cause total system failure.”55 If the single AOA sensor
    
    was triggered, even for a flawed reason unrelated to the plane’s pitch, MCAS would
    
    “correct” the aircraft by pushing its nose down.56
    
    
    54
         Id. ¶ 155.
    55
      Id. ¶¶ 159–60. A 2011 FAA Advisory Circular warned that “[h]azards identified and
    found to result from probable failures are not acceptable in multiengine airplanes,” and that
    “[i]n these situations, a design change may be required . . . such as increasing redundancy.”
    Id. ¶ 159.
    56
      Id. ¶ 190 (“[A]n analysis performed by the manufacturer showing that if an erroneously
    high single [AOA] sensor input is received by the flight control system, there is a potential
    for repeated nose-down trim commands of the horizontal stabilizer.”).
    
    
                                                 23
             In 2013, Boeing engineers proposed that the 737 MAX implement a
    
    Dreamliner safety feature called “synthetic airspeed” to detect a false AOA signal.57
    
    Managers rejected that proposal due to additional cost and pilot training, and MCAS
    
    remained dependent on a single fickle AOA sensor. Engineers remained skeptical;
    
    in late 2015, one queried: “[a]re we vulnerable to single AOA sensor failures with
    
    the MCAS implementation or is there some checking that occurs?”58
    
             Boeing’s analyses and FAA disclosures about MCAS underestimated its
    
    lethality. In 2014, Boeing submitted a System Safety Assessment (an “Assessment”)
    
    to the FAA calculating the effect of possible MCAS failures. The Assessment did
    
    not consider the possibility that MCAS could trigger repeatedly, effectively giving
    
    the software unlimited authority over the plane. Boeing concluded MCAS was not
    
    a “safety-critical system.”59 After MCAS was revised to rely on the single AOA
    
    sensor, internal safety analyses concluded that MCAS could cause “catastrophic”
    
    failures if it took a pilot more than ten seconds to identify and respond to the
    
    software’s activation.60 But the analyses assumed the pilot would react within four
    
    seconds, and so concluded that the likelihood of a “hazardous event” due to an
    
    
    
    
    57
         Id. ¶ 161.
    58
         Id. ¶ 160.
    59
         Id. ¶ 154.
    60
         Id. ¶ 156.
    
    
                                             24
    MCAS failure was nearly inconceivable.61 It would later be revealed that Boeing’s
    
    four-second reaction time assumption was a “gross underestimate.” 62
    
               Boeing did not update the 2014 FAA Assessment for MCAS as revised.
    
    Boeing’s technical pilots deceived the FAA by failing to disclose that MCAS as
    
    revised activated only upon the AOA sensor signal, regardless of speed, increasing
    
    the likelihood that MCAS would activate.
    
                           2.    Boeing Pushes Expedited Certification And
                                 Rapid Production.
               Based on purported commonality with the 737 NG, Boeing sought “Level B”
    
    pilot training for the 737 MAX, which can be done on a tablet computer without
    
    costly flight simulator training.63 More extensive training would incur additional
    
    costs, defeat the economies from commonality with the 737 NG, and make the 737
    
    MAX less competitive with the Airbus 320neo. Between 2014 and 2017, Boeing
    
    touted that flight simulator training would not be necessary on the 737 MAX.
    
               Boeing and its well-connected leadership had significant sway over the FAA,
    
    and the FAA often permitted Boeing to self-regulate. Boeing put “tremendous
    
    
    
    
    61
         Id.
    62
         Id.
    63
         Id. ¶ 164.
    
    
                                                25
    pressure” on its Chief Technical Pilot Mark Forkner to obtain Level B pilot training
    
    for the 737 MAX.64
    
             In August 2016, the FAA issued a provisional report establishing Level B
    
    training for the 737 MAX. In November, after Boeing had revised MCAS, Forkner
    
    texted a colleague that MCAS was “running rampant” on a flight simulator when
    
    operating at a low speed and then texted: “so basically I lied to the regulators
    
    (unknowingly).”65 Still, Forkner stressed to the FAA that it should not reference
    
    MCAS in its report because it was “outside the normal operating envelop[e].”66
    
             In July 2017, the FAA published the final 737 MAX report providing for
    
    Level B differences training determination. Based on Boeing’s failure to submit a
    
    new Assessment on the revised MCAS and misrepresentation of MCAS’s safety
    
    risks, the FAA deleted all information about MCAS from the July 2017 report.67
    
    Forkner emailed a Boeing colleague bragging that his “jedi mind tricks” had worked
    
    on the FAA.68
    
    
    
    
    64
         Id. ¶ 105.
    65
         Id. ¶ 169; see id. Ex. A; id. Ex. B at A-10.
    66
       Id. ¶ 170 (“[O]ne of the Program Directives we were given was to not create any
    differences . . . That is what we sold to the regulators who have already granted us the
    Level B differences determination. To go back to them now, and tell them there is in fact
    a difference . . . would be a huge threat to that differences training determination.”).
    67
         Id. ¶ 106; id. Ex. B.
    68
         Id. ¶ 171.
    
    
                                                    26
             As a result of the FAA’s decision, the 737 MAX airplane manuals and pilot
    
    training materials for U.S.-based airlines lacked specific information about MCAS.69
    
    Specifically, no substantive description of MCAS appeared in Boeing’s three
    
    documents for pilots flying new models: (1) the Flight Crew Operations Manual
    
    (“FCOM”), the primary pilot reference; (2) the Quick Reference Handbook, a
    
    shorter emergency manual for abnormal flight situations; and (3) the Flight Crew
    
    Training Manual, which provides general recommendations on flying maneuvers
    
    and techniques. After the Lion Air and Ethiopian Airlines Crashes, senior FAA
    
    officials testified before Congress that MCAS should have been explained in those
    
    manuals.
    
             After securing Level B training, Boeing continued to conceal issues with the
    
    737 MAX. The airplane was supposed to have an “AOA disagree alert” to identify
    
    malfunction in the airplane’s AOA sensor and prevent it from triggering MCAS’s
    
    “repeated nose-down trim commands of the horizontal stabilizer.”70 That alert was
    
    a standard feature of the 737 NG.71 Boeing included the alert in the March 2017
    
    “type certificate” submitted to the FAA, so the alert was required in all planes
    
    produced.72 But in August 2017, Boeing learned the alert did not function due to a
    
    
    69
         Id. ¶¶ 106, 173; id. Ex. B.
    70
         Id. ¶¶ 175, 190.
    71
         Id. ¶ 175.
    72
         Id. ¶ 177.
    
    
                                              27
    software issue; to make it work, customers needed to purchase an optional “add-on”
    
    feature for $80,000 called an “AOA indicator display.” 73 The AOA disagree alerts
    
    did not work in at least 80% of the 737 MAX planes Boeing delivered—including
    
    the Lion Air and Ethiopian Airlines planes that crashed. Boeing did not tell the FAA
    
    or its customers that the majority of its planes had inoperable AOA disagree alerts
    
    until after the Lion Air Crash in 2018. And even after the 2019 Ethiopian Airlines
    
    Crash, Boeing continued to insist that the AOA indicator display was not a
    
    “required” safety feature and that it was appropriate to offer it as an optional “add
    
    on.”74 Boeing decided to repair the AOA disagree alert via a software update that
    
    was not scheduled to roll out until 2020.
    
                         3.    Boeing Successfully Markets The 737 MAX In
                               Emerging Markets And Presses The Board’s
                               Business Objectives; Boeing’s Employees
                               Question The 737 MAX’s Safety, But Those
                               Concerns Never Reach The Board.
    
             Four months after announcing the 737 MAX in 2011, Boeing had logged more
    
    than 1,000 orders and commitments for the airplane from airlines and leasing
    
    customers worldwide. By 2014, Boeing had over 2,700 737 MAX orders from fifty-
    
    seven customers. And by the end of 2016, Boeing had 4,300 orders from ninety-two
    
    
    
    
    73
         Id. ¶ 176.
    74
         Id. ¶ 180.
    
    
                                                28
    customers. The 737 MAX had become the fastest-selling airplane in Boeing’s
    
    history.
    
             Many of those sales originated from Boeing’s target customers in emerging
    
    markets. Boeing pursued those customers in a cost-saving and revenue-enhancing
    
    strategy, knowing that in many countries with expanding fleets of low-cost airlines,
    
    the quality of pilot training was not consistently as high as in the United States.
    
    Those countries took their safety cues from the FAA. Although Lion Air and Garuda
    
    Indonesia Airlines both initially requested simulator training on their newly
    
    purchased 737 MAX airplanes, Boeing pressed that computer-based training was
    
    sufficient.75 Boeing never required or provided simulator training. By December
    
    2017, Boeing had sold numerous 737 MAX airplanes to airlines in Southeast Asia,
    
    including Lion Air.
    
             Boeing began fulfilling customer orders in May 2017.76 By 2018, Boeing’s
    
    profits from the 737 MAX skyrocketed.77 The BCA accounted for approximately
    
    60% of the Company’s record $101.1 billion in annual revenue and approximately
    
    
    
    
    75
       Id. ¶ 143 (explaining that “rather than provide costly simulator training, Boeing
    employees emphasized that the ‘FAA, [European regulators], Transport Canada, China,
    Malaysia, and Argentinia [sic] authorities have all accepted the [computer-based training]
    requirement’”).
    76
         Id. ¶ 144.
    77
         Id. ¶ 146.
    
    
                                               29
    $8 billion, or 80%, of the Company’s annual net earnings.78 By the end of 2018, the
    
    value of Boeing’s total backlog of orders—a measure of financial health for an
    
    airplane manufacturer—had risen to $490 billion, with the BCA accounting for $412
    
    billion and nearly 5,900 jetliners, more than 4,000 of which were 737 MAX
    
    airplanes.
    
               Boeing struggled to keep up with demand and customer expectations and to
    
    meet the Board’s production and delivery target of fifty-seven airplanes per month.
    
    In July and August 2018, deliveries averaged approximately thirty-nine airplanes per
    
    month. Falling behind, Boeing employees worked in a “factory in chaos,” facing
    
    intense pressure to maintain production schedules.79
    
               As Boeing’s 737 MAX’s sales accelerated, its employees grew concerned
    
    about the airplane’s safety. For example, in summer 2018, a longtime general
    
    manager and engineer at the 737 MAX plant in Renton, Washington, tried to raise
    
    “Recovery Operations & Safety Concerns” with the 737 program’s general manager
    
    and factory leader, writing, “[R]ight now all my internal warning bells are going
    
    off. . . . And for the first time in my life, I’m sorry to say that I’m hesitant about
    
    putting my family on a Boeing airplane.”80 At a meeting, the engineer expressed
    
    
    
    78
         Id.
    79
         Id. ¶ 148.
    80
         Id. ¶ 87.
    
    
                                              30
    that he had “seen larger operations shut down for far less safety issues . . . in the
    
    military and those organizations have national security responsibilities.” 81 The
    
    manager responded, “The military isn’t a profit making organization.” 82 The
    
    engineer retired from Boeing soon thereafter. Before and after the Lion Air Crash,
    
    similar concerns came in from other employees regarding unrelenting and dangerous
    
    economic pressure from senior management to produce the 737 MAX rapidly and
    
    cheaply.83
    
    81
         Id. ¶ 89.
    82
         Id.
    83
       See id. ¶ 90 (“Separately, in 2018, . . . a Boeing engineering manager working on the 737
    MAX, expressed frustration to Director of Global Operations . . . that Boeing had selected
    ‘the lowest cost supplier and sign[ed] up to impossible schedules,’ which reflected
    unrelenting and dangerous economic pressure from senior management: [‘]I don’t know
    how to fix these things . . . it’s systemic. It’s culture. It’s the fact that we have a senior
    leadership team that understand very little about the business and yet are driving us to
    certain objectives. . . . Sometimes you just have to let things fail big so that everyone can
    identify a problem . . . maybe that’s what needs to happen rather than just continuing to
    scrape by.[’]”); id. ¶ 91 (“In July 2018, Boeing’s Test and Evaluation department voiced
    concerns to ‘Boeing Executive Leadership’ regarding the ‘considerable pressure’ the 737
    MAX program faced over production schedules. The department’s letter identifies the
    ‘ero[sion of] safety margins’ due to the declining average experience among senior
    production pilots.         [Boeing’s] Employee Relations Director . . . forwarded the
    communication to defendant Hyslop, Boeing’s chief engineer, but . . . mischaracterized the
    letter as seeking mainly compensation and additional benefits, without flagging the safety
    concerns of overworked employees.”); id. ¶ 92 (“[I]n November 2018, after the Lion Air
    Crash, . . . a Quality Assurance Inspector and nearly 30-year Boeing veteran, recounted
    mistreatment ‘for reporting serious quality problems,’ explaining that ‘[n]o one should
    have to go through this when trying to do what is right – to assure the quality of our
    product.’ He added, ‘I have stood alone during these past months trying to assure that we
    have addressed these quality issues. I had only hoped that management would have stood
    with me.’ [The employee] identified another whistleblower . . . a former quality specialist
    and compliance monitor, whom he said was also harassed in retaliation for reporting of
    ‘quality concerns’ related to the 737 MAX.”).
    
    
                                                 31
          While some of these complaints made their way to senior management, none
    
    made it to the Board.      The Board was unaware of whistleblower complaints
    
    regarding airplane safety, compliance, workforce exhaustion, and production
    
    schedule pressure at the 737 MAX facility.
    
             D.     Undisclosed Issues With The 737 MAX Ultimately Cause The
                    Lion Air and Ethiopian Airlines Crashes; The Board Continues
                    To Shirk Safety Oversight, Receiving Only Sporadic Updates
                    About The 737 MAX From Management.
    
          On October 29, 2018, a new 737 MAX flying as Lion Air Flight 610 crashed
    
    in the Java Sea minutes after taking off from Jakarta, Indonesia, killing all 189
    
    passengers and crew. Satellite data show the plane rising and falling repeatedly, as
    
    MCAS continually activated to force the airplane’s nose downwards. The plane’s
    
    black box data revealed that the pilots searched the Quick Reference Handbook’s
    
    checklist for abnormal flight events, but it said nothing about MCAS, which was
    
    later identified as the cause of the tragedy. Within days of recovering the black box,
    
    Boeing started revising MCAS.
    
          The FAA quickly conducted a risk assessment analysis and concluded what
    
    many at Boeing already knew:         that there was an unacceptably high risk of
    
    catastrophic failure if MCAS was not changed, estimating that the then-existing fleet
    
    of Boeing 737 MAX planes would average one fatal crash stemming from MCAS
    
    every two to three years if the software was not corrected. Boeing then conducted
    
    its own risk assessment and reached a conclusion consistent with the FAA’s. On
    
                                             32
    November 6, Boeing issued an Operations Manual Bulletin to the airlines (the
    
    “Manual Bulletin”), stating, “[i]n the event of erroneous AOA sensor data, the pitch
    
    trim system can trim the stabilizer nose down in increments lasting up to 10
    
    seconds.”84 It did not name MCAS.
    
