Thu | Dec 8, 2016

Virgin Group sued in dispute over cruise line

Published:Friday | March 13, 2015 | 12:00 AM
Billionaire investor, Sir Richard Branson. (AP Photo/Scott Fain)

The former chief executive officer of Norwegian Cruise Line is suing British billionaire Richard Branson and his Virgin Group conglomerate, claiming that Virgin essentially stole his ideas and business plans to enter the lucrative luxury cruise industry by building a pair of state-of-the-art ships capable of carrying 4,200 passengers each.

The lawsuit, filed Wednesday in Miami federal court on behalf of Colin Veitch and his VSM Development company, seeks more than US$300 million in damages and asks a judge to stop London-based Virgin from going forward with its recently announced cruise line.

Veitch's attorney, Jeff Gutchess of the Bilzin Sumberg firm, said in an interview that Virgin wholeheartedly embraced Veitch's ideas in early 2011 and then abruptly did an about-face by forcing a costly renegotiation of their partnership terms.

Virgin did not immediately respond to emails seeking comment.

Virgin in December announced the formation of Virgin Cruises, which intends to sail out of Miami. It's one of the newest of Branson's numerous business ventures, which include airlines, the Virgin Galactic spacecraft, a music label, book publishing, a travel agency, hotels and mobile phone services.

According to the lawsuit, the plan was initially brought to Virgin by Veitch, who after analysing the cruise industry concluded that a well-known brand such as Virgin could break into the business profitably by building a pair of so-called 'ultra' ships. These vessels, such as Royal Caribbean International's Oasis of the Seas ship, feature a wide array of on-board attractions and command premium prices.

The May 2011 agreement between Virgin and Veitch estimated that Virgin could make between US$427 million and US$483 million in profits over 10 years if the venture performed as planned. Under this deal, Veitch would get nothing if the ships were not profitable but stood to make US$315 million if his projections were met.

Veitch, who was Norwegian CEO from 2000 to 2008, obtained financing to build one ship and a commitment from a German shipyard to do the work. It was then, according to his lawsuit, that Virgin changed the terms of their deal in such a way that Veitch would become essentially an employee, whose share of the profits depended upon Virgin.