Delaware Chancery Court Protects Whistleblowers’ Confidentiality in Derivative Suit Relating to Boeing 737 MAX Aircraft

Schnader Harrison Segal & Lewis LLP

Schnader Harrison Segal & Lewis LLPIn a derivative suit arising from alleged acts and omissions relating to Boeing’s 737 MAX aircraft, shareholders filed a redacted complaint in the Chancery Court of Delaware. Boeing filed a Motion for Continued Confidential Treatment, which was opposed by non-party Objectors Dow Jones & Company, Inc., publisher of The Wall Street Journal, and its reporter. The Court granted the motion only with respect to certain employees and whistle-blowers.

The presumption in Delaware is that all court proceedings and filings are available for public access; however, upon a showing of good cause, Chancery Court rules permit any person to request pleadings and other filings and materials be filed confidentially and sealed from public access. Generic allegations that harm will occur if sensitive information is made public are not enough to overcome the public right of access that is at the heart of the “good cause” analysis. A party must cite to specific information and “proffer tangible evidence of concrete damage if that information is made accessible to the public.”

In this case, Boeing argued that continued confidential treatment of the complaint was warranted because: (1) the subject documents were produced confidentially to Plaintiffs before they filed suit pursuant to a shareholder’s right to inspect certain company records; (2) the press already had reported on the events of the two MAX crashes to such an extent that the incremental information kept confidential would not substantially add to the public’s knowledge of relevant events, and (3) release of the confidential information would cause irreparable competitive harm to Boeing and its whistleblower employees. The Court rejected the first argument, holding that the information from books and records produced confidentially was only confidential until included in pleadings; thereafter, confidentiality is determined by the Court of Chancery Rules. The Court rejected the second
argument on the basis that “the public’s intense attention to the Company’s safety response compels the conclusion that even the details are of interest.” The Court nevertheless granted Boeing’s Motion with respect to retaining the confidentiality of the identity of non-party former or current whistleblower
employees because their identities have no bearing on the public’s understanding of the extent to which any fiduciary duties were breached.

When confidential information and documents are exchanged between prospective parties prior to a suit being filed, it is imperative to know the standard that must be met in your jurisdiction in order to retain confidentiality if a suit ultimately is filed, and to be sure the client appreciates the risk that litigation poses if that confidentiality is not retained. In re Boeing Co. Derivative Litig., 2021 Del. Ch. LEXIS 22 (Del. Ch. Feb. 1, 2021)

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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