             The next day, November 7, the FAA issued an Emergency Airworthiness
    
    Directive (the “Emergency Directive”), indicating that “an unsafe condition exists
    
    that requires immediate action by an owner/operator.”85 The Emergency Directive
    
    described “an analysis performed by the manufacturer showing that if an erroneously
    
    high single [AOA] sensor input is received by the flight control system, there is a
    
    potential for repeated nose-down trim commands of the horizontal stabilizer.”86 The
    
    FAA mandated that Boeing revise its flight manuals “to provide the flight crew
    
    horizontal stabilizer trim procedures to follow under certain conditions.” 87 In
    
    response, Muilenburg emailed Greg Smith warning the mandate might harm
    
    productivity: “[w]e need to be careful that the [airplane flight manual] doesn’t turn
    
    into a compliance item that restricts near-term deliveries.”88
    
    
    
    
    84
         Id. ¶ 188.
    85
         Id. ¶ 189.
    86
         Id. ¶ 190.
    87
         Id. ¶ 191.
    88
         Id. ¶ 211.
    
    
                                              33
             On November 12, The Wall Street Journal published an article entitled
    
    “Boeing Withheld Information on 737 Model, According to Safety Experts and
    
    Others” (the “WSJ Article”).89 It reported that “neither airline managers nor pilots
    
    had been told such a[n MCAS] system had been added to the latest 737 variant—
    
    and therefore aviators typically weren’t prepared to cope with the possible risks.”90
    
    It reported disdain by pilots who questioned why they were not properly trained on
    
    the MCAS system.91 Finally, the WSJ Article reported that the FAA learned the new
    
    flight control systems “were not highlighted in any training materials or during
    
    lengthy discussions between carriers and regulators about phasing in the latest 737
    
    derivatives” and that Boeing purposefully withheld that critical information. 92
    
                            1.       The Board Passively Receives Lion Air Crash
                                     Updates From Muilenburg, But Does Not
                                     Initiate Action.
    
             Management did not bring the Lion Air Crash to the Board’s attention for over
    
    a week. Muilenburg first contacted the Board, Smith, and McAllister regarding the
    
    Lion Air Crash on November 5.93 His half-page email identified the players in the
    
    
    
    89
         Id. ¶¶ 195–98; id. Ex. D.
    90
         id. Ex D; id. ¶ 198.
     Id. Ex. D (“It’s pretty asinine for them to put a system on an airplane and not tell pilots
    91
    
    who are operating the airplane, especially when it deals with flight controls . . . . Why
    weren’t they trained on it?”); id. ¶ 198.
    92
         id. Ex. D; id. ¶ 197.
    93
         id. ¶¶ 208–09; Defs.’ Ex. 55.
    
    
                                                 34
    investigation, reported that the Indonesian investigator “publicly said today that the
    
    airspeed indicator on the airplane that crashed was damaged during the last four
    
    flights of the airplane,” and concluded, “We believe the 737 MAX fleet is safe.”94
    
    It did not mention MCAS, the lack of redundancy for a faulty sensor, or the missing
    
    sensor alert or specific pilot instructions.
    
             Muilenburg updated the Board again between November 8 and 23, spurred by
    
    unfavorable information about the 737 MAX and Lion Air Crash becoming public.95
    
    On November 13, Director Arthur Collins forwarded Muilenburg a news summary:
    
    “I am sure you have already read [the WSJ Article] and will brief the [B]oard on this
    
    topic.” 96 Muilenburg consulted with then-current and former Lead Directors
    
    Calhoun and Duberstein about the WSJ Article and its fallout.97 Calhoun advised
    
    Muilenburg to contact the Board. And so on November 13, Muilenburg sent a memo
    
    to the Board regarding the Lion Air Crash.98 He told the Board the WSJ Article was
    
    “categorically false” and “wrongly claims Boeing withheld from customers and
    
    flight crews information related to a pitch augmentation system that’s unique to the
    
    
    
    
    94
         Defs.’ Ex. 55.
    95
         See Defs.’ Ex. 53; Defs.’ Ex. 56; Defs.’ Ex. 57; Defs.’ Ex. 58.
    96
         Am. Compl. ¶ 212.
    97
         See id. Ex. E.
    98
         See id. Ex. D.
    
    
                                                   35
    737 MAX.”99 And he blamed the Lion Air flight crew for the crash.100 He did not
    
    explain that Boeing knew MCAS was vulnerable and susceptible to failure, nor that
    
    pilots were not informed about or trained on MCAS.
    
                The next day, Muilenburg informed Duberstein that Calhoun “suggested that
    
    my note to the Board focus solely on the Lion Air matter given the importance and
    
    visibility,” and that he would update the Board on Lion Air the following
    
    weekend.101 Duberstein’s response focused on the negative public reaction to the
    
    Lion Air Crash and its impact on production: “Press is terrible. Very tough. Lots
    
    of negative chatter I’m picking up. Not pleasant. We need to address more
    
    aggressively concerns merging re 737 line, deliveries, and Lion Air.”102 Muilenburg
    
    responded that he was “working all angles” on public relations, government
    
    relations, and investor relations, including “working airline operations leaders to get
    
    messages and counter pilot comments (who are motivated to get separate type rating
    
    for MAX – equals more pay).”103
    
                On November 17, Boeing executives, including Muilenburg, Smith,
    
    McAllister, Hyslop, and Luttig, discussed a Bloomberg article that Muilenburg
    
    
    99
         Id.; Defs.’ Ex. 57.
    100
          Am. Compl. Ex. D.
    101
          See id. Ex. E.
    102
          Id.
    103
          Id.; id. ¶ 214.
    
    
                                                36
    characterized as “filled with misleading statements and inaccuracies – implying that
    
    we hid MCAS from operators and that procedures were not covered in
    
    training/manuals.”104
    
             On November 18, after The New York Times published an article addressing
    
    MCAS’s role in the Lion Air crash, Muilenburg sent the Board another letter.105 He
    
    bemoaned “a steady drumbeat of media coverage—and continued speculation—on
    
    what may have caused the accident” and again falsely suggested that the 737 MAX
    
    was safe.106 Muilenburg took the same position in November 19 and 20 internal
    
    messages to Boeing employees and executives.
    
             Then, on November 21, Muilenburg emailed the Board to invite them to an
    
    “optional” November 23 Board call for an update on the Lion Air Crash from
    
    Muilenburg, Luttig, and Smith.107 This was the first time the Board convened after
    
    the crash. There are no minutes. Management’s talking points for the call explained
    
    that erroneous AOA data “contributed to the mishap,” and that the Lion Air repair
    
    shop may not have followed the approved repair process on the sensor. 108 The
    
    
    
    104
          Id. ¶ 217.
    105
          Defs.’ Ex. 58; Am. Compl. ¶ 218.
    106
          Defs.’ Ex. 58.
    107
       Am. Compl. ¶¶ 223–24; Defs.’ Ex. 59 (“Consider this phone call ‘optional’,
    understanding that many of you have family and friend activities planned for this coming
    weekend.”).
    108
          Defs.’ Ex. 86.
    
    
                                              37
    talking points included an explanation of MCAS, and described Boeing’s post-Lion
    
    Air Crash updates to operators regarding erroneous AOA sensors and MCAS. They
    
    also explained the “further safety enhancement” of a software update “that will limit
    
    the airplane’s response in case of erroneous AOA sensor data” and “further reduce
    
    the risk associated with a discrepant AOA sensor and help reduce pilot workload.”109
    
    The talking points also provided that “the function performed by MCAS” was
    
    referenced in the FCOM, that the “appropriate flight crew response to uncommanded
    
    trim, regardless of cause, is contained in existing procedures,” and that “any
    
    suggestion that we intentionally withheld information about airplane functionality
    
    from our customers simply isn’t true.”110 They disclosed a meeting the week before
    
    with the acting FAA Administrator, who “understood how MCAS works and
    
    believes the 737 MAX is a safe airplane,” and who knew about the repair shop
    
    investigation.      Finally, the talking points expressed frustration with people
    
    “commenting freely, including customers, pilot unions, media, and aerospace
    
    industry punditry,” and addressed Lion Air’s orders, other customers’ orders, and
    
    Boeing’s stock price.111
    
    
    
    
    109
          Id.
    110
          Id.
    111
          Am. Compl. ¶ 224; Defs.’ Ex. 86.
    
    
                                             38
             Muilenburg’s subsequent written communications to the Board again blamed
    
    Lion Air’s crew, and stressed that Boeing’s external statement denying its fault was
    
    “showing up in the initial media coverage, which has focused largely on Lion Air’s
    
    operations, maintenance practices and decision to fly with malfunctioning angle of
    
    attack sensors.” 112 Muilenburg encouraged Boeing’s public relations team to
    
    maintain that the 737 MAX was safe, and on December 13, he reported to the Board
    
    that “members of our Communications team met with Wall Street Journal editors in
    
    New York to further discuss ongoing coverage and restate our expectation for fair
    
    and fact-based reporting.”113
    
                          2.     The Board Formally Addresses The Lion Air
                                 Crash For The First Time In December 2018,
                                 But Does Not Focus On The 737 MAX’s Safety
                                 Then Or Thereafter.
    
             After the November 23 optional update, the Board did not formally convene
    
    and address the Lion Air Crash until its regularly scheduled Board meetings on
    
    December 16 and 17. Consistent with the fact that safety was not a regular topic of
    
    Board discussion, the minutes reflect that the Board’s primary focus relating to the
    
    737 MAX and Lion Air Crash was on restoring profitability and efficiency in light
    
    of longstanding supply chain issues. Over the course of two days, the Board
    
    
    
    112
          Am. Compl. ¶ 226.
    113
          Defs.’ Ex. 60; see Am. Compl. ¶ 227.
    
    
                                                 39
    allocated five total minutes to eight different “Watch Items,” one of which was
    
    “progress working through supply chain and factory disruption affecting MAX
    
    deliveries.”114 The Board allocated another five minutes to reviewing a four-page
    
    legal memo “including matters related to the Lion Air incident.” 115 And it allocated
    
    ten minutes to Compliance Risk Management.116 The associated risk management
    
    report contained one page on the FAA Settlement, which said nothing about the 737
    
    MAX or airplane safety generally. 117 In the Executive Session presentation, the
    
    “Lion Air incident” was listed as a “Hot Topic.”118
    
             The Audit Committee met, too. The material it intended to present to the full
    
    Board included an “Ethics and Compliance Update,” but did not contain any
    
    meaningful information about the 737 MAX’s safety or safety generally. 119 An
    
    Ethics and Compliance Update presentation dated December 17, 2018, included a
    
    chart summarizing “Substantiated Cases” of eight categories of “Inquiries and
    
    Investigations,” including “Safety, Health & Environmental” alongside “Sexual
    
    Harassment,” “Proper Use of Co. Time or Resources,” and “Information
    
    
    114
          Defs.’ Ex. 61 at 2; Defs.’ Ex. 84 at -618197, -618203.
      Defs.’ Ex. 14; Defs.’ Ex. 61 at 2; Defs.’ Ex. 84 at -618197, -618204–07. That memo
    115
    
    was wholly redacted in Defendants’ Section 220 production.
    116
          Defs.’ Ex. 84 at -618197.
    117
          Id. at -618233.
    118
          Am. Compl. ¶ 231.
    119
          Defs.’ Ex. 84 at -618218–28.
    
    
                                                  40
    Integrity.”120 The agendas for the Audit Committee’s forthcoming 2019 meetings
    
    did not indicate any focus on airplane safety.121 The December 16 and 17 Board
    
    meeting did not result in any meaningful action to address airplane safety by either
    
    the full Board or the Audit Committee.
    
                The Board next received information about the Lion Air Crash on January 16,
    
    2019, when Muilenburg sent his monthly business summary and competitor
    
    dashboard.122 It began with a one-paragraph “brief update on the ongoing Lion Air
    
    flight 610 accident investigation” that was proceeding with Boeing’s “full
    
    support.”123 Muilenburg also noted that Boeing is “exploring potential 737 MAX
    
    software enhancements that, if made, would further improve the safety systems,”
    
    and maintained that “airlines around the world continue to operate the MAX safely”
    
    and were “ma[king] significant new orders and commitments, expressing strong
    
    confidence in the airplane.” 124 After mentioning safety in passing, Muilenburg
    
    moved on to a detailed discussion of the market’s confidence in the 737 MAX, and
    
    Boeing’s “financials” and “strong operating performance and solid cash generation,”
    
    which were “driven by solid commercial . . . deliveries . . . as well as continued
    
    
    120
          Id. at -618225.
    121
          Id. at -618301.
    122
          Am. Compl. ¶ 233; Defs.’ Ex. 62.
    123
          Defs.’ Ex. 62.
    124
          Id.
    
    
                                                 41
    focus on productivity.”125 He expressed that Boeing had “set a new industry and
    
    company record and validated our team’s 737 recovery efforts,” and noted that 2019
    
    was “already off to a strong start,” as the Company was “focus[ed]” on “driving 737
    
    production line stability and preparation for the 57 aircraft per month rate
    
    decision.”126 The dashboard concluded with an overview of political issues affecting
    
    the Company.127
    
                Muilenburg sent his next monthly business summary and competitor
    
    dashboard to the Board on February 13.128 It did not mention the Lion Air Crash.129
    
    Muilenburg wrote that Boeing would continue to work with the FAA on a
    
    “737 MAX software enhancement that, when implemented, will further improve
    
    system safety;” that “[d]espite recent media speculation,” nothing had been decided
    
    about the “software update and its timing;” and that “[w]e’ll keep engaging media
    
    and other stakeholders on the merits of the airplane, our processes and our
    
    people.”130 It went on:
    
                And on 737, we’re driving production line stability and engaging key
                suppliers, with a particular focus on CFM engines, as we prepare for a
                decision later this year on increasing rate to 57 airplanes per month. . . .
    
    125
          Id.
    126
          Id.
    127
          Id.
    128
          Am. Compl. ¶ 234; Defs.’ Ex. 63.
    129
          See generally Defs.’ Ex. 63.
    130
          Id. at -13683.
    
    
                                                    42
                We remain on track to achieve our quarterly delivery target of 206
                planes (including 147 737s), and ramp-up of 737 deliveries in February
                and March remains an intense focus area.131
    And it highlighted financials, noting that “Boeing stock [recently] closed at an all-
    
    time high.”132
    
                One week later, on February 20, Executive Vice President and General
    
    Counsel Michael Luttig provided a report to the Audit Committee summarizing
    
    significant legal matters, including the “Lion Air Accident.”133
    
                            3.     The Board Decides To Forego Investigation, And
                                   Boeing Belatedly Admits It Deceived The FAA.
    
                The Board next met formally on February 24 and 25. As reflected in the
    
    Executive Session presentation, two of the “Other Updates” on “Key Topics” were
    
    “737 Production” and “Lion Air Accident.”134 On February 25, the Board issued an
    
    addendum to its meeting minutes summarizing a legal update from Luttig.135 The
    
    addendum states that the Board “decided to delay any investigation until the
    
    conclusion of the regulatory investigations or until such time as the Board
    
    determines that an internal investigation would be appropriate.” 136
    
    
    
    131
          Id. at -13862.
    132
          Id.
    133
          Defs.’ Ex. 15. The remainder of that report was redacted in the Section 220 production.
    134
          Defs.’ Ex. 64 at -575.
    135
          Pls.’ Ex. 4; Am. Compl. ¶ 238.
    136
          Pls.’ Ex. 4.
    
    
                                                  43
              By January 2019, the Department of Justice (“DOJ”) had opened a criminal
    
    investigation into whether Boeing had defrauded the FAA when obtaining
    
    certification of the 737 MAX. In February 2019, Boeing gave the DOJ Forkner’s
    
    November 2016 text messages admitting he had lied to the FAA.137 Muilenburg and
    
    Luttig were aware of the text messages in the first couple of months of 2019.
    
