Initial Hopes of Sinking Helms-Burton Litigation Early May Die by Another Fate

Almost one year ago in the cases of Havana Docks Corp. v. Carnival Corp., 19-cv-21724-BB and Garcia-Bengochea v. Carnival Corp., 19-cv-21725-JLK, U.S. District Judges Beth Bloom and Senior U.S. District Judge James Lawrence King denied Carnival’s motions to dismiss both complaints filed in the Southern District of Florida by the plaintiffs, Havana Docks Corp. and Miami surgeon Javier Garcia-Bengochea. So initially, this meant that Carnival was stuck litigating both claims over its use of property seized by the Cuban government.

Both cases concerned Carnival’s use of the Port of Santiago, where the plaintiffs claim to have owned commercial property that was expropriated by the state of Cuba following the island’s communist revolution. The lawsuits were filed after the Trump administration allowed the suspension of Title III of the Helms-Burton Act to lapse on May 2. The move empowered U.S. citizens to pursue litigation against entities who purportedly traffic in Cuban property that had been privately owned prior to the revolution.

Carnival argued for the dismissal of the complaints on the grounds that its use of the waterfront property constituted “lawful travel,” thus immunizing the company from Helms-Burton claims. The cruise line also argued that the passage of its ships through the port was “incident to lawful travel to Cuba” and “necessary to the conduct of such travel.” The company also challenged the plaintiffs’ ”direct interest” and claims of ownership over the properties in question.

Both federal judges rejected Carnival’s arguments for dismissal, finding that the lawful travel exception is an affirmative defense to trafficking that must be established by Carnival, and that Helms-Burton does not expressly make any distinction as to whether such trafficking needs to occur while a party holds a property interest in the property at issue. The courts found that Carnival “incorrectly conflates a claim to a property and a property interest.” As a result, the courts found that the complaints sufficiently alleged that the plaintiffs own a claim to the property at issue.

Fast forward almost one year later and 26 Helms-Burton lawsuits have been filed. That is pretty incredible given the barriers to bring claims—the filing fee is $7,000 and the possibility of being countersued if the claimant seeks compensation from Canadian or EU companies. The U.S. Justice Department’s Foreign Claims Settlement Commission has certified nearly 6,000 claim on property confiscated by Cub with a principal value of $1.9 billion.

Judge King ultimately ruled in favor of Carnival, citing the dismissal of another Helms-Burton claim against Amazon and Susshi International. In that case, the plaintiff inherited the property less than 4 years ago. The statute only accommodates inheritances to 1996. Establishing jurisdiction has been the biggest struggle for claimants, as the claimant must prove that the defendants are “at home” in the Southern District of Florida. In a class action case against hotel booking sites including Expedia and Trivago, the plaintiffs argued the case was appropriate here because customers in the state can access the websites to make reservations at hotels on properties once owned by their families. U.S. District Judge Robert Scola disagreed and ruled that the plaintiffs failed to establish that the companies conducted enough activity in Florida to keep the case in Miami.

If you are interested in receiving a copy of any of these decisions or wish to discuss these cases further, please contact us at blog@miamimaritimelaw.co or 305.377.3700.

Cruise Pax Must Not Leave the Castle Walls and Must Bring Case in Fed Court

Another cruise passenger tries, but fails to get out from federal court jurisdiction in DeRoy v. Carnival Corp., No. 18-12619 (June 30, 2020), appealing the decision at No. 1:18-cv-20653-UU. After injuring her foot on a rug while onboard a Carnival ship, the plaintiff filed suit against Carnival in both state and federal court, seeking damages for the injuries she allegedly suffered onboard the ship. In this case, the plaintiff entered into a contract with Carnival that contained a forum-selection clause.

Under the forum-selection clause's plain language, when jurisdiction for a claim could lie in federal district court, federal court is the only option for a plaintiff under the contract. The court held that plaintiff's claim for negligence at sea falls well within the walls of the federal court's admiralty jurisdiction. Even without explicitly invoking admiralty jurisdiction, the court held that plaintiff's complaint is subject to Federal Rule of Civil Procedure 9(h)'s provision rendering her claim an admiralty or maritime claim.

The case is amusing in that it starts off explaining the background of the “loophole” and the fact that the plaintiff could not assert a loophole in the contract, allowing her to “get through the castle walls” to allege she could bring her claim in state court. It is a well written decision that explains why the court retains subject matter jurisdiction in these circumstances.

