Roth v. Royal Caribbean Cruises Ltd. et al

Filing 1

COMPLAINT against Richard D. Fain, Henry L. Pujol, Brian J. Rice, Royal Caribbean Cruises Ltd.. Filing fee $ 350.00 receipt number 113C-3959058, filed by Todd Roth. (Attachments: # 1 Certification, # 2 Civil Cover Sheet, # 3 Summon(s) Summons - Fain, # 4 Summon(s) Summons - Pujol, # 5 Summon(s) Summons - Rice, # 6 Summon(s) Summons - Royal Caribbean)(Vianale, Julie)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

Todd Roth, Individually And
On Behalf of All Others Similarly Situated,
Plaintiff,
vs.
ROYAL CARIBBEAN CRUISES LTD.,
RICHARD D. FAIN, BRIAN J. RICE
and HENRY L. PUJOL,
Defendants

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

CIVIL ACTION NO. ________

CLASS ACTION COMPLAINT
FOR VIOLATIONS OF
FEDERAL SECURITIES LAWS

JURY TRIAL DEMANDED

INTRODUCTION
1.

This is a federal class action on behalf of purchasers of the securities of Royal

Caribbean Cruises Ltd. (“Royal Caribbean” or the “Company”) between January 27, 2011 and
July 28, 2011, inclusive (the “Class Period”), seeking to pursue remedies under the Securities
Exchange Act of 1934 (the “Exchange Act”). As alleged herein, defendants published a series of
materially false and misleading statements that defendants knew and/or recklessly disregarded
were materially false and misleading at the time of such publication, and that omitted to reveal
material information necessary to make defendants’ statements, in light of such material
omissions, not materially false and misleading.
JURISDICTION AND VENUE
2.

The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Exchange Act [15 U.S.C. §§ 78j(b) and 78t(a)] and Rule 10b-5 promulgated thereunder by
the United States Securities and Exchange Commission (“SEC”) [17 C.F.R. § 240.10b-5].

3.

This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S.C. §§ 1331 and 1337, and Section 27 of the Exchange Act [15 U.S.C. § 78aa].
4.

Venue is proper in this District pursuant to Section 27 of the Exchange Act, and

28 U.S.C. § 1391(b). Royal Caribbean maintains its principal place of business in this District
and many of the acts and practices complained of herein occurred in substantial part in this
District.
5.

In connection with the acts alleged in this complaint, defendants, directly or

indirectly, used the means and instrumentalities of interstate commerce, including, but not
limited to, the mails, interstate telephone communications and the facilities of the national
securities markets.
PARTIES
6.

Plaintiff Todd Roth, as set forth in the accompanying certification, incorporated

by reference herein, purchased the securities of Royal Caribbean at artificially inflated prices
during the Class Period and has been damaged thereby.
7.

Defendant ROYAL CARIBBEAN CRUISES LTD. is a corporation organized

under the laws of the Republic of Liberia, which maintains its principal place of business at 1050
Caribbean Way, Miami, FL 33132-2096.

According to the Company’s website, Royal

Caribbean is the world’s second largest cruise company, with 40 ships and a passenger capacity
of approximately 92,300. The Company also has a 50% joint venture with TUI Cruises. The
ships operate worldwide with a selection of itineraries that call on approximately 400
destinations.
8.

Defendant RICHARD D. FAIN (“Fain”) is, and during the Class Period was,

Chief Executive Officer, Principal Executive Officer and Chairman of the Board of Directors of
2

the Company. During the Class Period, defendant Fain certified the Company’s Form(s) 10-Q
and 10-K. In addition, during the Class Period, defendant Fain sold 200,000 of his personally
held securities of the Company, to reap illicit gross proceeds of over $9.3 million.
9.

Defendant BRIAN J. RICE (“Rice”) is, and during the Class Period was, Chief

Executive Financial Officer, Principal Financial Officer and Executive Vice President of the
Company. During the Class Period, defendant Rice signed and certified the Company’s Form(s)
10-Q and 10-K. In addition, during the Class Period, defendant Rice sold over 88,872 of his
personally held securities of the Company, to reap illicit gross proceeds of over $4.1 million.
10.

Defendant HENRY L. PUJOL (“Pujol”) is, and during the Class Period was,

Vice President, Principal Accounting Officer and Corporate Controller of the Company. During
the Class Period, defendant Pujol signed the Company’s Form 10-K. In addition, during the
Class Period, defendant Pujol sold over 700 of his personally held securities of the Company, to
reap illicit gross proceeds of over $35,000.
11.

The defendants referenced above in ¶¶ 8-10 are referred to herein as the

“Individual Defendants.”
12.

The Individual Defendants, because of their positions with the Company,

possessed the power and authority to control the contents of Royal Caribbean’s quarterly reports,
press releases, and presentations to securities analysts, money and portfolio managers and
institutional investors, i.e., the market. They were provided with copies of the Company’s reports
and press releases alleged herein to be misleading prior to or shortly after their issuance and had
the ability and opportunity to prevent their issuance or cause them to be corrected. Because of
their positions with the Company, and their access to material non-public information available
to them but not to the public, the Individual Defendants knew that the adverse facts specified

3

herein had not been disclosed to and were being concealed from the public and that the positive
representations being made were then materially false and misleading. The Individual
Defendants are liable for the false and misleading statements pleaded herein.
13.

Each of the defendants is liable as a participant in a fraudulent scheme and course

of business that operated as a fraud or deceit on purchasers of Royal Caribbean securities by
disseminating materially false and misleading statements and/or concealing material adverse
facts. The scheme: (i) deceived the investing public regarding Royal Caribbean’s business,
operations, management and the intrinsic value of Royal Caribbean securities; (ii) enabled
defendants to artificially inflate the price of Royal Caribbean shares; (iii) enabled Royal
Caribbean insiders to sell millions of dollars of their privately held Royal Caribbean shares while
in possession of material adverse non-public information about the Company; and (iv) caused
plaintiff and other members of the Class to purchase Royal Caribbean securities at artificially
inflated prices.
PLAINTIFF’S CLASS ACTION ALLEGATIONS
14.

Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or
otherwise acquired securities of Royal Caribbean between January 27, 2011 and July 28, 2011,
inclusive (the “Class”) and who were damaged thereby. Excluded from the Class are defendants,
the officers and directors of the Company, at all relevant times, members of their immediate
families and their legal representatives, heirs, successors or assigns and any entity in which
defendants have or had a controlling interest.
15.

The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Royal Caribbean common shares were actively
4

traded on the New York Stock Exchange. As of April 18, 2011, the Company had 216,511,000
shares of common stock issued and outstanding. While the exact number of Class members is
unknown to plaintiff at this time and can only be ascertained through appropriate discovery,
plaintiff believes that there are hundreds or thousands of members in the proposed Class. Record
owners and other members of the Class may be identified from records maintained by Royal
Caribbean or its transfer agent and may be notified of the pendency of this action by mail, using
the form of notice similar to that customarily used in securities class actions.
16.

