The Duck of Minerva

The Boeing 737 Max Settlement: An American “Solution” to an International Disaster?

25 August 2022

In 2018 and 2019, two Boeing 737 MAX planes crashed, killing 346 people hailing from 36 different countries across the globe. Now, some of the families who lost loved ones are challenging in U.S. federal court the Department of Justice’s (“DOJ”) settlement with Boeing.

No matter what the court decides, the families have already raised important questions not only about the Boeing settlement, but also how corporations are held accountable for criminal wrongdoing. The families have brought to headline news the fact that the Boeing settlement – and most corporate criminal prosecutions today – are a product of negotiations between prosecutors and corporate wrongdoers

In many ways, the Boeing settlement offers an American solution to an international disaster. It’s a deal made behind behind closed doors in Washington, DC – but it affects the lives of hundreds of families around the world. These families are now asking a crucial question: who is left out in settlements like Boeing’s?

As we discuss below, these kinds of corporate settlements often sideline both courts and victims.

Recap: The 737 MAX crashes and the Boeing settlement

Boeing’s 737 MAX planes were involved in two of aviation’s most deadly disasters in the 21st century: in October 2018, Lion Air Flight 610 crashed into the Java Sea 13 minutes after taking off from Jakarta en route to Pangkal Pinang, Indonesia, killing all 189 on board.

In March 2019, Ethiopian Airlines Flight 302 crashed six minutes after taking off from Addis Ababa, Ethiopia en route to Nairobi, Kenya, killing all 157 of its crew and passengers. Following the second crash, national regulators worldwide grounded the 737 MAX planes.

In January 2021, during the final days of the Trump administration, the Department of Justice (DoJ) entered into a settlement with Boeing for conspiring to defraud the Federal Aviation Administration (FAA) about the 737 MAX planes.

The settlement came in the form of a deferred prosecution agreement (DPA) – an agreement negotiated between prosecutors and defendants that avoids a criminal trial or guilty plea in exchange for the defendant performing certain conditions, like paying a penalty. Prosecutors in the United States (and elsewhere) have increasingly made use of DPAs when corporations engage in criminal wrongdoing – even when the harms of corporate crime are felt far beyond one country’s borders.  

In its DPA, Boeing agreed to pay $2.5 billion. While the multi-billion-dollar number is eye-catching, this amount includes more than $1.77 billion that Boeing had already agreed to pay to compensate airlines for the grounding of the 737 MAX planes. It also includes a $500 million fund to compensate family members of those that lost their lives in the 737 MAX crashes. The part of the settlement that is a specifically criminal penalty amounts to $243.6 million—the minimum recommended fine.

To put this amount in perspective, the market price of a 737 MAX is around $134 million. Boeing paid less in criminal penalties than it made selling the two downed planes.

Criticisms of the settlement

From the outset, the Boeing settlement has drawn criticism. As Ankush Khardori put it, the issue isn’t just that the settlement is low. The agreement is also unusual: it including a statement declaring that Boeing engaged in no “pervasive” wrongdoing. It also exonerated the company’s executives. A number of commentators explain this by pointing out the close connections between the government and Boeing. The lead DOJ lawyer who negotiated the settlement now works as a partner for the firm defending Boeing.

The victims’ families have echoed these criticisms and raised others, including that DOJ prosecutors left them out of the settlement process. The families insist that they would have pushed prosecutors to take a tougher line on Boeing. Now, the victims’ families have turned to the court, asking it to review the government’s settlement with Boeing and include them in the resolution process.  

A call for judicial oversight

In their filings, the victims’ families have described the DPA as as “expansive” one that grants the company “immunity” from criminal prosecution. The families argue that the court has “supervisory power over the DPA” and are calling on the court to use it “to address the DPA’s failure to provide any criminal accountability for Boeing.”

The government disputes this characterization of the DPA. But even if we accept the families’ description of the DPA, what power does the court have to step in?

Very little, according to the DOJ and research on corporate criminal law.

