By Dean Seal

Law360 (May 28, 2021, 7:53 PM EDT) -- A Florida federal judge said Friday that investors hadn't shown any "severe recklessness" on the part of Carnival Corp. in connection with the cruise line's public statements about the risks posed by COVID-19 as the pandemic was breaking out.

U.S. District Judge K. Michael Moore dismissed the putative class action filed roughly a year ago accusing the world's largest cruise provider of concealing COVID-19 infections on its ships and spreading the virus "at various ports throughout the world."

Judge Moore said he could not find any statements from the company — pertaining to its "commitment" to health and safety or about complying with regulatory requirements — that rose to the level of being false or misleading.

"Lead plaintiffs' arguments require the court to infer that, because passengers would ultimately fall ill aboard Carnival's ships — just as people did in other venues across the globe — Carnival was non-compliant with health and safety standards, and thus Carnival's statements affirming its compliance with such standards were false or misleading," the judge said. "That inference is too tenuous to meet the heightened pleading standard applicable in the securities fraud context."

The securities suit is one of several filed in the immediate aftermath of the pandemic's onset last spring, and one of a few targeting the cruise line industry in particular.

Investors had claimed that as the coronavirus was emerging as a global health concern, Carnival misrepresented the company's health and safety protocols and its "role in facilitating the transmission of the virus," which hurt investors when trading prices for Carnival shares cratered as the virus spread.

The suit particularly challenged Carnival's public statements in January 2020 about the virus' risk to passengers and crew members being low, which the cruise line argued were based on a reasonable belief and the U.S. Centers for Disease Control and Prevention's own contemporary descriptions of the coronavirus' risk to the American public.

The investors had bolstered their claim by alleging that Carnival learned in late January 2020 from one of its China-based vendors about the "scale and severity" of the virus, but Judge Moore said he was unpersuaded by the argument that Carnival should've based its response to the pandemic on that vendor's statements rather than the "guidance and recommendations from public health officials."

"There is no allegation that this battery manufacturer [vendor] had and shared medically or scientifically based knowledge regarding the spread of coronavirus such that Carnival had an obligation to forewarn its investors of potential risks that were then unknown," the judge said.

The suit also challenged Carnival's statements in February 2020 that allegedly reassured investors about the company's response to the pandemic despite its knowledge that "COVID-19-related risks were materially increasing."

But Judge Moore said most of those statements reflected Carnival's goals, "which cannot be objectively measured in the face of a rapidly evolving global pandemic such as coronavirus."

The most actionable of those statements were Carnival's assertions that it had or would soon implement measures to address the pandemic, but the investors never argued that those measures were not carried out, the judge said.

"Rather, [the investors] rely on the fact that such measures, even if they were taken, would not ultimately prove to be effective to combat the coronavirus," the judge said. "But that hindsight knowledge cannot be used to assert securities fraud."

The suit further challenged a March 2020 statement about Carnival having not diagnosed a single case linked to its cruises.

The proposed investor class has acknowledged that it is unsure about what Carnival's regulatory failures were when it came to meeting health and safety guidelines, and the guidance at relevant times did not instruct Carnival on how to distribute masks or protective equipment to people on its ships, according to Friday's order.

"Lead plaintiffs fail to show with the required specificity how defendants were non-compliant with applicable guidelines and regulations," Judge Moore said. "Thus, lead plaintiffs' reliance on any such non-compliance fails to show that defendants' stated commitments to health and safety were false or misleading."

Even if any of Carnival's statements were found to be false or misleading, Judge Moore said he was not persuaded that the company or its executives had fraudulent intent. While the suit challenged other March 2020 statements about cruises being generally safe, it fails to reconcile those statements with others made the same month about halting its voyages, the judge's order said.

"Defendants did indeed take measures to further their health and safety goals, even if those efforts would ultimately prove to be unsuccessful in the face of a global pandemic," the judge said.

Counsel for the parties did not immediately respond to requests for comment Friday.

The proposed investor class is represented by James A. Harrod, Kate W. Aufses and Benjamin W. Horowitz of Bernstein Litowitz Berger & Grossmann LLP, Jennifer L. Joost, Jamie M. McCall and Richard A. Russo Jr. of Kessler Topaz Meltzer & Check LLP, and Zachary S. Bower of Carella Byrne Cecchi Olstein Brody & Agnello PC.

Carnival and its executives are represented by Daniel S. Sinnreich, Richard A. Rosen and Theodore V. Wells Jr. of Paul Weiss Rifkind Wharton & Garrison LLP, and Erin K. Kolmansberger and Mark F. Raymond of Nelson Mullins Broad & Cassel.

The case is In re: Carnival Corp. Securities Litigation, case number 1:20-cv-22202, in the U.S. District Court for the Southern District of Florida.

--Additional reporting by Emilie Ruscoe. Editing by Adam LoBelia.

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