Southwest Airlines Co. has agreed to settle a lawsuit that stemmed from last year's safety issues and a huge FAA fine, the airline said Friday.
As part of the settlement, Southwest will pay the plaintiffs' attorneys $3.5 million in fees and expenses, and the plaintiffs will drop claims against Southwest and its officers and directors.
The lawsuit was prompted by the Federal Aviation Administration's announcement in March 2008 proposing a $10.2 million fine against Southwest for failing to inspect some older Boeing 737s on schedule and for continuing to fly the planes after realizing that they should have been inspected for fuselage cracks.
Southwest, which fought the original penalty, reached a settlement with the FAA this March for a $7.5 million fine and an agreement to upgrade its procedures and beef up its staffing to track aircraft inspections and maintenance.
On Aug. 1, 2008, lead plaintiffs Carbon County, Pa., Employee Retirement System and Mark Cristello filed a lawsuit in Dallas state district court. The action alleged that Southwest's top officers and board of directors breached their fiduciary duties in allowing the safety lapses.
In a filing with the Securities and Exchange Commission, Southwest said it agreed to "a variety of reforms" to address the plaintiffs' concerns, including "implementation of various corporate governance reforms."
The changes also include "various reforms to Southwest's safety and maintenance processes and procedures," Southwest said.
However, the Dallas-based carrier defended its actions in a court document outlining the settlement.
It said that all Southwest people named "deny all allegations of wrongdoing, deny that they committed any violation of law, deny that they acted improperly in any way," but that they wanted to end the litigation and put the matter to rest.
State District Judge Carlos Cortez has given the proposed settlement preliminary approval, with a final hearing set for Dec. 9.
An attorney for the plaintiffs did not respond to a request for comment. Southwest declined to comment beyond what was in the court document.