    Muilenburg, Luttig, and Boeing did not provide those text messages to the FAA until
    
    October 2019. The FAA demanded an explanation for Forkner’s remarks and
    
    “Boeing’s delay in disclosing the document to its safety regulator.” 138
    
              As stated in Boeing’s eventual 2021 agreement with the DOJ, Boeing “did not
    
    timely and voluntarily disclose to the Fraud Section the offense conduct described
    
    in the Statement of Facts” and Boeing’s cooperation “was delayed and only began
    
    after the first six months of the Fraud Section’s investigation, during which time the
    
    Company’s response frustrated the Fraud Section’s investigation.”139 As a result,
    
    Boeing agreed to pay a “Total U.S. Criminal Monetary Amount” of $2.513 billion,
    
    composed of a criminal monetary penalty of $243.6 million, compensation payments
    
    to Boeing’s 737 MAX airline customers of $1.77 billion, and the establishment of a
    
    $500 million crash-victim beneficiaries fund.140
    
    
    137
          Am. Compl. ¶¶ 10, 235, 290; id. Ex. A; id. Ex. B.
    138
          Pls.’ Ex. 5; Am. Compl. ¶ 278.
    139
          Am. Compl. Ex. B ¶¶ 4(b)–(c); id. ¶¶ 13, 106, 123, 239, 290.
    140
          Id. ¶ 296; id. Ex. B.
    
    
                                                 44
                           4.     MCAS Causes The Ethiopian Airlines Crash.
    
             On March 10, less than one month after the Board declined to pursue an
    
    internal investigation, another 737 MAX crashed. Ethiopian Airlines Flight ET 302
    
    went down shortly after taking off, killing all 157 passengers and crew. The pilots
    
    followed Boeing’s recommended emergency procedures, but could not regain
    
    control of the plane because MCAS repeatedly activated.
    
                           5.     Muilenburg Does Damage Control, But The
                                  Board Does Not Assess The Safety Of Boeing’s
                                  Airplanes.
    
             Boeing quickly issued a public statement before authorities released any
    
    details about the Ethiopian Airlines Crash. On March 11, the Company emphasized
    
    that if the Ethiopian Airlines pilot followed the checklist of procedures in the flight
    
    manual, he “[would] always be able to override the flight control using electric trim
    
    or manual trim.”141 But by that time, one-third of the world’s fleet of in-service 737
    
    MAX aircraft had been grounded, and several United States Senators called for the
    
    FAA to ground the 737 MAX.
    
             That same day, Muilenburg emailed the Board. While stating that “[o]ur
    
    objective is to ensure our teams are centered on our priorities, including safety,
    
    quality and stability,” 142 Muilenburg’s comments were not geared toward taking
    
    
    141
          Id. ¶ 248.
    142
          Defs.’ Ex. 66 at -620851.
    
    
                                              45
    action to address and improve the 737 MAX’s safety. Nor were they made in
    
    response to any Board inquiry as to the airplane’s safety. Instead, Muilenburg
    
    addressed the Board’s objectives for the 737 MAX:                “ongoing production
    
    operations,” revenue, and reputational achievement.143 He advised the Board that
    
    management was engaging in extensive outreach with Boeing’s customers and
    
    regulators to “reinforce our confidence in the 737 MAX.”144 He touted that the FAA
    
    had issued a notification reinforcing the 737 MAX’s airworthiness, and “mentioned
    
    the pending MAX software enhancement with the expectation it will mandate
    
    upgrade in April.”145 He concluded by addressing how Boeing intended to handle
    
    the Ethiopian Airlines Crash in the media and internal communications, and directed
    
    inquiries to Boeing’s media relations team.
    
                Thereafter, Muilenburg reviewed and responded to an all-employee email
    
    prepared by that team. He thought the note was “solid,” but “lack[ed] a statement
    
    about our confidence in the fundamental safety of the MAX.” 146
    
                This goes back to our discussion last night on answering two basic
                questions: is the MAX safe? And was MCAS involved? We need to
                make a strong statement on the first, and be clear that there are no
                supporting facts on the second.147
    
    143
          Id.
    144
          Id.
    145
          Id.
    146
          Am. Compl. ¶ 243.
    147
          Id.
    
    
                                                46
                Muilenburg emailed the Board again on March 12, providing a “quick interim
    
    update” before a formal Board call the following day.148 Muilenburg stated that “[a]s
    
    you’ve seen in the news flow today, additional international authorities have
    
    grounded the 737 MAX,” but assured the Board that those decisions were driven
    
    solely by “public/political pressure, not by any new facts.” 149
    
                During this pivotal period, Boeing was engaged in continuous conversations
    
    with the FAA, and Muilenburg spoke with Department of Transportation Secretary
    
    Elaine Chao and President Donald Trump in an attempt to keep the 737 MAX flying.
    
    On March 12, FAA officials reiterated their position that domestic flights of the 737
    
    MAX would continue. At least one director, Liddy, praised Muilenburg’s efforts
    
    during this period.150
    
                            6.    The FAA Grounds The 737 MAX, But The
                                  Board’s Focus Remains On Restoring Boeing’s
                                  Reputation And Sales.
    
                On March 13, the FAA’s investigation of the Ethiopian Airline Crash
    
    indicated that the plane experienced the same pattern of repeated steep dives and
    
    
    
    
    148
          Defs.’ Ex. 68.
    149
          Id.
    150
       Am. Compl. ¶ 252 (“I, for one, really appreciate the strong leadership you’re
    demonstrating in a very challenging situation. Your leadership will prevail.”).
    
    
                                                47
    climbs caused by MCAS that preceded the Lion Air Crash. The FAA grounded the
    
    737 MAX, becoming the final major aviation regulator to do so.
    
                After the FAA grounded the planes, the Board held a call with management
    
    regarding the Ethiopian Airlines Crash and whether Boeing should itself ground the
    
    fleet.151 The Board did not consider, deliberate, or decide on grounding the plane or
    
    other immediate remedial measures until after the second crash and the FAA’s
    
    grounding over Boeing’s objection.          No Board minutes or agendas between
    
    November 2018 and March 2019 reference a discussion about grounding the 737
    
    MAX.
    
                Nonetheless, Boeing jumped at the opportunity to claim credit for the
    
    grounding. Later on March 13, Muilenburg told the Board that Boeing had managed
    
    to get its own messaging out about the grounding before the FAA released its
    
    statement.152
    
                That evening, Muilenburg followed up with his monthly business update,
    
    which began with his efforts to rehabilitate Boeing’s image.153 In particular, he
    
    shared that “Kevin McAllister and I spent time walking the 737 production line in
    
    Renton, where we filmed a joint video for team members.”154 With the comment
    
    
    151
          See Defs.’ Ex. 69; Am. Compl. ¶¶ 255–56.
    152
          Defs.’ Ex. 69.
    153
          Defs.’ Ex. 70.
    154
          Id.
    
    
                                               48
    that “safety . . . is our top priority,” Muilenburg disclosed that for the first time, he
    
    “added safety metrics to our monthly report.”155 This marked one of the first formal
    
    implementations of safety reporting to the Board. Muilenburg initiated this update.
    
    His addition continued to focus on production, including “year-to-date targets and
    
    actuals for lost workday cases, recordable injuries and near misses.”156 His March
    
    business summary then turned to the 737 MAX’s business performance and ability
    
    to meet delivery targets.157
    
                Over the next six weeks, Muilenburg’s communications to the Board focused
    
    on restoring Boeing’s reputation and returning the 737 MAX to service. And some
    
    Directors’ messages to Muilenburg echoed his focus on reputational and production
    
    triage. For example, on March 21, Giambastiani emailed Muilenburg to direct him
    
    to an article from Aviation Week and emphasized a comment suggesting the pilots
    
    were at fault for the two crashes. 158 And on March 26, Duberstein emailed
    
    Muilenburg to inquire about the reputational impact of an emergency landing of a
    
    Southwest 737 MAX due to engine problems, complaining that the report “[l]ed the
    
    network news” and was “[a]nother reputational hit at us and no comment from us.”159
    
    
    155
          Id.
    156
          Id.
    157
          Id.
    158
          Am. Compl. ¶ 259 (“More importantly for the pilot . . . FLY THE PLANE.”).
    159
          Id. ¶ 260.
    
    
                                                49
             On April 4, a preliminary report on the Ethiopian Airlines Crash identified
    
    MCAS as a contributing cause for the accident. After sending a draft to the full
    
    Board, Boeing issued a press release maintaining that most “accidents are caused by
    
    a chain of events” and that was the case for the two crashes.160
    
                       E.   In April 2019, The Board Adopts Safety Oversight Measures.
    
             Some directors questioned Boeing’s approach. On March 15, Arthur Collins
    
    and then-Lead Director David Calhoun recommended a Board meeting devoted to
    
    product safety. As Collins explained to Calhoun,
    
             In light of the two 737 MAX 8 crashes and subsequent global fleet
             grounding, the previous grounding of Air Force KC-46 tankers, and the
             Amazon 767 cargo plane crash, I believe we should devote the entire
             board meeting (other than required committee meetings and reports) to
             a review of quality within Boeing. This would start with an update on
             what we know about each of the three previously mentioned situations,
             but then include a review of quality metrics and actions that are either
             currently in place or planned to assure that the highest level of quality
             is designed into all Boeing products or incorporated into all
             manufacturing, customer training, and service support activities. In
             addition to providing necessary information for the Board, this type of
             agenda would underscore the board’s (and management’s) unwavering
             commitment to quality and safety above all other performance criteria.
             I recognize that this type of approach needs to be communicated
             carefully so as not to give the impression that the board has lost
             confidence in management (which we haven’t) or that there is a
             systemic problem with quality throughout the corporation (which I
             don’t believe there is), but I’m sure this can be done. . . . I’ll leave the
             decision in your hands with Dennis [Muilenburg].161
    
    
    160
          Id. ¶ 262.
    161
          Id. Ex. C.
    
    
                                                 50
    Collins followed up on the “category of ‘lessons learned,’” reminding Calhoun that,
    
    at Medtronic (on whose board they both had served), Collins “began each board
    
    meeting, executive committee meeting, and operating review with a review of
    
    product quality/safety—before any discussion of financial performance, market
    
    share/competitive activities, new product development timetables, and certainly
    
    stock price.”162 He stressed that people “paid close attention to the priorities of
    
    senior management, and everyone in the corporation understood that nothing was
    
    more important to the CEO and the board than quality/safety,” and that “[i]t’s hard
    
    to quantify the impact of this approach, but it certainly was important.” 163
    
                Calhoun forwarded Collins’s messages to Muilenburg, who responded that it
    
    was “[g]ood input”; that he “added Safety data to the Board lead-off briefing, and
    
    just added it to my monthly Board note too”; and that “just so you know, Safety data
    
    is the first data we look at during our internal ExCo reviews.” 164 Thereafter,
    
    Muilenburg and Calhoun held a call regarding Collins’s suggestions for making
    
    safety a Board priority.165
    
                At the Board’s next regularly scheduled meeting on April 28 and 29, the Board
    
    focused on the Ethiopian Airlines Crash and its implications for the Company. In
    
    
    162
          Id.
    163
          Id.
    164
          Id. I infer “ExCo” refers to management’s Executive Council.
    165
          See id.
    
    
                                                  51
    contrast to prior Board meetings, the Board dedicated approximately two hours and
    
    fifteen minutes to discussing the 737 MAX. For the first time, the Board critically
    
    assessed MCAS, the FAA certification process, and pilot training requirements.
    
              The Board also initiated Board-level safety reporting for the first time. On
    
    April 4, the Board established the Committee on Airplane Policies and Processes
    
    (the “Airplane Committee”). Even then, the Airplane Committee’s fact-finding
    
    sessions intended to inform the Committee’s conclusions and recommendations
    
    were sparsely attended: Giambastiani was the sole Board attendee at more than half
    
    of the Committee’s eighteen fact-finding sessions with internal and external experts,
    
    including on topics such as airline training requirements and an overview of BCA’s
    
    safety process.
    
              Between April and August 2019, the Airplane Committee entertained
    
    presentations on seven new topics—including “[c]ommercial airplane design and
    
    manufacturing and policies and processes,” “aircrew training requirements,” and
    
    “engineering and safety organizational structures in related industries”—none of
    
    which had been the subject of previous Board briefings.166 For example, in April
    
    2019, Lynne Hopper, Boeing’s Vice President of BCA Engineering, and Beth
    
    Pasztor, BCA’s Vice President of Safety, Security & Compliance, presented to the
    
    Board for the first time.
    
    166
          Id. ¶ 70.
    
    
                                               52
              On May 6, for the first time, the Airplane Committee formally requested
    
    information about the cause of the crashes. As Committee chair, Giambastiani asked
    
    Hyslop to provide information about pilot training requirements, Boeing’s “Quick
    
    Action” checklists for emergencies, and airlines that had purchased an AOA disagree
    
    alert. 167 And in late June, Giambastiani proposed that product safety reports
    
    evaluated by the SRB “should feed to [A]udit [C]ommittee” and “should go to
    
    CTO/CFO and [be] shared with Board”; that the Audit Committee should have
    
    “visibility of high risk issues”; and that “the entire list of safety issues on the MAX
    
    [should be] reported to Dennis [Muilenburg]/Greg [Hyslop].” 168
    
              The Airplane Committee also recommended that the Board establish another
    
    committee dedicated to safety. And so on August 26, the Board established the
    
    Aerospace Safety Committee “for the purpose of assisting the Board in the oversight
    
    of the safe design, development, manufacture, production, operations, maintenance,
    
    and delivery of the aerospace products and services of the Company.” 169 It was also
    
    responsible for overseeing the airplane certification process and Company protocols
    
    for engaging with the FAA. In turn, the Aerospace Safety Committee quickly
    
    recommended that the Board create yet another oversight committee. On September
    
    
    
    167
          Id. ¶ 72.
    168
          Id. ¶ 81 (alteration in original).
    169
          Id. ¶ 73.
    
    
                                               53
    30, the Board created a Product and Services Safety Organization that was
    
    responsible for, among other things, investigating “cases of undue pressure and
    
    anonymous product and service safety concerns raised by employees,” and
    
    represented Boeing’s first mechanism or reporting line to convey employee
    
    complaints to the Board.170
    
              Product safety reporting processes up to executives and the Board were
    
    operational by October 20. And at the December 15 Board meeting, the Audit
    
    Committee received a compliance risk management report from chief compliance
    
    and ethics officer Sands that, for the first time, included a category for “Safety.” In
    
    comparison, Sands’s report from the December 2018 Board meeting following the
    
    Lion Air Crash had not covered product safety at all.
    
              Muilenburg also embraced the new focus on safety. In an email to McAllister,
    
    Hyslop, Smith, and other senior Boeing officials, he wrote,
    
              As part of our lessons learned from the MAX, we need to have a clear
              understanding of how safety risk is being assessed, and appropriately
              “test” those items that are assessed as “medium” or at a “minor” or
              “major”         hazard     level       to       ensure     the      right
              visibility/action/communication. . . . This is an exceptionally important
              process improvement area for us all.171
    
    
    
    
    170
          Id. ¶ 93.
    171
          Id. ¶ 82.
    
    
                                                 54
    By late 2019, Muilenburg began receiving “granular weekly reports of potential
    
    safety issues discussed at meetings of rank-and-file engineers - something that did
    
    not happen in the past.”172 And Muilenburg eventually acknowledged that access to
    
    better information would have supported grounding the 737 MAX fleet shortly after
    
    the Lion Air Crash.173
    
                       F.   The Board Attempts To Preserve Its Image, Despite
                            Eschewing Safety Oversight Initiatives Until April 2019.
    
