UNITED STATES DISTRICT COURT SECURITIES LITIGATION )...

Case 1:11-cv-22855-KMW Document 73 Entered on FLSD Docket 04/19/2013 of 33

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

Case No. 1:11 -22855-dy-WILLIAMS

In re ROYAL CARIBBEAN CRUISES LTD.) SECURITIES LITIGATION )

)

)

This Document Relates To: ) )

ALL ACTIONS. ) )

ORDER ON DEFENDANTS' MOTION TO DISMISS

THIS MATTER is before the Court on Defendants' Motion to Dismiss [D.E. 53],

Plaintiffs' Response in Opposition [D.E. 58] and Defendants' Reply [D.E. 64]. The Court

has also considered Plaintiffs' Motion to Strike [D.E. 59]. The Court held a hearing on the

Motion on March 22, 2013. For the reasons discussed below, the Motion to Dismiss is

GRANTED. The Motion to Strike is GRANTED IN PART AND DENIED IN PART. The

case is DISMISSED WITH PREJUDICE. The Clerk is ordered to CLOSE the case.

I. Background

A. The Parties

On February 17, 2012, Lead Plaintiffs No. 9, I.A. of M&A.W. Pension Trust and

United Association Local Union Officers & Employees Pension Fund and KBC Asset

Management NV ("Lead Plaintiffs" or "Plaintiffs") filed their Amended, Consolidated Class

Action Complaint (the "Complaint") against Defendants Royal Caribbean Cruises Ltd. (the

"Company"), Richard D. Fain ("Fain"), Brian J. Rice ("Rice"), Adam M. Goldstein

("Goldstein") and Daniel J. Hanrahan ("Hanrahan") (collectively, "Defendants"). [D.E. 461.

Lead Plaintiffs filed this federal securities action on behalf of themselves and a putative

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class of other persons and entities who purchased or otherwise acquired the Company's

common stock between October 26, 2010, and July 27, 2011 (the "Class Period"). Lead

Plaintiffs' two count complaint alleges violations of Sections 10(b) and 20(a) of the

Securities Exchange Act of 1934 and the Securities and Exchange Commission ("SEC")

Rule 1Ob-5.

The Company is organized under the laws of the Republic of Liberia and maintains

its principal place of business in Miami, Florida. Compl. ¶ 15. The Company's brands

include Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises,

Pullmantur and CDF Croisières de France. Id. During the Class Period, Defendant Fain

served (and continues to serve) as the Chief Executive Officer and Director, as well as

Chairman of the Board. Id. ¶ 16. Defendant Rice was and is the Company's Chief

Financial Officer and Executive Vice President. Id. ¶ 17. Defendant Goldstein was and is

the President and Chief Executive Officer of Royal Caribbean International. Id. ¶ 18.

Defendant Hanrahan was and is the President and Chief Executive Officer of Celebrity

Cruises. Id. ¶19.

B. The Company's Business Model

Royal Caribbean gets its revenues from two primary sources: passenger ticket sales

and onboard revenues. Id. ¶ 30. Most of the Company's sales are made through external

travel agent partners, while about 15% of sales are made through internal, direct consumer

sales. Id. ¶ 31. The Company plans revenue forecasts a year in advance. Id. ¶ 37. This

plan is done in conjunction with a deployment plan detailing where individual ships will be

sent for the year. Id. The Company tracks revenue on a daily, weekly and monthly basis.

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Id. ¶ 39. As a result of this monitoring, the Company frequently adjusts its pricing and

inventory forecasts. Id. ¶IT 54-58.

Beginning in 2009, the Company focused efforts on expanding its business in

Europe. Id. ¶ 59. The Company hoped to garner 50% of its guests from locations other

than the United States. Id. To further this goal, the Company hired A.T. Kearney, a

consulting firm, to advise the Company on strategies to increase the Company's revenue

per guest, per day. Id. ¶ 61. A.T. Kearney advised the Company to focus on Europe and

to move more ships to Europe and to the Mediterranean to support this increase. Id. ¶ 62.

The Company did so, which Plaintiffs allege "ultimately contributed to the pricing softness

Royal Caribbean experienced in the region." Id. ¶ 64. Plaintiffs contend that "numerous

factors caused lack of demand, lagging bookings, and pricing softness for 2011 cruises,

including: (1) rising cost of airfare; (2) lack of demand for unique port destinations; (3)

competition; and (4) the recession. Moreover, the political unrest in early 2011 further

exacerbated the significant problems the Company was already facing." Id. ¶ 68.

C. The Allegations

Lead Plaintiffs allege that during the Class Period Defendants "engaged in a

fraudulent scheme to artificially inflate the Company's stock price by concealing from the

market its lagging demand, bookings, and pricing softness for European and Mediterranean

cruise itineraries and by issuing inflated guidance for 2011 that was unattainable at the time

it was made." Id. ¶ 1. Plaintiffs claim that Defendants "knew from their receipt of reports,

attendance at revenue review meetings, and otherwise intimate involvement with the

Company's booking and pricing data" that the Company was not meeting internal

expectations for bookings but despite this, Defendants "repeatedly touted.. .their

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expectations for the Company's performance in 2011." Id. T 4. Plaintiffs cite two

anonymous sources who worked at the Company and reported that as of Third Quarter

2010, the Company was experiencing difficulty in booking European and Mediterranean

cruises. Id. ¶ 78-79. Plaintiffs cite five specific instances of alleged misrepresentations or

omissions.

II. Alleged Misrepresentations and Omissions

A. The October 26, 2010 Press Release and Conference Call

The Class Period begins on October 26, 2010, the date that the Company reported

its third quarter 2010 results and discussed the Company's 2011 guidance. Id. ¶ 144. The

Company's press release from that day announced "a 55% year-over-year increase in third

quarter earnings, provided higher earnings guidance for full year 2010 and commented on

2011." Id. The release, in pertinent part, stated:

While it is early in the booking cycle, 2011 Yields are trending positively in all four quarters and the company expects yield increases in 2011 comparable to 2010. As a result, early 2011 EPS modeling indicates that next year will set a new EPS record for the company.

* * *

"We continue to characterize demand for our brands as steady and solid and the strength of our third quarter results is certainly a validation of that," said Richard D. Fain, chairman and chief executive officer. Fain continued, "Profitability momentum moving into 2011 is also quite strong with our newest vessels performing exceptionally well and our management team controlling costs very effectively. The economy is still tough, but even facing such headwinds our outlook is remarkably encouraging."

* * *

Looking to 2011, while recognizing it is still too early to provide definitive guidance, the company reported that early indications are encouraging.

* * *

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Taking into account these revenue trends as well as current fuel prices and exchange rates, the company expects 2011 EPS to exceed its previous record of $3.26 per share.