Plaintiff’s claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by defendants’ wrongful conduct in violation of
federal law that is complained of herein.
17.

Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.
18.

Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
(a)

whether the federal securities laws were violated by defendants’ acts as

(b)

whether statements made by defendants to the investing public during the

alleged herein;

Class Period misrepresented material facts about the business, operations and management of
Royal Caribbean; and
(c)

to what extent the members of the Class have sustained damages and the

proper measure of damages.

5

19.

A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense and
burden of individual litigation make it impossible for members of the Class to individually
redress the wrongs done to them. There will be no difficulty in the management of this action as
a class action.
SUBSTANTIVE ALLEGATIONS
Defendants’ Materially False and Misleading
Statements Made During the Class Period
20.

FY:10 Results / 2011 Guidance Announced.

On January 27, 2011, the

inception of the Class Period, defendants published a release announcing purported results for
the fourth quarter and year end 2010, the period ended December 31, 2010. This release stated,
in part, the following:
Royal Caribbean Reports Better Than Expected Results and Forward Guidance
Royal Caribbean Cruises Ltd. (NYSE, OSE: RCL) today announced better than
expected fourth quarter and full year 2010 results and provided earnings guidance
for 2011.

Key Highlights
For the Fourth Quarter 2010:
•

Net income was $42.7 million, or $0.20 per share versus $3.4 million, or
$0.02 per share in 2009;

•

Weather and currency related issues reduced earnings by $0.03 per share, but
were more than offset by higher revenues and cost containment;

•

Net Yields increased 3.2%, (4.2% on a Constant Currency basis). Absent
extreme weather conditions, constant currency Net Yields would have
increased 4.7%;
6

•

Net Cruise Costs per APCD ("NCC") were flat, (up 1.0% on a Constant
Currency basis).

For the Full Year 2010:
•

Net Yields increased 4.2% (4.4% on a Constant Currency basis);

•

NCC declined 1.8% (down 1.3% on a Constant Currency basis);

•

NCC excluding fuel declined for the third year in a row and were down 1.6%;

•

Net income was $547.5 million, or $2.51 per share versus $162.4 million, or
$0.75 per share in 2009.
*

*

*

Full Year 2010 Results
Net income for the full year 2010 was $547.5 million, or $2.51 per share,
compared to net income of $162.4 million, or $0.75 per share, for the full year
2009. Revenues for the full year 2010 increased 15% to $6.8 billion from
revenues of $5.9 billion for the full year 2009. Net cruise costs excluding fuel
declined for the third year in a row and were down 1.6%. Despite significant
market price increases, fuel costs per metric ton increased only 1% to $493 as a
result of the company's hedging program. Since 2005, the company has reduced
energy consumption per APCD by 15% and full year 2010 consumption was
1,311,000 metric tons.
21.

Regarding the Company’s forward guidance, the January 27, 2011 release also

stated, in part, the following:
2011 Guidance:
•

Net Yields are expected to improve 4% to 6% for the full year and 2% to 3%
in the first quarter;

•

NCC excluding fuel are expected to increase approximately 2% for the full
year and the first quarter;

•

EPS is expected to be between $3.25 and $3.45 for the full year and $0.10 to
$0.15 for the first quarter of 2011, based on current fuel prices and currency
exchange rates.
*

*

2011 Outlook
7

*

The company reported that early "WAVE season" bookings have been
encouraging and booked load factors and average per diems are ahead of same
time last year. On an as reported basis, the company expects net yields to increase
between 4% and 6% for the full year and 2% to 3% for the first quarter of 2011.
On a Constant Currency basis, Net Yields are forecasted to be up between 4% and
5% for the full year and to increase 1% to 2% in the first quarter of 2011.
On a Constant Currency basis, NCC excluding fuel are forecasted to be up 1% to
2% for the full year and the first quarter of 2011. On an as reported basis, NCC
excluding fuel are expected to be up approximately 2% for the full year and the
first quarter of 2011.
Based upon the above and current fuel prices and currency exchange rates, the
company expects full year EPS will be between $3.25 and $3.45 per share. "Our
company continues to focus on costs and improving its financial performance,"
said Brian J. Rice, executive vice president and chief financial officer. "This
focus, combined with the improving pricing power of our brands should generate
significant earnings opportunities as we move into 2011 and beyond."
22.

In addition to the foregoing, the January 27, 2011 release also quoted defendant

Fain, in part, as follows:
"These improved results reflect the strong reception our new ships have
received along with the solid branding our different cruise brands have
enjoyed," said Richard D. Fain, chairman and chief executive officer. Fain
continued, "WAVE is off to a solid start and supports our earlier confidence in
meaningful pricing recovery and record financial performance in 2011."
[Emphasis added.]
23.

Following the publication of the January 27, 2011 release, shares of the Company

traded at prices artificially inflated by defendants’ false and misleading statements. Taking
advantage of this artificial inflation in the price of Company shares, defendant Fain immediately
liquidated over $9 million of his personally held Royal Caribbean shares.
24.

2010 Form 10-K. On February 24, 2011, defendants filed with the SEC the

Company’s 2010 Form 10-K, for the year ended December 31, 2010, signed by all defendants
and certified by defendants Rice and Fain. In addition to making substantially similar statements
concerning the Company operations, including expenses, costs and ratios, as had been published
8

previously in the January 27, 2011 release, the 2010 Form 10-K also contained representations
which attested to the purported effectiveness and sufficiency of the Company’s controls and
procedures, as follows:
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chairman and Chief Executive
Officer and our Executive Vice President and Chief Financial Officer, conducted
an evaluation of the effectiveness of our disclosure controls and procedures, as
such term is defined in Exchange Act Rule 13a-15(e), as of the end of the period
covered by this report. Based upon such evaluation, our Chairman and Chief
Executive Officer and Executive Vice President and Chief Financial Officer
concluded that those controls and procedures are effective to provide reasonable
assurance that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is accumulated and communicated to
management, including our Chairman and Chief Executive Officer and our
Executive Vice President and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure and are effective to provide
reasonable assurance that such information is recorded, processed, summarized
and reported within the time periods specified by the SEC’s rules and forms.

Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Our management, with the participation of our Chairman and Chief
Executive Officer and our Executive Vice President and Chief Financial Officer,
conducted an evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management concluded that our internal
control over financial reporting was effective as of December 31, 2010. The
effectiveness of our internal control over financial reporting as of December 31,
2010 has been audited by PricewaterhouseCoopers LLP, the independent
registered certified public accounting firm that audited our consolidated financial
statements included in this Annual Report on Form 10-K, as stated in its report,
which is included herein on page F-2.

