Avia Files 737 Max Breach of Contract Lawsuit Against Boeing

 - August 27, 2019, 11:44 AM
A Boeing 737 Max operated by Indonesia's Lion Air crashed in October 2018, killing all passengers and crew.

Russian aircraft leasing company Avia Capital Services has begun a breach of contract lawsuit against Boeing over its order for thirty-five 737 Max airliners. In a case filed on August 26 with the Cook County district court near Boeing’s Chicago headquarters, Avia is demanding the return of the $35 million deposit it paid (with interest). It is also seeking $75 million in compensation for profits that it says will be lost as a consequence of severe disruption in deliveries in the wake of two fatal accidents involving the 737 Max, plus significant punitive damages.

Miami-based aviation law firm Podhurst Orseck, which is representing Avia, is arguing that Boeing knowingly misrepresented the steps necessary to safely bring the new 737 Max into commercial service. In view of the significant changes in aerodynamics, weight, and systems compared to earlier versions of the 737, it claims that the U.S. manufacturer should have taken the Max through a completely new type certification process that would have resulted in the need for type-specific training for pilots.

“We’re seeking damages for fraud and misrepresentation because Boeing intentionally misrepresented that it was going to provide a properly certified and airworthy aircraft,” Podhurst Orseck partner Steven Marks told AIN. “Boeing knew what the situation was at the time it signed the contract [with Avia] and it knowingly misrepresented the facts.”

In the wake of two fatal accidents involving 737 Max aircraft operated by Indonesia’s Lion Air and Ethiopian Airlines, the value of the aircraft and public trust in Boeing have significantly declined, he said. This in turn has left customers like Avia facing significant losses and diminished commercial opportunity. Boeing has refused to return deposits placed by Avia and other airlines and lessors.

Marks indicated that he expects more 737 Max customers to file similar lawsuits in the coming weeks. Podhurst Orseck, which is also representing some families who lost relatives in the accidents, is in discussions with several companies that have aircraft on order.

Over and above legal action by customers, Boeing is now facing multiple lawsuits from shareholders and the families of passengers killed in the accidents. “Boeing is trying to get its hands around how to move forward,” said Marks. “Will they do the right thing and pursue full type certification, with new training and manuals for pilots, or will they keep pushing the FAA for all sorts of freedom from proper oversight? There is a lot of international pressure for them to do the right thing, but in the U.S. we have a [federal] administration that doesn’t believe in the regulatory functions of government and this is critically needed.”

Podhurst Orseck is hopeful that the discovery phase of the trial will proceed quite quickly and that the Cook County court may start hearing the case within eight to 12 months.

Avia had been due to start taking delivery of its 737 Max aircraft in October 2019, but, before the two accidents, this had already been pushed back to March 2022. The leasing company, which is part of the Russian government-backed Rostec group, had already taken delivery of another 50 Boeing aircraft.