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Analysis: Carnival joins Mermaid pod legal battle
Rajesh Joshi - Thursday 11 December 2008
The Queen Mary 2
Carnival counsel George Fowler said after the cruise company’s $100m lawsuit was filed in federal court last week that the arrival of Carnival as a new plaintiff would “strengthen both cases by giving them credence”.
Royal Caribbean’s case is in state court, and the matters will be fought separately. Mr Fowler’s firm is also representing Royal Caribbean.
Rolls-Royce, meanwhile, has turned to a new law firm, headed by renowned trial lawyer Roy Black, and has vowed to “vigorously defend itself” against what it describes as a baseless case.
Rolls-Royce has also confirmed that in the Carnival case, it would no longer pursue its earlier insistence that the matter be moved to arbitration in Europe, but would instead dig in and meet the challenge in the US court system.
Royal Caribbean’s lawsuit was filed originally for $300m, but the damages demanded have by now ballooned to beyond $700m.
Regent Seven Seas Cruises has another lawsuit pending against Rolls-Royce, involving the cruiseship Seven Seas Mariner.
Carnival and Cunard’s $100m lawsuit is expected to bring the main accusations against the Mermaid pod propulsion system back into the spotlight, after arcane legal wrangling between Royal Caribbean and Rolls-Royce over jurisdictional issues had effectively sidelined this core matter.
Carnival’s 45-page lawsuit against Rolls-Royce, Converteam (Alstom) and the Mermaid consortium levels 11 charges, including fraudulent misrepresentation, deceptive and unfair trade practices, breach of warranty, false advertising and negligence. The lawsuit demands a jury trial.
Carnival claims it was deceived into purchasing the Mermaid pod propulsion system for the Queen Mary 2 instead of the ABB Azipod system with which the company had prior experience, when the newbuilding was launched in 2000 at Chantiers de l’Atlantique, the former Alstom subsidiary that is now a unit of Aker Yards.
The shipyard is not a party in the Carnival lawsuit.
Carnival says the defendants “touted the Mermaid pod system as the best in the industry when it was a defectively designed system which was in fact at an experimental stage”.
The lawsuit states: “The defendants have known about this situation all along, but have deliberately conspired to mislead, deceive and defraud Carnival into believing otherwise. The defendants either do not know how to fix the Mermaids, or they do not want to spend the money to repair or replace them.”
Damages are estimated at $100m, but Carnival said it “will continue to suffer damages in future because the Mermaid pods have not been satisfactorily fixed”.
Larry Stumpf, of Rolls-Royce law firm Black, Srebnick, Kornspan & Stumpf, told Lloyd’s List: “In the defendants’ view, they have done everything possible to respond to Carnival’s complaints, in fact far beyond their legal and commercial responsibility. We intend to vigorously defend the case and assert appropriate claims of our own.”
The first Mermaid was constructed in 1999, and by the time the Queen Mary 2 was completed, problems and legal troubles had already begun for the developers. Royal Caribbean and Celebrity Cruises brought their $300m lawsuit in 2003 involving the latter’s four Millennium-class cruiseships.
However, non-core matters delayed the actual trial. Royal Caribbean’s original lawsuit in state court in Miami-Dade County was moved at Rolls-Royce’s behest to the federal court, a decision the cruise firm challenged.
Alstom and Rolls-Royce separately demanded that the dispute be subjected to Royal Caribbean’s arbitration clause with the shipyard, Chantiers de l’Atlantique, and moved to Europe. Royal Caribbean disputed this demand as well, saying podded propulsors were not covered by this provision, since are the responsibility of supplier Rolls-Royce.
Royal Caribbean’s motions to remand the case back to state court as well as to prevent it from being shifted to arbitration were granted, and then survived appeals by Rolls-Royce.
Alstom has settled with Royal Caribbean for $38m, leaving Rolls-Royce as sole defendant in this lawsuit.
The Royal Caribbean case is now in the discovery phase in state court, and is finally expected to come to trial next year.
With Rolls-Royce having ruled out petitioning for arbitration in the Carnival case, that matter too is expected to come to a separate trial in federal court within a year.
Mr Fowler said the Royal Caribbean matter has set a “strong case precedent” for Carnival’s action in federal court.
“Each case will stand on its own feet, and similar experiences and charges in each of these cases will give each case more strength,” Mr Fowler said.
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