              The Board publicly lied about if and how it monitored the 737 MAX’s safety.
    
    As the Board was establishing formal safety monitoring processes, then-Lead
    
    Director Calhoun held a series of interviews with major newspapers with the
    
    following corporate objective: “Position the Boeing Board of Directors as an
    
    independent body that has exercised appropriate oversight.” 174 As to the Lion Air
    
    Crash, Calhoun represented that the Board had been “notified immediately, as a
    
    board broadly,” after the Lion Air crash and met “very, very quickly” thereafter;175
    
    participated in evaluating the safety risk associated with the 737 MAX; and
    
    considered grounding the 737 MAX after the Lion Air Crash, but concluded the
    
    
    
    
    172
          Id. ¶ 83.
    173
       Id. ¶ 84 (“[I]f we knew back then what we know now, we would have grounded right
    after the first accident.”).
    174
          Id. ¶ 263.
    175
          Id. ¶¶ 268–69.
    
    
                                               55
    crash “was an anomaly” that did not warrant grounding the airplane. 176 As to the
    
    Ethiopian Airlines Crash, Calhoun represented that the Board met within twenty-
    
    four hours of the crash to discuss potential grounding of the 737 MAX and
    
    recommended that the 737 MAX be grounded. Each of Calhoun’s representations
    
    was false.
    
             In addition, Calhoun and the Board would publicly denounce Muilenburg.
    
    Muilenburg had come under fire from the FAA, but as of November 5, 2019,
    
    Calhoun maintained that, “[f]rom the vantage point of our board, Dennis has done
    
    everything right.” 177 With additional scrutiny, regulators learned the extent of
    
    Boeing’s deceit under Muilenburg’s leadership, and the FAA came down on him.
    
    On December 22, after learning that the FAA had reprimanded Muilenburg and after
    
    The New York Times published an article reporting on his deficiencies, the Board
    
    called a meeting and voted to terminate Muilenburg and replace him with Calhoun,
    
    “to restore confidence in the Company moving forward as it works to repair
    
    relationships with regulators, customers, and all other stockholders.” 178
    
             The Board did not terminate Muilenburg for cause, and publicly characterized
    
    his departure as his “resignation,” and later as his “retirement.”179 In doing so, the
    
    
    176
          Id. ¶ 271.
    177
          Id. ¶ 280.
    178
          Id. ¶¶ 284–85.
    179
          Id. ¶¶ 288–89.
    
    
                                              56
    Board enabled Muilenburg to retain unvested equity awards worth approximately
    
    $38,642,304.180 The Board also announced that Luttig would “retire,” allowing him
    
    to keep his unvested equity awards as well.181 As alleged, the Board chose this path
    
    because “[a]ny public dispute between Boeing and Muilenburg would have exposed
    
    the Board’s prolonged support of Muilenburg and lack of safety oversight.” 182
    
              Calhoun became CEO in January 2020. In that role, he publicly questioned
    
    Muilenburg’s leadership, shifting blame away from the Board. Calhoun stated that
    
    the Board “never seriously questioned [Muilenburg’s] strategy, in part because
    
    before the first MAX crash off the coast of Indonesia in October 2018, the company
    
    was enjoying its best run in years,” and painted Muilenburg as a money-hungry
    
    leader that was willing to prioritize profits over quality and safety.183 In Calhoun’s
    
    words, “If [the Board] w[as] complacent in any way, maybe, maybe not, I don’t
    
    know. . . . We supported a C.E.O. who was willing and whose history would suggest
    
    that he might be really good at taking a few more risks.”184
    
    
    
    180
          Id. ¶ 286.
    181
          Id. ¶ 289.
    182
          Id. ¶ 287.
    183
       Id. ¶ 291 (quoting a New York Times article as stating, “[Calhoun had] never be able to
    judge what motivated [Muilenburg], whether it was a stock price that was going to continue
    to go up and up, or whether it was just beating the other guy to the next rate increase,” and
    that “[i]f anybody ran over the rainbow for the pot of gold on stock, it would have been
    [Muilenburg]”).
    184
          Id. (alterations in original).
    
    
                                                 57
                 G.    Corporate Trauma Inspires This Suit.
    
             The 737 MAX fleet was grounded for twenty months, until November 18,
    
    2020. During that period, Boeing was federally mandated to cure the defects in the
    
    737 MAX’s MCAS system and AOA sensor and to revamp pilot training. But these
    
    measures did not rectify the significant damage the Lion Air and Ethiopian Airlines
    
    Crashes and the 737 MAX Grounding caused to Boeing’s profitability, credibility,
    
    reputation, and business prospects. Nor did they unwind Boeing’s exposure to
    
    substantial criminal, regulatory, and civil liability. In 2020, Boeing estimated that it
    
    had incurred non-litigation costs of $20 billion, and litigation-related costs in excess
    
    of $2.5 billion. Litigation continues on multiple fronts, and customers cancelled
    
    orders.      And in January 2021, Boeing consented to the filing of a criminal
    
    information charging the Company with conspiracy to defraud the United States and
    
    thereby incurring billions of dollars in penalties.185
    
             The corporate harm Boeing suffered inspired numerous books and records
    
    requests and derivative actions filed in this Court in 2019. The Court consolidated
    
    the plenary actions and appointed NYSCRF and FPPA as Co-Lead Plaintiffs on
    
    August 3, 2020.186 Plaintiffs filed the Verified Amended Consolidated Complaint
    
    on January 29, 2021 (the “Amended Complaint”), addressing the DOJ’s criminal
    
    
    185
          Id. ¶ 11; Am. Compl. Ex. B.
    186
          D.I. 88.
    
    
                                               58
    penalties.187 Count I asserts a derivative claim for breach of fiduciary duty against
    
    the Director Defendants, alleging they consciously breached their fiduciary duties
    
    and violated their corporate responsibilities by (1) before the Lion Air Crash, failing
    
    to implement any reasonable information and reporting system to monitor and
    
    oversee the safety of Boeing’s airplanes; (2) after the Lion Air Crash, despite being
    
    made aware of red flags concerning the operation, development, and nondisclosure
    
    of MCAS, consciously disregarding their duty to investigate and to remedy any
    
    misconduct uncovered; and (3) after the Ethiopian Airlines Crash, falsely assuring
    
    the public about the safety of the 737 MAX and MCAS and deciding to cash out
    
    Muilenburg’s unvested equity-based compensation.188 Count II asserts a derivative
    
    claim for breach of fiduciary duty against the Officer Defendants, alleging they
    
    consciously breached their fiduciary duties or, at a minimum, acted with gross
    
    
    
    187
          See generally Am. Compl.
    188
        Id. ¶ 305. Plaintiffs originally alleged that the Director Defendants breached their
    fiduciary duties before the Lion Air Crash by ignoring several red flags concerning airplane
    safety. Id. At oral argument, Plaintiffs shifted this theory. See Hr’g Tr. 135–36 (“MR.
    FRIEDLANDER: Frankly, Your Honor, I think it’s better not to think of those as red flags
    for Marchand in the sense of that -- like Marchand never uses the concept of red flags. . . .
    I would say these are points of emphasis to illustrate the problems that the reporting system
    had . . . because there’s an affirmative obligation to create a reporting system of the type
    described in Marchand. We’re saying they didn’t do it, and then we said which Marchand
    requires. And as a second argument, and they had red flags and nonetheless they still didn’t
    do it. But really it’s all incorporated under the affirmative obligation of Marchand to create
    it. THE COURT: So you would like me to look at those more under prong one as a
    deficient reporting system [rather] than under prong two, red flags? MR. FRIEDLANDER:
    Yeah. But I think they’re important . . . .”).
    
    
                                                 59
    negligence by (1) consciously and repeatedly failing to implement and actively
    
    monitor or oversee a compliance and safety program; (2) consciously disregarding
    
    their duty to investigate red flags and to remedy any misconduct uncovered; and (3)
    
    covering up the extreme safety risks of Boeing’s aircraft.
    
             On March 19, Defendants moved to dismiss pursuant to Court of Chancery
    
    Rules 12(b)(6) and 23.1 (the “Motion”). 189 Defendants submitted eighty-eight
    
    exhibits in support of the Motion.190 The parties briefed the Motion as of June 4.191
    
    I heard argument on June 25 and took the Motion under advisement. 192
    
             II.     ANALYSIS
    
             Defendants have moved to dismiss all claims against them pursuant to Court
    
    of Chancery Rule 23.1 for failure to plead that demand is futile.
    
             Plaintiffs assert Defendants’ breaches of fiduciary duty harmed Boeing. Thus,
    
    the claims belong to Boeing and the decision whether to pursue the claim
    
    presumptively lies with the Board. 193 But our law recognizes that, “[i]n certain
    
    
    189
          D.I. 145; D.I. 146.
    190
          D.I. 147; D.I. 148; D.I. 149; D.I. 150; D.I. 151; D.I. 152; D.I. 160.
    191
          D.I. 146; D.I. 155; D.I. 159.
    192
          D.I. 167; Hr’g Tr.
    193
        White v. Panic, 783 A.2d 543, 550 (Del. 2001) (“In most situations, the board of
    directors has sole authority to initiate or to refrain from initiating legal actions asserting
    rights held by the corporation.”); see Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984) (“A
    cardinal precept of the General Corporation Law of the state of Delaware is that directors,
    rather than shareholders, manage the business and affairs of the corporation.”), overruled
    on other grounds by Brehm v. Eisner, 746 A.2d 244 (Del. 2000).
    
    
                                                    60
    circumstances, stockholders may pursue litigation derivatively on behalf of the
    
    corporation as a matter of equity to redress the conduct of a torpid or unfaithful
    
    management . . . where those in control of the company refuse to assert (or are unfit
    
    to consider) a claim belonging to it.”194 “Because stockholder derivative suits by
    
    [their] very nature . . . impinge on the managerial freedom of directors, our law
    
    requires that a stockholder satisfy the threshold demand requirements of Court of
    
    Chancery Rule 23.1 before he is permitted to assume control of a claim belonging
    
    to the corporation.”195
    
          Rule 23.1 requires pleadings to “comply with stringent requirements of factual
    
    particularity that differ substantially from the permissive notice pleadings governed
    
    solely by Chancery Rule 8(a).”196 To satisfy Rule 23.1, the stockholder must plead
    
    with particularity either that she made a demand on the company’s board of directors
    
    to pursue particular claims and was refused, or why any such demand would be
    
    futile, thereby excusing the need to make a demand altogether. 197 Where, as here,
    
    
    
    194
       In re CBS Corp. S’holder Class Action & Deriv. Litig., 2021 WL 268779, at *27 (Del.
    Ch. Jan. 27, 2021), as corrected (Feb. 4, 2021) (quoting Cumming v. Edens, 2018 WL
    992877, at *11 (Del. Ch. Feb. 20, 2018) (internal quotation marks omitted)).
    195
      Horman v. Abney, 2017 WL 242571, at *6 (Del. Ch. Jan. 19, 2017) (quoting Aronson,
    473 A.2d at 811) (internal quotation marks omitted).
      Brehm, 746 A.2d at 254; accord In re Citigroup Inc. S’holder Deriv. Litig., 964 A.2d
    196
    
    106, 120–21 (Del. Ch. 2009).
    197
      Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040, 1044
    (Del. 2004); Wood v. Baum, 953 A.2d 136, 140 (Del. 2008).
    
    
                                             61
    the stockholder plaintiff foregoes a demand on the board, she “must plead
    
    particularized facts creating a reasonable doubt concerning the Board’s ability to
    
    consider the demand.”198
    
             Demand futility turns on “whether the board that would be addressing the
    
    demand can impartially consider [the demand’s] merits without being influenced by
    
    improper considerations.” 199 While the continued utility of a binary approach to
    
    demand futility has been called into question, for now, Delaware still applies one of
    
    two tests when deciding whether demand upon the board would be futile. 200 The
    
    first, established in Aronson v. Lewis, “applies to claims involving a contested
    
    transaction i.e., where it is alleged that the directors made a conscious business
    
    decision in breach of their fiduciary duties.”201 The second, established in Rales v.
    
    
    
    198
       CBS, 2021 WL 268779, at *28; Citigroup, 964 A.2d at 121 (“Demand is not excused
    solely because the directors would be deciding to sue themselves. Rather, demand will be
    excused based on a possibility of personal director liability only in the rare case when a
    plaintiff is able to show director conduct that is so egregious on its face that board approval
    cannot meet the test of business judgment, and a substantial likelihood of director liability
    therefore exists.” (footnotes and internal quotation marks omitted)).
    199
          Rales v. Blasband, 634 A.2d 927, 934 (Del. 1993).
    200
       See United Food & Commerc. Workers Union v. Zuckerberg, 250 A.3d 862, 877 (Del.
    Ch. 2020) (observing that “the Aronson test has proved to be comparatively narrow and
    inflexible in its application, and its formulation has not fared well in the face of subsequent
    judicial developments”).
    201
        Wood, 953 A.2d at 140 (citing Aronson, 473 A.2d at 814) (explaining the two demand
    futility tests). Under Aronson, the plaintiff must plead particularized facts that create a
    reasonable doubt that (i) the directors are disinterested and independent or (ii) the
    challenged transaction was otherwise the product of a valid exercise of business judgment.
    Id.
    