Id. That same day, the Company hosted a conference call for securities analysts. Id.

145. Defendants Fain, Rice, Goldstein and Hanrahan all participated. Id. Fain stated on

the call, "[t]oday, obviously, we are reporting more good news. As Brian will go into further

in a few moments, both revenues and expenses continue to improve. Profits for the third

quarter were better than expected, and the fourth quarter's better than expected, and 2011

is better than expected." Id. He went on to explain that "[o]ur brands are gaining traction,

and our global strategy is working. So, while I wish the economy were more of a driver, the

fact that we're doing this well against such headwinds argues particularly well for the

future." Id.

Defendant Rice discussed the Company's yields and bookings. Id. ¶ 146. He

commented that "[v]irtually all of our products showed solid improvement, especially Alaska

and the Caribbean. Yields for European itineraries also improved. . ." Id. "Moving on to

the booking environment, demand for our brands continues to be stable and remarkably

consistent, while showing a trend of gradual improvement." Id. In looking ahead to 2011,

"we expect our yields to continue to improve at a pace similar to 2010. And although I

would caution it is still very early, current trends point to yield improvement in all four

quarters, with the greatest upside opportunity during the summer months." Id. Rice went

on to give more qualified guidance for 2011:

I need to again caution that it is still very early, but we did want to provide you with some color. First quarter bookings are off to a solid start, and at today's exchange rates, we are estimating yield improvement of between 2% to 4%. Our current thinking is that the second and third quarters should provide the greatest opportunity for yield improvement in 2011. Our early projections for the year are that yields will continue to improve in 2011 at a rate fairly similar to 2010.

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* * *

Accordingly, based on current fuel prices and currency exchange rates, we are encouraged that 2011 could be a year of record profits for our company.

Id. During the same call, Defendant Hanrahan commented that Celebrity Cruises

experienced a "healthy demand for all of [its] products" and that "[b]ooking for Europe held

up well .. ." Id. 1T 147 .

In response to questions from analysts about the Company's increasing customer

base in Europe, Defendant Goldstein stated that the Company was "very aware of the

overall competitive environment and [its] own increasing capacity. . . . So, we expect a

competitive market environment as it has been, and our intention is to compete

successfully in that environment, but we're not going to be able to say anything more in

detail, really, until we get a couple of quarters closer to the action." Id. ¶ 148. Fain and

Hanrahan affirmed Goldstein's statements. Id. TT 148-49.

Also on October 26, 2010, the Company filed its third quarter report (for the period

ending September 30, 2010) on Form 10-0 with the SEC. Id. ¶ 150. The report confirmed

the financials announced in the press release and conference call. The Form 1 0-Q stated:

While recognizing it is still too early to provide definitive guidance, early indications are encouraging. At today's exchange rates, we expect full year 2011 Net Yields to increase by a similar proportion to 2010. We also noted that our business is seasonal and that the biggest yield declines caused by the recession impacted the second and third quarters more than they impacted the first and fourth quarters. As a result, we expect that the most meaningful yield recovery in 2011 will occur correspondingly during those same two summer quarters. We anticipate Net Yields in the first quarter of 2011 to improve in the range of 2% to 4%.

Id. Fain and Rice signed a Sarbanes-Oxley ("SOX") certification confirming the statements

in the Form. Id. ¶ 151. The market responded to the 2010 financials and the 2011

guidance—the Company's stock rose $5.08 and closed that day at $40.23. Id. ¶ 152.


Analysts commented positively on the Company's stock. Id. 11153. William Blair &

Company restated its "Outperform" rating of the Company, Terra Markets upgraded its

recommendation of the Company's shares to "Buy" and Argus Research upgraded its

rating of the stock from "Hold" to "Buy." Id.

B. January 27, 2011 Press Release and Conference Call

On January 27, 2011, the Company announced its fourth quarter and year end 2010

results and provided earnings guidance for 2011. Id. ¶ 156. The fourth quarter and full

year results were "better than expected." Id. The updated guidance for 2011 stated that

"early 'WAVE season" bookings have been encouraging and booked load factors and

average per diems are ahead of same time last year." Id. The Company expected "net

yields to increase between 4% and 6% for the full year and 2% to 3% for the first quarter of

2011." Id. The full year EPS was estimated to be between $3.25 and $3.45 per share. Id.

During the conference call held that same day, Defendant Fain reiterated that WAVE

bookings were "off to a good start." Id. 11 157. Defendant Rice stated that "we are still early

in the WAVE season but the strength of demand continues to be consistent with our earlier

expectations.... [O]verall, the demand environment remains solid and we are projecting

another year of healthy yield recovery." Id. 11 158. Rice went on that "the numbers are

shaping up as expected in all four quarters at this point." Id. ¶ 160. The market again

reacted positively to the 2010 financials and the 2011 financials: Deutsche Bank reiterated

its "Buy" rating for the Company's bonds, Susquehanna International Group confirmed its

1 The WAVE period begins in mid January and extends through late February or early March and is the period of time that "reflects a disproportionately high percentage of the overall bookings for the year." Compl. ¶87, n.18.

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"Positive" rating and J. P. Morgan reiterated its "Overweight" rating for the Company's stock.

Id. J 161.

C. February 24, 2011 Filing of the 10-K

The Company filed its 2010 year end financials on Form 10-K with the SEC on

February 24, 2011. Id. 1163. The 10-K affirmed the financial results and statements from

the January 27, 2011 press release and conference call. Id. The 10-K also included

statements similar to those made above: "Even though the economy remains a challenge

our outlook remains encouraging." Id. The 10-K stated that the "international expansion

also remains a key focus going into 2011 and we continue to invest in mature markets

while strategically focusing on developing markets. As a result, we are experiencing an

increased demand in these markets." Id. Defendants Fain and Rice signed SOX

certificates confirming these statements. Id. ¶ 164. The Company's stock rose to $44.15

on February 25, 2011. Id. ¶ 165.

D. April 28, 2011 First Quarter Results and Updated Guidance

On April 28, 2011, the Company reported first quarter 2011 results and updated

guidance for the rest of the year. Id. ¶ 167. The press release "announced better than

expected first quarter results." Id. The release discussed the geopolitical events that

occurred in 2011, specifically the Arab Spring and the Japanese tsunami:

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.

"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."

Id. The Company modified its 2011 guidance based on "three significant factors:" (1)

geopolitical events in Japan (resulting in itinerary modifications of 21 sailings) and the

unrest in Northern Africa (leading to itinerary modifications of 63 sailings); (2) the

weakening of the US Dollar; and (3) increased tour activities. Id. The events in Northern

Africa also contributed to a "broad slowdown in bookings for Mediterranean sailings." Id.

