Among the industries hit hardest at the outset of the coronavirus outbreak last year was the cruise ship business. As these companies were forced to cease operations, revenues plunged. Several of the companies were hit with securities class action lawsuits as well, though, as discussed below, these lawsuits have not fared well. On May 28, 2021, in the latest ruling in a COVID-19-related securities suit against a cruise ship line, the federal judge in the securities suit pending against Carnival Corp. granted the defendants motion to dismiss. The court’s ruling evinces a great deal of skepticism of the plaintiffs’ case.



As discussed here, in May 2020, Carnival Corp., the world’s largest cruise ship company, was hit with several securities class action lawsuits in the Southern District of Florida. The actions were ultimately consolidated. The amended consolidated complaint purported to be filed on behalf of a class of investors who purchased Carnival shares between September 16, 2019 and March 31, 2020. The consolidated complaint named certain directors and officers of Carnival as defendants.


The complaint alleges that in a series of statements the company stated its commitment to the health and safety of its passengers and crew and represented that the company was in compliance with appliable health and safety standards. The complaint alleges that the company’s actual health and safety practices were far different than the company represented. The “true financial impact” of the company’s alleged misrepresentations about its health and safety practices “became apparent” as the company was forced to deal with COVID-19.


The complaint further alleges that as COVID-19 began to spread in January 2020, the company “downplayed the risk,” even though the company’s chief experience and innovation officer, John Padgett was “briefed” about the scale and severity of the viral outbreak by one of the company’s vendors in Wuhan, China. Thereafter, passengers and crew on Carnival ship became ill, including passengers on the company’s Diamond Princess ship. Despite the outbreak, the complaint alleges, the company continued to sell cruises, despite the health danger.


In late February 2020, Carnival announced the cancellation of all cruises to China, but, according to the complaint, continued to “downplay” the outbreak, while continuing to tout the company’s health and safety record and practices. Carnival cruise ships continued to launch other cruises into early March 2020, although on March 16, 2020, the company said it could no longer provide an earnings forecast and expected to end the year in a net loss, resulting in a decline of over 12% of the company’s share price – “yet,” the complaint alleges, the defendants “continued to misrepresent the effectiveness of their health and safety protocols.” The company ultimately was forced by government orders to cease operations. During the class period the company’s share price declined over 73%.


The defendants filed motions to dismiss the plaintiffs’ complaint. The defendants contended in their motions that the complaint should be dismissed because it failed to allege any actionable misrepresentations and failed to allege scienter.


The May 28, 2021 Order

In a detailed May 28, 2021 order (here), Southern District of Florida Judge K. Michael Moore granted the defendants’ motion and dismissed the plaintiffs’ complaint, albeit with leave for the plaintiffs to seek to amend their complaint.


In ruling on the defendants’ motions, Judge Moore took each of the categories of alleged misrepresentations in turn. With respect to the company’s January 2020 pre-outbreak statements of the company’s health and safety procedures as well as the company’s alleged failure to warn of the risks of COVID-19, notwithstanding the fact that the company’s Wuhan, China battery vendor had briefed a Carnival official about the Wuhan outbreak, Judge Moore said the he “finds unpersuasive the argument that Carnival should have chosen a different course of action” based on the conversation with the battery vendor “rather than basing its decisions on the guidance and recommendations from public health officials, such as the CDC or the WHO.” With respect to the information from vendor, Judge Moore said that the plaintiffs “failed to allege how that amounts to Carnival having any more insight as to the impact of COVID-19 than the average person, whether in the United States or abroad, could readily ascertain.”


Judge Moore said he did not find the company’s January 2020 statements to be materially false and misleading, “particularly considering the COVID-19 specific warnings provided in Carnival’s 2019 10-K.”


With respect to the company’s allegedly falsely reassuring statements in February 2020, Judge Moore said that “most of the February statements cited reflect Carnival’s goals which cannot be objectively measured in the face of a rapidly evolving pandemic such as coronavirus.” The “most actionable statements as potentially false or misleading” are those relating to actions the company said it was implementing. Judge Moore noted that the plaintiffs do not argue that those actions were not taken; rather they rely on the fact that “such measures, even if they were taken, would not ultimately prove to be effective to combat the coronavirus” – but, Judge Moore added, “that hindsight cannot be used to assert securities fraud.”


