Case: 21-40720 Document: 00516552661 Page: 1 Date Filed: 11/21/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 21, 2022
No. 21-40720 Lyle W. Cayce
Clerk
Damonie Earl, individually and on behalf of all others
similarly situated; Linda Rugg, individually and on behalf
of all others similarly situated; Alesa Beck,
individually and on behalf of all others similarly
situated; Timothy Blakey, Jr.; Stephanie Blakey;
Marisa Thompson, individually and on behalf of all others
similarly situated; Muhammad Muddasir Khan; John
Rogers, individually and on behalf of all others similarly
situated; Valerie Mortz-Rogers, individually and on
behalf of all others similarly situated; James LaMorte;
Brett Noble, individually and on behalf of all others
similarly situated; Ruben Castro, individually and on
behalf of all others similarly situated; Fritz Ringling,
individually and on behalf of all others similarly
situated; Litaun Lewis, individually and on behalf of all
others similarly situated; Lance Hogue, Jr.,
individually and on behalf of all others similarly situated,
Plaintiffs—Appellees,
versus
The Boeing Company; Southwest Airlines Company,
Defendants—Appellants.
Case: 21-40720 Document: 00516552661 Page: 2 Date Filed: 11/21/2022
No. 21-40720
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 4:19-CV-507
Before Smith, Duncan, and Oldham, Circuit Judges.
Andrew S. Oldham, Circuit Judge:
The plaintiffs in this class-action lawsuit allege that Boeing and
Southwest Airlines defrauded them by, among other things, concealing a
serious safety defect in the Boeing 737 MAX 8 aircraft. The district court
certified four classes encompassing those who purchased or reimbursed
approximately 200 million airline tickets for flights that were flown or could
have been flown on a MAX 8. But plaintiffs have not plausibly alleged that
any class member suffered either physical or economic injury from Boeing’s
and Southwest’s alleged fraud. Plaintiffs therefore lack Article III standing.
We reverse and remand with instructions to dismiss for want of jurisdiction.
I.
A.
This is an interlocutory appeal of a district court order granting
plaintiffs’ motion for class certification. Plaintiffs seek to recover under
RICO for alleged fraud by Boeing and Southwest Airlines in connection with
the certification and marketing of the Boeing 737 MAX 8 aircraft.
We provide only a brief summary of the alleged fraud because the
particulars are largely irrelevant to the dispositive legal issues in this appeal.
According to plaintiffs, defendants have a unique and “symbiotic” business
relationship. As part of that relationship, Southwest only flies variants of the
Boeing 737 aircraft. When Boeing announced the new MAX 8 variant in 2011,
Southwest was the launch customer.
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Plaintiffs allege that behind the scenes, Southwest aggressively
pressured Boeing to deliver the MAX 8 without requiring pilots to undergo
significant additional training. Southwest wanted Boeing to convince the
Federal Aviation Administration (“FAA”) that the MAX 8 and a previous
737 variant—the 737 NG—were so similar that pilots did not need to
complete new flight-simulator training for the MAX 8. Instead, a short course
on an iPad or computer would be sufficient. This abbreviated training
program is called “Level B pilot training.”
The defendants’ effort to ensure Level B pilot training encountered
various difficulties. Most relevant here, Boeing’s decision to place more
powerful engines closer to the fuselage and farther forward on the aircraft (to
enhance fuel efficiency) meant that the MAX 8 handled differently from the
737 NG. So Boeing added the “Maneuvering Characteristics Augmentation
System” (“MCAS”) to the MAX 8. MCAS automatically adjusted the trim
of the aircraft to make the MAX 8 mimic the handling and flight behavior of
the 737 NG.
Plaintiffs allege that defendants omitted references to MCAS in flight
crew documentation and misled the FAA about the significance and
operation of MCAS. Defendants also coordinated communications to the
public and the press to minimize public concern about the MAX 8. Boeing
succeeded in getting Level B training approval for the MAX 8 and began
delivering MAX 8 aircraft to Southwest and American Airlines. Throughout
the class period (August 2017 to March 2019), MAX 8 aircraft made up at
most 34 of over 700 planes in Southwest’s fleet, and 28 of over 1,500 planes
in American’s fleet.
During Lion Air Flight 610 on October 29, 2018, a faulty Angle-ofAttack sensor on a MAX 8 fed incorrect information to the flight computer.
MCAS took control of the plane and improperly pushed the nose down. The
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plane crashed, killing everyone on board. On March 10, 2019, another MAX
8 flight—Ethiopian Airlines Flight 302—suffered the same fate. After this
second crash, the MAX 8 was grounded worldwide.
B.
The eleven named plaintiffs filed suit in July 2019. They sought to
represent everyone who purchased a ticket for air travel on Southwest or
American Airlines 1 between August 29, 2017, and March 13, 2019 (the
“Class Period”). They alleged the class overpaid for plane tickets: “The
actual prices of the tickets that were purchased as a result of the
misrepresentations by Southwest and Boeing about the safety of the MAX 8
and MAX Series Aircraft were significantly higher than the value of those
tickets, which for many, if not most, passengers was zero.”