The release stated that the booking volumes "have now returned to normal levels as a

result of reduced pricing. The effect of this booking disruption has been largely offset by

the company's other product groups, including Caribbean and Alaskan itineraries, which

continue to show better than expected year-over-year improvement." Id.

During a conference call held on April 28, 2011, the individual Defendants pointed to

"geopolitical factors" as the reason for the revision of the 2011 guidance but stated that the

Company's "risk mitigation and diversification efforts" were "working as they should to

reduce earnings volatility and to insulate our shareholders." Id. 1168. Fain discussed how

by "becoming a more international Company we are more broadly exposed to events that

occur throughout the world." Id. Defendant Rice commented that:

While the situation is still fluid our best estimate is that the total direct impact from the combination of these geopolitical events will be approximately $0.20 per share and will reduce our yields by about 1%. Not included in these figures are the indirect costs associated with discounting we needed to do to stimulate bookings for the Mediterranean itineraries . . . . Prior to the Libyan uprising, Mediterranean bookings were running ahead of the same time last year despite significant increases in capacity.

Id. ¶1 169. Similar statements were made in response to questions from analysts during the

conference call. Id. ¶1 171.

I


That same day, the first quarter earnings report was filed via Form 10-Q with the

SEC. Id. 1172. The I 0-Q reiterated the reported first quarter earnings and updated 2011

expectations. Id. Fain and Rice signed SOX certifications as to the 10-Q. Id. 1173. The

market again responded favorably, with multiple banks and analysts giving the Company's

shares high marks. Id. ¶1 174. The stock price closed at $39.82. Id. ¶1 175.

E. July 27, 2011 Press Release and Form 8-K

On July 27, 2011, the Company released a press release announcing that it was

lowering its 2011 guidance. Id. ¶1 177. The release stated that "[m]anagement 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 (the "Interest Expense Revision")." Id.

Excluding the Interest Expense Revision, full year 2011 EPS guidance is now expected to be $3.05 to $3.15, reflecting a 100 reduction to prior guidance on continuing price softness for Eastern Mediterranean sailings, partially offset by strong cost savings. The Interest Expense Revision is forecasted to reduce 2011 EPS by 200 resulting in full year 2011 EPS guidance of $2.85 to $2.95.

Id. In discussing the Second Quarter results, the release commented that

[t]he ongoing conflicts in the Eastern Mediterranean and its spillover effects continue[]to create hesitation around travel to the region. Some of this was already evident at the time of the company's last guidance. However, during the second quarter, the civil unrest in the Eastern Mediterranean expanded to other areas including Syria and Greece and the level of concern amongst travelers grew as tensions in the region dominated the headlines. This has resulted in a full year yield reduction of approximately 150 basis points versus April guidance.

Id. The Company stated that the "Eastern Mediterranean pricing softness this summer

appears to be geopolitically related and []the economic demand for its products is strong."

Id.

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On July 28, 2011, the Company held a conference call with analysts. Id. IT 178.

Plaintiffs allege that Defendants "continued to mislead the market, blaming the pricing

softness on geopolitical events rather than its own problems with bookings in the region."

Id. Defendant Fain stated:

The two big changes to our business outlook that we are reporting today are, first of all, the current weakness in our Eastern Mediterranean itineraries. . . . Naturally, our biggest redeployment was to substantially increase Mediterranean sailings because this was the area which showed the greatest promise. Naturally, that market where we expected the biggest improvement is also the market that suffered the most from the geopolitical changes.

The Arab [Spring] not only failed to stabilize, it continued to fester and the turmoil grew to other countries throughout the region. The result is that, during the quarter, we reached a tipping point and we saw significant declines in our pricing in that area. The net result has been a serious decline in our revenue in what was supposed to be one of our strongest markets. That decline has been painful but to put it in perspective, it's only amounted to a drop of 2% in our overall yields from what we had expected at the beginning of the year.

Id. Defendant Goldstein explained that:

The Royal Caribbean International brand has deployed half of our 22 ship fleet in Europe this summer. When we set our 2011 European deployment about 18 months ago, we placed our main emphasis on establishing home ports in our priority markets. This approach includes several ships that we have based in the UK and in the Nordic market, which have performed well this summer. We placed most of our European capacity, however, in Italy and Spain. The geopolitical events of 2011 have had a disproportionate impact on these products, particularly the ships with itineraries in Greece, Egypt and Israel.

Id. 11180. The market responded negatively to this "disappointing Q2 report." Id. 11 184 .

And the second-quarter Form 10-0 stated that:

[t]otal revenues increased 10.4% to $1.8 billion in the second quarter of 2011 from total revenues of $1.6 bilion for the same period in 2010. . . . The increase in Net Yields was primarily due to the favorable effect on our revenues of changes in foreign currency exchange rates, and, to a lesser extent, an increase in ticket prices. These increases were partially offset by the continuing effect of the impact of

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geopolitical events including the political unrest in Northern Africa and the earthquake and related events in Japan.

Id. ¶ 185. The Company's stock fell from $35.76 per share to $28.83 per share on August

2, 2011. Id. 11 1 86.

F. Individual Defendants' Stock Sales

The Complaint contends that Defendant Fain sold 300,000 shares of common stock

on November 3-4, 2010, a week after the Company's third quarter earnings were

announced, and received proceeds of $12,346,500. Id. IT 122-124. Plaintiffs also allege

that after the press release on January 27, 2011, Fain sold 200,000 shares of his common

stock at $46.63 for proceeds of $9,326,000 and Rice, Goldstein and Han rahan also sold a

combined 117,099 shares of common stock for $5,497,704 in proceeds. Id. ¶ 162.

G. Scienter Allegations

Plaintiffs claim that the individual Defendants acted with scienter because "they

knew or recklessly disregarded that the public documents and statements issued or

disseminated in the name of the Company were materially false and misleading, and

knowingly or severely recklessly substantially [sic] participated or acquiesced in the

issuance or dissemination of such statements or documents as primary violators of the

federal securities laws." Id. ¶1104. In support of this claim, Plaintiffs state that the

individual Defendants were "hands-on executives" who were "intimately aware of the

Company's bookings, sales and pricing . . . ." Id. IT 109-115. Plaintiffs point to thirteen

confidential witnesses who allegedly demonstrate that the Individual Defendants received

information on the state of the business on a weekly and monthly basis from emails, reports

and meetings. Id. ¶ 50-53, 115-118. The witnesses claim that these reports and

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meetings were held with regard to bookings and revenue and that Defendants also

received information on bookings and revenue from regular monitoring of booking data. Id.

¶J 44-56, 109-118. Therefore, Plaintiffs allege that Defendants knew there was excess

capacity in the Mediterranean and that bookings in the Mediterranean and in the Caribbean

were lagging before and during the Class Period. Id. ¶1144, 65, 74-98.

