Boeing Plea Agreement Rejected by U.S. Judge

By Mike Spector, Allison Lampert, and David Shepardson
(Reuters) – A U.S. judge on Thursday rejected Boeing (NYSE:BA)'s agreement to plead guilty to fraud in the aftermath of two fatal 737 MAX crashes, criticizing a diversity and inclusion provision in the deal.

Boeing did not immediately provide a comment. The U.S. Department of Justice (DOJ), which negotiated the plea agreement with Boeing, is currently reviewing the judge’s decision, according to a spokesperson. Boeing and the DOJ have options, including appealing the decision or negotiating a revised agreement for court approval.

U.S. District Judge Reed O'Connor from Fort Worth, Texas, who is known for favoring conservative causes, focused on a single line in the plea agreement that referenced the DOJ's diversity policy regarding the selection of an independent monitor to oversee Boeing's adherence to compliance practices. The judge had previously asked Boeing and prosecutors to provide additional clarification in October.

Judge O'Connor has ruled that both Boeing and the DOJ have 30 days to inform the court on how they wish to proceed with the case.

Typically, judges do not overturn plea deals over disputed issues not raised by the parties involved. Rarely, this happens when a judge seeks to impose a different punishment than what prosecutors proposed.

The judge noted that the agreement also “marginalizes” his role in supervising the independent monitor and prevents implementing probation terms mandating Boeing's compliance with the monitor’s anti-fraud suggestions, asserting it was “not in the public interest.”

Relatives of the victims from the two 737 MAX crashes in 2018 and 2019, which resulted in 346 fatalities, have criticized the plea agreement as a “sweetheart” deal that inadequately holds Boeing accountable.

The tragic crashes occurred in Indonesia and Ethiopia within a five-month timeframe. Families contested the DOJ's diversity policy in court filings but did not elaborate on their concerns.

“Judge O’Connor’s emphatic rejection of the plea deal is an important victory” for the victims’ families, stated Paul Cassell, the families' lawyer. “Judge O’Connor recognized that this was a cozy deal between the government and Boeing that failed to address crucial issues: holding Boeing accountable for its deadly actions and preventing future incidents.”

Cassell expressed hope that the court’s decision would lead to a renegotiated agreement that directly considers the passengers and crew lost in the crashes.

An accepted plea deal would have rendered Boeing a convicted felon for conspiring to deceive the U.S. Federal Aviation Administration regarding troubling software that affected the aircraft's flight control systems.

As part of the agreement, Boeing had consented to pay up to $487.2 million in fines and invest $455 million towards safety and compliance improvements during a three-year supervised probation period.

Families of the victims are advocating for criminal charges against Boeing and its executives, insisting they should be held responsible for their loved ones' deaths with evidence of any wrongdoing displayed in a public trial. They have also proposed Boeing pay up to $24.78 billion related to the crashes.

In May, the DOJ identified that Boeing failed to comply with a 2021 agreement that offered it protection from prosecution related to the crashes, resulting in prosecutors opting to criminally charge Boeing and negotiate the current plea agreement.

The judge’s concerns were prominently related to the government's diversity and inclusion policy concerning the consent decree’s independent monitor selection.

Such policies, often referred to as diversity, equity, and inclusion (DEI), have ignited conflict in America’s culture wars, reflecting liberal and conservative value clashes. Proponents argue that DEI policies help mitigate unconscious bias and discrimination in hiring, while critics suggest they prioritize race and gender over primary job qualifications.

“The plea agreement requires parties to consider race when selecting the independent monitor,” Judge O'Connor noted. “In a case of this magnitude, it is critical to ensure public confidence that the monitor is chosen solely for their competence.”

O'Connor, appointed to the federal bench in 2007 by Republican President George W. Bush, has gained attention for rulings that favor conservative litigants, including declaring Obamacare unconstitutional in a ruling later reversed by the U.S. Supreme Court.

He has also overturned a Biden administration effort to prevent discrimination against students based on gender identity or sexual orientation.