Southwest Airlines Co. has agreed to pay $3.5 million in attorneys' fees and expenses to settle a lawsuit filed against the company by shareholders who alleged the airline had failed to comply with Federal Aviation Administration inspection requirements.
Southwest shareholders filed a derivative complaint against Southwest and senior officers, including CEO Gary Kelly, according to court filings. The plaintiffs — Carbon County Employees Retirement System and Mark Criestello — contended in the complaint that Southwest’s officers and directors breached fiduciary duties, as well as their fiduciary duty of good faith when dealing with a 2007 incident in which the FAA mandated inspection of certain planes.
The plaintiffs allege in the court documents that the corporate officers failed to provide the appropriate oversight to ensure the FAA’s inspection requirements were met. The complaint alleges the inspections of "a number of airplanes" had been only partially completed by that date. Southwest also was accused by the shareholders of mismanagement and corporate waste.
The shareholders allege in the suit that “defendants allowed Southwest (through the actions of its management) to violate the law by continuing to fly certain of those airplanes (subject to FAA inspection mandates) between March 15, 2007 and March 23, 2007."
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