WICHITA, Kan. – Shareholders failed to show that Spirit AeroSystems and four of its executives lied about three manufacturing contracts that resulted in $434.6 million in losses, a federal appeals court panel ruled Tuesday.
Upholding a lower court decision, the 10th U.S. Circuit Court of Appeals ruled Tuesday that the investors behind a class-action lawsuit failed to show the aircraft parts maker or its executives made any material misrepresentations or omissions.
The lawsuit followed an October 2012 announcement that the Wichita-based company recorded $434.6 million forward losses on the three contracts at issue in the appeal. U.S. District Judge Eric Melgren threw out the lawsuit last year before it got to trial.
In addition to the Spirit, the executives named as defendants in the lawsuit are Jeffrey Turner, Spirit’s former chief executive officer; Philip Anderson, the company’s chief financial officer; Alexander Kummant, senior vice-president of Oklahoma operations; and Terry George, vice-president overseeing the Boeing 787 project.
The class-action lawsuit was brought by stockholder Wayne Anderson as the lead plaintiff, along with the International Association of Machinists and Aerospace Workers, among others.
Spirit AeroSystems agreed to supply parts for three types of aircraft manufactured by Gulfstream Aerospace Corp. and The Boeing Co., specifically the Gulfstream G280 and G60, and the Boeing 787. Each project had production delays and cost overruns, which Spirit periodically publicly reported. Spirit acknowledged the risks in these reports, but expressed confidence in its ability to meet production deadlines and ultimately break even on the projects.
But on Oct. 25, 2012, Spirit announced it expected to lose hundreds of millions of dollars, and its stock price dropped 30 per cent.
“The size of the loss does not suggest that the four executives knew or recklessly disregarded the risks that Spirit was eventually going to lose money on the three projects,” the appeals court panel concluded.
Justice Carlos Lucero partly dissented with majority opinion when it came to statements pertaining to the 787 program. He concluded that two executives likely had actual knowledge of the cost overruns and had “intentionally lied to investors about the status of the 787 project,” saying that part of the case should have been allowed to go to trial.