9

Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting identified
in connection with the evaluation required by paragraph (d) of Exchange Act
Rules 13a-15 during the quarter ended December 31, 2010 that have materially
affected or are reasonably likely to materially affect our internal control over
financial reporting.
25.

Certifications. In addition to the foregoing, the Company’s 2010 Form 10-K also

contained certifications by defendants Rice and Fain, that attested to the purported accuracy and
completeness of the Company’s financial and operational reports, as follows:
CERTIFICATION
1.
I have reviewed this annual report on Form 10-K of Royal Caribbean
Cruises Ltd.;
2.
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b)
Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
10

statements for external purposes in accordance with generally accepted
accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal
control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 24, 2011
/s/ Richard D. Fain
Richard D. Fain
Chairman and Chief Executive Officer
(Principal Executive Officer)
***
Date: February 24, 2011
/s/ Brian J. Rice
Brian J. Rice
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

11

In connection with the annual report on Form 10-K for the year ended December
31, 2010 as filed by Royal Caribbean Cruises Ltd. with the Securities and
Exchange Commission on the date hereof (the “Report”), Richard D. Fain,
Chairman and Chief Executive Officer, and Brian J. Rice, Executive Vice
President and Chief Financial Officer, each certifies pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
to his knowledge:
1.
the Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, and
2.
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of Royal Caribbean
Cruises Ltd.
Date: February 24, 2011
By:/s/ Richard D. Fain
Richard D. Fain
Chairman and Chief Executive Officer
(Principal Executive Officer)
By:/s/ Brian J. Rice
Brian J. Rice
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
[Emphasis added.]
26.

The statements made by defendants and contained in the Company’s January 27,

2011 release and in the Company’s 2010 Form 10-K were each materially false and misleading
when made, and were known by defendants to be false or were recklessly disregarded as such
thereby, for the following reasons, among others:
(a)

At all times during the Class Period, it was not true that the Company had

reported its results in accordance with Generally Accepted Accounting Principles, when in fact,
throughout that time, defendants had failed to properly account for interest expenses related to
the amortization of financing fees, such that defendants would be required to revise past financial
statements to reflect Royal Caribbean’s correct accounting;

12

(b)

At all times during the Class Period, unbeknownst to investors, defendants

had materially overstated the Company’s profitability by failing to properly account for the
Company’s results of operations and by artificially inflating the Company’s financial results;
(c)

Throughout the Class Period, it was also not true that Royal Caribbean

had adequate systems of internal operational or financial controls, such that Royal Caribbean ’s
reported financial statements were true, accurate or reliable;
(d)

As a result of the foregoing, throughout the Class Period it also was not

true that the Company’s financial statements and reports were prepared in accordance with
GAAP and SEC rules, where defendants had failed to disclose that errors in the previous
accounting treatment of interest expense relating to its amortization of certain financing fees
would require the revision of the Company’s past financial statements to reflect the correct
accounting; and
(e)

As a result of the aforementioned adverse conditions which defendants

failed to disclose, throughout the Class Period, defendants lacked any reasonable basis to claim
that Royal Caribbean was operating according to plan, or that Royal Caribbean could achieve
guidance sponsored and/or endorsed by defendants.
27.

Taking full advantage of the artificial inflation in the price of Company shares

caused as a result of the publication of defendants materially false and misleading statements,
throughout February 2011, Company insiders - - including defendants Fain, Rice and Pujol - sold millions of dollars of their privately held Royal Caribbean securities. The sale of Company
shares by Royal Caribbean insiders during that time, included in part, the following:
Insider Transactions Reported – During Class Period
Date

Insider

Shares

Sale / Disposition

Value

52

$40.18 per share.

2,089

May 18, 2011 BAYLEY MICHAEL W

13

Officer
Feb 17, 2011 CHICO BARBIER GONZALO
Officer

43,000

$46.98 per share.

2,020,139

Feb 16, 2011 GOLDSTEIN ADAM M
Officer

23,191

$47.34 per share.

1,097,861

Feb 16, 2011 STEIN BRADLEY H
Officer

22,828

$47.76 per share.

1,090,265

Feb 14, 2011 HANRAHAN DANIEL J
Officer

16,978

$46.83 per share.

795,079

Feb 14, 2011 RICE BRIAN J
Officer

3,000

$46.90 per share.

140,700

Feb 14, 2011 RICE BRIAN J
Officer

73,930

$46.83 - $46.91 per
share.

3,465,000

Feb 11, 2011 STEIN BRADLEY H
Officer

258

$47.38 per share.

12,224

Feb 11, 2011 BAYLEY MICHAEL W
Officer

302

$47.38 per share.

14,308

Feb 11, 2011 PUJOL HENRY L
Officer

215

$47.38 per share.

10,186

Feb 11, 2011 KULOVAARA HARRI U
Officer

388

$47.38 per share.

18,383

Feb 11, 2011 HANRAHAN DANIEL J
Officer

1,695

$47.38 per share.

80,309

Feb 11, 2011 RICE BRIAN J
Officer

1,606

$47.38 per share.

76,092

Feb 11, 2011 GOLDSTEIN ADAM M
Officer

2,231

$47.38 per share.

105,704

113

$46.58 per share.

5,263

Feb 10, 2011 BAYLEY MICHAEL W
Officer

5,569

$46.26 per share.

257,621

Feb 10, 2011 KULOVAARA HARRI U
Officer

2,048

$46.58 per share.

95,395

Feb 10, 2011 HANRAHAN DANIEL J
Officer

7,832

$46.58 per share.

364,814

Feb 10, 2011 RICE BRIAN J
Officer

7,305

$46.58 per share.

340,266

Feb 10, 2011 GOLDSTEIN ADAM M
Officer

11,014

$46.58 per share.

513,032

Feb 10, 2011 STEIN BRADLEY H
Officer

14

Feb 9, 2011

BAYLEY MICHAEL W
Officer

10,037

$46.69 per share.

468,627

Feb 8, 2011

STEIN BRADLEY H
Officer

424

$46.18 per share.

19,580

Feb 8, 2011

GOLDSTEIN ADAM M
Officer

2,660

$46.18 per share.

122,838

Feb 8, 2011

RICE BRIAN J
Officer

2,227

$46.18 per share.

102,842

Feb 8, 2011

HANRAHAN DANIEL J
Officer

2,345

$46.18 per share.

108,292

Feb 8, 2011

KULOVAARA HARRI U
Officer

593

$46.18 per share.

27,384

Feb 8, 2011

PUJOL HENRY L
Officer

380

$46.18 per share.