If you are interested in obtaining a copy of this decision or wish to discuss it further, please feel free to reach out to us at blog@miamimaritimelaw.co.

Cruise Pax, Crew and Shareholders Suing Over COVID-19

The last cruise ship carrying passengers reportedly docked on Tuesday, April 21, 2020. The COSTA DELIZIOSA disembarked passengers in Genoa, Italy, allowing more than 1,500 people to return home after a 113-day round the world voyage. Under orders from the Centers for Disease Control and Prevention, it will be some time until cruise ships will once again be able to sail from U.S. ports. In the meantime, cruise lines are dealing with a host of lawsuits filed by passengers, crew and their own shareholders who accuse the companies of negligence in exposing them to the Coronavirus or otherwise downplaying the risk.

One of the first cases filed was for 40 passengers on board the GRAND PRINCESS, who claimed emotional distress due to an outbreak of COVID-19 onboard. Princess has defended the suits, stating that allowing cruise ship passengers to sue over emotional distress because they could have been exposed to the COVID-19 pandemic would “open the door to open-ended liability.” Princess cited the U.S. Supreme Court case of Metro-North Commuter R. Co. v. Buckley, 521 U.S. 424 (1997), which generally holds that Plaintiffs are prohibited from suing for fear of exposure, in this case, to the Coronavirus. Such an “unprecedented theory of liability for emotional distress” could unleash lawsuits against all types of businesses, reasons Princess. Princess further notes that “[i]f accepted, plaintiffs’ theory would open the door to open-ended liability for every business, school, church, and municipality across America, stalling economic recovery in the wake of the COVID-19 pandemic and complicating the ability of businesses to reopen…If individuals in plaintiffs’ situation can recover, businesses, school, churches and other venues across America will be forced to keep their doors closed long after state stay-at-home orders are lifted, lest they risk crushing liability to each and every one of their invitees for emotional distress, based on the mere possibility of infection, because some employee or other current or past customer of the business was later discovered to have the virus.”

Maritime law generally allows recovery for emotional distress if there is physical injury to the claimant. However generally, maritime law does not permit recovery for mental anguish or wholly emotional injuries absent some physical impact and unless the emotional injury is associated with some actual physical injury to the claimant.

In addition to the lawsuits for emotional distress, Princess faces wrongful death claims on behalf of passengers who died from COVID-19 and at least one class action on behalf of more than 2,000 passengers on the GRAND PRINCESS. The suit claims Carnival and Princess failed to protect passengers and contain the spread of the virus. At least 100 of the passengers contracted COVID-19, and two died after disembarking, according to the complaint.

A shareholder also filed a class action against Carnival Corp., the parent company of Princess. The same occurred to Norwegian Cruise Lines, where a shareholder filed a stock drop securities class action in the Southern District of Florida. The shareholder’s suit challenged statements made by NCL on and after February 20, 2020, in which the company allegedly minimized the likely impact of the Coronavirus outbreak on NCL’s operations and omitted information about allegedly deceptive sales practices undertaken in response to the virus.

Rpyal Caribbean faces a wrongful death lawsuit after a 27-year-old crew member on the CELEBRITY INFINITY died from the virus and two others were airlifted off of the OASIS OF THE SEAS.

Congress has launched an investigation into Carnival’s response to the Coronavirus pandemic. Bloomberg reported that the U.S. House Committee on Transportation and Infrastructure is investigating the company's handling of the outbreak as more than 1,500 cases have been confirmed from aboard the company's ships and dozens of passengers and crew members have died.

The rapid developments in the spread and economic impact of COVID-19 present particular challenges for officers and directors of public companies trying to manage their businesses while providing timely and truthful information to shareholders. Shareholders have filed suits alleging that public companies materially misrepresented the impact of COVID-19 on their operations. If history is any guide, derivative litigation alleging director and officer mismanagement is likely to follow. Directors and officers of public companies should exercise great care in any public statements regarding the impact of COVID-19 on their businesses, and carefully consider and document the steps they are taking to oversee and respond to COVID-19 developments.

