The highly publicized Celebrity Cruise, Inc. case over lost profits caused by a 1984 Legionnaires’ disease outbreak aboard the Celebrity ship “Horizon” has settled. The maker of the swimming pool water filters (Essef Corporation, now called Pentair Water Treatment Co.)—which allegedly triggered the disease—agreed to pay the cruise company $35 million this month. Subscribers to the Business Valuation Litigation Database™ can read the January 2007 District Court abstract of the case here and the January 2008 District Court abstract here.
The event sparked a number of individual claims and a class action. In the original bellwether trial a jury found that Celebrity shared 30% of the responsibility for the outbreak, assigning 70% of the liability to Essef Corp. now called Pentair Water Treatment Co. In 2006 a jury awarded $190 million to Celebrity, based largely on the “yardstick analysis” conducted by business valuation expert Robert Schweihs of Willamette Management Associates. The verdicts for lost profits and loss of enterprise value were reversed in 2007. At a second trial, this time seeking damages of roughly $60 million, Celebrity and Schweihs presented the yardstick analysis with two comparables criticized by the court, plus a third that was considered more reliable yet reached a similar valuation as the first two. This time the jury returned $15M in damages to Celebrity. On appeal, the court found the evidence sufficient to support the award, but applied a 30% reduction for comparative fault. Celebrity Cruises, Inc. v. Essef Corp., 2008 U.S. Dist. LEXIS 568 (January 4, 2008).
In February 2008 the District Court entered a $30.4 million judgment against Pentair for out-of-pocket costs, expenses and lost profits, including interest. Celebrity and Pentair both appealed.
According to a 10Q filing by Pentair on July 22, 2008, the parties agreed to a $35 million settlement. Pentair agreed to pay $28 million this month, with its first layer excess carrier covering the $7 million remainder of its policy limits. According to a July 25 10-Q filing by Royal Caribbean Cruises Ltd., Celebrity’s parent, the cruise company will receive “net of costs and payment to insurers, approximately $18.0 million.” Pentair says it has sued an insurance carrier for coverage under another policy.
Celebrity Cruises was represented by Gregory W. O’Neill, Mark M. Jaffe, and Mary Teresa Reilly of Hill, Betts & Nash LLP of New York and Miami. The defendant manufacturer was represented by Jeffrey C. Crawford and Renee M. Plessner of Mound Cotton Wollan & Greengrass in New York.