A federal judge in the United States has dismissed a lawsuit filed by CrowdStrike shareholders. They claimed that the cybersecurity company had misled them about inadequate software testing and quality assurance surrounding the July 2024 outage that crashed more than 8 million Windows computers.
On July 19, 2024, a faulty update to CrowdStrike’s Falcon software caused global chaos. Airlines, banks, and hospitals were shut down. In the days following the outage, CrowdStrike’s share price fell by 32 percent. That represented a $25 billion loss in value.
The lawsuit was filed by shareholders led by Thomas DiNapoli, the administrator of the New York State Common Retirement Fund. With $291.4 billion, this is one of the largest pension funds in the US. The shareholders claimed that CrowdStrike had insufficient quality controls, citing former employees.
No evidence of deception
Judge Robert Pitman of the federal court in Austin, Texas, ruled that the shareholders had not demonstrated that CrowdStrike had deliberately misled them. The claim that the company had “no test plans and no quality assurance team” was not supported. Nor could the assertion that executives prioritized “speed over everything else” in order to maximize profits be proven.
The judge found two questionable statements regarding compliance with security requirements set by federal agencies, such as the Department of Defense. However, he concluded that shareholders had not credibly demonstrated fraudulent intent by executives or by CrowdStrike itself.
Cathleen Anderson, chief legal officer of CrowdStrike, said she was pleased with the ruling. “We appreciate the court’s thoughtful consideration and decision to dismiss this case,” Anderson said. A spokesperson for DiNapoli said the ruling is “under review.” Judge Pitman left open the possibility of shareholders amending the complaint.
Delta files lawsuit
CrowdStrike is not only facing legal pressure from shareholders. Delta Air Lines was severely affected by the July outage. The airline said it lost approximately $500 million and canceled more than 7,000 flights. Delta went to court. A judge in Georgia allowed Delta to continue most of that case in May.
Airline passengers also filed a lawsuit against CrowdStrike. Judge Pitman dismissed that case in June. The passengers have appealed to the U.S. Court of Appeals for the Fifth Circuit in New Orleans.