Ill. Standards of Law

A. General Motion to Dismiss

To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead sufficient facts to

state a claim that is "plausible on its face." Ashcroft v. lqbal, 556 U.S. 662, 678

(2009)(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court's

consideration is limited to the allegations in the complaint. See GSW, Inc. v. Long Cnty.,

999 F.2d 1508, 1510 (11th Cir. 1993). All factual allegations are accepted as true and all

reasonable inferences are drawn in the plaintiffs favor. See Speaker v. U.S. Dep't. of

Health & Human Se,vs. Ctrs. for Disease Control & Prevention, 623 F.3d 1371, 1379 (11th

Cir. 2010); see also Roberts v. Fla. Power & Light Co., 146 F.3d 1305, 1307 (11th Cir.

1998). While a plaintiff need not provide "detailed factual allegations," a plaintiffs complaint

must provide "more than labels and conclusions." Twombly, 550 U.S. at 555 (internal

citations and quotations omitted). "[A] formulaic recitation of the elements of a cause of

action will not do." Id. Rule 12(b)(6) does not allow dismissal of a complaint because the

court anticipates "actual proof of those facts is improbable;" however, the "[f]actual

allegations must be enough to raise a right to relief above the speculative level." Watts v.

Fla. Intl Univ., 495 F.3d 1289 (11th Cir. 2007)(quoting Twombly, 550 U.S. at 545).

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B. Securities Fraud Claims

Plaintiffs' claims arise under §1 O(b) of the Securities Exchange Act of 1934, which

forbids:

[A]ny person, directly or indirectly.. . [from].. . us[ing] or employ[ing], in connection with the purchase or sale of any security registered on a national securities exchange. . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

15 U.S.C. §78j(b). Rule 10b-5 makes it unlawful:

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

17 C. F. R. §240.1 Ob-5. Pursuant to these laws, a securities fraud claim based on failure to

reveal information to investors has six required elements: "(1) a material misrepresentation

or omission; (2) made with scienter; (3) a connection with the purchase or sale of a

security; (4) reliance on the misstatement or omission; (5) economic loss; and (6) a causal

connection between the material misrepresentation or omission and the loss, commonly

called 'loss causation." Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1236-37 (11th Cir.

2008) (quoting Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 341-42 (2005)).

Plaintiffs claim that the individual Defendants are liable as "control persons" pursuant

to Section 20(a) of the Securities and Exchange Act. The Act imposes joint and several

liability on "[e]very person who, directly or indirectly, controls any person liable under any

provision of this chapter or any rule or regulation thereunder. . ." 15 U.S.C. §78t(a). The

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statute, in effect, "imposes derivative liability on persons that control primary violators of the

Act." Mizzaro, 544 F.3d at 1237 (quoting Laperriere v. Vesta Ins. Group, Inc., 526 F.3d

715, 721 (11th Cir. 2008)(per curiam)). The viability of a Section 20(a) claim is dependent

on the successful pleading of a primary violation under Section 10(a) of the Exchange Act.

Id. "Therefore, the pivotal issue in this case [is] whether [Plaintiffs] adequately pleaded a

violation of §10(b) and Rule 1Ob-5." Id.

Securities fraud claims, like general fraud claims, must meet the heightened

pleading standard of Federal Rule of Civil Procedure 9(b), which requires that such claims

be pled with "particularity." FED. R. Civ. P. 9(b). The requirements of Rule 9(b) are to notify

defendants of the "precise misconduct with which they are charged." Ziemba v. Cascade

Intern., Inc., 256 F.3d 1194,1202 (1 1th Cir. 2001) (quoting Durham v. Bus. Mgmt. Assocs.,

847 F.2d 1505, 1511 (11th Cir. 1988) (internal quotations omitted)). In Ziemba, the

Eleventh Circuit found that Rule 9(b) was satisfied when the complaint states "(1) precisely

what statements were made in what documents or oral representations or what omissions

were made, and (2) the time and place of each such statement and the person responsible

for making (or, in the case of omissions, not making) same, and (3) the content of such

statements and the manner in which they misled the plaintiff, and (4) what the defendants

obtained as a consequence of the fraud." Id. (quoting Brooks v. Blue Cross and Blue

Shield of Florida, Inc., 116 F.3d 1364, 1371 (11th Cir. 1997)). Under Rule 9, "[m]alice,

intent, knowledge, and other conditions of a person's mind may be alleged generally." FED.

R. Civ. P. 9(b).

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C. Private Securities Litigation Reform Act

In 1995, Congress passed the Private Securities Litigation Reform Act ("PSLRA"),

which was intended to be "a check against abusive litigation by private parties." Tellabs,

Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313 (2007). The PSLRA made two

important changes to the pleading requirements for a securities fraud class action. First, a

securities fraud class action complaint must "specify each statement alleged to have been

misleading, the reason or reasons why the statement is misleading, and, if an allegation

regarding the statement or omission is made on information and belief, the complaint shall

state with particularity all facts on which that belief is formed." 15 U.S.C. § 78u-4(b)(1)(B).

Second, the PSLRA requires a heightened pleading of scienter:

in any private action arising under this chapter in which the plaintiff may recover money damages only on proof that the defendant acted with a particular state of mind, the complaint shall, with respect to each act or omission alleged to violate this chapter, state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.

15 U.S.C. §78u-4(b)(2) (emphasis added). The Supreme Court has held that this "strong

inference" of scienter is met when the inference is "more than merely plausible or

reasonable—it must be cogent and at least as compelling as any opposing inference of

nonfraudulent intent." Tellabs, 551 U.S. at 314. This inquiry should focus on whether "all

of the facts alleged, taken collectively, give rise to a strong inference of scienter, not

whether any individual allegation, scrutinized in isolation, meets that standard." Id. at 323.

The Eleventh Circuit has held that claims under Section 10(b) and Rule 10b-5

"require a showing of either an 'intent to deceive, manipulate, or defraud' or 'severe

recklessness." Mizzaro, 544 F.3d at 1238 (quoting Bryant v. Avado Brands, Inc., 187 F.3d

1271, 1282 (11th Cir. 1999)).

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Severe recklessness is limited to those highly unreasonable omissions or misrepresentations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and that present a danger of misleading buyers or sellers which is either known to the defendant or is so obvious that the defendant must have been aware of it.

Id. A motive or opportunity to commit fraud, without more, is not sufficient to establish

scienter. Bryant, 187 F.3d at 1285-86.