Cruise lines have been particularly hard hit as large numbers of COVID-19 cases were identified among cruise passengers, certain cruises faced lengthy quarantines at sea, and cruise ship operations were suspended from all U.S. ports of call. Add to the expenditures of cruise lines having to keep ships afloat, requires huge expense, while not generating revenue. There have been articles suggesting that with so many lawsuits already filed, and more likely to come, the hope is that some rulings will help write new case law and make it easier to bring future cases against cruise lines. The idea being that cruise lines have insurance to cover any possible awards or settlements. However such statements ignore the plain truth that cruise lines have high self-insured retentions. They would have to pay out a considerable amount of money for each individual claim before their insurance policies kick in. These same people suggest that high volume litigation against cruise lines are unlikely to have much of a financial impact on the companies. This is to not understand how cruise ships and their owners are insured. Add the fact that the no-sail orders in effect in the U.S. are crippling the cruise industry, there is the adage that you should not kill the goose that lays the golden egg.

This law firm does not represent cruise lines and has no “skin in this game.” Nevertheless, these are issues that will affect not just cruise lines but ordinary working ships. If the cruise lines all go down with some of these novel theories, smaller carriers, with less power, will likely be next. Please feel free to reach out to us at blog@miamimaritimelaw.co, if you would like to discuss these issues further.

No Dismissal of Rape Case Against Royal Caribbean on Motion to Dismiss

In K.T. v. Royal Caribbean Cruises, Ltd., No. 17-14237 (July 24, 2019), the Eleventh Circuit Court of Appeals reversed and remanded a District Court Judge’s order in dismissing, for failure to state a claim, an action against the cruise line alleging negligent failure to warn passengers and prospective passengers of danger of sexual assault on cruise ship and failure to take action to prevent physical assault, including sexual assault, suffered by the plaintiff.

According to the Complaint, the plaintiff, a minor, embarked on a 7-day cruise with her 2 sisters and her grandparents. Plaintiff alleged that on the first  night of the cruise, a group of nearly a dozen male passengers bought her multiple alcoholic drinks in a public lounge and other public areas of the ship. The plaintiff alleges she became “highly intoxicated” and “obviously incapacitated.” The group of nearly a dozen men then steered the plaintiff “to a cabin where they brutally assaulted and gang raped her.” The plaintiff alleged that everything, except the rape itself, happened in the view of multiple Royal Caribbean crewmembers and allegedly did nothing. Royal Caribbean filed a motion to dismiss, alleging that the plaintiff did not sufficiently allege that Royal Caribbean breached its duty of care or that any breach proximately caused the plaintiff’s injuries.

The appellate court held that the complaint sufficiently alleged that defendant breached duty of ordinary care owed to plaintiff when crewmembers did nothing to prevent large group of men from plying plaintiff, a minor at the time, with enough alcohol to incapacitate her and did nothing to stop the men from leading plaintiff away to a private cabin where she was brutally assaulted and gang raped. The Court also found that allegations in the complaint demonstrated that the cruise line had notice and actual knowledge of dangers that resulted in plaintiff's injuries.

Writing a special concurrence to his own opinion, Chief Judge Ed Carnes stated that generally when a concurring judge agrees with the opinion, “there is nothing else for the author of a majority opinion to say, but here there is…It is self-evident from the allegations of the complaint that but for Royal Caribbean’s breach of its duties of care to K.T. she would not have been brutalized and gang raped…If the allegations are true, Royal Caribbean proximately caused the alleged injuries.” Carnes added that publicly available data reinforces the plaintiff’s allegations that Royal Caribbean knew or should have known about the dangers of sexual assault on its ships. According to the opinion, this is due to cruise lines being required to keep records of all complaints of sexual assaults and other serious crimes since 2010, which are given to the FBI and the Department of Transportation. Carnes noted that the court can take judicial notice of those incident reports.

According to transcripts from oral arguments referenced in the opinion, there were more than 20 sexual assaults on Royal Caribbean’s ships between 2010 and 2015, not counting those which were still under investigation. Carnes said those numbers are likely understated, and yet amount to almost one-third of the number reported by all cruise lines. This information, Carnes wrote, reinforces plaintiff’s claims of negligence, particularly since there have been congressional reports on it.

This opinion is remarkable for drilling down into the facts of a case for purposes of a motion to dismiss. If you are interested in receiving a copy of this decision or have any questions regarding this decision, you may contact us at blog@miamimaritimelaw.co or 3053773700.