17,548

Feb 1, 2011

BAYLEY MICHAEL W
Officer

253

$45.57 per share.

11,529

Feb 1, 2011

PUJOL HENRY L
Officer

169

$45.57 per share.

7,701

Feb 1, 2011

KULOVAARA HARRI U
Officer

337

$45.57 per share.

15,357

Feb 1, 2011

HANRAHAN DANIEL J
Officer

855

$45.57 per share.

38,962

Feb 1, 2011

RICE BRIAN J
Officer

804

$45.57 per share.

36,638

Feb 1, 2011

GOLDSTEIN ADAM M
Officer

1,533

$45.57 per share.

69,858

Jan 28, 2011

FAIN RICHARD D
Officer

200,000

$46.63 per share.

9,326,000

447,172

Gross Proceeds =

$ 20,908,786

Total Shares Sold =

28.

1Q:11 Results Announced. On April 28, 2011, defendants published a release

announcing purported “Record” setting results for the third quarter of 2011, the period ended
March 31, 2011. This release also stated, in part, the following:
Royal Caribbean Reports First Quarter Results and Updates 2011 Guidance
Royal Caribbean Cruises Ltd. (NYSE, OSE: RCL) today announced better than
expected first quarter results and updated guidance for the remainder of 2011.
15

Key Highlights
For the First Quarter 2011:
•

Net income was $91.6 million, or $0.42 per share versus, $87.4 million, or
$0.40 per share in 2010. Included in the 2010 results was a one-time gain of
$85.6 million, or $0.39 per share related to a legal settlement;

•

Net Yields increased 4.0% (2.8% on a Constant-Currency basis);

•

Net Cruise Costs per APCD ("NCC") were up 0.2% (down 0.1% on a
Constant-Currency basis);

•

Included in Other Income/(Expense) was an $0.11 per share marked-to-market
gain on the company's fuel option portfolio.
*

*

*

First Quarter 2011 Results
Royal Caribbean Cruises Ltd. today announced net income for the first quarter
2011 of $91.6 million, or $0.42 per share. This compares to net income of $87.4
million, or $0.40 per share, in the first quarter of 2010, which included a gain on a
legal settlement of $85.6 million, or $0.39 per share. An $0.11 per share markedto-market gain on the company's fuel option portfolio is included in first quarter
2011 results.
Revenues improved to $1.7 billion in the first quarter of 2011 compared to $1.5
billion in the first quarter of 2010 as a result of capacity increases and yield
improvements. Net Yields for the first quarter of 2011 increased 4.0% (2.8% on a
Constant-Currency basis). The company saw improvement in both ticket and
onboard revenue yields and across all major product groups.
Costs in the first quarter of 2011 were well controlled with most expense
categories performing better than expected. While a less significant factor, some
timing shifts to later in 2011 occurred. NCC were up 0.2%, and NCC excluding
fuel increased 0.8%. Excluding currency impacts, the comparable figures show
decreases of 0.1% and increases of 0.6%, respectively.
At-the-pump fuel pricing (including the benefit of the company's hedging
program) was very similar to earlier calculations at $511 per metric ton. As
previously disclosed, in addition to its fuel hedging activities the company has
purchased various fuel options as further protection against rising fuel prices.
Unlike its fuel swaps which largely receive hedge accounting treatment, fuel
options are marked-to-market to the income statement at the end of each reporting
period. During the first quarter of 2011 the value of the company's fuel option
16

portfolio increased by $24.2 million, or $0.11 per share, and the associated gain
was booked to Other Income/(Expense).
29.

In addition to the foregoing, the April 28, 2011 release also quoted defendant

Fain, in part, as follows:
"The year started off with a roar -- strong bookings, low costs and solid profits - and in the first quarter every one of our brands exceeded its forecast," said
Richard D. Fain, chairman and chief executive officer. Fain added,
"Unfortunately, the events in Northern Africa and Japan have turned what was
shaping up as a spectacular year into merely a very good one. Nonetheless, other
than adjustments for fuel pricing, our earnings guidance for the year is
essentially intact despite these dramatic geopolitical events. The demand for the
majority of our products has remained quite strong and even the impacted
itineraries have begun to improve." [Emphasis added.]
30.

The Company’s April 28, 2011 release also purported to provide 2011 Guidance,

in part, as follows:
2011 Guidance:
•

31.

The company has been able to largely offset higher fuel prices through its
hedging strategies as well as the impact of currency exchange rates. The
effects of recent geopolitical events in Northern Africa and Japan have also
been partially offset by improvements in the company's other itineraries. As a
result, full year EPS guidance has been reduced by $0.15 per share to a range
of $3.10 to $3.30.
1Q:11 Form 10-Q. On or about April 28, 2011, defendants also filed with the

SEC the Company’s 1Q:11 Form 10-Q, for the quarter ended March 31, 2011, signed by
defendant Rice and certified by defendants Fein and Rice. In addition to making substantially
similar statements concerning the Company operations, including expenses, costs and ratios, as
had been published previously, the 1Q:11 Form 10-Q also provided statements concerning the
Company’s Significant Accounting Policies and the Basis of its Accounting Presentation, in part,
as follows:
Basis for Preparation of Consolidated Financial Statements

17

The unaudited consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America.
Estimates are required for the preparation of financial statements in accordance
with these principles. Actual results could differ from these estimates.
All significant intercompany accounts and transactions are eliminated in
consolidation. We consolidate entities over which we have control, usually
evidenced by a direct ownership interest of greater than 50% and variable interest
entities where we are determined to be the primary beneficiary….
We believe the accompanying unaudited consolidated financial statements
contain all normal recurring accruals necessary for a fair statement. Our
revenues are seasonal and results for interim periods are not necessarily indicative
of results for the entire year. [Emphasis added.]
32.

Controls.

The Company’s 1Q:11 Form 10-Q also contained representations

which attested to the purported effectiveness and sufficiency of the Company’s controls and
procedures, as follows:
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chairman and Chief Executive
Officer and Executive Vice President and Chief Financial Officer, conducted an
evaluation of the effectiveness of our disclosure controls and procedures, as such
term is defined in Exchange Act Rule 13a-15(e), as of the end of the period
covered by this report. Based upon such evaluation, our Chairman and Chief
Executive Officer and Executive Vice President and Chief Financial Officer
concluded that those controls and procedures are effective to provide
reasonable assurance that information required to be disclosed by us in the
reports that we file or submits under the Exchange Act is accumulated and
communicated to management, including our Chairman and Chief Executive
Officer and our Executive Vice President and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure and are
effective to provide reasonable assurance that such information is recorded,
processed, summarized and reported within the time periods specified by the
SEC’s rules and forms.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting
identified in connection with the evaluation required by paragraph (d) of
Exchange Act Rules 13a-15 during the quarter ended March 31, 2011 that have
18

materially affected or are reasonably likely to materially affect our internal
control over financial reporting. [Emphasis added.]
33.