DPAs are deals struck between prosecutors and corporations suspected of criminal wrongdoing. They have become the dominant mechanism through which the DOJ resolves allegations of corporate crime. Courts are involved in DPAs to the extent that criminal charges are filed in court and then “deferred” pending the defendant’s payment of a penalty and performance of any other conditions. But courts have little space to assess the appropriateness of a DPA or its contents.

A recent article surveying case law finds that “judges have virtually no role in reviewing DPAs to which a prosecutor and a corporate defendant have agreed.” As the DOJ is currently arguing in response to the families’ motion, DPAs are “a quintessential exercise of prosecutorial discretion.” In short, DPAs are a tool controlled by prosecutors and the corporate defendants they negotiate with, not courts.

But the use of DPAs has received considerable pushback. Not everyone agrees that DPAs should be in the exclusive domain of prosecutors. Other countries, including Canada, France, and the UK, have recently adopted DPAs and DPA-like instruments. But they require court involvement.

For instance, Canadian and British courts must approve any DPA and must assess whether the DPA is fair and in the public interest. As one of us has argued in another paper, countries established this requirement to ensure public trust in corporate prosecutions. The requirement aims to guard against perceptions of DPAs as little more than a tool for companies to “buy their way out of prosecutions.”

A call for meaningful victim participation

The families have also asked the court to recognize them as victims under the Crime Victims’ Rights Act (“CVRA”). The CVRA grants a range of rights to victims of crime—like rights to confer with prosecutors, receive timely notice of a settlement, and be treated with fairness and respect—all of which the families argue prosecutors failed to protect in the Boeing case.

The families only found out about the Boeing settlement through media reports, after the DOJ announced the settlement. The government apologized to the families for failing to update them prior to publicly announcing the Boeing settlement.

However, the government argues that prosecutors were under no legal obligation to confer with the families because they do not qualify as “victims” under the CVRA. According to the government, the families are not protected by the CVRA because the plane crashes in which they lost loved ones were not “directly and proximately” caused by Boeing’s crime of defrauding the FAA.

This month, the court is holding hearings on whether the crashes were caused by Boeing’s crimes and thus whether the victims’ families fall within the CVRA. The families have asked the court to consider multiple remedies for any CVRA violation, including the court’s review of the DPA.

But while the victims’ families are clearly unhappy with the government’s settlement with Boeing, they are asking for more than revisiting the DPA terms. The families are asking to be heard.

Almost all of the victims’ families have participated in the compensation fund established by the settlement, but still, they want their day in court. The families have requested a public arraignment of Boeing, where they can address the court and Boeing. As the families argue, the administration of criminal justice should not “proceed in the dark” and the families—and the public at large—should have the opportunity “to see justice done.”

These arguments highlight the impact of DPAs on those harmed by corporate crime. The Boeing DPA may be particularly egregious for failing to even notify families of the settlement. But it raises the much wider issue of what scholars call the “invisibility of corporate victims.” Corporate crime tends to affect many people across multiple countries. This can actually make it easier to overlook victims, as it reduces them to lines in a long, impersonal list of names.

DPAs, especially when negotiated behind closed doors, just makes things worse. DPAs shield corporate wrongdoers from reckoning with the individual harm caused by corporate crime. Not only can they limit the opportunity for those harmed by corporate crime to make their voices heard, but it can also impede the calling to account that criminal law is meant to provide. And because they are a product of negotiations between prosecutors and defense counsel, DPAs provide a curated account of criminal wrongdoing for the historical record.

In short, the Boeing DPA – along with the many others like it – risk creating an arrangement where the Department of Justice unilaterally administers justice to hundreds of families around the world.

What’s next

Lawyers for the victims’ families and the government will return to court on August 26, 2022, to offer further evidence on whether Boeing’s defrauding of the FAA caused the plane crashes and thus whether the CVRA protects the families. The court’s decision on this and the families’ other motions will likely come soon after.

Regardless of the outcome, the families are already drawing needed attention to the prevalence of these kinds of corporate settlements and their consequences for victims, courts, and criminal justice.

The views expressed in this article are solely those of the authors.