    
                                                  62
    Blasband,202 applies where a majority of the current members of the board “had not
    
    participated in the challenged decision,”203 or “where the subject of a derivative suit
    
    is not a business decision . . . [such as when the board is alleged to have violated its]
    
    oversight duties.”204
    
             Here, the parties agree that Rales governs.205 “The central question of a Rales
    
    inquiry, no matter the context, is the same: ‘whether the board can exercise its
    
    business judgment on the corporate behalf in considering demand.’”206 In refining
    
    that question, Rales instructs that a director cannot objectively exercise her business
    
    judgment in considering a demand if she is either (1) “interested,” meaning, among
    
    other things, that she faces a “substantial likelihood of liability” for her role in the
    
    alleged corporate wrongdoing; or (2) not independent of another interested
    
    fiduciary.207
    
    
    202
          634 A.2d at 927.
    203
          Zuckerberg, 250 A.3d at 887.
    204
       Wood, 953 A.2d at 140; see also Horman, 2017 WL 242571, at *6 (holding that Rales
    applies “when a plaintiff challenges board inaction such as when a board is alleged to have
    consciously disregarded its oversight duties”).
    205
       See D.I. 146 at 58 (“Whether the Board’s decision to terminate Muilenburg is
    considered under Aronson or Rales, . . . Plaintiffs fail to establish demand futility.” (citing
    Zuckerberg, 2020 WL 6266162, at *9–18)); id. at 60 (assessing Plaintiffs’ claims under
    Rales); D.I. 155 at 38 (citing and applying Rales).
    206
       McElrath ex rel. Uber Techs. v. Kalanick, 2019 WL 1430210, at *8 (Del. Ch.
    Apr. 1, 2019) (quoting Inter-Mktg. Gp. USA, Inc. v. Armstrong, 2019 WL 417849, at *4
    (Del. Ch. Jan. 31, 2019)), aff’d sub nom. McElrath v. Kalanick, 224 A.3d 982 (Del. 2020).
    207
       Rales, 634 A.2d at 934, 936 (noting that, at bottom, the court must “determine whether
    or not the particularized factual allegations of a derivative stockholder complaint create a
    
                                                  63
                “On a motion to dismiss pursuant to Rule 23.1, the Court considers the same
    
    documents, similarly accepts well-pled allegations as true, and makes reasonable
    
    inferences in favor of the plaintiff—all as it does in considering a motion to dismiss
    
    under Rule 12(b)(6).”208 Given the heightened pleading requirements of Rule 23.1,
    
    however, “conclusory allegations of fact or law not supported by allegations of
    
    specific fact may not be taken as true.”209 “Because of the absence of a precise
    
    formula in the Rule for pleading compliance with the demand requirement, the
    
    sufficiency of a complaint under Rule 23.1 is determined on the basis of the facts of
    
    each case.”210
    
                “Rule 23.1 does not abrogate Rule 12(b)(6).”211 But because “the standard
    
    under Rule 12(b)(6) is less stringent than the standard under Rule 23.1, a complaint
    
    that survives a Rule 23.1 motion to dismiss generally will also survive a Rule
    
    
    
    reasonable doubt that, as of the time the complaint is filed, the board of directors could
    have properly exercised its independent and disinterested business judgment in responding
    to a demand”); CBS, 2021 WL 268779, at *28 (same); In re Clovis Oncology, Inc. Deriv.
    Litig., 2019 WL 4850188, at *11 (Del. Ch. Oct. 1, 2019) (stating that when board oversight
    is challenged, “such improper influence arises if a majority of the board’s members are
    compromised because [] they face a substantial likelihood of personal liability with respect
    to at least one of the alleged claims” (internal quotation marks omitted)).
    208
       Beam, 833 A.2d at 976 (Del. Ch. 2003) (citing White, 783 A.2d at 549), aff’d, 845 A.2d
    1040 (Del. 2004).
    209
      Grobow v. Perot, 539 A.2d 180, 187 (Del. 1988), overruled on other grounds by Brehm,
    746 A.2d at 244.
    210
          Brehm, 746 A.2d at 268 (Hartnett, J. concurring).
    211
          Id.
    
    
                                                  64
    12(b)(6) motion to dismiss, assuming that it otherwise contains sufficient facts to
    
    state a cognizable claim.”212 The standards governing a motion to dismiss under
    
    Court of Chancery Rule 12(b)(6) for failure to state a claim for relief are well settled:
    
             (i) all well-pleaded factual allegations are accepted as true; (ii) even
             vague allegations are “well-pleaded” if they give the opposing party
             notice of the claim; (iii) the Court must draw all reasonable inferences
             in favor of the non-moving party; and ([iv]) dismissal is inappropriate
             unless the “plaintiff would not be entitled to recover under any
             reasonably conceivable set of circumstances susceptible to proof.” 213
    
    Thus, the touchstone “to survive a motion to dismiss is reasonable
    
    ‘conceivability.’” 214      This standard is “minimal” 215 and plaintiff-friendly. 216
    
    “Indeed, it may, as a factual matter, ultimately prove impossible for the plaintiff to
    
    prove his claims at a later stage of a proceeding, but that is not the test to survive a
    
    motion to dismiss.”217 Despite this forgiving standard, the Court need not “accept
    
    conclusory allegations unsupported by specific facts” or “draw unreasonable
    
    
    
    
    212
          In re Walt Disney Co. Deriv. Litig., 825 A.2d 275, 285 (Del. Ch. 2003).
    213
          Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (citations omitted).
    214
       Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 537 (Del.
    2011).
    215
          Id. at 536 (citing Savor, 812 A.2d at 896).
    216
       See, e.g., Clouser v. Doherty, 175 A.3d 86 (Del. 2017) (TABLE); In re USG Corp.
    S’holder Litig., 2021 WL 930620, at *3–4 (Del. Ch. Mar. 11, 2021).
    217
          Cent. Mortg. Co., 27 A.3d at 536.
    
    
                                                   65
    inferences in favor of the non-moving party.”218 “Moreover, the court is not required
    
    to accept every strained interpretation of the allegations proposed by the plaintiff.”219
    
             I conclude that (1) Plaintiffs have pled facts sufficient to render demand futile
    
    for claims against the Director Defendants, with one carveout, but (2) Plaintiffs have
    
    failed to plead demand futility for the claims against the Officer Defendants.
    
    Accordingly, the Motion is granted and denied in part as to Count I, and granted as
    
    to Count II.
    
                   A.     With One Exception, Plaintiffs Have Pled That Demand Is
                          Futile For Claims Against The Director Defendants.
    
             For Count I, Plaintiffs assert demand is futile because “from at least
    
    November 18, 2019 (the date of filing of the first derivative complaint alleging
    
    demand futility) through and including today, a majority of the members of the
    
    Board have faced a substantial likelihood of liability for failing to make any good
    
    faith effort to implement and oversee a board-level system to monitor and report on
    
    safety.”220 At bottom, Plaintiffs’ position is that nine of the twelve board members
    
    
    
    
    218
        Price v. E.I. du Pont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011), (citing Clinton
    v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009)), overruled on other grounds by
    Ramsey v Ga. S. Univ. Advanced Dev. Ctr., 189 A.3d 1255 (Del. 2018).
    219
       In re Trados Inc. S’holder Litig., 2009 WL 2225958, at *4 (Del. Ch. July 24, 2009)
    (internal quotation marks omitted) (quoting In re Gen. Motors (Hughes) S’holder Litig.,
    897 A.2d 162, 168 (Del. 2006)).
    220
          Am. Compl. ¶ 299.
    
    
                                                66
    at the time the original complaint was filed221 face a substantial likelihood of liability
    
    for failure to fulfill their oversight duties under the standards set forth in
    
    Caremark,222 as applied by the Delaware Supreme Court in Marchand.223
    
             As Chancellor Allen first observed in Caremark, and as since emphasized by
    
    this Court many times, perhaps to redundance,224 the claim that corporate fiduciaries
    
    have breached their duties to stockholders by failing to monitor corporate affairs is
    
    “possibly the most difficult theory in corporation law upon which a plaintiff might
    
    hope to win a judgment.”225 A decade after Caremark, our Supreme Court affirmed
    
    the doctrine Chancellor Allen announced there and clarified that our law will hold
    
    directors personally liable only where, in failing to oversee the operations of the
    
    company, “the directors knew that they were not discharging their fiduciary
    
    
    
    
    221
       Id. ¶¶ 22–43; see id. ¶ 301 (alleging that when the original complaint was filed, six of
    the twelve Board members had served for at least five years before the 2019 Ethiopian
    Airlines Crash); D.I. 146 at 6 n.2 (detailing changes on the Board since the original
    complaint was filed).
    222
          698 A.2d 959.
    223
          212 A.3d 805.
    224
        See Chou, 2020 WL 5028065, at *1 (“It has become among the hoariest of Chancery
    clichés for an opinion to note that a derivative claim against a company’s directors, on the
    grounds that they have failed to comply with oversight duties under Caremark, is among
    the most difficult of claims in this Court to plead successfully.”).
    225
       Caremark, 698 A.2d at 967; Globis P’rs, L.P. v. Plumtree Software, Inc., 2007
    WL4292024, at *7 (Del. Ch. Nov. 30, 2007) (same); Desimone v. Barrows, 924 A.2d 908,
    939 (Del. Ch. 2007) (same); Guttman v. Huang, 823 A.2d 492, 506 n.33 (Del. Ch. 2003)
    (same).
    
    
                                                67
    obligations.”226 At the pleading stage, a plaintiff must allege particularized facts that
    
    satisfy one of the necessary conditions for director oversight liability articulated in
    
    Caremark: either that (1) “the directors utterly failed to implement any reporting or
    
    information system or controls”; or (2) “having implemented such a system or
    
    controls, [the directors] consciously failed to monitor or oversee its operations thus
    
    disabling themselves from being informed of risks or problems requiring their
    
    attention.”227 I respectfully refer to these conditions as Caremark “prong one” and
    
    “prong two.”
    
                “Delaware courts routinely reject the conclusory allegation that because
    
    illegal behavior occurred, internal controls must have been deficient, and the board
    
    must have known so.” 228 Rather, the plaintiff must plead with particularity “a
    
    sufficient connection between the corporate trauma and the board.” 229 “To be sure,
    
    even in this context, Caremark does not demand omniscience.” 230 But it does
    
    mandate that “to satisfy their duty of loyalty, directors must make a good faith effort
    
    to implement an oversight system and then monitor it.” 231
    
    
    226
          Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006).
    227
          Id.
    228
          Desimone, 924 A.2d at 940.
    229
       La. Mun. Police Emps.’ Ret. Sys. v. Pyott, 46 A.3d 313, 340 (Del. Ch. 2012), rev’d on
    other grounds, 74 A.3d 612 (Del. 2013).
    230
          Clovis, 2019 WL 4850188, at *13.
    231
          Marchand, 212 A.3d at 821.
    
    
                                                  68
              The Caremark standard “draws heavily upon the concept of director failure to
    
    act in good faith,”232 and does not constitute a freestanding fiduciary duty that could
    
    independently give rise to liability.233 Because “[t]he test is rooted in concepts of
    
    bad faith,” “a showing of bad faith is a necessary condition to director oversight
    
    liability.”234 As our Supreme Court explained in In re Walt Disney Co. Derivative
    
    Litigation, the “intentional dereliction of duty” or “conscious disregard for one’s
    
    responsibilities,” which “is more culpable than simple inattention or failure to be
    
    informed of all facts material to the decision,” reflects that directors have acted in
    
    bad faith and cannot avail themselves of defenses grounded in a presumption of good
    
    faith.235 In order to plead a derivative claim under Caremark, therefore, a plaintiff
    
    must plead particularized facts that allow a reasonable inference the directors acted
    
    with scienter which in turn “requires [not only] proof that a director acted
    
    
    
    
    232
          Stone, 911 A.2d at 369.
    233
          Citigroup, 964 A.2d at 122–23.
    234
          Id. at 123.
    235
       906 A.2d 27, 66 (Del. 2006); Citigroup, 964 A.2d at 125 (“[O]ne can see a similarity
    between the standard for assessing oversight liability and the standard for assessing a
    disinterested director’s decision under the duty of care when the company has adopted an
    exculpatory provision pursuant to § 102(b)(7). In either case, a plaintiff can show that the
    director defendants will be liable if their acts or omissions constitute bad faith. A plaintiff
    can show bad faith conduct by, for example, properly alleging particularized facts that
    show that a director consciously disregarded an obligation to be reasonably informed about
    the business and its risks or consciously disregarded the duty to monitor and oversee the
    business.”).
    
    
                                                  69
    inconsistent[ly] with his fiduciary duties,” but also “most importantly, that the
    
    director knew he was so acting.”236
    
                         1.      The Motion Is Denied In Part As To Count I;
                                 Plaintiffs Have Pled Particularized Facts
                                 Demonstrating A Majority Of The Director
                                 Defendants Face A Substantial Likelihood Of
                                 Caremark Liability.
    
              Plaintiffs’ Caremark theory breaks the Company’s 737 MAX trauma into
    
    three periods of time: before the first crash, between the two crashes, and after the
    
    second crash. As crystallized at argument, Plaintiffs’ theory before the Lion Air
    
    Crash maps onto Caremark’s first prong, asserting the Board utterly failed to
    
    implement any reporting or information systems or controls.237 Plaintiffs further
    
    assert the first Lion Air Crash was a red flag the Board ignored under prong two,
    
    while continuing to fall short under prong one. Plaintiffs contend the Board’s prong
    
    two deficiencies culminated in the Ethiopian Airlines Crash. And after both crashes,
    
    Plaintiffs assert the Director Defendants breached their fiduciary duties by allowing
    
    Muilenburg to retire with his unvested equity compensation.                 Plaintiffs have
    
    
    
    
    236
        In re Massey Energy Co., 2011 WL 2176479, at *22 (Del. Ch. May 31, 2011) (emphasis
    omitted); Citigroup, 964 A.2d at 123 (“[T]o establish oversight liability a plaintiff must
    show that the directors knew they were not discharging their fiduciary obligations or that
    the directors demonstrated a conscious disregard for their responsibilities such as by failing
    to act in the face of a known duty to act.”).
    237
          See Hr’g Tr. 135–36.
    
    
                                                 70
    sufficiently alleged the Director Defendants face a substantial likelihood of liability
    
    under their Caremark theories, but not with regard to Muilenburg’s compensation.
    
                                  a.     Plaintiffs Have Stated A Claim Under
                                         Caremark Prong One.
    
             Directors may use their business judgment to “design context- and industry-
    
    specific approaches tailored to their companies’ businesses and resources. But
    
    Caremark does have a bottom-line requirement that is important: the board must
    
    make a good faith effort—i.e., try—to put in place a reasonable board-level system
    
    of monitoring and reporting.”238 This oversight obligation is “designed to ensure
    
    reasonable reporting and information systems exist that would allow directors to
    
    know about and prevent wrongdoing that could cause losses for the Company.”239
    
    “[O]nly a sustained or systematic failure of the board to exercise oversight—such as
    
    an utter failure to attempt to assure a reasonable information and reporting system
    
    exists—will establish the lack of good faith that is a necessary condition to
    
    liability.”240
    
             Our Supreme Court’s recent decision in Marchand addressed the contours of
    
    a Caremark prong one claim when the company is operating in the shadow of
    
    
    
    
    238
          Marchand, 212 A.3d at 821 (footnote omitted).
    239
          Citigroup, 964 A.2d at 131.
    240
          Id. at 122 (internal quotation marks omitted).
    
    
                                                   71
    “essential and mission critical” regulatory compliance risk.241 Distinct from many
    
    Caremark cases evaluating the company’s systems to monitor financial wrongdoing
    
    like accounting fraud,242 Marchand addressed the regulatory compliance risk of food
    
    safety and the failure to manage it at the board level, which allegedly allowed the
    
    company to distribute mass quantities of ice cream tainted by listeria. Food safety
    
    was the “most central safety and legal compliance issue facing the company.” 243 In
    
    the face of risk pertaining to that issue, Marchand noted the board’s oversight
    
    function “must be more rigorously exercised.” 244 This “entails a sensitivity to
    
    compliance issues intrinsically critical to the company.” 245
    
             Marchand held the board had not made a “good faith effort to put in place a
    
    reasonable system of monitoring and reporting” when it left compliance with food
    
    safety mandates to management’s discretion, rather than implementing and then
    
    overseeing a more structured compliance system. 246 The Court considered the
    
    
    
    241
          Marchand, 212 A.3d at 824; see Clovis, 2019 WL 4850188, at *12.
    242
          E.g., Stone, 911 A.2d 362; Hughes, 897 A.2d 162; Citigroup, 964 A.2d 106.
    243
       Marchand, 212 A.3d at 824 (stating “food safety was essential and mission critical”);
    see also id. at 822 (observing that food safety “has to be one of the most central issues at
    the company” and “a compliance issue intrinsically critical to the company’s [monoline]
    business operation”).
    244
          Clovis, 2019 WL 4850188, at *13 (citing Marchand, 212 A.3d at 824).
    245
       Id. (alterations, footnotes, internal quotation marks omitted) (quoting Marchand, 212
    A.3d at 822).
    246
          Marchand, 212 A.3d at 821–24.
    
