By Rachel O'Brien

Law360 (May 27, 2020, 6:29 PM EDT) -- Three law firm groups fighting to lead a consolidated proposed securities class action accusing Norwegian Cruise Line of downplaying the seriousness of the COVID-19 pandemic continued to duke it out in Florida federal court Tuesday, with one urging the judge to select it and not conduct a "beauty contest" among the parties.

The suit alleges Norwegian sales staff were urged to lie to prospective customers about the impact of the coronavirus outbreak, and when news coverage detailed leaked internal memos, Norwegian's stock fell more than 50% in two days.

In their filings Tuesday, Labaton Sucharow LLP and Bernstein Liebhard LLP, representing investors William C. Perry and Brian Mark Eddy, who have the largest claimed loss at $267,807; Robbins Geller Rudman & Dowd LLP, representing Employer-Teamsters Local 175 & 505 Pension Trust Fund; and Stull Stull & Brody, representing investor Abraham Atachbarian, shot barbs at one another, with Perry and Eddy implying the Teamsters fund used its political connections to benefit its investments and the fund calling attention to Perry's guilty plea in a recent criminal case.

In his memo to the court, Atachbarian, who lost $71,250 from the stock drop, said he should be the lead plaintiff and Stull Stull the lead counsel for a separate class of options purchasers and sellers, so as not to compete for compensation with common stock purchasers.

Atachbarian is in a position to represent options investors, who against common stock investors have "divided loyalties," he argued, and require different calculations for the complex issue of determining whether a purchaser or seller of an options contract suffered damage.

"A lead plaintiff who did not trade options has little incentive to spend its time and energy amassing this type of evidence pertinent only to options traders, especially given the limited assets available for recovery," he said.

Meanwhile, the Teamsters pension fund, which is alleging the second-highest losses at $136,074, said investors Perry and Eddy are unrelated and were "cobbled together" by their attorneys to create a large combined loss and take control of the case.

Both Atachbarian and the Teamsters fund also argued Perry should be disqualified as lead plaintiff because his investment losses came before the March revelations. By then, Perry had sold all his positions.

The fund also brought up Perry's guilty plea in September for evading federal reporting requirements of transactions to hide assets from his wife during their divorce.

Perry was sentenced to five years' probation in March and ordered to pay a $55,012 judgment, restitution of $183,375 to his ex-wife and a $20,000 fine, according to filings in that case.

"Such recent and serious admitted acts of dishonesty render Perry inadequate to serve in a fiduciary capacity on behalf of the putative class," the Teamsters fund argued.

If Perry's $197,318 weren't counted toward the Perry-Eddy total of $267,807, the Teamster pension fund would have the largest financial loss and make it the plaintiff favored for lead status, it said.

Perry and Eddy pushed back at all the claims against them, saying they are entitled to a "strong presumption" of being appointed lead plaintiff.

"It is well established that once this 'strong presumption' attaches, the court must focus its attention on the presumptive lead plaintiff and should not conduct a beauty contest among the movants," they said.

Fighting the allegation that their lawyers "cobbled together" the two men, they said they clients speak regularly on the phone and "are like-minded and sophisticated investors with over 60 years of combined investing experience."

They said both men's large financial losses came from purchasing Norwegian securities that were artificially inflated by the company's misleading comments.

Perry called attention to his time in the U.S. Navy, where he achieved the rank of captain and earned several awards, and they criticized Atachbarian for providing "no meaningful information about himself to assess his adequacy and typicality."

They also said the Teamsters fund  was atypical of the proposed class because it had access to information not generally available to other investors from its lobbying arm in Washington, "which had access to top legislators in the U.S. government with specialized knowledge of the implications of Covid-19."

The consolidated lawsuit — combining the first suit filed March 12 by investor Eric Douglas with the second filed by Atachbarian on March 31 and adding a third on May 12 — allege that Norwegian was giving concerned customers false reassurances about the threat of COVID-19 and driving up the price of the stock.

A March 11 Miami New Times article reported on leaked emails that appeared to show a senior sales manager giving scripted responses to sales agents to use on concerned customers and prevent them from canceling their bookings.

One message said that coronavirus isn't a concern in warm Caribbean climates and that health experts said the disease would end in warmer spring weather.

The next day, the Washington Post reported on a leaked internal memo headed "The coronavirus will not affect you" that stated as fact that coronavirus is an "overhyped pandemic scare."

Norwegian's stock fell $5.47 on March 11 and $5.38 on March 12 to end at $9.65, investors say.

On March 13, U.S. Sens. Richard Blumenthal, D-Conn., and Edward J. Markey, D-Mass., sent a letter to the cruise line's CEO demanding the company stop spreading false information and "suspend all operations until sufficient measures are in place to protect the health and safety of passengers and crew members." The company suspended all its cruises through April 11 in response to the senators' letter.

On March 23, Florida Attorney General Ashley Moody announced an investigation into reports that Norwegian gave its sales staff "inaccurate one-liners" to downplay the danger posed by the coronavirus outbreak.

The securities suit is one of the first filed in direct connection with COVID-19, lining up Norwegian to possibly serve as a test case for asserting claims over a company's risk disclosures during the pandemic.

Norwegian President and CEO Frank Del Rio and Executive Vice President and Chief Financial Officer Mark A. Kempa are also named in the suit.

Counsel for all the parties and a representative for Norwegian didn't immediately respond to requests for comment Wednesday.

The Teamsters fund is represented by Jack Reise, Sabrina E. Tirabassi, Danielle S. Mysers and Juan Carlos Sanchez of Robbins Geller Rudman & Dowd LLP.

Atachbarian is represented by Howard T. Longman of Stull Stull & Brody.

Perry and Eddy are represented by Christopher J. Keller, Eric J. Belfi and Francis P. McConville of Labaton Sucharow LLP and Stanley D. Bernstein, Laurence J. Hasson and Matthew E. Guarnero of Bernstein Liebhard LLP.

Norwegian is represented by Tracy Ann Nichols of Holland & Knight 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 Dean Seal. Editing by Brian Baresch.

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