Case: 21-40720 Document: 00516552661 Page: 1 Date Filed: 11/21/2022
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`United States Court of Appeals
`Fifth Circuit
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`FILED
`November 21, 2022
`
`Lyle W. Cayce
`Clerk
`
`United States Court of Appeals
`for the Fifth Circuit
`
`
`No. 21-40720
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`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,
`
`
`
`
`versus
`
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`The Boeing Company; Southwest Airlines Company,
`
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`Plaintiffs—Appellees,
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`Defendants—Appellants.
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`Case: 21-40720 Document: 00516552661 Page: 2 Date Filed: 11/21/2022
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`No. 21-40720
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`
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`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.
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`This is an interlocutory appeal of a district court order granting
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`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.
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`We provide only a brief summary of the alleged fraud because the
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`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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`Case: 21-40720 Document: 00516552661 Page: 3 Date Filed: 11/21/2022
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`No. 21-40720
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`Plaintiffs allege that behind the scenes, Southwest aggressively
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`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.
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`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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`Case: 21-40720 Document: 00516552661 Page: 4 Date Filed: 11/21/2022
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`No. 21-40720
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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.
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`B.
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`The eleven named plaintiffs filed suit in July 2019. They sought to
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`represent everyone who purchased a ticket for air travel on Southwest or
`American Airlines1 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.”
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`The airlines moved to dismiss, arguing, among other things, that
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`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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`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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`Case: 21-40720 Document: 00516552661 Page: 5 Date Filed: 11/21/2022
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`The district court then held, however, that plaintiffs pleaded an
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`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.
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`Plaintiffs next moved for class certification. The district court granted
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`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).
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`II.
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`We start, as always, with jurisdiction. “Though rule 23(f) allows a
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`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.
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`Article III of the United States Constitution limits the judicial power
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`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
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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).
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`The dispute in this case concerns injury in fact. As the Supreme Court
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`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).
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`Plaintiffs contend that defendants fraudulently concealed defects in
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`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
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`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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`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.
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`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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`Case: 21-40720 Document: 00516552661 Page: 10 Date Filed: 11/21/2022
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`No. 21-40720
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`*
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`*
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`*
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`The district court’s class certification order is REVERSED, and the
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`case is REMANDED with instructions to DISMISS the case for lack of
`jurisdiction.
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