With respect to the company’s March 2020 statements about the outbreaks on Carnival ships, Judge Moore did find that a specific March 13, 2020 statement that “Carnival had not had a diagnosed case linked to its operations” was false. However, Judge Moore noted, “this statement was made on the same day that Carnival announced the voluntary suspension of voyages in response to the pandemic,” adding that the Court “fails to see how that statement, or any of the statements made thereafter, could reasonably mislead investors at that stage of the pandemic.” Indeed, on March 16, 2020 the company issued an 8-K stating that the company “believes the ongoing effects of COVID-19 on its operations and global bookings will have a material negative impact on its financial results and liquidity.”


With respect to the company’s statements about tis compliance with regulatory requirements, Judge Moore noted that the 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.” That inference, Judge Moore said, “is too tenuous to meet the heightened pleading standard applicable in the securities fraud context.” Accordingly, the Court could not find that, as plead, “the statements affirming compliance with then-existing regulatory requirements are materially false or misleading.”


With respect to the company’s statements about its commitment to the health and safety of its passengers and crew, Judge Moore said that the plaintiffs’ allegation “fails to show that Defendants’ stated commitments to health and safety were false or misleading.”


Finally, Judge Moore said that “as an initial matter the Court has not found any of the Defendants’ statements to be materially false or misleading to sustain a securities fraud claim,” adding that even if the statements were materially false, he found that the plaintiffs “have not sufficiently alleged a strong inference that Carnival acted with (1) the intend to deceive, manipulate, or defraud its investors; or (2) severe recklessness.”


Judge Moore added that “it is plausible that Carnival is committed to and prioritizes health and safety aboard its ships notwithstanding the impact that COVID-19 would ultimately have” and also “it is plausible that Defendants did indeed believe the risk to Carnival’s business and passengers to be relatively low, as cases outside of China were only then starting to surface.” 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.” On balance, “the Court does not find the inference of scienter to be as compelling as the opposing inferences that one could draw from the facts alleged here.”


Judge Moore dismissed the plaintiffs’ complaint without prejudice, allowing the plaintiffs 21 days in which to file an amended complaint.



In the wake of the pandemic, several cruise ship lines were hit with securities class action lawsuits. As it has turned out, these suits have not fared well. As detailed here, in April 2021, the COVID-19-related securities suit filed against Norwegian Cruise Lines was dismissed. And as discussed here, in March 2021, the COVID-19-related securities suit filed against Royal Caribbean was voluntarily dismissed. Judge Moore’s recent dismissal of the securities suit against Carnival adds to this poor track record in these suits against companies in the cruise line industry.


Judge Moore’s opinion in the Carnival lawsuit highlights the reason these cases have not survived. It is clear that Judge Moore, at least, perceived the plaintiffs’ claims as essentially fraud by hindsight. Woven throughout his opinion is a perception that the pandemic unfolded quickly and unexpectedly, and that Carnival was reacting to a rapidly changing set of events. Judge Moore’s opinion also reflects a perception that Carnival was as blindsided by the severity and speed of the outbreak as everyone else was. His opinion also reflects an unwillingness to conclude that, in light of how things turned out, the company should have said or done more earlier on.  Judging events by how things stood at the time, Judge Moore was unwilling to find that the company’s statements were misleading or to find that the company sought to mislead investors.


While the COVID-19 securities suits against the cruise ship lines have not fared well, that does not mean that none of the various COVID-19 securities suits will succeed. Indeed, as noted here, the motion to dismiss was denied in the COVID-19 securities suit filed against vaccine manufacturer Inovio. Time will tell, of course, how all of these cases will ultimately shake out. Judge Moore’s opinion does suggest a certain amount of judicial skepticism about fraud allegations in the context of an unprecedented public health emergency that evolved much more quickly and much more severely than most people anticipated — or could have anticipated.