D. Judicial Notice

In analyzing a motion to dismiss in a securities fraud case, the Court may take

judicial notice of the contents of relevant public documents required by, and actually filed

with, the SEC. Id. at 1278. The SEC documents may only be considered for "determining

what statements the documents contain and not to prove the truth of the documents'

contents." Id. Unlike a typical Rule 12(b)(6) motion, the documents need not be attached

to the Complaint to be considered so long as they are central to the claim and either

undisputed or not considered for the truth of the documents. See Hubbard v. BankAtlantic

Bancorp, Inc., 625 F. Supp. 2d 1267, 1280 (S.D. Fla. 2008).

IV. Analysis

As an initial matter, it is important to note that Plaintiffs do not contend that the

accounting error that was announced in July 2011 was a material misrepresentation or

fraudulent in any way. Plaintiffs' allegations center on whether the Company

misrepresented their bookings and earnings potential.

Turning to what is appropriately before the Court for purposes of its analysis, the

Court has reviewed Plaintiffs' Motion to Strike Extraneous Documents from Defendants'

Motion to Dismiss [D.E. 59]. As noted, the Court may judicially notice publicly filed

documents for determining what statements the documents contain. The Court determines

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that the documents attached to Defendants' Motion to Dismiss meet this criteria—all were

required by and publicly filed with the SEC [D.E. 53 with exhibits]. Plaintiffs' argument that

such documents are not material to this case is unavailing. The relevant 8-Ks, 10-Ks and

1 0-Qs are at the heart of this case. Plaintiffs' failure to cite to certain of these documents in

their Complaint does not alter their materiality and is not a requirement for the Court's

judicial notice under Bryant. However, Plaintiffs' argument is well taken in that the Court

cannot look to the attached documents for purposes of ascertaining the truth of the matters

contained within them. Nonetheless, when asked at the hearing whether Plaintiffs disputed

the truth of statements in the relevant Form 4s, Plaintiffs' counsel stated that they did not.

Therefore, because their contents are undisputed, the Court has considered these

documents in order to determine whether or not there was a pattern of stock sales that

gives rise to an inference of scienter. Accordingly, the Motion to Strike is GRANTED IN

PART AND DENIED IN PART subject to the following limitation. The Motion is GRANTED

as to Exhibit 18, the chart prepared by the Company's counsel, as it was not publicly filed

with the SEC, but DENIED as to all other documents.

The Court also finds that Plaintiffs' contention (repeated several times during oral

argument) that this matter should be reviewed under the normal Rule 12(b)(6) standards is

incorrect and unavailing. While the Court must take the facts in the Complaint to be true as

in any Rule 12(b)(6) context, the PSLRA "requires greater specificity" than even Rule 9(b),

which lays out the typical pleading requirements for fraud cases. Hubbard, 625 F.Supp.2d

at 1280. Plaintiffs assert that the Court should not parse the Complaint looking for specific

facts to support the securities fraud claim or allow one inadequately pled instance to

condemn the Complaint. Instead, Plaintiffs urge the Court to read the Complaint


"holistically" or in its "totality" to allow an inference of scienter. This argument is equally

unpersuasive. While the decision in Tel/abs does state that the court's "job is not to

scrutinize each allegation in isolation but to assess all the allegations holistically," the Court

goes on to caution that plaintiffs must still "state with particularity facts giving rise to a

strong inference that the defendant acted with the required state of mind." Te//abs, 551

U.S. at 326. (quoting 15 U.S.C. § 78u-4(b)(2)). Thus, while the Court agrees that all of the

allegations of the Complaint must be taken into consideration to determine whether or not

they give rise to a strong inference of scienter, the Complaint must still allege with

particularity the specific facts that underlie each alleged misstatement, misrepresentation or

omission. See 15 U.S.C. § 78u-4(b)(2)

A. Materiality

Only misrepresentations or omissions that are "material" give rise to a securities

fraud cause of action. 17 C.F.R. § 240.10b-5 ("It shall be unlawful for any person . . . [t]

make any untrue statement of a material fact or to omit to state a material fact[.]"). In

determining whether the public statements made were "material," the Court must make an

"objective' inquiry [into] the significance of an omitted or misrepresented fact to a

reasonable investor." SEC v. Morgan Keegan & Co., Inc., 678 F.3d 1233, 1245 (11th Cir.

2012) (quoting TSC Indus. v. Northway, Inc., 426 U.S. 438,445 (1976)). "In other words, a

misstatement or omission is material if there is a 'substantial likelihood that the disclosure

of the omitted fact would have been viewed by the reasonable investor as having

significantly altered the 'total mix' of information made available." Id. A statement that is

vague, generalized, or "mere corporate puffery" is immaterial because a reasonable

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investor would not base a decision on such statements. Waterford Township Gen. Emps.

Ret. Sys. V. BankUnited Fin. Corp., 2010 WL 1332574, *8 (S.D. Fla. 2010).

A number of Defendants' statements certainly constitute "mere corporate puffery."

Defendants' discussion of "healthy demands," an "intention to compete successfully" and

the "encouraging" prospect of early bookings are all examples of such puffery on which a

reasonable investor would not rely. "Plaintiffs must look beyond these optimistic

characterizations to the specific, verifiable statements made by Defendants if they are to

successfully allege a violation of the federal securities laws." Id. See also ECA, Local 134

IBEW Joint Pension Trust of Chicago v. JP Morgan Chase Co., 553 F.3d 187, 206 (2d Cir.

2009) (Defendant's statements regarding its "highly disciplined" risk management were

puffery and "too general to cause a reasonable investor to rely upon them"); Southland

Securities Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 372 (5th Cir. 2004) ("analysts

rely on facts in determining the value of a security" and "generalized, positive statements

about the company's competitive strengths, experienced management, and future

prospects are not actionable because they are immaterial") (internal citations and

quotations omitted).

B. Safe Harbor Provisions

The PSLRA codifies two safe harbor provisions that were previously incorporated

into jurisprudence under the common law "bespeaks caution" doctrine. See Edward J.

Goodman Life Income Trust v. Jabil Circuit, Inc., 594 F. 3d 783, 796 (11th Cir. 2010). The

first safe harbor provision insulates forward looking statements that are accompanied by

meaningful cautionary language, which is also the purpose of the "bespeaks caution"

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doctrine. Id. The second safe harbor provision allows a defendant to avoid liability if the

plaintiff fails to show the statement was made with actual knowledge that it was false. Id.

