Fourth Circuit Reverses Class Certification in Boeing Securities Fraud Case
In Short
The Situation: In State of Rhode Island Office of the General Treasurer v. The Boeing Company, No. 25-1492 (4th Cir. July 20, 2026), the Fourth Circuit opined on the level of proof that securities class-action plaintiffs, at the time of class certification, need to provide concerning their damages methodology in order to meet the standard articulated in Comcast Corp. v. Behrend, 569 U.S. 27 (2013).
The Result: The Fourth Circuit held that the plaintiffs' proof was insufficient because their damages expert offered only a "menu of options" rather than a specific methodology shown to be consistent with the plaintiffs' liability theory.
Looking Ahead: This decision establishes the Fourth Circuit as having a rigorous standard for evaluating damages methodologies at the class-certification stage in securities fraud cases. Both within and outside the Fourth Circuit, the Boeing decision will be an important tool for defendants seeking to defeat class certification in securities class actions.
Background
The case arises from statements that Boeing and its executives made about the company's safety practices following two crashes of 737 MAX aircraft and a worldwide grounding of the 737 MAX fleet. The plaintiffs alleged that a series of 75 statements made across five years falsely reassured investors about changes to Boeing's manufacturing and safety practices that were, in fact, not being implemented. Furthermore, the plaintiffs alleged that the truth began to emerge when another 737 MAX experienced a severe in-flight issue in January 2024, after which Boeing's stock price dropped by 8%.
The bulk of the plaintiffs' complaint survived a motion to dismiss, after which the parties proceeded to class certification. In support of their effort to show that damages could be determined on a class-wide basis, the plaintiffs' expert opined that a non-exhaustive "menu of options" would allow him to calculate damages on a class-wide basis later in the case. Those options included a number of different approaches to damage calculations, such as constant-dollar inflation, constant-percentage inflation, and an undefined variable approach. The expert did not specify which methodology he would use, nor did he or the plaintiffs describe how any damages methodology was consistent with their theory of liability. Nonetheless, the district court granted the plaintiffs' motion for class certification. Boeing petitioned for review under Rule 23(f), and the Fourth Circuit decided to hear the case.
The Fourth Circuit Announces a Five-Part Test for Class Certification
The Fourth Circuit articulated five requirements that plaintiffs must satisfy under Comcast to obtain class certification:
- First, plaintiffs must put forth an actual damages "methodology"—not merely a generic legal description of what damages are. As the court emphasized, "[m]ethodologies require more than a legal description of what damages are generically—they must explain how damages will be measured in a specific case." If the model does not even attempt to explain how damages will be measured, "it cannot possibly establish that damages are susceptible of measurement across the entire class."
- Second, the methodology must demonstrate that damages are measurable on a class-wide basis, though it may incorporate some individualized inputs such as purchase and sale data.
- Third, the damages methodology must be consistent with plaintiffs' theory of liability. This requires plaintiffs to clearly identify both comparators—the theory of liability, stated with enough factual specificity, and the methodology—and then demonstrate that they are sufficiently consistent with each other.
- Fourth, the methodology must permit "a just and reasonable inference" of damages and cannot be "speculative." Calculations need not be exact, but arbitrary measurements, applied merely because they happen to be class-wide, would reduce Rule 23(b)(3)'s predominance requirement "to a nullity."
- Fifth, plaintiffs must support all of the above with "evidentiary proof." Rule 23 "does not set forth a mere pleading standard," and this evidentiary burden applies even where certification issues overlap with the merits.
Applying those five elements, the Fourth Circuit concluded that the plaintiffs failed to meet them across the board. The plaintiffs' expert did not select a specific methodology to use and only said that damages could be measured by determining the inflation in stock price caused by the misstatement, which simply recited the legal test for damages in securities cases. Nor did the plaintiffs tie a damages methodology to a theory of liability. The court observed that this failure was particularly acute given that the plaintiffs based their case on dozens of alleged misstatements over a multi-year period, making it difficult to identify the impact of any specific misstatement at any given point in time on Boeing's stock price. The court thus reversed the grant of class certification and remanded to the district court for further proceedings.
Guidance for District Courts Going Forward
The Fourth Circuit provided additional guidance to district courts on conducting Comcast analysis at the certification stage:
Rigorous analysis is mandatory. District courts must conduct a "rigorous analysis," taking a "close look" at whether plaintiffs' damages methodology satisfies the five requirements, even where that analysis overlaps with the merits.
Both comparators must be specifically identified. A court must have both the damages methodology and the liability theory properly and specifically identified so that it can perform the required consistency comparison.
Post-certification reports cannot cure certification-stage failures. The panel held that even if at the merits stage, post-certification, an expert opines on a specific damages calculation using a specific methodology, that would not cure the failure to present that analysis in the pre-certification stage, given Comcast's requirement for the court to perform a rigorous pre-certification analysis.
Three Key Takeaways
- Comcast applies in securities class actions. Comcast was originally decided in the antitrust context. The Fourth Circuit unambiguously held that Comcast applies in Section 10(b) securities class actions, joining the Third, Fifth, and Sixth Circuits.
- Plaintiffs' damages methodology faces heightened scrutiny at the class-certification stage. Plaintiffs cannot defer their approach to damages to the end of the case, but instead must present a specific, committed methodology at the time of certification. There is also a greater risk now for plaintiffs alleging a wide array of misstatements over an extended time period, as the breadth and diversity of the allegations will be treated as directly relevant to whether a single damages methodology can consistently apply across the class.
- Potential for further judicial guidance. The Fourth Circuit framed its holding as consistent with other circuit courts and distinguished the Second Circuit’s approach in Waggoner v. Barclays PLC, 875 F.3d 79 (2d Cir. 2017), on the facts. Defendants in securities class actions in any circuit should closely monitor these developments, as there may be additional judicial guidance in the future, including possibly from other circuit courts and the Supreme Court.
