SEC 10Q Filing By Carnival Corporation For Potential Impact By Libertad Act Lawsuits

United States Securities And Exchange Commission (SEC)

Washington DC

Form 10Q (For the quarterly period ended May 31, 2019)

Carnival Corporation

Miami, Florida

Page 11 

NOTE 4 – Contingencies

Litigation 

“On May 2, 2019, two lawsuits were filed against Carnival Corporation in the U.S. District Court for the Southern District of Florida under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation alleges it holds an interest in the Havana Cruise Port Terminal and the complaint filed by Javier Garcia-Bengochea alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban Government. 

The complaints further allege that Carnival Cruise Line “trafficked” in those properties by embarking and disembarking passengers at these facilities. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs. We believe we have meritorious defenses to the claims and we intend to vigorously defend against them. We do not believe that it is likely that the outcome of these matters will be material, but litigation is inherently unpredictable and there can be no assurances that the final outcome of the case might not be material to our operating results or financial condition. 

Additionally, in the normal course of our business, various claims and lawsuits have been filed or are pending against us. Most of these claims and lawsuits, or any settlement of claims and lawsuits, are covered by insurance and the maximum amount of our liability, net of any insurance recoverables, is typically limited to our self-insurance retention levels. We believe the ultimate outcome of these claims, lawsuits and settlements, as applicable, each and in the aggregate, will not have a material impact on our consolidated financial statements.”

LINK To 10 Q Filing

The U.S.-Cuba Trade and Economic Council requested statements (on-the-record or off-the-record) relating to SEC obligations from attorneys. The following is an on-the-record response:

“Carnival should continue to disclose the ongoing Helms-Burton matters in its financial statements (and as you identified, Carnival began doing so no later than May 2019), but there is no requirement for Carnival to provide an estimated financial impact. Whether Carnival is required to record an accrual or disclose a loss contingency is an accounting matter, and must be made jointly by Carnival and PwC.  

ASC 450 (formerly FAS 5) defines a contingency as an “existing condition, situation, or set of circumstances involving uncertainty . . . that will ultimately be resolved when . . . future events occur or fail to occur.” An analysis under ASC 450 requires Carnival to determine the likelihood that the company will incur a “material loss.” There are three ranges of material losses: remote, reasonably possible and probable. 

A material loss is “remote” if the chance of the future event is slight, and there is no requirement for the company to either record an accrual or make disclosures of a remote contingency. A material loss is “probable” if the future event is likely to occur, and if the amount of loss is reasonably estimable, then the company must accrue for the probable contingent loss. A material loss is “reasonable possible” if the likelihood falls in the range between being remote and probable, and only a disclosure of the contingency is required—not an accrual.  

Carnival retains affirmative defenses and there will be a lot of litigation before the likelihood becomes probable that Carnival will experience a material loss.”  

Evan J.  Stroman, Esq., CPA

Kozyak Tropin & Throckmorton

2525 Ponce De Leon Blvd., 9th Floor, Miami, FL 33134

305.372.1800 | Direct 305.728.2988 | estroman@kttlaw.com

From The United States Securities And Exchange Commission (SEC) on 29 August 2019: 

“see Item 103 of Regulation S-K. Also, US GAAP (ASC 450) requires disclosures of loss contingencies, including legal proceedings.” 

PART 229—STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND CONSERVATION ACT OF 1975—REGULATION S-K 

§229.103 (Item 103) Legal proceedings. 

Describe briefly any material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the registrant or any of its subsidiaries is a party or of which any of their property is the subject. Include the name of the court or agency in which the proceedings are pending, the date instituted, the principal parties thereto, a description of the factual basis alleged to underlie the proceeding and the relief sought. Include similar information as to any such proceedings known to be contemplated by governmental authorities.

Instructions to Item 103:  

1. If the business ordinarily results in actions for negligence or other claims, no such action or claim need be described unless it departs from the normal kind of such actions. 

2. No information need be given with respect to any proceeding that involves primarily a claim for damages if the amount involved, exclusive of interest and costs, does not exceed 10 percent of the current assets of the registrant and its subsidiaries on a consolidated basis. However, if any proceeding presents in large degree the same legal and factual issues as other proceedings pending or known to be contemplated, the amount involved in such other proceedings shall be included in computing such percentage. 

3. Notwithstanding Instructions 1 and 2, any material bankruptcy, receivership, or similar proceeding with respect to the registrant or any of its significant subsidiaries shall be described. 

4. Any material proceedings to which any director, officer or affiliate of the registrant, any owner of record or beneficially of more than five percent of any class of voting securities of the registrant, or any associate of any such director, officer, affiliate of the registrant, or security holder is a party adverse to the registrant or any of its subsidiaries or has a material interest adverse to the registrant or any of its subsidiaries also shall be described. 

5. Notwithstanding the foregoing, an administrative or judicial proceeding (including, for purposes of A and B of this Instruction, proceedings which present in large degree the same issues) arising under any Federal, State or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primary for the purpose of protecting the environment shall not be deemed “ordinary routine litigation incidental to the business” and shall be described if: 

A. Such proceeding is material to the business or financial condition of the registrant; 

B. Such proceeding involves primarily a claim for damages, or involves potential monetary sanctions, capital expenditures, deferred charges or charges to income and the amount involved, exclusive of interest and costs, exceeds 10 percent of the current assets of the registrant and its subsidiaries on a consolidated basis; or 

C. A governmental authority is a party to such proceeding and such proceeding involves potential monetary sanctions, unless the registrant reasonably believes that such proceeding will result in no monetary sanctions, or in monetary sanctions, exclusive of interest and costs, of less than $100,000; provided, however, that such proceedings which are similar in nature may be grouped and described generically.