The airlines moved to dismiss, arguing, among other things, that
plaintiffs lacked Article III standing. The district court dismissed plaintiffs’
claims for lack of standing to the extent they alleged that “if Plaintiffs had
known the MAX 8 was fatally defective, Plaintiffs would never have
purchased a ticket, so Plaintiffs want their money back.” The court held that
because this theory sought to recover for a risk of physical injury that did not
materialize as to any plaintiff, it was akin to the “no-injury products liability
claim” that we held insufficient to support standing in Rivera v. Wyeth-Ayerst
Laboratories, 283 F.3d 315 (5th Cir. 2002).
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Plaintiffs included American Airlines ticket purchasers as proposed class
members because, as they put it, “[t]he same Boeing-Southwest conspiracy that caused
passengers to fly on a MAX 8 on Southwest Airlines . . . proximately caused passengers to
fly on other airlines that flew the MAX 8, such as American Airlines (when they would not
have done so but for the Boeing-Southwest conspiracy, which hid safety issues with the
airplane).”
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The district court then held, however, that plaintiffs pleaded an
economic injury in fact sufficient to support standing. Specifically, plaintiffs
alleged that defendants’ fraudulent actions allowed Southwest and American
to overcharge plaintiffs for their tickets. Absent a fraudulent scheme to
conceal the MAX 8’s safety defects, demand for tickets on routes flying the
MAX 8 would have decreased, along with the price of those tickets. So, the
theory goes, plaintiffs paid a fraud-induced overcharge at the time they
bought their tickets, and they have Article III standing to recover the amount
of that overcharge. The district court held that plaintiffs could proceed on
this theory of Article III injury and this theory only.
Plaintiffs next moved for class certification. The district court granted
the motion and certified four classes covering nearly 200 million ticket
purchases. Defendants petitioned us for permission to appeal the class
certification decision. See Fed. R. Civ. P. 23(f). We granted it. Defendants
then moved us to stay district court proceedings pending the outcome of this
appeal. We granted that motion too. Earl v. Boeing Co., 21 F.4th 895, 897 (5th
Cir. 2021).
II.
We start, as always, with jurisdiction. “Though rule 23(f) allows a
party to appeal only the issue of class certification, standing is an inherent
prerequisite to the class certification inquiry. Accordingly, standing may—
indeed must—be addressed even under the limits of a rule 23(f) appeal.”
Rivera, 283 F.3d at 319 (quotation omitted). Article III standing is a question
of law that we review de novo.
Ibid.
Article III of the United States Constitution limits the judicial power
to “Cases” and “Controversies.” U.S. Const. art. III, § 2; see Cranor v. 5
Star Nutrition, LLC, 998 F.3d 686, 689 (5th Cir. 2021). Because of that
limitation, any party invoking the judicial power must establish the
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“irreducible constitutional minimum of standing.” Lujan v. Defs. of Wildlife,
504 U.S. 555, 560 (1992). Article III standing requires three elements: (1) an
“injury in fact” that is (2) “fairly traceable” to the “conduct complained
of” and that is (3) likely redressable by a favorable court decision.
Id. at 560–
61 (quotation omitted); see also TransUnion LLC v. Ramirez,
141 S. Ct. 2190,
2203 (2021).
The dispute in this case concerns injury in fact. As the Supreme Court
has repeatedly instructed, standing requires a claim of injury that is
“concrete, particularized, and actual or imminent.” TransUnion, 141 S. Ct.
at 2203; see also Spokeo, Inc. v. Robins,
578 U.S. 330, 339 (2016). That means
a claimed injury must be real—“it must actually exist.” Spokeo,
578 U.S. at
340. And it must not be “too speculative for Article III purposes.” Clapper v.
Amnesty Int’l, USA,
568 U.S. 398, 409 (2013) (quotation omitted).
Plaintiffs contend that defendants fraudulently concealed defects in
the MAX 8 that threatened passengers with a serious risk of physical injury
or death. But no plaintiff alleges that he has suffered or will suffer any
physical injury as a result of defendants’ fraud. To the contrary, plaintiffs
expressly disclaim any recovery for physical injury.
Instead, the complaint asserts plaintiffs “were harmed and suffered
actual damages” because the ticket prices they paid “were significantly
higher than the value of those tickets, which for many, if not most, passengers
was zero.” As the district court observed, there are two ways to understand
this alleged injury. The first and perhaps most straightforward reading is that
plaintiffs were allegedly harmed because defendants’ fraud induced them to
buy tickets they never would have bought otherwise. The second way to
understand this allegation is that plaintiffs were harmed because defendants’
fraud allowed Southwest and American Airlines to set higher fares for
plaintiffs’ tickets than they could or would have done absent the fraud.
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Everyone now agrees the first theory of injury cannot support Article
III standing under our decision in Rivera. That case involved a class action by
plaintiffs who had been prescribed and taken an allegedly defective painkiller.
283 F.3d at 317. The Rivera plaintiffs alleged the painkiller was defective
because of a risk of liver damage.
