||In re Carnival Corp. Securities Litigation
||United States District Court for the Southern District of Florida
||Honorable K. Michael Moore
Massachusetts Laborers’ Pension and Annuity Funds, New England Carpenters Pension & Guaranteed Annuity Funds, & Michael W. Slaunwhite
||Carnival Corp., Carnival plc, and Arnold W. Donald
||September 16, 2019 to March 31, 2020
This securities fraud class action concerns Defendants’ statements touting Carnival’s compliance with health and safety requirements and related protocols and with respect to the risk and impact of COVID-19 on its passengers, crew, and business. Carnival is the world’s largest cruise operator, carrying nearly half of the world’s cruise passengers on voyages around the world on over 100 ships across nine cruise lines. At the start of the Class Period, Defendants announced the creation of Carnival’s Incident Analysis Group (the “IAG”). The Company tasked the IAG with making recommendations to enhance Carnival’s Health, Environment, Safety, and Security (“HESS”) policies and procedures and developing programs to standardize training and investigation of the Company’s HESS issues.
The worldwide COVID-19 pandemic illustrated that Carnival’s HESS policies, Defendants’ statements touting their commitment to their passengers’ and crew members’ health safety, and the Company’s commitment to keeping its ships “free of . . . illness” were ultimately false. As COVID-19 spread throughout the world in the early months of 2020, unbeknownst to investors, Carnival’s policies, procedures, and infrastructure were insufficient, if existent at all. Rather than publicly acknowledging the risks posed by the coronavirus and that its policies, procedures, and protocols were insufficient to address them, Carnival publicly projected a “business as usual” narrative. Specifically, Carnival kept its ships full and on the water, continued to sell cruise tickets, and limited customers’ access to refunds. All the while, Carnival’s deficient health and safety protocols created all manner of problems on its ships, which ultimately proved to be virulent breeding grounds for the virus, causing severe illness and death among its passengers.
Despite Defendants’ falsely optimistic outlook on Carnival’s ability to contain the coronavirus and the potential effects of the virus on their business, the relevant truth began to emerge in mid-March. First, on March 16, 2020, Defendants disclosed publicly what they had known since late January: that COVID-19 would have a “material negative impact on [Carnival’s] financial results and liquidity,” and while the Company would be “unable to provide an earnings forecast,” it “expect[ed] results of operations for the fiscal year ending November 30, 2020 to result in a net loss.” The price of both Carnival common stock and Carnival ADSs declined by over 12% on this news. Then, on March 31, 2020, Defendants comprehensively revised the risk factors contained in the Company’s Form 10-K. These new risk factors finally divulged the true and extremely serious risks that the coronavirus pandemic posed to Carnival’s business as a result of Defendants’ inability to implement adequate policies, procedures, and protocols to safeguard passengers’ and employees’ health and safety. On this news, shares of Carnival common stock declined by 34%, and the price of Carnival ADSs declined by a similar amount.
Plaintiffs’ filed the Second Amended Class Action Complaint on July 2, 2021. Defendants’ motion to dismiss is fully briefed and pending before the Court.