RTX Concealed Critical Manufacturing Defect from Investors for Years, Second Circuit Appeal Argues
Boston, MA —Zimmer, Citron & Clarke, together with their co-counsel at Labaton Keller Sucharow and Saxena White, have now fully briefed an appeal in the U.S. Court of Appeals for the Second Circuit seeking to revive securities fraud claims against RTX Corporation and several of its executives.
For years, RTX executives told shareholders that their flagship airplane engine was technically sound and that its financial prospects were strong. But, as RTX’s CEO would admit, the company knew for years that it was using a defective manufacturing process for certain engine parts. The defect caused two passenger-plane engines to explode while attempting takeoff and affected thousands more. When RTX ultimately disclosed the defect and recalled the engines, the company incurred billions of dollars in costs and RTX’s stock plummeted.
“The securities laws do not allow a company to reassure investors that technical problems have been addressed while concealing known manufacturing defects that pose substantial financial and safety risks,” said David Zimmer, partner at Zimmer, Citron & Clarke. “As RTX’s CEO admitted, RTX knew about its defective manufacturing process for years before they disclosed it to investors.”
The district court dismissed the investors’ suit on the ground that they did not allege that RTX knew that the defect would necessarily prompt a recall. As the appeal explains, that gets the law wrong. The securities laws forbid companies from knowingly or recklessly making materially misleading statements. Assuring investors that the company’s flagship engine is performing well while concealing a known defect that causes engine failure fits that bill, even if it is not yet clear how extensive the fallout will be.
The appeal asks the Second Circuit to reverse the dismissal and permit the suit to proceed Oral argument has not yet been scheduled. The case is No. 25-2549 before the U.S. Court of Appeals for the Second Circuit.