Id. at 319–20. But even though other
customers had been injured, the risk of liver damage had not materialized as
to any plaintiff, and the painkiller had worked as advertised in every other
respect.
Id. at 319. We held that plaintiffs had “asserted no concrete injury”
because they “paid for an effective pain killer, and [they] received just that.”
Id. at 320–21.
Plaintiffs therefore fall back to their second theory—what we’ll call
the “overcharge-by-fraud” theory. This theory seeks to recover for a
purported economic injury rather than any risk of physical injury.
Specifically, plaintiffs claim that if the public had known about defendants’
fraudulent scheme, demand for tickets on routes flying the MAX 8 would
have dropped, so the airlines would have been forced to lower fares and
plaintiffs would have paid less for their tickets. Defendants’ fraud thus
allowed them to inflate demand for tickets on MAX 8 routes and overcharge
their customers.
Plaintiffs have attempted to show that they suffered this sort of
economic injury through the report and testimony of their principal expert,
Professor Greg Allenby. Professor Allenby used conjoint analysis—a surveybased technique—to show that demand for flights on MAX 8 aircraft would
have lessened if the public had known the information about the MCAS
defect that was allegedly concealed by defendants’ fraud. He conducted his
analysis as follows: First, he surveyed respondents about several hypothetical
flight options they could choose, given variables including the number of
stops, type of aircraft, and price. Second, Allenby showed respondents a
short video with a message about the MAX 8’s MCAS defect. Third, Allenby
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again asked respondents to choose between hypothetical flight options, some
of which were scheduled on MAX 8 flights, and some of which were not.
Unsurprisingly, respondents showed less willingness to fly on MAX 8 flights
after watching a video discussing the MCAS defect.
Notwithstanding this conjoint study, plaintiffs’ theory of injury rests
on two unsupportable inferences. See Ashcroft v. Igbal, 556 U.S. 662, 678
(2009) (“[A] complaint must contain sufficient factual matter . . . to state a
claim to relief that is plausible on its face. A claim has facial plausibility when
the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.”
(quotation omitted)). First, plaintiffs assume that if there was widespread
public knowledge during the class period of the MCAS defect, Southwest and
American Airlines would have continued offering the same MAX 8 flights—
but with a price discount to compensate for the heightened risk that
passengers would die. But the facts don’t support this inference. See
id. at
682. The more plausible inference is that Southwest and American would
have offered zero MAX 8 flights until the defect could be fixed. And on this
latter, more obvious inference, ticket fares would have likely gone up because
the airlines’ usable fleets would have been smaller in the meantime. (In other
words, the airlines’ supply of seats would have gone down, demand would
have stayed the same, and prices would have risen as a result.)
Second, plaintiffs assume the FAA would have permitted airlines to
fly the MAX 8 even with full knowledge of the MCAS defect. This inference
is even more implausible than the first. That’s because in reality, after the
public learned the full extent of the risk caused by the MCAS defect,
regulators worldwide grounded the MAX 8. The FAA, for example,
grounded the MAX 8 for 20 months. So in all likelihood, if the FAA had
learned the full extent of the MCAS defect sooner—which plaintiffs contend
would have happened absent defendants’ alleged fraud—then the MAX 8
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would have been pulled from plaintiffs’ routes. But again, that would have
caused ticket prices to go up, not down, because of the reduced aircraft
supply in Southwest’s and American’s fleets.
Plaintiffs do not contest any of this. Instead, when pressed at oral
argument, plaintiffs’ counsel contended that rejecting their theory of
standing would imperil all sorts of fraud litigation. That’s because it’s always
the case that in a hypothetical world where the fraud didn’t happen, anyone
injured by the fraud would have been better off. See Oral Argument at 31:50.
But that misses the point. In an ordinary fraud lawsuit—a pyramid scheme,
for example—there are identifiable victims who lost money that wouldn’t
have been lost in a counterfactual world without the fraudulent scheme. See,
e.g., Torres v. S.G.E. Mgmt., LLC, 838 F.3d 629, 634 (5th Cir. 2016) (en banc)
(suit by plaintiffs who lost money participating in a pyramid scheme). By
contrast, the plaintiffs in this suit have not plausibly alleged that they’re any
worse off financially because defendants’ fraud allowed Southwest and
American Airlines to keep flying the MAX 8 during the class period. If
anything, plaintiffs are likely better off financially. If the MCAS defect had
been widely exposed earlier, the MAX 8 flights plaintiffs chose would have
been unavailable and they’d have had to take different, more expensive (or
otherwise less desirable) flights instead.
In sum, plaintiffs have not plausibly alleged any concrete injury. See
Spokeo, 578 U.S. at 340. They concededly have suffered no physical harm.
They have offered no plausible theory of economic harm. At bottom,
plaintiffs complain of a past risk of physical injury to which they were
allegedly exposed because of defendants’ fraud. But because that risk never
materialized, plaintiffs have suffered no injury in fact and lack Article III
standing. Their case therefore must be dismissed.
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…
The district court’s class certification order is REVERSED, and the
case is REMANDED with instructions to DISMISS the case for lack of
jurisdiction.
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