1. Safe Harbor for Forward Looking Statements with Meaningful Cautionary Language

The PSLRA contains a safe harbor provision that insulates certain forward looking

statements from liability when they are accompanied by meaningful cautionary language

that "identiflies] important factors that could cause actual results to differ materially from

those in the forward-looking statement. . . ." 15 U.S.C. § 78u-5(c). The statute defines a

"forward-looking statement" as including "a statement of future economic performance,

including any such statement contained in a discussion and analysis of financial condition

by the management or in the results of operations. . . ." 15 U.S.C. § 78u-5(i)(1)(C). In

analyzing statements which Defendants argue are protected, the Court is to consider "any

statement cited in the complaint" as well as "any cautionary statement accompanying the

forward-looking statement, which are not subject to material dispute, cited by the

defendant." 15 U.S.C. § 78u-5(e).

If the Court determines that the statement is accompanied by "meaningful

cautionary language,' the defendants' state of mind is irrelevant." Harris v. Ivax Corp., 182

F.3d 799, 803 (11th Cir. 1999). The Eleventh Circuit has held that "when the factors

underlying a projection or economic forecast include both assumptions and statements of

known fact, and a plaintiff alleges that a material fact is missing, the entire list of factors is

treated as a forward looking statement." Id. at 807. The cautionary language need not

explicitly mention the specific factor that ultimately makes a forward looking statement

untrue—"when an investor has been warned of risks of a significance similar to that actually

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realized, she is sufficiently on notice of the danger of the investment to make an intelligent

decision about it according to her own preferences for risk and reward." Id.

Defendants have cited to what they argue is meaningful cautionary language

throughout the conference calls and various SEC documents. Plaintiffs do not dispute that

Defendants made the statements, but argue that such statements were "boilerplate" and

insufficient. The Company's 10-Ks, 10-Qs and 8-Ks all included a "cautionary note

concerning factors that may affect future results" and made a specific reference to the

PSLRA. See, e.g., 2010 10-K at 35. In addition, all public filings included the following

statement:

Forward-looking statements reflect management's current expectations, are inherently uncertain and are subject to risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements.

Id. Before each conference call, Defendant Rice referred participants to the Company's

"notice about forward looking statements. During this call we will be making comments that

are forward-looking." 10/26/2010 Conf. Call at 1; 1/27/2011 Conf. Call at 1; 4/28/2011

Conf. Call at 1. Defendants also pointed call participants to a "full discussion regarding the

implication(s) of these [forward looking] statements" in the Company's SEC filings or the

Investor Website. Id.

Moreover, the 2009 and 2010 10-Ks specified that operating internationally brought

with it the risks of "volatile local political conditions," the possibility of a decrease in demand

due to "fear of ... hostilities and resulting political instability" and effects from "economic or

geo-political factors beyond our control." 2010 10-K at 24-5; 2009 10-K at 22-24. The

2010 10-K specified that "[s]tagnant or worsening global economic conditions could result

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in a prolonged period of booking slowdowns, depressed cruise prices and reduced onboard

revenues." 2010 10-K at 23. The 10-K also discussed the possible risks associated with a

limitation of port availability, expansion into new markets, adding new ships, airfare

increases, competition and customer demand. Id. at 23-27.

The Court will not engage in a recitation of all forward looking statements, as many

were repeated throughout the Class Period. But the following excerpts give a

representative sample of these types of statements with emphases added on the forward

looking terminology:

While it is early in the booking cycle, 2011 Yields are trending positively in all four quarters and the company expects yield increases in 2011 comparable to 2010. As a result, early 2011 EPS modeling indicates that next year will set a new EPS record for the company. Compl. ¶1 144.

Looking to 2011, while recognizing it/s still too early to provide definitive guidance, the company reported that early indications are encouraging. Id.

Taking into account these revenue trends as well as current fuel prices and exchange rates, the company expects 2011 EPS to exceed its previous record of $3.26 per share. Id.

[W]hile I wish the economy were more of a driver, the fact that we're doing this well against such headwinds argues particularly well for the future. Id. 1 145.

Accordingly, based on current fuel prices and currency exchange rates, we are encouraged that 2011 could be a year of record profits for our company. Id. ¶1 146.

I need to again caution that it is still very early, but we did want to provide you with some color. First quarter bookings are off to a solid start. . ." Id.

[W]e expect a competitive market environment. . . and our intention is to compete successfully in that environment, but we're not going to be able to say anything more in detail, really, until we get a couple of quarters closer to the action. Id. ¶11 48 [in discussing the increased capacity in the European market].

[E]arly WAVE season bookings have been encouraging... Id. ¶1 156.

WAVE bookings are "off to a good start." Id. ¶1 157.

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Even though the economy remains a challenge, our outlook remains encouraging. Id. 163.

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. ld.IT 167.

The Company's "risk mitigation and diversification efforts" are "working as they should to reduce earnings volatility and to insulate our shareholders." Id. IT 168.

While the situation is still fluid our best estimate is that the total direct impact from the combination of these geopolitical events will be approximately $0.20 per share and will reduce our yields by about 1%. /d. %169.

Eastern Mediterranean pricing softness this summer appears to be geopolitically related and []the economic demand for our products is strong. Id. ¶ 177.

Naturally, that market where we expected the biggest improvement is also the market that suffered the most from the geopolitical changes. Id. 11 178 .

Accordingly, as a threshold matter, the Court finds the alleged misrepresentations

identified in the Complaint to be forward looking. Again, as the Eleventh Circuit held in

Harris, "when the factors underlying a projection or economic forecast include both

assumptions and statements of known fact, and a plaintiff alleges that a material fact is

missing, the entire list of factors is treated as a forward looking statement." Id. at 807.

Here, the statements of known fact (if any) about the booking capacity were given to lend

context to the forward looking projections for earnings. The Harris analysis is even more

compelling here, where bookings were simply a preliminary indication of how full the ships

would be in the future and, thus, predictive of the Company's future earnings, but

unverifiable at the time the statements were made. See Harris, 192 F.3d at 805.

Further, the Court finds that the forward looking statements alleged in the Complaint

were accompanied by meaningful cautionary language. First, there is no dispute that each

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filing and call was appropriately preceded with a warning about forward looking statements.

Defendants stated that "words such as 'anticipate,' 'believe,' 'could,' 'estimate,' 'expect,'

'goal,' 'intend,' 'may,' 'plan,' 'project,' 'seek,' 'should,' 'will' and similar expressions [were]

intended to identify" forward looking statements. As noted above, Defendants used such

language to identify the forward looking statements. Second, the cautionary language

warned of risks that were "of a significance similar to that actually realized." Harris, 182

F.3d at 807. As one of Plaintiffs' cited cases points out, meaningful cautionary language

should be "explicit, repetitive and linked to the projections about which the plaintiff

complains." Bellocco v. Curd, 2005 WL 2675022, at *3 (M.D. Fla. Oct. 20, 2005) (quoting

Saltzberg v. TM Sterling/Austin Assocs., Ltd., 45 F.3d 399, 400 (11th Cir. 1995)).