Certifications. In addition to the foregoing, the Company’s 1Q:11 Form 10-Q

also contained certifications by defendants Rice and Fein, that attested to the purported accuracy
and completeness of the Company’s financial and operational reports, as follows:
CERTIFICATIONS
1.
I have reviewed this quarterly report on Form 10-Q of Royal Caribbean
Cruises Ltd.;
2.
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b)
Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls
and procedures and presented in this report our conclusions about the
19

effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal
control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: April 28, 2011
/s/ RICHARD D. FAIN
Richard D. Fain
Chairman and Chief Executive Officer
(Principal Executive Officer)
*

*

*

/s/ BRIAN J. RICE
Brian J. Rice
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

In connection with the quarterly report on Form 10-Q for the quarterly period
ended March 31, 2011 as filed by Royal Caribbean Cruises Ltd. with the
Securities and Exchange Commission on the date hereof (the “Report”), Richard
D. Fain, Chairman and Chief Executive Officer, and Brian J. Rice, Executive
Vice President and Chief Financial Officer, each hereby certifies pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to his knowledge:
20

1.
the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, and
2.
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of Royal Caribbean
Cruises Ltd.
Date: April 28, 2011
By: /s/ RICHARD D. FAIN
Richard D. Fain
Chairman and Chief Executive Officer
(Principal Executive Officer)
By: /s/ BRIAN J. RICE
Brian J. Rice
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
34.

[Emphasis added.]

The statements made by defendants and contained in the Company’s April 28,

2011 release and in the Company’s 1Q:11 Form 10-Q were materially false and misleading when
made, and were know by defendants to be false at that time or were recklessly disregarded as
such thereby for the reasons stated herein in ¶ 26, supra.
THE TRUE FINANCIAL AND OPERATIONAL CONDITION
OF ROYAL CARIBBEAN IS BELATED DISCLOSED
35.

On July 28, 2011, defendants shocked and alarmed investors after they published

a release that revealed, for the first time, that the Company was performing well below
expectations and that errors in the previous accounting treatment of interest expense relating to
its amortization of certain financing fees, had resulted in the revision of the Company’s past
financial statements.

That day, the South Florida Business Journal reported, in part, the

following:
Royal Caribbean takes beating over accounting issue

21

Royal Caribbean Cruises Ltd. shares took a drubbing Thursday after the company
announced some accounting issues along with second quarter results.
Shares of the world's second-largest cruise company were down $3.94, or 11.02
percent, to $31.82 in mid-afternoon trading. Trading was a heavy 8.48 million
shares, compared with an average daily volume of 2.78 million.
Yahoo Finance reported that Royal Caribbean (NYSE: RCL) was the day's 11thbiggest decliner.
The accounting revisions overshadowed revenue improving to $1.8 billion in the
second quarter from $1.6 billion a year ago as a result of capacity increases and
yield improvements. Profit rose to $93.5 million, or 43 cents a share, from $53.7
million, or 25 cents a share.
A press release gave an accounting of what went wrong, but also said a dividend
would be reinstated:
•

Management identified an error in the previous accounting treatment of
interest expense relating to its amortization of certain financing fees and has
revised its past financial statements to reflect the correct accounting.

•

Second quarter earnings per share were 47 cents before the interest expense
revision, but were revised to 43 cents.

The interest revision is forecast to reduce 2011 earnings per share by 20 cents,
within a range of $2.85 to $2.95.
36.

Investors were quick to realize that defendants had attempted to slide another

$0.10 reduction in full-year earnings under the radar, in conjunction with this press release,
completely unrelated to the accounting snafu.

Accordingly, following defendants’ belated

revelation, analysts at JP Morgan immediately downgraded shares of the Company, from Neutral
to Overweight, and slashed its price target to $33 from $48 per share.
37.

The following day, July 29, 2011, the Associated Press reported on the analyst

ratings cut and price target downgrade, in part, as follows:
Analyst cuts Royal Caribbean rating, price target
Analyst cuts Royal Caribbean rating, price target on difficulties facing
Mediterranean cruises
22

NEW YORK (AP) -- Wall Street analysts are lowering expectations for cruise
operator Royal Caribbean Cruises Ltd. on Friday, citing soft demand and
difficulties facing its Mediterranean cruises.
*

*

*

JPMorgan Analyst Kevin Milota said that Royal Caribbean's prices will likely be
weak for some of its cruises to the Eastern Mediterranean area for the near to
intermediate term until unrest in the region starts to stabilize and negative media
attention fades. He cut his rating to "Neutral" from "Overweight" and slashed its
price target to $33 from $48.
*

*

*

Raymond James lowered its target price from $46 to $39, but maintained its
"outperform" rating, saying that outside of the troubled Middle East, "demand
remains strong, with Caribbean and Alaska net yields growing double digits."
William Blair & Co. lowered its per-share estimate for this year by 29 cents to
$2.91, including interest expenses. It also lowered its 2012 estimate "to better
handicap the Mediterranean wild card."
After falling sharply Thursday, Royal Caribbean's shares fell 25 cents to $31.01 in
Friday morning trading.
38.

The revelations that the Company had materially misrepresented its financial and

operational condition, its controls and procedures and its results of operations, belatedly revealed
on July 28, 2011 caused shares of Royal Caribbean stock to fall precipitously. As evidence of
this, on July 28, 2011, shares of the Company collapsed over 13%, from a close of $35.75 per
share to a trading low of just below $31.00 - - in the single trading day, on very high trading
volume of over 11.32 million shares traded. The following day, July 29, 2011, shares of the
Company continued to trade lower, closing just above $30.50 per share, again on high volume of
over 4.337 million shares traded.

23

CAUSATION AND ECONOMIC LOSS
39.

During the Class Period, as detailed herein, defendants engaged in a scheme to

deceive the market, and a course of conduct that artificially inflated the price of Royal Caribbean
securities and operated as a fraud or deceit on Class Period purchasers of Royal Caribbean’s
securities by misrepresenting the Company’s financial results. Over a period of approximately
six months, defendants improperly inflated the Company’s financial results.

Ultimately,

however, when defendants’ prior misrepresentations and fraudulent conduct came to be revealed
and was apparent to investors, shares of Royal Caribbean declined precipitously - - evidence that
the prior artificial inflation in the price of Royal Caribbean ’s shares was eradicated. As a result
of their purchases of Royal Caribbean

stock during the Class Period, plaintiff and other

members of the Class suffered economic losses, i.e. damages under the federal securities laws.
40.