    
                                                72
    absence of various board-level structures “before the listeria outbreak engulfed the
    
    company.” 247        The Court concluded that the complaint fairly alleged several
    
    dispositive deficiencies:
    
                • no board committee that addressed food safety existed;
                • no regular process or protocols that required management to keep
                  the board apprised of food safety compliance practices, risks, or
                  reports existed;
                • no schedule for the board to consider on a regular basis, such as
                  quarterly or biannually, any key food safety risks existed;
                • during a key period leading up to the deaths of three customers,
                  management received reports that contained what could be
                  considered red, or at least yellow, flags, and the board minutes of
                  the relevant period revealed no evidence that these were disclosed
                  to the board;
                • the board was given certain favorable information about food safety
                  by management, but was not given important reports that presented
                  a much different picture; and
                • the board meetings are devoid of any suggestion that there was any
                  regular discussion of food safety issues.248
    
                Like food safety in Marchand, airplane safety “was essential and mission
    
    critical” to Boeing’s business,        249
                                                 and externally regulated.   250
                                                                                   Considering
    
    
    247
          Id. at 822.
    248
          Id.
    249
          Id. at 824.
    250
       See Chou, 2020 WL 5028065, at *18 (“[W]hen regulations governing drug health and
    safety are at issue, ABC’s Board must actively exercise its oversight duties in order to
    properly discharge its duties in good faith. The allegations here are a prime example:
    flouting laws meant to ensure the safety and purity of drugs destined for patients suffering
    from cancer is directly inimical to the central purpose of ABC’s business.”); Clovis, 2019
    WL 4850188, at *13 (“[W]hen a company operates in an environment where externally
    imposed regulations govern its ‘mission critical’ operations, the board’s oversight function
    must be more rigorously exercised.”).
    
    
                                                   73
    Marchand’s mandate that the board rigorously exercise its oversight function with
    
    respect to mission critical aspects of the company’s business, such as the safety of
    
    its products that are widely distributed and used by consumers, as well as the failings
    
    Marchand identified as giving rise to the reasonable inference that the board faced
    
    a substantial likelihood of liability under prong one, I conclude that Plaintiffs have
    
    carried their burden under Rule 23.1 for their prong one claim. To be clear, I do not
    
    track the deficiencies Marchand identified because they are any sort of prescriptive
    
    list; “[a]s with any other disinterested business judgment, directors have great
    
    discretion to design context- and industry-specific approaches tailored to their
    
    companies’ businesses and resources.”251 I echo Marchand because it is dispositive
    
    in view of Plaintiffs’ remarkably similar factual allegations.
    
                                       i.    The Board had no committee
                                             charged with direct responsibility to
                                             monitor airplane safety.
    
             The Amended Complaint alleges the Board had no committee charged with
    
    direct responsibility to monitor airplane safety. While the Audit Committee was
    
    charged with “risk oversight,” safety does not appear in its charter. Rather, its
    
    oversight function was primarily geared toward monitoring Boeing’s financial
    
    risks.252
    
    
    251
          Marchand, 212 A.3d at 821.
    252
          See Hr’g Tr. 30–33.
    
    
                                              74
              Perhaps because the Audit Committee was not asked to do so, the pleading
    
    stage record indicates the Audit Committee did not regularly or meaningfully
    
    address or discuss airplane safety. The yearly report the Audit Committee received
    
    on Boeing’s compliance risk management process did not include oversight of
    
    airplane safety.253 Specifically as to the 737 MAX, the Audit Committee never
    
    assessed its safety risks, including those regarding MCAS and the AOA sensor,
    
    during its development before the Lion Air Crash or after; nor did the Audit
    
    Committee ask for presentations or information on the topic. 254 Similarly, the ERV
    
    process and Corporate Audit group did not address airplane safety.255
    
              Defendants press that the Audit Committee addressed “risk” broadly, pointing
    
    to one-off instances like when it responded to FAA questions about the Dreamliner
    
    battery incident, or when it referred to “quality” or “safety” in passing. But those
    
    occasional occurrences fail to dislodge Plaintiffs’ allegations that the Board did not
    
    specifically charge the Audit Committee with monitoring airplane safety. And to
    
    the extent Defendants point to risk analysis mechanisms and reports, like the ERV
    
    process and the Corporate Audit group, 256 in the absence of any allegation or
    
    
    
    253
          Hr’g Tr. 20–23.
    254
          Id. 32.
    255
          See supra notes 31–32.
    256
       See Defs.’ Ex. 7; Defs.’ Ex. 9; Defs.’ Ex. 10; Defs.’ Ex. 23; Defs.’ Ex. 24; Defs.’ Ex.
    25.
    
    
                                               75
    indication that they were devoted to airplane safety, the reasonable inference is that
    
    they fall within the Audit Committee’s financial and regulatory risk mandate.
    
          At the pleading stage, the existence of the Audit Committee, Corporate Audit
    
    group, and ERV process cannot support the conclusion that the Board established
    
    any committee or process charged with direct responsibility to monitor airplane
    
    safety. To the contrary, the Board did not establish the Airplane Committee, which
    
    was explicitly tasked with overseeing airplane safety, until April 2019; the Airplane
    
    Committee was the first Board committee to formally request information about the
    
    cause of the crashes.
    
          The lack of Board-level safety monitoring was compounded by Boeing’s lack
    
    of an internal reporting system by which whistleblowers and employees could bring
    
    their safety concerns to the Board’s attention. More than three months after the
    
    Ethiopian Airlines Crash, Giambastiani proposed that once safety concerns were
    
    evaluated by the SRB, they should be elevated to the Audit Committee, CTO, and
    
    CFO, and thereafter be shared with the Board.
    
                                    ii.      The Board did not monitor, discuss,
                                             or address airplane safety on a
                                             regular basis.
    
          Zooming out from the committee level, Plaintiffs have alleged specific facts
    
    supporting the conclusion that the Board writ large did not formally address or
    
    monitor safety. The Board did not regularly allocate meeting time or devote
    
    
    
                                             76
    discussion to airplane safety and quality control until after the second crash. Nor did
    
    the Board establish a schedule under which it would regularly assess airplane safety
    
    to determine whether legitimate safety risks existed.
    
             The period after the Lion Air Crash is emblematic of these deficiencies. The
    
    Board’s first call on November 23 was explicitly optional. The crash did not appear
    
    on the Board’s formal agenda until the Board’s regularly scheduled December
    
    meeting; those board materials reflect discussion of restoration of profitability and
    
    efficiency, but not product safety, MCAS, or the AOA sensor. 257 The Audit
    
    Committee devoted slices of five-minute blocks to the crash, through the lens of
    
    supply chain, factory disruption, and legal issues—not safety.258
    
             The next board meeting, in February 2019, addressed factory production
    
    recovery and a rate increase, but not product safety or MCAS.259 At that meeting,
    
    the Board affirmatively decided to delay its investigation into the 737 MAX,
    
    notwithstanding publicly reported concerns about the airplane’s safety. Weeks later,
    
    after the Ethiopian Airlines Crash,260 the Board still did not consider the 737 MAX’s
    
    
    
    
    257
       See id. ¶¶ 230–31; Defs.’ Ex. 61; see also Defs.’ Ex. 64 at -575 (identifying the Lion
    Air Crash as a “key topic” with no mention of safety).
    258
          Defs.’Ex. 14; Defs’ Ex. 61 at 2; Defs’. Ex. 84 at -618197, -618203–07.
    259
          Am. Compl. ¶ 237; Defs.’ Ex. 64 at -575.
    260
          Am. Compl. ¶ 248; Defs.’ Ex. 66 at -620851.
    
    
                                                 77
    safety. It was not until April 2019—after the FAA grounded the 737 MAX fleet—
    
    that the Board built in time to address airplane safety.261
    
             Defendants argue the Board “regularly discussed” safety as part of its strategic
    
    initiatives, pointing to slide decks that nod to “safety” as an “enduring value”262 and
    
    as part of a “production system” that was simultaneously focused on “[a]ccelerating
    
    productivity.”263 They also point out that the Board was updated on the 737 MAX’s
    
    development, production, and certification,264 and that the Board inspected the plants
    
    where the 737 MAX was assembled, including on a June 2018 inspection of the
    
    Everett production site.265 Defendants stress that the Board “oversaw the quality and
    
    safety of the 737 MAX program through monitoring the progress of the FAA’s
    
    extensive certification review of the 737 MAX.”266
    
             But the invocations of safety Defendants highlight must be considered in the
    
    broader context Plaintiffs plead. The Board focused on the 737 MAX’s production,
    
    development, and certification in order to assess production timelines and revenue
    
    
    261
          Am. Compl. ¶ 79; Defs.’ Ex. 75; Defs.’ Ex. 77.
    262
          Defs.’ Ex. 16 at -11080, -13052.
    263
       Defs.’ Ex. 17 at -11645; see also Defs.’ Ex. 20 at -13057 (including the tagline
    “[e]nsuring the safety, integrity and quality of Boeing products” in a test evaluation
    update).
    264
       D.I. 146 at 19–22; Defs.’ Ex. 8 at -11183; Defs.’ Ex. 28; Defs.’ Ex. 29; Defs.’ Ex. 39 at
    -8133; Defs.’ Ex. -8086; Defs.’ Ex. 41 -8314; Defs.’ Ex. 52 at -11403.
    265
          Defs.’ Ex. 26; Defs.’ Ex. 27; Defs.’ Ex. 28; Defs.’ Ex. 29.
    266
          D.I. 146 at 20.
    
    
                                                   78
    expectations, and to strengthen the Company’s relationships with FAA officials—
    
    not to consider customer safety. 267        The Board and management’s passive
    
    invocations of quality and safety, and use of safety taglines, fall short of the rigorous
    
    oversight Marchand contemplates.
    
             And under Marchand, minimal regulatory compliance and oversight do not
    
    equate to a per se indicator of a reasonable reporting system. “[T]he fact that
    
    [Boeing] nominally complied with F[A]A regulations does not imply that
    
    the board implemented a system to monitor [airplane] safety at the board level.
    
    Indeed, these types of routine regulatory requirements, although important, are not
    
    typically directed at the board.”268 The fact that Boeing’s management was seeking
    
    minimal regulatory certification and periodically informing the Board of its progress
    
    in pursuit of production-based business objectives “does not rationally suggest that
    
    the board implemented a reporting system to monitor [airplane] safety or [Boeing’s]
    
    operational performance,” as “[t]he mundane reality that [Boeing] is in a highly
    
    regulated industry and complied with some of the applicable regulations does not
    
    foreclose any pleading-stage inference that the directors’ lack of attentiveness rose
    
    
    
    
    267
       Am. Compl. ¶¶ 127–28 (addressing board presentations containing taglines such as
    “Performance, schedule, and cost certain . . . Stingy with a purpose” and “Transforming
    production system to support market demand,” and “Imperatives” such as “Break Cost
    Curve,” “Faster to Market,” and “Affordability Culture”).
    268
          Marchand, 212 A.3d at 823.
    
    
                                               79
    to the level of bad faith indifference required to state a Caremark claim.” 269 As
    
    Marchand made plain, the fact that the company’s product facially satisfies
    
    regulatory requirements does not mean that the board has fulfilled its oversight
    
    obligations to prevent corporate trauma.
    
                                         iii.      The Board had no regular process
                                                   or protocols requiring management
                                                   to apprise the Board of airplane
                                                   safety; instead, the Board only
                                                   received ad hoc management
                                                   reports that conveyed only favorable
                                                   or strategic information.
    
                As alleged, the Board did not simply fail to assess safety itself; it also failed
    
    to expect or demand that management would deliver safety reports or summaries to
    
    the Board on a consistent and mandatory basis.                 The Amended Complaint’s
    
    allegations and exhibits incorporated by reference show that the Board received
    
    intermittent, management-initiated communications that mentioned safety in name,
    
    but were not safety-centric and instead focused on the Company’s production and
    
    revenue strategy. And when safety was mentioned to the Board, it did not press for
    
    further information, but rather passively accepted management’s assurances and
    
    opinions.270
    
    
    
    269
          Id.
      See Defs. Ex. 53; Defs.’ Ex. 56; Defs.’ Ex. 58; Defs.’ Ex. 59; Defs.’ Exs. 62–63; Defs.’
    270
    
    Ex. 86; Am. Compl. ¶¶ 214, 224, 225, 227, 228.
    
    
                                                   80
             For mission-critical safety, discretionary management reports that mention
    
    safety as part of the Company’s overall operations are insufficient to support the
    
    inference that the Board expected and received regular reports on product safety.271
    
    Boeing’s Board cannot leave “compliance with [airplane] safety mandates to
    
    management’s discretion rather than implementing and then overseeing a more
    
    structured compliance system.”272 An effective safety monitoring system is what
    
    allows directors to believe that, unless issues or “red flags” make it to the board
    
    through that system, corporate officers and employees are exercising their delegated
    
    powers in the corporation’s best interest.273
    
             Here, the reports the Board received throughout the 737 MAX’s development
    
    and FAA certification were high-level reports focused on the Company’s operations
    
    and business strategy; the Board did not expect any safety content.274 After the Lion
    
    Air Crash, management’s communications to the Board demonstrate the lack of a
                                                                           275
    Board process or protocol governing such communications.                     None of
    
    
    271
          See Marchand, 212 A.3d at 823–24.
    272
          Clovis, 2019 WL 4850188, at *12 (describing Marchand).
    273
      See Forsythe v. ESC Fund Mgmt. Co. (U.S.), 2007 WL 2982247, at *7 (Del. Ch.
    Oct. 9, 2007).
    274
          See Defs.’ Ex. 40 at -8086; Defs.’ Ex. 41.
    275
       See, e.g., Am. Compl. ¶ 91(“In July 2018, Boeing’s Test and Evaluation department
    voiced concerns to ‘Boeing Executive Leadership’ regarding the ‘considerable pressure’
    the 737 MAX program faced over production schedules. The department’s letter identifies
    the ‘ero[sion of] safety margins’ due to the declining average experience among senior
    production pilots.      [Boeing’s] Employee Relations Director . . . . forwarded the
    
                                                  81
    Muilenburg’s communications in the weeks following the Lion Air Crash were
    
    initiated by a Board request, either as a one-off or as part of a standing protocol.
    
    Muilenburg sent them at his discretion. 276 In the absence of a safety mandate,
    
    Muilenburg’s self-directed communications to the Board focused on discrediting
    
    media reports faulting MCAS, and on blaming Lion Air repair shops and crew.
    
