Carnival Defeats Securities Fraud Lawsuit Over Covid-19 Handling

Carnival Corp. shook off a securities class complaint alleging it concealed information about following health and safety protocols during the Covid-19 pandemic, after the Southern District of Florida found the cruise line made no materially false or misleading statements.

The complaint doesn’t adequately plead violations of then-existing Centers for Disease Control and Prevention regulations or internal protocols, the U.S. District Court for the Southern District of Florida said Wednesday. Carnival’s statements on the topics weren’t, therefore, misrepresentations, the court said.

Although the shareholders alleged that Carnival violated the CDC’s guidance by failing to provide personal protective equipment to all passengers and crew, and to require social distancing for those on its ships, the guidance at the time “did not require, or even recommend, the masking and distancing of healthy passengers,” the court said.

The shareholders also failed to show that enhanced cleaning protocols weren’t conducted aboard the ships, or that sick or exposed passengers and crew failed to isolate or wear masks and socially distance when outside their cabins, the court said.

The court found that the Covid-specific warnings provided in Carnival’s annual report to the Securities and Exchange Commission on Jan. 28, 2020, were sufficient.

The amended complaint, filed July 2, 2021, on behalf of holders of common stock, alleged Carnival misrepresented its role in the transmission of the virus, and that the company’s stock tumbled when news of outbreaks aboard its ships hit.

The plaintiffs, citing an April 16 Bloomberg Businessweek article, alleged the company knew about the scale of the outbreak before it filed its annual report with the SEC.

The court also dismissed the case on May 28, 2021, but allowed the plaintiffs to file an amended complaint.

Judge K. Michael Moore issued the opinion.

Bernstein Litowitz Berger & Grossmann LLP and Kessler Topaz Meltzer & Check LLP were lead counsel for the proposed class.

Paul Weiss Rifkind Wharton & Garrison LLP and Nelson Mullins Broad and Cassel represented Carnival.

The case is Serv. Lamp Corp. Profit Sharing Plan v. Carnival Corp., S.D. Fla., No. 20-cv-22202, 3/30/22.