By improperly characterizing the Company’s financial results and misrepresent-

ing its prospects, the defendants presented a misleading image of Royal Caribbean’s business
and future growth prospects. During the Class Period, defendants repeatedly emphasized the
ability of the Company to monitor and control expenses, and consistently reported expenses and
expense ratios within expectations and within the range for which the Company was adequately
reserved. These claims caused and maintained the artificial inflation in the price of Royal
Caribbean ’s securities throughout the Class Period and until the truth about the Company was
ultimately revealed to investors.
41.

Defendants’ false and materially misleading statements had the intended effect of

causing Royal Caribbean’s securities to trade at artificially inflated levels throughout the Class
Period - - the Company’s common stock closed above $47.00 per share on February 18, 2011.

24

42.

On July 28, 2011, however, as investors learned the truth about the Company, and

learned that defendants had failed to properly report the Company’s financial and operational
results, shares of the Company collapsed. Defendants’ belated disclosures had an immediate,
adverse impact on the price of Royal Caribbean shares.
43.

These belated revelations also evidenced defendants’ prior falsification of Royal

Caribbean ’s business prospects due to defendants’ false statements. As investors and the market
ultimately learned, the Company’s prior business prospects had been overstated as were the
Company’s results of operations. As this adverse information became known to investors, the
prior artificial inflation began to be eliminated from Royal Caribbean’s share price and were
damaged as a result of the related share price decline.
44.

As a direct result of investors learning the truth about the Company on July 28,

2011, shares of the Company collapsed over 13%, from a close of $35.75 per share to a trading
low of just below $31.00 - - in the single trading day, on very high trading volume of over 11.32
million shares traded. The following day, July 29, 2011, shares of the Company continued to
trade lower, closing just above $30.50 per share, again on high volume of over 4.337 million
shares traded. These dramatic share price declines, eradicated much of the artificial inflation
from Royal Caribbean ’s share price, causing real economic loss to investors who purchased this
stock during the Class Period.
45.

The decline in price of Royal Caribbean securities at the end of the Class Period

was a direct result of the nature and extent of defendants’ fraud being revealed to investors and
to the market. The timing and magnitude of Royal Caribbean ’s stock price decline negates any
inference that the losses suffered by plaintiff and the other members of the Class was caused by
changed market conditions, macroeconomic or industry factors or even Company-specific facts

25

unrelated to defendants’ fraudulent conduct.

During the same period in which Royal

Caribbean’s share price fell almost 15% as a result of defendants’ fraud being revealed, the
Standard & Poor’s 500 securities index was relatively unchanged.
46.

The economic loss, i.e. damages suffered by plaintiff and other members of the

Class, was a direct result of defendants’ fraudulent scheme to artificially inflate the price of
Royal Caribbean’s stock and the subsequent significant decline in the value of the Company’s
shares when defendants’ prior misstatements and other fraudulent conduct was revealed.

The

dramatic decline in the price of Company shares immediately following defendants’ belated
disclosure is evidenced, in part, by the chart below:

VIOLATIONS OF GAAP AND SEC REPORTING RULES
47.

During the Class period, defendants materially misled the investing public,

thereby inflating the price of the Company's securities, by publicly issuing false and misleading
statements and omitting to disclose material facts necessary to make defendants' statements, as
set forth herein, not false and misleading. Said statements and omissions were materially false
and misleading in that they failed to disclose material adverse information and misrepresented

26

the truth about the Company, its financial performance, accounting, reporting, and financial
condition in violation of the federal securities laws and GAAP.
48.

GAAP consists of those principles recognized by the accounting profession as the

conventions, rules, and procedures necessary to define accepted accounting practice at the
particular time. Regulation S-X, to which the Company is subject as a registrant under the
Exchange Act, 17 C.F.R. 210.4-01(a)(1), provides that financial statements filed with the SEC
which are not prepared in compliance with GAAP, are presumed to be misleading and
inaccurate. SEC Rule 13a-13 requires issuers to file quarterly reports.
49.

SEC Rule 12b-20 requires that periodic reports contain such further information

as is necessary to make the required statements, in light of the circumstances under which they
are made, not misleading.
50.

In addition, Item 303 of Regulation S-K requires that, for interim periods, the

Management Division and Analysis Section ("MD&A") must include, among other things, a
discussion of any material changes in the registrant's results of operations with respect to the
most recent fiscal year-to-date period for which an income statement is provided. Instructions to
Item 303 require that the this discussion identify any significant elements of registrant's income
or loss from continuing operations that are not necessarily representative of the registrant's
ongoing business. Item 303(a)(2)(ii) to Regulation S-K requires the following discussion in the
MD&A of a company's publicly filed reports with the SEC:
Describe any known trends or uncertainties that have had or that the registrant
reasonably expects will have a material favorable or unfavorable impact on net
sales or revenues or income from continuing operations. If the registrant knows of
events that will cause a material change in the relationship between costs and
revenues (such as known future increases in costs of labor or materials or price
increases or inventory adjustments), the change in relationship shall be disclosed.
Paragraph 3 of the Instructions to Item 303 states in relevant part:
27

The discussion and analysis shall focus specifically on material events and
uncertainties known to management that would cause reported financial
information not to be necessarily indicative of future operating results or of future
financial condition. This would include descriptions and amounts of (A) matters
that would have an impact on future operations and have not had an impact in the
past. . .

51.

The GAAP requirement for recognition of an adequate provision for foreseeable

costs and an associated allowance applies to interim financial statements as required by
Accounting Principles Board Opinion No. 28. Paragraph 17 of this authoritative pronouncement
states that:
The amounts of certain costs and expenses are frequently subjected to year-end
adjustments even though they can be reasonably approximated at interim dates.
To the extent possible such adjustments should be estimated and the estimated
costs and expenses assigned to interim periods so that the interim periods bear a
reasonable portion of the anticipated annual amount.
52.

The Company's financial statements contained in the quarterly reports filed with

the SEC on Forms 10-Q for the quarterly periods throughout the Class Period were presented in a
manner that violated the principle of fair financial reporting and the following GAAP, among
others:
(a)

The principle that financial reporting should provide information that is

useful to present and potential investors and creditors and other users in making rational
investment, credit and similar decisions (FASB Statement of Concepts No. 1).
(b)

The principle that financial reporting should provide information about an

enterprise's financial performance during a period (FASB Statement of Concepts No. 1).
(c)

The principle that financial reporting should be reliable in that it

represents what it purports to represent (FASB Statement of Concepts No. 2).