             Muilenburg did not send any communication to the Board about the Lion Air
    
    Crash until November 5, 2018, roughly one week after it happened.277 In that email,
    
    he disclosed that an airspeed indicator was damaged, but treated the Lion Air crash
    
    as a public relations problem and maintained to the Board that the “737 MAX fleet
    
    is safe.”278 Muilenburg contacted the Board again after the WSJ Article was printed:
    
    he gave lip service to the idea that “[t]he safety of our planes is our top priority,” but
    
    claimed the references to withholding information “are categorically false,” that
    
    existing flight crew procedures were adequate, and that the 737 MAX was safe.279
    
    Muilenburg’s assurances to the Board that the 737 MAX was safe were based on
    
    unreliable information, as he emphasized the “rigorous test program” Boeing
    
    
    communication to defendant Hyslop, Boeing’s chief engineer, but . . . mischaracterized the
    letter as seeking mainly compensation and additional benefits, without flagging the safety
    concerns of overworked employees.”).
    276
          See Defs.’ Ex. 53; Defs.’ Ex. 56; Defs.’ Ex. 57; Defs.’ Ex. 58; Am. Compl. ¶¶ 206, 229.
    277
       At argument, Boeing’s counsel explained this was so because the crash occurred
    overseas and in the water. See Hr’g Tr. 27.
    278
          Defs.’ Ex. 55.
    279
          Am. Compl. Ex. D.
    
    
                                                  82
    endured “[t]o earn FAA certification.”280 His primary focus was the restoration of
    
    Boeing’s public image.281
    
             In the months that followed, Muilenburg’s updates focused on Boeing’s image
    
    and the accident’s impact on the 737 MAX’s production and delivery schedule, not
    
    product safety.282 His monthly dashboard reports to the Board and regular updates
    
    on Company engineering initiatives addressed production and cost expectation and
    
    challenges, but not safety. 283 He repeatedly told the Board the 737 MAX was safe
    
    and blamed pilot and maintenance error.284 Nothing indicates that the Board pressed
    
    him for more information about the cause of the accident or questioned
    
    management’s conclusion.285
    
    
    
    
    280
          Id.; accord Defs.’ Ex. 57.
    281
          Am. Compl. Ex. D; accord Defs.’ Ex. 57.
    282
        See, e.g., Defs.’ Ex. 56 (focusing on “our strong performance [a]s supported by our
    continued 737 recovery); Defs.’ Ex. 58 (stating that Boeing “must allow [the investigation]
    to run its course,” maintaining the “[b]ottom line” that “the 737 MAX is safe,” and
    ultimately concluding with an update on “737 production” and touting that the Company
    completed “43 deliveries for October,” “an all-time high for the month and a positive sign
    or production recovery plane and supplier management efforts are working”); Defs.’ Ex.
    60.
    283
          See Defs.’ Ex. 21; Defs.’ Ex. 22 at -18838.
    284
          See, e.g., Am. Compl. ¶¶ 218, 225; Defs.’ Ex. 58.
    285
       While Muilenburg himself was Chairman of the Board at this time, Defendants have
    not attempted to impute his knowledge to the Board as a whole. See Am. Compl. ¶ 37.
    
    
                                                  83
                Muilenburg’s notes did not reference any Board-level directives for reporting
    
    or on investigating the Lion Air Crash. 286 Rather, they indicated that Boeing’s
    
    management was taking charge while the Board remained a passive recipient of
    
    updates: management would “determine whether any action is required,” and
    
    Muilenburg would “share additional details, if available, in [his] monthly update.”287
    
    Those updates, too, were discretionary and not Board-ordered safety reports.
    
                The Board’s reliance on management-directed intermittent safety reporting
    
    continued after the Ethiopian Airline Crash.            The Board passively accepted
    
    Muilenburg’s assurances that Boeing’s “teams are centered on our priorities,
    
    including safety, quality and stability,” 288 as an “ongoing” component of its
    
    “production operations”; 289 and that public and regulatory backlash was driven
    
    solely by “public/political pressure, not by any new facts” about the 737 MAX’s
    
    safety.290 The Board did not press for more information. On March 12, Muilenburg
    
    emailed the Board about engagement with high federal executive branch officials to
    
    
    
    
    286
          See Defs.’ Ex. 57.
    287
          E.g., Defs.’ Ex. 55.
    288
          Defs.’ Ex. 66 at -620851.
    289
          Id.
    290
          Defs.’ Ex. 68.
    
    
                                                  84
    keep the 737 MAX flying.291 One outside director praised Muilenburg’s “strong
    
    leadership.”292
    
                It was not until April 2019, the month following the Ethiopian Airline Crash,
    
    that Boeing’s Vice President of BCA Engineering and BCA’s Vice President of
    
    Safety, Security & Compliance presented to the Board. This was the first time that
    
    the Board or any of its committees heard a presentation from either member of
    
    management, “despite their roles leading engineering and safety, respectively, for
    
    Boeing’s largest segment.”293
    
                The nature and content of management’s ad hoc reports to the Board indicate
    
    that the Board had no regular process or protocols requiring management to apprise
    
    the Board of airplane safety.294 Nothing in the Amended Complaint or documents
    
    
    
    
    291
          Id.
    292
          Am. Compl. ¶ 252.
    293
          Id. ¶ 71.
    294
         Hr’g Tr. 14–16 (“THE COURT: Where can I see that expectation and practice from the
    board’s side rather than management coming forward and – you’ve pointed me to some
    examples of management coming forward to the board. Can you point me to any examples
    of where the board has expressed its expectation that management do so? MR.
    RABINOVITZ: I can’t point you to a written protocol, Your Honor . . . [But] the fact that
    this practice existed is a meaningful indication of the protocol that did exist between
    management and the board. The board doesn’t need to say so. The proof is in the pudding,
    as it were. . . . THE COURT: Just before you do that, just to put a bit of a finer point on
    it, the protocol that you’re offering is manifested only when management chose to elevate
    issues to the board? MR. RABINOVITZ: This specific part, right. Elevating specific
    safety issues when management believed they warranted board attention. I cannot point to
    that in writing.”).
    
    
                                                  85
    submitted supports the inference that the Board requested those reports or expected
    
    those reports to contain safety information.295
    
             Management’s ad hoc reports were also one-sided at best and false at worst,
    
    conveying only favorable and optimistic safety updates and assurances that the
    
    quality of Boeing’s aircraft would drive production and revenue. Management
    
    reported its unsupported conclusion that MCAS and the AOA sensor did not cause
    
    the crashes and that the 737 MAX remained airworthy and able to meet production
    
    goals. Management told the Board that “the function performed by MCAS” was
    
    referenced in the Flight Crew Operations Manual, and expressed frustration with
    
    public commentary.296 Muilenburg also told the Board that Boeing was developing
    
    a “737 MAX software enhancement that, when implemented, will further improve
    
    system safety,” and that “[d]espite recent media speculation,” nothing had been
    
    decided about the “software update and its timing”—understating that
    
    “enhancement[’s]” lifesaving importance.297
    
             Because the Board did not have any formal procedures in place to monitor the
    
    safety of Boeing’s airplanes, the Board was not privy to the truth about MCAS, AOA
    
    sensor vulnerabilities, or how those issues were handled in FAA certification and
    
    
    
    295
          See id. 14–16, 19–21, 32, 47–48.
    296
          Am. Compl. ¶ 224.
    297
          Id. ¶ 234; Defs.’ Ex. 63 at -13683.
    
    
                                                86
    pilot training. 298    It accepted Muilenburg’s denials, deflections, and repeated
    
    insistence that the 737 MAX was safe, even after the press faulted MCAS and
    
    insufficient training for the Lion Air Crash.
    
              The fact that management only communicated with the Board regarding
    
    safety on an ad hoc basis as necessary to further business strategy, and the fact that
    
    management only gave the board “certain favorable information” but not “important
    
    reports that presented a much different picture,” indicate that the Board failed to
    
    implement a reasonable reporting system to monitor the safety of Boeing’s
    
    airplanes.299
    
                                      iv.      Management saw red, or at least
                                               yellow, flags, but that information
                                               never reached the Board.
    
              In Marchand, the Supreme Court agreed with the plaintiff that management’s
    
    knowledge about growing safety issues in the company and failure to report those
    
    issues to the board was “further evidence that the board had no food safety reporting
    
    system in place.”300 Where management received reports that contained what could
    
    be considered red, or at least yellow, flags, and the board minutes of the relevant
    
    
    
    298
       See Hr’g Tr. 32 (“MR. RABINOVITZ: I do not think there is anything in the record
    suggesting that the board was briefed on the MCAS at all before the – before the first 737
    MAX accident.”).
    299
          See Marchand, 212 A.3d at 822.
    300
          Id. at 817.
    
    
                                               87
    period revealed no evidence that these were disclosed to the board, it is reasonable
    
    to infer the absence of a reporting system. 301 Here, as in Marchand, Boeing
    
    management knew that the 737 MAX had numerous safety defects, but did not report
    
    those facts to the Board.
    
              In the critical period leading up to the Lion Air Crash, Boeing management
    
    received formal complaints from employees who questioned the safety of the 737
    
    MAX. Further, Boeing’s Internal Safety Analysis found that if a pilot took more
    
    than ten seconds to identify and respond to the MCAS activation, the result would
    
    be catastrophic. Forkner made MCAS’s vulnerability issues known within the
    
    Company. But before the Lion Air Crash, there is no evidence that management
    
    apprised the Board of the AOA disagree sensor’s malfunctions or the probability of
    
    catastrophic failure.302
    
              After the Lion Air Crash, Boeing started revising MCAS and, like the FAA,
    
    performed a risk assessment that concluded an unacceptably high risk of catastrophic
    
    failure. Boeing also pushed out the Manual Bulletin, and the FAA issued the
    
    
    
    
    301
          Id. at 822.
    302
       See Hr’g. Tr. 32 (“MR. RABINOVITZ: I do not think there is anything in the record
    suggesting that the board was briefed on the MCAS at all before the – before the first 737
    MAX accident.”).
    
    
                                               88
    Emergency Directive.303 But management told the Board the 737 MAX was safe,
    
    and did not brief the Board on the risks of MCAS.
    
             Thus, safety concerns known to management failed to make their way to the
    
    Board, supporting the conclusion that the Board failed to establish a reporting
    
    system.
    
                                     v.      In addition to the inferences drawn
                                             above, the pleading-stage record
                                             supports an explicit finding of
                                             scienter.
    
             Plaintiffs have pled facts that allowing a reasonable inference that the
    
    directors breached their duties of oversight with scienter: not only did the Director
    
    Defendants act inconsistently with their fiduciary duties, but they also knew of their
    
    shortcomings.304 In Marchand, the Delaware Supreme Court inferred scienter from
    
    the lack of any board committee focused on safety; any regular process or protocols
    
    requiring management to report on safety risks; any regular schedule for the board
    
    to address safety; any board minutes or documents suggesting that they regularly
    
    discussed safety; any evidence that red, or at least yellow, flags, were disclosed to
    
    the board; and any evidence that management conveyed both favorable and
    
    
    
    
    303
          Am. Compl. ¶¶ 189–91.
    304
      See, e.g., Horman, 2017 WL 242571, at *7 (quoting Massey, 2011 WL 2176479, at
    *22).
    
    
                                             89
    unfavorable safety information to the board. 305 Those allegations support an
    
    inference of scienter here as well.
    
                But no inference is needed: the difficult scienter element is directly met by
    
    the Board’s own words. They confirm that directors knew the Board should have
    
    had structures in place to receive and consider safety information. Collins’s March
    
    15, 2019 email to Calhoun is exemplary. In the absence of Board meetings and
    
    discussions about safety before the crashes, Collins pitched that “we should devote
    
    the entire board meeting (other than required committee meetings and reports) to a
    
    review of quality within Boeing,” because “[i]n addition to providing necessary
    
    information for the Board, this type of agenda would underscore the board’s (and
    
    management’s) unwavering commitment to quality and safety above all other
    
    performance criteria.” 306 Collins’s follow-up email on the “category of ‘lessons
    
    learned’” reflected on his and Calhoun’s time at Medtronic, where they “began each
    
    board meeting, executive committee meeting, and operating review with a review of
    
    product quality/safety—before any discussion of financial performance, market
    
    share/competitive activities, new product development timetables, and certainly
    
    stock price,”307 so that “everyone in the corporation understood that nothing was
    
    
    
    305
          Marchand, 212 A.3d at 822.
    306
          Am. Compl. Ex. C.
    307
          Id.
    
    
                                                  90
    more important to the CEO and the board than quality/safety.” 308 In response,
    
    Muilenburg “added Safety data to the Board lead-off briefing, and . . . monthly
    
    Board note too,”309 and the Board held its first meetings to formally address airplane
    
    safety.
    
                That the Board knowingly fell short is also evident in the Board’s public
    
    crowing about taking specific actions to monitor safety that it did not actually
    
    perform. Calhoun hustled to “[p]osition the Boeing Board of Directors as an
    
    independent body that has exercised appropriate oversight.”310 He falsely touted that
    
    the Board was immediately contacted and met “very, very quickly” after the Lion
    
    Air Crash; 311 participated in evaluating the 737 MAX’s safety risks; considered
    
    grounding the 737 MAX after the Lion Air Crash;312 met within twenty-four hours
    
    of that crash to consider grounding; and recommended grounding. 313 Each of
    
    Calhoun’s public representations was knowingly false.314 They evidence that at least
    
    Calhoun knew what the Board should have been doing all along.
    
    
    
    308
          Id.
    309
          Id.
    310
          Am. Compl. ¶ 263.
    311
          Id. ¶¶ 268–69.
    312
          Id. ¶ 271.
    313
          Id. ¶¶ 274–75.
    314
       See, e.g., id. ¶¶ 271–76; Defs.’ Ex. 69. As stated, Count I of the Amended Complaint
    categorizes the Board’s public deception as a breach of fiduciary duty. Although the parties
    
                                                91
                                             *****
    
              Plaintiffs have met their “onerous pleading burden” under Caremark prong
    
    one, and are entitled to discovery to prove out that claim. 315 As espoused in
    
    Marchand, the Board has a rigorous oversight obligation where safety is mission
    
    critical, as the fallout from the Board’s utter failure to try to satisfy this “bottom-line
    
    requirement” 316 can cause “material suffering,” even short of death, “among
    
    customers, or to the public at large,” and attendant reputational and financial harm
    
    to the company. 317 Plaintiffs allege a majority of the Director Defendants face
    
    liability under that theory, and have stated a claim.
    
                                 b.    Plaintiffs Have Stated A Post-Lion Air
                                       Claim Under Caremark Prong Two.
    
              Plaintiffs also contend the Director Defendants face a substantial likelihood
    
    of liability under Caremark prong two because they ignored the Lion Air Crash and
    
    other red flags about the 737 MAX’s safety before the Ethiopian Airlines Crash.318
    
    “To state a prong two Caremark claim, Plaintiff must plead particularized facts that
    
    the board knew of evidence of corporate misconduct—the proverbial red flag—yet
    
    
    did not focus on that allegation in briefing or at argument, to the extent Plaintiffs pursue
    the Board’s misrepresentations as an independent breach, the Motion is DENIED.
    315
          Marchand, 212 A.3d at 824.
    316
          Id. at 821.
    317
          Chou, 2020 WL 5028065, at *1.
    318
       By the time of the October 2018 Lion Air Crash, Stephenson and McNerney were no
    longer on the Board.
    
                                                92
    acted in bad faith by consciously disregarding its duty to address that misconduct.”319
    
    Plaintiffs have done so here.
    
           A classic prong two claim acknowledges the board had a reporting system,
    
    but alleges that system brought information to the board that the board then
    
    ignored.320 In this case, Plaintiffs’ prong two claim overlaps and coexists with their
    
    prong one claim; Plaintiffs assert the Board ignored red flags at the same time they
    
    utterly failed to establish a reporting system.321
    
           I can appreciate the breadth of Plaintiffs’ theory in view of the Board’s
    
    pervasive failures under prong one and the scale of the tragedy that followed.
    
