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Fourth Circuit Reverses Class Certification In Securities Class Action Against Aerospace Manufacturing Company
08/04/2026On July 20, 2026, the United States Court of Appeals for the Fourth Circuit reversed and remanded a decision from the United States District Court for the Eastern District of Virginia certifying a class in a securities fraud action against an aerospace manufacturing company (the “Company”), and four of its former officers (the “Individual Defendants”), alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Rhode Island Office of the General Treasurer, et al. v. The Boeing Co., et al., No. 25-1492 (4th Cir. July 20, 2026). In reversing the class certification order, the Fourth Circuit held that plaintiffs failed to provide a class-wide damages methodology consistent with their theory of liability, as required by Comcast Corp. v. Behrend, 569 U.S. 27 (2013), and that the district court failed to conduct the “rigorous analysis” that Comcast and Rule 23 require.
According to the operative complaint, the Company is one of only two manufacturers of large commercial airplanes. In the wake of two fatal plane crashes involving the Company’s planes in 2018 and 2019, plaintiffs alleged that the Company repeatedly represented that it was prioritizing the safety and quality of its airplanes. Plaintiffs alleged that from January 7, 2021, to January 8, 2024, defendants made dozens of false or misleading statements concerning the safety and manufacturing quality of the Company’s airplanes, the Company’s culture of encouraging employees to report safety concerns, the stable and growing production of safe airplanes, and the Company’s regulatory compliance including with respect to an investigation by the SEC. Plaintiffs alleged that these alleged statements were false because the Company continued unsafe practices such as “traveled work”—moving an airplane down the production line when production on its current station is not complete, in order to prevent delays—despite stating that it planned to eliminate that practice, that the Company allegedly tolerated manufacturing shortcuts, improper quality control, and that it retaliated against employees who reported concerns. Plaintiffs alleged that, as a result of these alleged misstatements and omissions, the Company’s stock price was artificially inflated, and that the truth emerged when a door plug detached from one of the Company’s airplanes during a flight on January 5, 2024, the reporting of which allegedly caused a drop in the Company’s stock price on the next trading day.
The district court denied the Company’s motion to dismiss the putative securities class action, and the district court later certified the proposed class. Defendants sought an interlocutory appeal of the class certification decision under Federal Rule of Civil Procedure 23(f), which the Fourth Circuit agreed to hear.
On appeal, defendants argued that plaintiffs’ reliance on the “out-of-pocket” damages methodology offered by their expert—under which each class member’s alleged “damages are equal to the artificial inflation per share at the time of purchase minus the artificial inflation per share at the time of sale”—was inadequate under Comcast. Defendants argued that plaintiffs’ expert merely identified possible techniques for calculating damages without committing to an approach—including an approach for how to determine artificial inflation—and did not account for the complexity of the case.
The Fourth Circuit agreed. Applying Comcast, which the Court explained requires evidentiary proof of a damages methodology that measures damages on a class-wide basis and that is “consistent with its liability case,” the Court reasoned that adequate damages methodology must show how damages will actually be measured in the specific case, and that “[a] menu of options that the party will decide on later is not a damages methodology.”
In assessing whether plaintiffs’ damages methodology was adequate, the Court held that the out-of-pocket approach plaintiffs offered was only a legal description of securities-fraud damages rather than a methodology, because it did not explain how to determine the alleged artificial inflation embedded in the Company’s stock price on any day of the putative class period. The Court emphasized that plaintiffs’ expert never committed to any methodology, offering instead a non-exhaustive list of possible valuation techniques, and three possible measures of inflation without selecting among them. The Court found that plaintiffs’ expert offered “a series of ‘maybe[s],’ ‘perhaps[es]’ and ‘what ifs’” that fell short of the Comcast requirements. The Court also held that plaintiffs failed to commit to a theory of liability by pleading both that the alleged misrepresentations inflated the Company’s share price, or, in the alternative, caused the share price to be maintained at an artificially high level. The Court added that, at the class certification stage, plaintiffs must commit to a theory of liability, because “the district court needs that information to compare the plaintiffs’ damages methodology to their liability theory.” As a result, the Court held that the district court failed to conduct the rigorous analysis that Comcast and Rule 23 require.
Finally, the Court rejected plaintiffs’ argument that their expert’s later-filed merits report cured the deficiency. The Court reasoned that the report’s application of a constant percentage to measure the alleged inflation was inconsistent with plaintiffs’ own allegations of dozens of varied misstatements made over three years, and held that “[c]onclusorily claiming that each statement had the exact same effect on the market is speculation,” not a showing of consistency.
Accordingly, the Court reversed the class certification order and remanded the case to the district court for further proceedings.
Securities Litigation