28

(d)

The principle of completeness, which means that nothing material is left

out of the information that may be necessary to ensure that it validly represents underlying
events and conditions (FASB Statement of Concepts No. 2).
(e)

The principle that conservatism be used as a prudent reaction to

uncertainty to try to ensure that uncertainties and risks inherent in business situations are
adequately considered (FASB Statement of Concepts No. 2).
(f)

The principle that contingencies and other uncertainties that affect the

fairness of presentation of financial data at an interim date shall be disclosed in interim reports in
the same manner required for annual reports (APB Opinion No. 28).
(g)

The principle that disclosures of contingencies shall be repeated in interim

and annual reports until the contingencies and have been removed, resolved, or have become
immaterial (APB Opinion No. 28).
(h)

The principle that management should provide commentary relating to the

effects of significant events upon the interim financial results (APB Opinion No. 28).
53.

In addition, during the Class Period, defendants violated SEC disclosure rules:
(a)

defendants failed to disclose the existence of known trends, events or

uncertainties that they reasonably expected would have a material, unfavorable impact on net
revenues or income or that were reasonably likely to result in the Company's liquidity decreasing
in a material way, in violation of Item 303 of Regulation S-K under the federal securities laws
(17 C.F.R. § 229.303), and that failure to disclose the information rendered the statements that
were made during the Class Period materially false and misleading; and

29

(b)

by failing to file financial statements with the SEC that conformed to the

requirements of GAAP, such financial statements were presumptively misleading and inaccurate
pursuant to Regulation S-X, 17 C.F.R. § 210.4-01(a)(1).
54.

Defendants were required to disclose, in the Company's financial statements, the

existence of the material facts described herein and to appropriately recognize and report assets,
revenues, and expenses in conformity with GAAP.

The Company failed to make such

disclosures and to account for and to report its financial statements in conformity with GAAP.
Defendants knew, or were reckless in not knowing, the facts which indicated that all of the
Company's interim financial statements, press releases, public statements, and filings with the
SEC, which were disseminated to the investing public during the Class Period, were materially
false and misleading for the reasons set forth herein. Had the true financial position and results
of operations of the Company been disclosed during the Class period, the Company's securities
would have traded at prices well below that which they did.
ADDITIONAL SCIENTER ALLEGATIONS
55.

As alleged herein, defendants acted with scienter in that each defendant knew that

the public documents and statements issued or disseminated in the name of the Company were
materially false and misleading; knew that such statements or documents would be issued or
disseminated to the investing public; and knowingly and substantially participated or acquiesced
in the issuance or dissemination of such statements or documents as primary violations of the
federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their
receipt of information reflecting the true facts regarding Royal Caribbean, their control over,
and/or receipt and/or modification of Royal Caribbean’s allegedly materially misleading
misstatements and/or their associations with the Company which made them privy to
30

confidential proprietary information concerning Royal Caribbean, participated in the fraudulent
scheme alleged herein.
56.

Defendants were motivated to materially misrepresent to the SEC and investors

the true financial condition of the Company because: (i) it deceived the investing public
regarding Royal Caribbean ’s business, operations, management and the intrinsic value of Royal
Caribbean securities; (ii) it enabled defendants to artificially inflate the price of Royal Caribbean
shares; (iii) it enabled Royal Caribbean insiders to sell tens of millions of dollars of their
privately held Royal Caribbean shares while in possession of material adverse non-public
information about the Company; and (iv) it caused plaintiff and other members of the Class to
purchase Royal Caribbean securities at artificially inflated prices.
Applicability Of Presumption Of Reliance:
Fraud-On-The-Market Doctrine
57.

At all relevant times, the market for Royal Caribbean ’s securities was an efficient

market for the following reasons, among others:
(a)

Royal Caribbean’s stock met the requirements for listing, and was listed

and actively traded on the NYSE national market exchange, a highly efficient and automated
market;
(b)

As a regulated issuer, Royal Caribbean filed periodic public reports with

the SEC and the NYSE;
(c)

Royal Caribbean

regularly communicated with public investors via

established market communication mechanisms, including through regular disseminations of
press releases on the national circuits of major newswire services and through other wideranging public disclosures, such as communications with the financial press and other similar
reporting services; and
31

(d)

Royal Caribbean was followed by several securities analysts employed by

major brokerage firm(s) who wrote reports which were distributed to the sales force and certain
customers of their respective brokerage firm(s). Each of these reports was publicly available and
entered the public marketplace.
58.

As a result of the foregoing, the market for Royal Caribbean securities promptly

digested current information regarding Royal Caribbean from all publicly available sources and
reflected such information in Royal Caribbean stock price. Under these circumstances, all
purchasers of Royal Caribbean securities during the Class Period suffered similar injury through
their purchase of Royal Caribbean securities at artificially inflated prices and a presumption of
reliance applies.
NO SAFE HARBOR
59.

The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this complaint.
Many of the specific statements pleaded herein were not identified as “forward-looking
statements” when made. To the extent there were any forward-looking statements, there were no
meaningful cautionary statements identifying important factors that could cause actual results to
differ materially from those in the purportedly forward-looking statements. Alternatively, to the
extent that the statutory safe harbor does apply to any forward-looking statements pleaded
herein, defendants are liable for those false forward-looking statements because at the time each
of those forward-looking statements was made, the particular speaker knew that the particular
forward-looking statement was false, and/or the forward-looking statement was authorized
and/or approved by an executive officer of Royal Caribbean who knew that those statements
were false when made.
32

BASIS OF ALLEGATIONS
60.

Plaintiff has alleged the following based upon the investigation of plaintiff’s

counsel, which included a review of SEC filings by Royal Caribbean, as well as regulatory
filings and reports, securities analysts’ reports and advisories about the Company, press releases
and other public statements issued by the Company, and media reports about the Company, and
plaintiff believes that substantial additional evidentiary support will exist for the allegations set
forth herein after a reasonable opportunity for discovery.
FIRST CLAIM
Violation Of Section 10(b) Of
The Exchange Act And Rule 10b-5
Promulgated Thereunder Against All Defendants
61.

Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.
62.

During the Class Period, defendants carried out a plan, scheme and course of

conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing
public regarding Royal Caribbean ’s business, operations, management and the intrinsic value of
Royal Caribbean securities; (ii) it enabled defendants to artificially inflate the price of Royal
Caribbean securities; (iii) enable Royal Caribbean insiders to sell tens of millions of dollars of
their privately held Royal Caribbean securities while in possession of material adverse nonpublic information about the Company; and (iv) cause plaintiff and other members of the Class
to purchase Royal Caribbean securities at artificially inflated prices. In furtherance of this
unlawful scheme, plan and course of conduct, defendants, jointly and individually (and each of
them) took the actions set forth herein.

33

63.

Defendants (a) employed devices, schemes, and artifices to defraud; (b) made

untrue statements of material fact and/or omitted to state material facts necessary to make the
statements not misleading; and (c) engaged in acts, practices, and a course of business which
operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to
maintain artificially high market prices for Royal Caribbean ’s securities in violation of Section
10(b) of the Exchange Act and Rule 10b-5.