    Boeing’s safety issues manifested in the Lion Air Crash—an accident the Board
    
    
    
    319
       Id. at *17 (alterations and internal quotation marks omitted) (quoting Reiter, 2016 WL
    6081823, at *8).
    320
       See, e.g., Pettry on behalf of FedEx Corp. v. Smith, 2021 WL 2644475, at *7–12 (Del.
    Ch. June 28, 2021) (reciting the Caremark prong two standard, and finding that the board
    did not ignore red flags that were elevated through the company’s reporting system);
    Clovis, 2019 WL 4850188, at *13 (quoting Marchand, 212 A.2d at 821) (“Caremark’s
    second prong is implicated when it is alleged the company implemented an oversight
    system but the board failed to ‘monitor it.’”); cf. Chou, 2020 WL 5028065, at *17–26
    (concluding that the board consciously ignored red flags that were raised to the board where
    “Plaintiffs allege[d] that the Director Defendants face a substantial likelihood of liability
    under both prongs of Caremark”).
    321
       See, e.g., Chou, 2020 WL 5028065, at *26 (“Because the Complaint survives under a
    ‘prong two’ theory, I need not decide whether the Director Defendants face a substantial
    likelihood of liability under ‘prong one’ of Caremark. I note, however, that the Davis Polk
    Report indicates that several years after acquiring Specialty, ABC had a woefully
    inadequate compliance system. While the implication of a ‘prong one’ claim is
    unnecessary to survive the Defendants’ Motion, it nonetheless speaks to a lax approach (at
    best) to compliance at ABC.”).
    
    
                                                 93
    could not help but learn about, despite the lack of a Board-level monitoring system.
    
    Unlike many harms in the Caremark context, which include financial misconduct
    
    that the board can likely discover only through an internal system, the Board did not
    
    require an internal system to learn about the Lion Air Crash and the attendant MCAS
    
    failures.322 The Lion Air Crash and its causes were widely reported in the media;
    
    those reports reached the Board; and the Board ignored them.323
    
             But I need not decide today whether Plaintiffs’ prong two theory is cognizable
    
    in view of my conclusion that the Board utterly failed under prong one. Defendants
    
    press that “the Board had extensive reporting systems and controls,” including its
    
    Audit Committee, ERV, ethics and compliance reporting portals, internal audits
    
    group, and regular management and legal updates.324 Assuming Defendants are
    
    correct, the Board nonetheless ignored the Lion Air Crash and the consequent
    
    revelations about the unsafe 737 MAX.
    
             The Lion Air Crash was a red flag about MCAS that the Board should have
    
    heeded but instead ignored. The Board did not request any information about it from
    
    management, and did not receive any until November 5, 2018, over one week after
    
    it happened. In that communication, Muilenburg advanced management’s position
    
    
    
    322
          See, e.g., Am. Compl. ¶¶ 195–98, 208–09; id. Ex. D; Defs.’ Ex. 55; Hr’g Tr. 32.
    323
          See Am. Compl. ¶¶ 195–98, 208–09; id. Ex. D; Defs.’ Ex. 55.
    324
          D.I. 146 at 38.
    
    
                                                 94
    that the 737 MAX was safe, and the Board passively accepted that position. The
    
    November 12 WSJ Article circulated the theory that MCAS had serious engineering
    
    defects that were concealed from regulators and pilots, which required immediate
    
    investigation and remediation. The Board was aware of that article, but did not
    
    question management’s contrary position. The Section 220 record does not reveal
    
    evidence of any director seeking or receiving additional written information about
    
    MCAS or the AOA sensor, Boeing’s dealings with the FAA, how it had obtained
    
    FAA certification, the required amount of pilot training for the 737 MAX, or about
    
    airplane safety generally.325
    
             When the Board finally convened to address the Lion Air Crash, the call was
    
    optional. The full Board did not anchor the tragedy as an agenda item until it met
    
    for its regularly scheduled Board meeting in December 2018, and its focus at that
    
    meeting was on the continued production of the 737 MAX, rather than MCAS,
    
    potential remedial steps, or safety generally.326 And when the Board eventually
    
    considered whether it should investigate the causes of the Lion Air Crash, at the
    
    February 2019 Board meeting, the Board formally resolved to “delay any
    
    
    
    
    325
        See In re Tyson Foods, Inc., 919 A.2d 563, 578 (Del. Ch. 2007) (“[I]t is more reasonable
    to infer that exculpatory documents would be provided than to believe the opposite: that
    such documents existed and yet were inexplicably withheld.”).
    326
          Am. Compl. ¶ 231–32; Defs.’ Ex. 84 at -618203.
    
    
                                                95
    investigation until the conclusion of the regulatory investigations or until such time
    
    as the Board determines that an internal investigation would be appropriate.” 327
    
             Electing to follow management’s steady misrepresentations that the 737 MAX
    
    fleet was safe and airworthy, the Board treated the crash as an “anomaly,” a public
    
    relations problem, and a litigation risk,328 rather than investigating the safety of the
    
    aircraft and the adequacy of the certification process. The Board’s declination to
    
    test the modicum of information it received and seek the truth of the 737 MAX’s
    
    safety, despite reported information calling it into question, do not indicate a mere
    
    “failed attempt” to address a red flag.329 As alleged and supported by the Section
    
    220 record, the Board was aware or should have been aware that its response to the
    
    Lion Air Crash fell short.330
    
    
    
    
    327
          Am. Compl. ¶ 238; Pls.’ Ex. 4.
    328
          Am. Compl. ¶ 271.
    329
       Cf. Richardson v. Clark, 2020 WL 7861335, at *11 (Del. Ch. Dec. 31, 2020); In re
    Qualcomm FCPA S’holder Deriv. Litig., 2017 WL 2608723, at *4 (Del. Ch.
    June 16, 2017).
    330
       See Am. Compl. Ex. C (addressing “lessons learned’ and the Board’s need to begin
    addressing safety in a formal setting); Rich ex rel. Fuqi Int’l, Inc. v. Yu Kwai Chong, 66
    A.3d 963, 983–84 (Del. Ch. 2013) (finding scienter where company’s directors “knew that
    there were material weaknesses in [the company’s] internal controls”); cf. In re GoPro,
    Inc., 2020 WL 2036602, at *13 (Del. Ch. Apr. 28, 2020) (declining to find that Plaintiffs
    offered “well-pled facts supporting an inference that a majority of the Demand Board
    personally knew about Karma’s defect, could meaningfully address the issue at the Board
    level and yet elected to do nothing”).
    
    
                                               96
                          2.       Plaintiffs Have Not Pled Particularized Facts
                                   Demonstrating The Director Defendants Face A
                                   Substantial Likelihood Of Liability With
                                   Respect To Muilenburg’s Retirement And
                                   Compensation.
    
             Plaintiffs also allege that the Director Defendants consciously breached their
    
    fiduciary duties by allowing Muilenburg to receive unvested equity-based
    
    compensation in a quiet retirement, despite knowing that he misled the FAA and the
    
    Board, and failed in his response to the Lion Air and Ethiopian Airlines Crashes.
    
    Plaintiffs couch this claim as one for waste or, in the alternative, bad faith. 331 But
    
    Plaintiffs have not alleged particularized facts sufficient to demonstrate that the
    
    Director Defendants face a substantial likelihood of liability under these rigorous
    
    standards.332
    
             Plaintiffs   do    not    meaningfully       challenge     the    independence        and
    
    disinterestedness of the Board as to the terms of Muilenburg’s departure. Plaintiffs
    
    theorize the Board bought Muilenburg’s silence because he knew the depth of the
    
    Board’s ignorance about the 737 MAX. Plaintiffs contend that the Board acted out
    
    of self-interest by allowing Muilenburg to retire and claim his unvested equity
    
    
    
    331
          See D.I. 155 at 56–61.
    332
       This is true whether the Board’s decision to terminate Muilenburg is considered under
    Aronson or Rales. See Zuckerberg, 250 A.3d at 877–90; see also D.I. 146 at 58 (“Whether
    the Board’s decision to terminate Muilenburg is considered under Aronson or
    Rales, . . .Plaintiffs fail to establish demand futility.”); id. at 60 (assessing Plaintiffs’ claims
    under Rales); D.I. 155 at 38 (citing and applying Rales).
    
    
                                                    97
    because “Muilenburg could have accused the Board members of unfairly
    
    scapegoating him for doing what the Board wanted.”333 They argue “[t]he Board’s
    
    pronounced lack of safety oversight incentivized the Board members not to make an
    
    enemy of Muilenburg at a time of public clamor over whether the Board bore any
    
    culpability for the mass fatalities and resulting financial catastrophe at Boeing.”334
    
    But Plaintiffs do not plead particularized facts supporting their theory that “[p]aying
    
    Muilenburg encouraged his silence about his interactions with the Board.” 335
    
    Nothing in the Section 220 production gives rise to the reasonable inference that
    
    Muilenburg intended to retaliate against the Board by placing the blame at its feet.
    
    This theory is conclusory.
    
                Further, Plaintiffs have not pled particularized facts giving rise to the
    
    inference that the Board would face a substantial likelihood of liability under waste
    
    or bad faith theories. “[T]he standard for waste is a very high one that is difficult to
    
    meet,”336 and “to prevail on a waste claim the plaintiff must overcome the general
    
    presumption of good faith by showing that the board’s decision was so egregious or
    
    irrational that it could not have been based on a valid assessment of the corporation’s
    
    
    
    
    333
          D.I. 155 at 59.
    334
          Id. at 60.
    335
          Id.
    336
          In re Walt Disney Co. Deriv. Litig., 907 A.2d 693, 759 (Del. Ch. 2005).
    
    
                                                  98
    best interests.”337 “[T]o excuse demand on grounds of waste the Complaint must
    
    allege particularized facts that lead to a reasonable inference that the director
    
    defendants authorized ‘an exchange that is so one sided that no business person of
    
    ordinary, sound judgment could conclude that the corporation has received adequate
    
    consideration.’” 338 The burden to establish a claim for bad faith is similarly
    
    stringent. A finding of bad faith in the fiduciary context is rare.339 “Absent direct
    
    evidence of an improper intent, a plaintiff must point to a decision that lacked any
    
    rationally conceivable basis . . . to survive a motion to dismiss.”340
    
                The Amended Complaint and the Section 220 record do not support such
    
    claims here, as it is reasonable to infer that the Board was validly exercising its
    
    business judgment when it decided to allow Muilenburg to retire with compensation.
    
    At that time, Boeing was facing substantial backlash and had spent millions of
    
    
    337
          Citigroup, 964 A.2d at 136 (alterations and internal quotation marks omitted).
    338
          Id.
    339
       See In re Saba Software, Inc. S’holder Litig., 2017 WL 1201108, at *20 (Del. Ch.
    Mar. 31, 2017) (citing In re Chelsea Therapeutics Int’l Ltd. S’holders Litig., 2016 WL
    3044721, at *1 (Del. Ch. May 20, 2016)). That said, I acknowledge the bulk of this opinion
    concludes the Director Defendants face liability for bad faith dereliction of their oversight
    duties.
    340
        In re Essendant, Inc. S’holder Litig., 2019 WL 7290944, at *14 (Del. Ch. Dec. 30, 2019)
    (alteration and internal quotation marks omitted) (quoting Chen v. Howard-Anderson, 87
    A.3d 648, 684 (Del. Ch. 2014)); see also Chelsea Therapeutics, 2016 WL 3044721, at *1
    (stating that in cases where “there is no indication of conflicted interests or lack of
    independence on the part of the directors,” a finding of bad faith should be reserved for
    situations where “the nature of [the directors’] action can in no way be understood as in the
    corporate interest: res ipsa loquitur”).
    
    
                                                  99
    dollars addressing the 737 MAX corporate trauma. Even accepting as true that the
    
    Board allowed Muilenburg to go quietly and with full pockets to avoid further public
    
    criticism, it is reasonable to infer that doing so was in furtherance of the legitimate
    
    business objective of avoiding further reputational and financial harm to the
    
    Company.341 Accordingly, Plaintiffs have failed to allege particularized facts that
    
    the decision to forego Muilenburg’s termination for cause “was otherwise the
    
    product of a valid exercise of business judgment.” 342 The Motion is therefore
    
    granted as to Plaintiffs’ Muilenburg compensation claims.
    
                 B.     The Motion Is Granted As To Count II’s Claim Against The
                        Officer Defendants.
    
             Defendants have also moved to dismiss all claims against the Officer
    
    Defendants under Rules 23.1 and 12(b)(6). Defendants argue that Plaintiffs do not
    
    plead with particularity facts establishing that demand is excused for Count II of
    
    their Complaint, alleging breach of fiduciary duty by Boeing’s officers. 343
    
    
    
    
    341
        See Shabbouei v. Potdevin, 2020 WL 1609177, at *12 (Del. Ch. Apr. 2, 2020) (“[T]he
    Board was operating well-within the bounds of proper business judgment when it decided
    to settle with [the former CEO] rather than fire him ‘for cause,’ a decision that could have
    embroiled the Company in an embarrassing legal battle with its former CEO.”); Seinfeld v.
    Slager, 2012 WL 2501105, at *6 (Del. Ch. June 29, 2012) (“Other factors may also
    properly influence the board, including ensuring a smooth and harmonious transfer of
    power, securing a good relationship with the retiring employee, preventing future
    embarrassing disclosure and lawsuits, and so on.”).
    342
          Aronson, 473 A.2d at 814.
    343
          D.I. 146 at 60.
    
    
                                                100
    Defendants further argue that Delaware does not recognize Caremark claims against
    
    officers, and that Plaintiffs have failed to allege that the Officer Defendants breached
    
    their duty of care.344
    
             In briefing, Plaintiffs did not address Defendants’ demand futility arguments
    
    as to Count II.345 Instead, Plaintiffs’ theory under Rule 23.1 presumably turns on the
    
    assumption that the Officer Defendants can face Caremark liability, and that
    
    therefore demand was futile as to all Defendants facing the same claim. But
    
    Plaintiffs have not pled this with the requisite particularity, nor have they argued that
    
    any of the Director Defendants are beholden to or dominated by the Boeing officers
    
    such that they would be unable to assess Count II regardless of the theory of
    
    liability.346 Indeed, the Amended Complaint’s demand futility allegations do not
    
    address the Officer Defendants, asserting only that “a majority of the members of
    
    the Board have faced a substantial likelihood of liability for failing to make any good
    
    faith effort to implement and oversee a board-level system to monitor and report on
    
    
    
    
    344
          See id. at 61–62.
    345
          See generally D.I. 155; D.I. 159 at 33.
    346
       E.g., In re MetLife, Inc. Deriv. Litig., 2020 WL 4746635, at *13 n.186 (Del. Ch.
    Aug. 17, 2020) (pointing out that plaintiffs did not argue that any board members were
    beholden to management so as to disable them from evaluating the claims); Rales, 634
    A.2d at 936.
    
    
                                                    101
    safety.”347 Accordingly, Count II is dismissed pursuant to Rule 23.1, and therefore
    
    I need not address Defendants’ arguments under Rule 12(b)(6).
    
          III.   CONCLUSION
    
             The Motion is GRANTED in part and DENIED in part. The parties shall
    
    submit an implementing order with twenty days of this decision.
    
    
    
    
    347
          Am. Compl. ¶ 299.
    
    
                                           102