Court Opinion

ID: 8488454
Source: CourtListenerOpinion
Date Created: 2022-11-22 01:00:21.815738+00
Date Added: 2024-06-11T16:50:11.759566
License: Public Domain

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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                                    No. 21-40720

          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-of-
   Attack 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).

           1
              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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                                     No. 21-40720

          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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                                     No. 21-40720

   “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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                                    No. 21-40720

          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 survey-
   based 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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                                      No. 21-40720

   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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                                     No. 21-40720

   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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                                    No. 21-40720

                                *        *         *
          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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