All defendants are sued either as primary

participants in the wrongful and illegal conduct charged herein or as controlling persons as
alleged below.
64.

Defendants, individually and in concert, directly and indirectly, by the use, means

or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a
continuous course of conduct to conceal adverse material information about the business,
operations and future prospects of Royal Caribbean as specified herein.
65.

These defendants employed devices, schemes and artifices to defraud, while in

possession of material adverse non-public information and engaged in acts, practices, and a
course of conduct as alleged herein in an effort to assure investors of Royal Caribbean ’s value
and performance and continued substantial growth, which included the making of, or the
participation in the making of, untrue statements of material facts and omitting to state material
facts necessary in order to make the statements made about Royal Caribbean and its business
operations and future prospects in the light of the circumstances under which they were made,
not misleading, as set forth more particularly herein, and engaged in transactions, practices and a
course of business which operated as a fraud and deceit upon the purchasers of Royal Caribbean
securities during the Class Period.

34

66.

Each of the Individual Defendants’ primary liability, and controlling person

liability, arises from the following facts: (i) the Individual Defendants were high-level executives
and/or directors at the Company during the Class Period and members of the Company’s
management team or had control thereof; (ii) each of these defendants, by virtue of his
responsibilities and activities as a senior officer and/or director of the Company was privy to and
participated in the creation, development and reporting of the Company’s internal budgets, plans,
projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and
familiarity with the other defendants and was advised of and had access to other members of the
Company’s management team, internal reports and other data and information about the
Company’s finances, operations, and sales at all relevant times; and (iv) each of these defendants
was aware of the Company’s dissemination of information to the investing public which they
knew or recklessly disregarded was materially false and misleading.
67.

The defendants had actual knowledge of the misrepresentations and omissions of

material facts set forth herein, or acted with reckless disregard for the truth in that they failed to
ascertain and to disclose such facts.

Such defendants’ material misrepresentations and/or

omissions were done knowingly or with recklessly for the purpose and effect of concealing
Royal Caribbean ’s operating condition and future business prospects from the investing public
and supporting the artificially inflated price of its securities. As demonstrated by defendants’
overstatements and misstatements of the Company’s business, operations and earnings
throughout the Class Period, defendants, if they did not have actual knowledge of the
misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by
recklessly refraining from taking those steps necessary to discover whether those statements
were false or misleading.

35

68.

As a result of the dissemination of the materially false and misleading information

and failure to disclose material facts, as set forth above, the market price of Royal Caribbean
securities was artificially inflated during the Class Period. In ignorance of the fact that market
prices of Royal Caribbean ’s publicly-traded securities were artificially inflated, and relying
directly or indirectly on the false and misleading statements made by defendants, or upon the
integrity of the market in which the securities trade, and/or on the absence of material adverse
information that was known to or recklessly disregarded by defendants but not disclosed in
public statements by defendants during the Class Period, plaintiff and the other members of the
Class acquired Royal Caribbean securities during the Class Period at artificially high prices and
were damaged thereby.
69.

At the time of said misrepresentations and omissions, plaintiff and other members

of the Class were ignorant of their falsity, and believed them to be true. Had plaintiff and the
other members of the Class and the marketplace known the truth regarding the problems that
Royal Caribbean was experiencing, which were not disclosed by defendants, plaintiff and other
members of the Class would not have purchased or otherwise acquired their Royal Caribbean
securities, or, if they had acquired such securities during the Class Period, they would not have
done so at the artificially inflated prices which they paid.
70.

By virtue of the foregoing, defendants have violated Section 10(b) of the

Exchange Act, and Rule 10b-5 promulgated thereunder.
71.

As a direct and proximate result of defendants’ wrongful conduct, plaintiff and

the other members of the Class suffered damages in connection with their respective purchases
and sales of the Company’s securities during the Class Period.

36

SECOND CLAIM
Violation Of Section 20(a) Of
The Exchange Act Against Individual Defendants
72.

Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.
73.

The Individual Defendants acted as controlling persons of Royal Caribbean

within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their
high-level positions, and their ownership and contractual rights, participation in and/or
awareness of the Company’s operations and/or intimate knowledge of the false financial
statements filed by the Company with the SEC and disseminated to the investing public, the
Individual Defendants had the power to influence and control and did influence and control,
directly or indirectly, the decision-making of the Company, including the content and
dissemination of the various statements which plaintiff contends are false and misleading. The
Individual Defendants were provided with or had unlimited access to copies of the Company’s
reports, press releases, public filings and other statements alleged by plaintiff to be misleading
prior to and/or shortly after these statements were issued and had the ability to prevent the
issuance of the statements or cause the statements to be corrected.
74.

In particular, each of these defendants had direct and supervisory involvement in

the day-to-day operations of the Company and, therefore, is presumed to have had the power to
control or influence the particular transactions giving rise to the securities violations as alleged
herein, and exercised the same.
75.

As set forth above, Royal Caribbean and the Individual Defendants each violated

Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue
of their positions as controlling persons, the Individual Defendants are liable pursuant to Section
37

20(a) of the Exchange Act. As a direct and proximate result of defendants’ wrongful conduct,
plaintiff and other members of the Class suffered damages in connection with their purchases of
the Company’s securities during the Class Period.
WHEREFORE, plaintiff prays for relief and judgment, as follows:
A.

Determining that this action is a proper class action, designating plaintiff

as Lead Plaintiff and certifying plaintiff as a class representative under Rule 23 of the Federal
Rules of Civil Procedure and plaintiff’s counsel as Lead Counsel;
B.

Awarding compensatory damages in favor of plaintiff and the other Class

members against all defendants, jointly and severally, for all damages sustained as a result of
defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon;
C.

Awarding plaintiff and the Class their reasonable costs and expenses

incurred in this action, including counsel fees and expert fees;
D.

Awarding extraordinary, equitable and/or injunctive relief as permitted by

law, equity and the federal statutory provisions sued hereunder, pursuant to Rules 64 and 65 and
any appropriate state law remedies to assure that the Class has an effective remedy; and
E.

Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.
Dated: August 1, 2011

s/ Julie Prag Vianale
JULIE PRAG VIANALE
VIANALE & VIANALE LLP
Florida Bar No. 184977
[e-mail]
2499 Glades Road, Suite 112
Boca Raton, FL 33431
Telephone: [phone]
Facsimile: [phone]
38

KIM MILLER
KAHN SWICK & FOTI, LLC
500 Fifth Avenue, Ste. 1810
New York, NY 10110
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
LEWIS KAHN
KAHN SWICK & FOTI, LLC
206 Covington Street
Madisonville, Louisiana 70447
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Attorneys for Plaintiff

39