CrowdStrike lawyer Michael Carlinsky, who is a co-managing partner at Quinn Emanuel Urquhart & Sullivan, penned a letter on Sunday to Delta Air Lines, making it very clear that the carrier has pushed a “misleading narrative that CrowdStrike is responsible for Delta’s IT decisions and response to the outage” that lasted several days.
“Should Delta pursue this path [referring to a lawsuit], Delta will have to explain to the public, its shareholders, and ultimately a jury why CrowdStrike took responsibility for its actions—swiftly, transparently, and constructively—while Delta did not,” Carlinsky wrote in the letter addressed to Delta’s legal team, which was obtained by the Wall Street Journal.
The letter comes as there has been a growing public conflict between CrowdStrike and the airline over last month’s global IT outage.
Here’s the latest reporting:
Last week, Delta CEO Ed Bastian told CNBC’s “Squawk Box” that the mass flight disruptions last month triggered by a faulty CrowdStrike update cost the company around $500 million, including customer compensation.
Delta lawyered up last week, with Bastian indicating that the airline had “no choice” but to seek damages from CrowdStrike.
Carlinsky reiterated CrowdStrike’s apology in the letter, adding the cybersecurity firm is “highly disappointed by Delta’s suggestion that CrowdStrike acted inappropriately and strongly rejects any allegation that it was grossly negligent or committed misconduct.”
While most airlines and businesses that were affected by CrowdStrike’s faulty update, which triggered the ‘blue screen of death’ on millions of computers, what remains a mystery is why Delta continued to struggle for at least a week to reboot its backend system. In all, the airline canceled more than 5,000 domestic flights.
Joseph Gallo, senior vice president at Jefferies, told clients last week, “We don’t believe CRWD will be held liable” in court by Delta.
“We expect other companies impacted by the IT outage could potentially follow suit (helps with an image to customers of impacted companies), creating further headline risk in the near term,” Gallo said.
Gallo continued, “We don’t expect CRWD to have to reimburse customers for the outage, but the litigation cost & distraction (CEO appearing before Congress) will certainly weigh.”
In the markets, CrowdStrike shares have been halved since peaking around $400 in early June.
CNBC’s Jim Cramer tried to catch the falling knife around the $260 level one week ago.
Gallo is likely correct. In the short term, a wave of lawsuits and hearings on Capitol Hill could weigh on shares.
Tyler Durden
Mon, 08/05/2024 – 15:40
