Virgin Group has been slapped with a lawsuit filed by Colin Veitch, former CEO of Norwegian Cruise Line, and his VSM Development Company. Filed in Miami’s federal court, the lawsuit asks for $300 million in damages and for the group’s Virgin Cruises operation to be shut down.
Veitch’s claim? He says Virgin Group, headed by British billionaire Richard Branson, essentially stole his plan to create the new cruise line. The lawsuit accuses Virgin Group of breach of contract, misappropriation, violations of the State of Florida’s Deceptive and Unfair Practices Trade Act, and more.
For its part, the Virgin Group issued this statement: “Richard Branson and the Virgin Group first looked at the cruise market in the late 1970s, and our current team has been exploring the opportunity for more than a decade. Over the years, we have been in discussions with a number of parties including the plaintiff, and those discussions ceased in 2012. We strongly believe the claim has no merits.”
From Freestyle to Court Case
Well-known to many travel agents, Veitch came to Norwegian Cruise Line and served as its CEO through late 2008. He was instrumental in the overhaul of the line's fleet, the design concept for the Norwegian Epic and the launch of “Freestyle Cruising," which began shifting the cruise industry away from its more traditional vacation concept to a less structured approach to onboard dining and activities.
According to court documents filed by Veitch’s law firm, Bilzin Sumberg Baena Price & Axelrod LLP, Veitch offered Virgin Group a plan for a new cruise line with two new “Ultra Ships.”
The goal was to do for the new Virgin venture what similar ships -- Norwegian Epic and Oasis of the Seas -- had done for other lines. Those mega-ships boast razzle-dazzle features, multiple restaurants and active options. Most importantly, they're capable of attracting new types of cruisers.
The lawsuit filing says the new Virgin Group ships were estimated to earn between $427 million to $483 million over a decade. It also claims that in 2011, Veitch presented his plan for the ships to Virgin Group.
In an agreement subsequently reached between the parties, Virgin would have received an annual licensing fee, ranging from a minimum of $8 million annually, but up to $16 million for good performance, and a small portion of profits.
In turn, Veitch was to get nothing unless the ships performed well but, if they did, he’d get more than $300 million.
Court documents say Veitch brought on designers, including SMC Design and Foreship Oy; signed a letter of intent with Germany’s Meyer Werft; and secured bank and export credit debt financing.
The lawsuit claims that Virgin later tried to change terms to give themselves a more advantageous deal. As a result, Veitch would get a reduced share. The lawsuit claims Virgin's actions essentially turned Veitch from a founder and owner into a Virgin employee.
Virgin Group subsequently hired Tom McAlpin, former president of Disney Cruise Line. The lawsuit claims Veitch was squeezed out of the project, despite being touted in a promotional video with Veitch for the new project; that was made back in 2011.
As Travel Agent reported last December, Virgin plans to launch a new cruise line with Bain Capital and McAlphin at the helm.
In addition to its plans for Virgin Cruises, the Virgin Group has a slew of other business ventures, including the Virgin Galactic space program, Virgin Atlantic Airways and other airlines, music and book publishing, hotels and travel industry entities, along with telecommunications services.