Defendants did exactly that here. The warnings, which went back to 2009 (before the Arab

Spring and Japanese tsunami), cautioned investors that the Company operated

internationally in the travel industry and thus was subject to the uncontrollable factors of

political and economic instability and port availability. Moreover, because the Company is

a leisure company, its success is dependent on its customers' financial situations and

fluctuating ability to afford vacations in difficult economic times. Defendants' warnings were

not boilerplate, general economic warnings that affected all businesses, but instead were

specifically tailored to the Company's international presence, reliance on customers,

reliance on port availability and vulnerability to the influence of local political factors.

Finally, the Court does not find that Defendants warned of these risks only to

discount their import. To the contrary, during many of the conference calls and press

releases, Defendants acknowledged the impact of events such as the Arab Spring and

Japanese tsunami, including the impact those events had on the Company. While

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Defendants expressed optimism about the Company's ability to manage these risks, the

Court does not find that this outlook discounted the risks.

Plaintiffs also argue that the Company cannot warn of risks that have already

materialized. In this regard, Plaintiffs attempt to have their proverbial cake and eat it, too -

they want the Court to strike the 2009 10-K statement's warnings of economic and

geopolitical risks as outside the Class Period, but argue that the events of the Arab Spring

had already begun to materialize in 2010, rendering the 2010 10-Kwarnings of political and

economic events insufficient because the risks had already materialized. The Court has

taken judicial notice of the statements in the 2009 10-K, particularly as that 10-K provided

forward looking guidance for the Class Period. The Court finds that these warnings were

given in advance of the risks materializing and thus are sufficient to protect Defendants

under the PSLRA's safe harbor provision. Therefore, having found that the allegedly

misleading statements were forward looking and were accompanied by meaningful

cautionary language, dismissal is appropriate.

2. Safe Harbor for Failure to Plead Actual Falsity

A defendant is entitled to protection under the PSLRA's safe harbor provisions if the

plaintiff fails to prove that the forward looking statement was made with actual knowledge

that the statement was false. 15 U.S.C. §78u-5(c)(1 )(B); Jabil, 594 F.3d at 795. Having

found that the forward looking statements are protected by the cautionary language safe

harbor, under which Defendants' state of mind is irrelevant, the Court need not consider

whether these same statements are protected by the failure to plead actual falsity.

However, the Court notes that when specifically asked at the hearing what particular

statements Plaintiffs were alleging were false and what information they had to

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demonstrate that the statements were false, Plaintiffs had no answer. Plaintiffs could point

to no evidence - no reports that the confidential witnesses saw to demonstrate that

bookings were in fact significantly different from what Defendants claimed them to be; no

description of any reports, generated when and by whom, that contained relevant

information in juxtaposition to Defendants' statements; no conversation had by a

confidential witness with Defendants about any report - to demonstrate that Defendants

made these statements knowing them to be false. Therefore, Plaintiffs have not carried

their burden of demonstrating actual knowledge and the forward looking statements are

protected by the second safe harbor provision.

C. Scienter

The Court has found that the Company's forward looking statements were

accompanied by meaningful cautionary language and thus are protected under the

PSLRA's safe harbor. However, Plaintiffs allege that there are fraudulent statements that

gave present facts - that Defendants' bookings were strong at the time the statements

were made. As noted above, the Court finds this argument to be flawed in that bookings

are a preliminary indication of how full the ships would be in the future. Even so, in an

abundance of caution, the Court will analyze these statements for a "strong inference" of

scienter.

To avoid dismissal, the Complaint must plead with particularity facts that

demonstrate a strong inference that each Defendant acted with scienter with regard to each

act or omission alleged. 15 U.S.C. § 78u-4(b)(2). Plaintiffs allege that Defendants' scheme

was to fraudulently tout the Company's bookings and earnings by claiming that the

Company was managing the geopolitical risks effectively and then issue false SOX

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certificates with regard to such statements. To support these allegations, Plaintiffs point

initially to Defendants' stock sales, claiming that Defendants inflated the price of the

Company's stock for their own gain. The Eleventh Circuit has held that motive and

opportunity, demonstrated through suspicious stock sales, are not sufficient to establish

scienter but may be an indication of scienter. Bryant, 187 F.3d at 1285; see also, In re

Smith-Gardner Secs. Litig., 214 F. Supp. 2d 1291, 1303 (S.D. Fla. 2002). To determine

whether stock sales are unusual or suspicious, a court should examine "(1) the amount and

percentage of shares sold; (2) the timing of the sales; and (3) the consistency between the

sales and the insider's prior trading history." Smith-Gardner, 214 F.Supp.2d at 1303. Here,

Plaintiffs have not alleged that the amounts sold were unusual or out of sync with the

individual Defendants' prior trading history; as in Hubbard, they simply allege the amounts

sold. See Hubbard, 625 F.Supp.2d at 1287. But insider stock sales themselves are not

inherently suspicious, particularly with executives like the Individual Defendants here who

receive much of their compensation via stock options. Sales only become suspicious when

they are "dramatically out of line with prior trading practices at times calculated to maximize

the personal benefit from undisclosed inside information." Id. (quoting In re the Vantive

Corp. Sec. Litig., 283 F.3d 1079, 1092 (9th Cir. 2002)). Plaintiffs have alleged that the

sales were made at times calculated to maximize the personal benefit from the sale but not

that these sales were dramatically out of line with prior trading practices. Moreover, as

Defendants have pointed out (and Plaintiffs conceded at the hearing they do not dispute),

the individual Defendants either maintained the vast percentage of their holdings of

Company stock during the Class Period, or in the case of Defendants Hanrahan and

IRM


Goldstein, increased their holdings during the class period. Mot. at 21. Therefore, the

Court does not find that Defendants' stock sales give rise to an inference of scienter.

Next, Plaintiffs rely on the allegations of certain confidential witnesses, none of

whom recount any interaction with the individual Defendants. In considering the testimony

of confidential witnesses, the Eleventh Circuit has instructed that courts may be wary of

confidential sources but did not adopt a per se rule requiring the Complaint to identify the

sources "so long as the complaint unambiguously provides in a cognizable and detailed

way the basis of the whistleblower's knowledge." Mizzaro, 544 F.3d at 1239-40 (11th Cir.

2008). "[T]he weight to be afforded to allegations based on statements proffered by a

confidential source depends on the particularity of the allegations made in each case.

