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Law360 (October 8, 2020, 8:07 PM EDT) -- Royal Caribbean Cruises Ltd. joined its rivals on Wednesday as the latest cruise line to be hit with securities claims over its response to the COVID-19 pandemic and stock selloffs it faced earlier this year.
A pension fund alleged in Florida federal court that the Miami-based Royal Caribbean failed to disclose the decrease in bookings that it was experiencing outside of China during the early stages of the pandemic and also falsely assured the public that its protocols for dealing with the virus were aggressive and effective.
"Despite these assurances, the company's policies and procedures were grossly inadequate to control the spread of the virus and failed to protect the health of its passengers and crews," the lawsuit alleges. "In fact, the Company's disregard of reasonable safety measures exacerbated the spread of COVID-19 throughout the world."
The suit claims the extent of COVID-19's impact on the company's overall bookings and the "inability of Royal Caribbean to prevent the virus' spread on its ships" was revealed to the public in a series of corrective disclosures from February to March, during which time Royal Caribbean's share price faced repeated blows.
Wednesday's suit follows similar proposed class actions filed against Carnival Corp. and Norwegian Cruise Line in the Southern District of Florida after the COVID-19 pandemic brought the cruise industry to a halt in February and March, although the suits differ in their allegations of misconduct on the part of the cruise companies.
Among the first securities cases filed in direct connection to COVID-19 was the consolidated suit first filed in March by an investor claiming Norwegian's managers pressured sales agents to mislead potential customers and provided scripted answers containing false reassurances that downplayed the growing pandemic.
Then in May, a Carnival shareholder claimed the world's largest cruise company concealed the number and severity of COVID-19 infections on its ships, in violation of port-of-call regulations, and further failed to follow its own health and safety protocols. Those misrepresentations allegedly helped spread the virus "at various ports throughout the world" and kept Carnival's share price artificially inflated.
Wednesday's suit against the world's second largest cruise company claims that Royal Caribbean told investors in early February that it was only experiencing a slowdown from bookings in China, even though the industry was facing declines in bookings worldwide.
Royal Caribbean also assured investors its safety protocols would "ultimately contain the virus," but in reality, the first quarter of 2020 saw hundreds of COVID-19 cases reported on at least 13 Royal Caribbean ships, the lawsuit alleges, some of which resulted in fatalities and wrongful death suits.
"As the scope of the impact COVID-19 had on the company's overall bookings and the inability of Royal Caribbean to prevent the virus' spread on its ships was revealed through a series of corrective disclosures, the price of Royal Caribbean stock declined significantly and reflected the true value of the company's stock," the pension fund claims.
The suit says the company's announcements later in February that recent bookings for its "broader business" were softening and that its overall business was being negatively impacted corrected its previous claims that its business outside of Asia was not being disrupted and led to sharp decreases in Royal Caribbean's share price.
On March 10, the company withdrew its 2020 financial guidance and increased its revolving credit facility by $550 million because of the proliferation of the virus, causing a 14% drop in the company's share price over the next trading session. Another 32% drop came the following day when competitor Carnival announced a two-month suspension of all operations, "prompting concern that Royal Caribbean would follow suit," the pension fund alleges.
Shortly following a final 19% share price drop on March 18, after Stifel Nicolaus cut its one-year price target on Royal Caribbean from $161 to $40, two lawsuits were filed accusing the cruise company of failing to protect its crews, the suit notes. The pension fund is seeking certification of a class of investors who acquired Royal Caribbean shares between Feb. 4 and March 17.
A representative for Royal Caribbean told Law360 on Thursday that the company hasn't been served with the suit yet and is "not in a position at this time to comment on the matter."
The pension fund is represented by Maya Saxena, Joseph E. White III and Lester Hooker of Saxena White PA and Christopher J. Keller, Eric J. Belfi and Francis P. McConville of Labaton Sucharow LLP.
Counsel information for Royal Caribbean is not yet available.
The case is City of Riviera Beach General Employees Retirement System v. Royal Caribbean Cruises LTD et al., case number 1:20-cv-24111, in the U.S. District Court for the Southern District of Florida.
--Editing by Amy Rowe.
For a reprint of this article, please contact reprints@law360.com.
