As the lawsuits have been coming in, we have been tracking the coronavirus outbreak-related litigation, with more than two dozen securities suits accounted for so far. But while the plaintiffs’ lawyers have proven willing to pursue pandemic-related securities suits, the track record so far for these kinds of suits has been decidedly mixed. In the latest sign of the mixed bag of results for plaintiffs’ lawyers on these kinds of suits, on February 25, 2021, the plaintiffs’ lawyers who initiated the coronavirus outbreak-related securities suit against Royal Caribbean Cruises entered a voluntary dismissal without prejudice with the court (here). As discussed below, this development may have significance for other potential cases as well as for cases that have already been filed.
As discussed here, on October 8, 2020, a plaintiff shareholder filed a securities class action lawsuit in the Southern District of Florida against Royal Caribbean and certain of its directors and officers. The complaint was filed on behalf of a class of investors who purchased Royal Caribbean securities between February 4, 2020 and March 17, 2020.
The complaint alleges that as COVID-19 spread during early 2020, the company made a series of statements about the impact of the coronavirus outbreak on its operations, passenger bookings, and financial results. In several of these statements, particularly earlier in the class period, the company provided reassurance that while the outbreak had disrupted certain specific cruises in certain geographic locations, its operations were otherwise unaffected. The company also provided reassurances about its efforts and protocols to protect the safety of its passengers and crew.
The complaint alleges that as a result of these misrepresentations, the defendants “caused Royal Caribbean stock to trade at artificially high prices during the Class Period.” The lawsuit also alleges that as a result of the company’s allegedly inadequate safety protocols and procedures, the company was hit with lawsuits on behalf of crewmembers or their families, alleging that the company’s “inadequate execution of safety protocols” had resulted in the illness or death of crew members.
Pursuant to an order of the presiding court, the lead plaintiff in this action was to file its consolidated amended complaint on or before February 25, 2021. Instead, rather than filing a consolidated amended complaint, on February 25, 2021 lead plaintiffs’ counsel filed a Notice for Voluntary Dismissal Without Prejudice.
Although voluntary dismissals are relatively common in merger objection-related securities lawsuits, voluntary dismissals are relatively unusual in traditional securities class action lawsuits – though, of course, not unprecedented. The plaintiff elections to enter a voluntary dismissal is interesting and of course raises the question why the plaintiff has taken this step.
One clue might be gleaned from the timing of the initial lawsuit filing. Even though the complaint relates to events that took place in March 2020 and that were well-known and highly publicized at the time, the lawsuit was not initially filed until October 2020, contrary to the usual pattern where plaintiffs’ lawyer rush to file securities suits filing high-profile bad news. The plaintiff’s lawyers also had to have to been conscious of the tricky general proposition involved of filing a securities suits against a company that was as blindsided by the pandemic as the entire rest of the world. The fact that the notice of voluntary dismissal was filed the day that the consolidated amended complaint was due does suggest that the plaintiff’s counsel ran into challenges when trying to craft the amended complaint.
The dismissal is without prejudice which means that another plaintiff could at least theoretically seek to file a renewed complaint. Call me skeptical, but I doubt that is going to happen.
Whatever the reason for the plaintiff’s unwillingness to carry this lawsuit forward, it is one of several signs suggesting that the plaintiffs in the various coronavirus-related securities lawsuit may in many instances face an uphill battle in sustaining their lawsuits.
To be sure, there is at least one example of a coronavirus-related securities lawsuit where the plaintiff has survived the initial pleading hurdle. As discussed here, in February 2021, the defendants’ motion to dismiss the securities suit that had been filed against Inovio Pharmaceuticals was largely denied.
On the other hand, as discussed here, in what was the first dismissal motion ruling on a coronavirus-related securities class action lawsuit, in January 2021, the Central District of California granted the motion to dismiss in the coronavirus outbreak-related securities lawsuit that had been filed against Velocity Financial, as discussed here.
These prior rulings, taken together with the latest voluntary dismissal in the Royal Caribbean lawsuit, suggest that at least so far the plaintiffs’ track record in the coronavirus-related securities suits has been a mixed bag at best. Certainly, the voluntary dismissal in the Royal Caribbean lawsuit seems to represent a tacit recognition that the prospects in that case at least were not strong.
One can hope that these various developments have come to the attention of prospective claimants considering the possibility of filing future coronavirus outbreak-related securities lawsuits.
Although there is much further to go before the overall success of the coronavirus-related securities lawsuits can fully be assessed, at this point the interim record suggests that in the end this type of litigation will not have proven to be successful from a plaintiffs’ standpoint. Of course, there is still a long way to go before any pronouncement along these lines can be declared.