Law360 (May 12, 2020, 6:07 PM EDT) -- Nine law firms are vying to lead a putative securities class action accusing Norwegian Cruise Line of downplaying the seriousness of the COVID-19 pandemic in its public filings and pitches to prospective customers.
The firms are backing eight sets of investors who filed motions in Florida federal court on Monday for appointment as lead plaintiff in the consolidated suit faced by Norwegian Cruise Line Holdings Ltd., whose stock price has plunged and industry crippled by the novel coronavirus outbreak.
Each of the prospective lead plaintiffs claims to have the largest financial interest in the case, though a pair of investors led jointly by Labaton Sucharow LLP and Bernstein Liebhard LLP appear to be asserting the largest losses — roughly $267,807 wiped out when it was alleged that Norwegian had pressured sales agents to mislead customers about the spread of the virus.
The motions filed Monday also seek to fold a third suit into the consolidated action first filed two months ago after a pair of articles published by the Miami New Times and the Washington Post reported the accounts of Norwegian sales staff being urged to lie to prospective customers about the impact of COVID-19 and to ply concerned customers with false reassurances.
The Miami New Times reported March 11 on what it said were leaked emails from a Norwegian employee that showed a senior sales manager had come up with scripted responses for sales agents to give to customers concerned about coronavirus, with the goal of protecting the company's bookings.
In one example, agents were allegedly instructed to pressure customers to book immediately to avoid potential high prices later: "'Mr Becker,' the line reads, 'due to the Coronavirus we have canceled all of our Asia cruises on the Norwegian Spirit. This has caused a huge surge in demand for all of our other itineraries. I suggest we secure your reservation today to avoid you paying more tomorrow.'"
Other recommended responses included information investors now contend is blatantly false, including that coronavirus is not a concern in warm Caribbean climates and that health experts have confirmed the disease will end with the arrival of warmer spring weather.
The Washington Post's article, published a day later, reported on a leaked internal memorandum featuring the headline "The coronavirus will not affect you" that also stated it as fact that coronavirus is an "overhyped pandemic scare."
Norwegian's stock fell $5.47, or about 26.7%, the day after the New Times article came out and an additional $5.38, about 35.8%, following the Post's report, investors contend.
The stock drops were followed by a March 13 letter to Norwegian's CEO by U.S. Sens. Richard Blumenthal of Connecticut and Edward J. Markey of Massachusetts that demanded that the company stop spreading false information and "suspend all operations until sufficient measures are in place to protect the health and safety of [its] passengers and crew members." The company suspended all its cruises through Apr. 11 in response to the senators' letter.
On March 23, Florida Attorney General Ashley Moody announced that her office had launched an investigation into reports that Norwegian fed sales staff "inaccurate one-liners" that downplayed the danger posed by the coronavirus outbreak to use as responses to questions from concerned customers.
On top of scrutiny from regulators and investors, Norwegian has also faced "substantial doubt" about its ability to ride out the COVID-19 pandemic and its evisceration of the travel industry, though it was able to secure $2.2 billion in financing earlier this month, providing the company with a 12-month liquidity guarantee runway.
As one of the first securities suits filed in direct connection with COVID-19, the consolidated action against Norwegian will likely serve as a test case for asserting claims over a company's risk disclosures as they relate to the crisis. The U.S. Securities and Exchange Commission has warned other issuers to take proactive measures in assessing and disclosing risks that could affect their business operations, or else face the potential ire of investors.
Assuming that the third investor action against Norwegian is consolidated with its predecessors in Florida federal court, it will now fall on U.S. District Judge Robert N. Scola Jr. to assess which of the eight investor sets, which include mostly individual investors and just one pension fund, is best suited to lead the putative class.
The sole pension fund, the Employer-Teamsters Local Nos. 175 & 505 Pension Trust Fund, is alleging the second-highest losses among the eight prospective lead plaintiffs at $136,074, but could lose out to investors William C. Perry and Brian Mark Eddy, who claim to have lost nearly double that amount.
Counsel for the eight investor sets did not immediately respond to requests for comment Tuesday.
Investor Abraham Atachbarian is represented by Stull Stull & Brody.
Investor Herman Tumurcuoglu is represented by Levi & Korsinsky LLP.
Investor Richard Myint is represented by Glancy Prongay & Murray LLP.
Employer-Teamsters Local Nos. 175 & 505 Pension Trust Fund is represented by Robbins Geller Rudman & Dowd LLP.
Investor Dat N. Le is represented by Kahn Swick & Foti LLC.
Perry and Eddy are represented by Labaton Sucharow LLP and Bernstein Liebhard LLP.
Investor Simon Hurduise is represented by The Rosen Law Firm PA.
Investors Joel Keefe and Camille Pagan are represented by Pomerantz LLP.
The case is Douglas et al. v. Norwegian Cruise Lines et al., case number 1:20-cv-21107, in the U.S. District Court for the Southern District of Florida.
--Additional reporting by Emilie Ruscoe. Editing by Peter Rozovsky.
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