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Law360 (August 11, 2020, 6:10 PM EDT) -- Carnival Corp. urged a Florida federal judge Monday to consolidate a proposed investor class action alleging that the cruise company hid COVID-19 infections on its ships with other suits making similar claims, saying they all deal with the same set of facts concerning Carnival's response to the pandemic.
Carnival said a potential class suit led by investor Abraham Atachbarian — who is opposing consolidation — should be combined with another already consolidated action to "prevent inefficiency and waste of the court's and the litigants' resources" because they arise out of the same alleged facts and legal theories.
"If the Atachbarian action is allowed to proceed as a separate case from the consolidated action, defendants will be forced to engage in costly and inefficient duplicative litigation," Carnival said. "Allowing these cases to proceed on two separate schedules, with separate lead plaintiff deadlines and dispositive motion practice, will similarly waste the court's time and resources."
Atachbarian has agreed to transfer his case to U.S. District Judge K. Michael Moore, who is already presiding over the other consolidated action, but said his potential class suit should be separate because he wants to represent a class of option investors, while the other suit is brought only on behalf of investors in Carnival stock.
In his own motion filed Monday, Atachbarian said any potential consolidation should be put on hold until the lead plaintiff is chosen in the other action. He argues that the notice disseminated in the other suit failed to place options traders on notice of their ability to move to lead the class suit, which eliminated those types of investors from the lead plaintiff process.
But Carnival said the other complaint was brought on behalf of everyone who bought Carnival stock and securities during the class period, and by law, the term "security" includes options investors.
"As a legal matter, courts routinely reject efforts by option investors to bring and maintain separate securities lawsuits when there already exists a lawsuit arising out of the same facts and circumstances brought by common shareholders," Carnival said.
The investors allege that Carnival hid that its medics were reporting increased COVID-19 cases on its ships, that Carnival was violating port-of-call regulations by hiding the number and severity of infections on its ships and that Carnival didn't follow its own health and safety protocols.
By continuing to operate, Carnival ships were responsible for spreading COVID-19 at various ports throughout the world, investors allege, and as a result, Carnival's positive statements about its business were misleading, causing its stock prices to drop when the truth was revealed in news articles.
The suits seek to hold Carnival, CEO Arnold W. Donald and Chief Financial Officer David Bernstein liable for the drops.
Investors allege that on April 16, a news article said company executives may have failed to protect passengers from the virus and "continued to operate new cruise departures despite its knowledge that the threat posed by COVID-19 had materialized on its ships and was likely to proliferate further."
The news came while Carnival still had two cruise ships at sea, and its share price dropped $0.53 that day, according to the lawsuits.
On May 1, another article said the virus spread on cruise ships despite early warning signs to Carnival and its affiliated cruise lines, and further revealed that the government was looking into Carnival's response to the pandemic, according to the suits.
Investors claim Carnival's stock price dropped $1.97 that day, to $13.93 per share.
Attorneys for Atachbarian and Carnival declined to comment on Tuesday.
Abraham Atachbarian is represented by Joshua H. Eggnatz of Eggnatz Pascucci, Lynda J. Grant of The Grant Law Firm PLLC and Howard T. Longman and Patrick Slyne of Stull Stull & Brody.
Carnival and its executives are represented by Daniel S. Sinnreich, Richard A. Rosen and Theodore V. Wells Jr. of Paul Weiss Rifkind Wharton & Garrison LLP and Erin K. Kolmansberger and Mark F. Raymond of Nelson Mullins Broad & Cassel.
The cases are In re: Carnival Corp. Securities Litigation, case number 1:20-cv-22202, and Atachbarian v. Carnival Corp. et al., case number 20-cv-23011, both in the U.S. District Court for the Southern District of Florida.
--Additional reporting by Rachel O'Brien. Editing by Stephen Berg.
Update: This story has been updated to include responses from the parties' attorneys.
For a reprint of this article, please contact reprints@law360.com.