Id

Plaintiffs argue that the confidential witnesses' testimony would show that

Defendants attended meetings in which the Company's revenues and bookings were

discussed on a weekly and monthly basis, and thus Defendants knew that the booking

schedulings were not as strong as the public statements claimed. Aside from this overall

description, the allegations regarding the confidential witnesses are devoid of any indicia of

particularity. Although the witnesses can attest that sales reports were prepared on a daily,

weekly and monthly basis, there is no indication as to what was in those reports or that the

individual Defendants actually received (besides being on a "huge laundry list" email

distribution) or discussed them. See Compl. IT 43. Plaintiffs point to no specific facts

demonstrating that Defendants were in meetings with these confidential witnesses or that

Defendants otherwise had specific information that contradicted the public statements.

Plaintiffs make statements like "Defendants Rice, Goldsten and Hanrahan attended the

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monthly revenue review meetings as did Director-level employees and their superiors" (Id. IT

53) without articulating any specific facts as to what was discussed, when it was discussed

and by whom (let alone specific facts showing that what was discussed was in direct

contrast with what was publicly disclosed). Plaintiffs also point to what is, in essence,

opinion testimony from the confidential witnesses: "going all in on the Med[iterranean] was

a risky move" and there was "too much capacity in the Med." See Id. 165. These

conclusory opinions do not give rise to an inference of scienter. Likewise, a description of

the itinerary of one ship, the Voyager, and the assertion that "[e]veryone knew this was a

terrible itinerary" gives no specific factual basis upon which to build an inference of scienter.

See id. IT 71 .

In response, Plaintiffs cite to the former "Business Development Specialist" who was

employed with the Company for just over a year and left in August 2010, before the Class

Period began. He/she claims that the Company was having "trouble signing up"

passengers for cruises in the Mediterranean even prior to August 2010. Id. 78. But

again, this statement does not give the Court any specific facts to demonstrate that the

public statements about bookings were false or misleading or that the individual

Defendants knew and acted upon this information. Plaintiffs also cite to the former

Cruisetours Sales and Marketing Manager, who worked for the Company focusing on the

marketing of cruises in Alaska (and not the Mediterranean or Europe) (see Id. n. 11), and

who claimed the Company was not "on track" to meet expectations for cruises in Europe,

without providing any basis for how he received this information or why his testimony

should be given credence since he worked in an entirely different geographic area. See Id.

IT 83. This witness explained that according to his notes from a January 10, 2011 meeting,

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two of the Company's ships were "suffering," but does not allege that the individual

Defendants were present at the meeting or give specifics as to what "suffering" meant. The

same witness offered that at a March 21, 2011 meeting, there was a discussion of a "broad

shortfall across products" and that the Company was "down $12 million overall track." Id. J

91. Also, the former Celebrity Cruises District Sates Manager said one "ship was pretty

empty" and bookings on that Ship were "below expectations" and witnesses also discussed

pricing cutbacks for March and April. Id. 1192-94. However (and again), none of these

witnesses allege that they spoke to the individual Defendants, that the individual

Defendants had actual knowledge of this data, or that this data should or would have

changed the public statements made. There is nothing in the Complaint that gives the

Court context as to what kind of impact the alleged shortfalls of the one or two ships

discussed would have had on the world's third largest cruise company. There is no

evidence that Defendants actually discussed the revenue reports while in meetings with the

Confidential Witnesses or that the booking shortfalls on certain ships were significant in the

context of the larger company. Again, the Complaint lacks any specificity as to what was in

the reports, whether they concerned the company as a whole or simply one region, or

whether the reports were considered in issuing the relevant guidance. In sum, the Court

finds that Plaintiffs have not adequately pled scienter for purposes of the PSLRA and the

Motion to Dismiss is therefore properly granted.

Plaintiffs' additional, miscellaneous allegations of scienter are similarly infirm.

Plaintiffs allege that scienter should be inferred because Defendants were "hands on"

executives, but this has been held insufficient to establish scienter even prior to the

PSLRA. In re Republic Sen's., Inc. Sec. Litig., 134 F. Supp. 2d 1355, 1360 (S.D. Fla.

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2001). Defendants' public statements of how they reviewed revenue and booking reports

are also inadequate to establish scienter because there is no allegation that such reports

demonstrated that the Company's guidance was false or misleading.

Finally, the Court does not impute any scienter to the Company itself. The scienter

of a corporation's officers may be imputed to the corporation itself through agency

principles. Hubbard, 625 F.Supp. at 1289. As the Court has not found any strong

inference of scienter as to the individual Defendants, Plaintiffs have failed to plead a strong

inference of scienter with regard to the Company.

D. Failure to Identify Any False Statements

As noted above in Section IV.13.2., Plaintiffs have failed to identify any false

statements (and could not identify any when asked repeatedly at the hearing on

Defendants' Motion). Under the PSLRA, a plaintiff must demonstrate the reason that the

statement is misleading or false. 15 U.S.C. § 78u-4(b)(1). There is no evidence that the

guidance was false when given - Plaintiffs' excerpts of data from certain ships or meetings

is not placed in any sort of context within the Company as a whole. Moreover, the

Company acknowledged in its April guidance that pricing and demand in the Mediterranean

and Japan were down. There is no evidence that Defendants did not believe the guidance

they gave when it was given. Therefore, the Motion to Dismiss should be granted.

E. Secondary Liability Claim

The viability of a Section 20(a) claim is dependent on the successful pleading of a

primary violation under Section 10(a) of the Exchange Act. Mizzaro, 544 F.3d at 1237.

"Therefore, the pivotal issue in this case [is] whether [Plaintiffs] have adequately pleaded a

violation of §10(b) and Rule lOb-S." Id. As the Court has determined Plaintiffs have not

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adequately pled their substantive securities allegations, the secondary liability claim is also

properly dismissed.

V. Conclusion

For the reasons stated above, Defendants' Motion to Dismiss is GRANTED. During

the hearing, the Court asked Plaintiffs what they would add to the Complaint if the Court

allowed a second amendment. Plaintiffs' counsel could not articulate any specific facts that

Plaintiffs would add to the allegations to cure the fatal deficiencies in the Complaint absent

Court guidance as to what it thought would suffice. Plaintiffs' counsel did mention that

additional discovery could be helpful. However, the PSLRA prohibits discovery while a

motion to dismiss is pending. 15 U.S.C. § 78u-4(b)(3)(B) ("In any private action . . ., all

discovery and other proceedings shall be stayed during the pendency of any motion to

dismiss.") (emphasis added). Therefore, the Court determines that further amendment

would be futile. See FED. R. Civ. P. 15. Consequently, this case is DISMISSED WITH

PREJUDICE. Plaintiffs' Motion to Strike is GRANTED IN PART AND DENIED IN PART.

The Clerk is ordered to CLOSE the case.

DONE AND ORDERED in Chambers in Miami, Florida this Ly of April, 2013.

A KATHLEN M. WILLIAMS UNITED TATES DISTRICT JUDGE

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UNITED STATES DISTRICT COURT SECURITIES LITIGATION )...

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