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August 2023    Download the Entire Issue (PDF) Vol. 49, No. 8   RSS Feed for Undercurrent Issues
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Guadalupe Island Closing Cost Big Money

for liveaboard operators and some customers

from the August, 2023 issue of Undercurrent   Subscribe Now

In the debacle that followed the great white shark diving closure at Guadalupe Island off Baja California (February 2023), Horizon liveaboard, Islander Charters and Pacific Fleet went out of business after refunding their prepaid customers. The owners of Horizon posted this message on Facebook.

"The closure of Guadalupe Island has left us financially tapped out. We cannot do the right thing by our divers with $500,000 in refunds and stay in business. So, we made the decision to sell the company to a new operator who will be taking the MV Horizon in a new direction at the end of February 2023."

The Aggressor Fleet returned money to some clients, but our emails asking whether they refunded everyone have not been answered.

The owner of Canadian-based Nautilus Adventures, Mike Lever, took a different tack. Because he has several boats, he says he satisfied many customers "by switching them to other trips and refunded some clients who were in tough circumstances."

But not all his customers were satisfied, especially some nondivers and others who were hell-bent on seeing great whites up close from shark cages, with no interest in alternatives. Many who received no refund demanded their money back, up to $5000 per person. Some argued that the Nautilus Adventures' policy - "Cancellations received more than 12 months prior to departure are fully refundable" - applied.

But the clients didn't cancel. The Mexican government ended all tourist activity in the Guadalupe Marine Park, forcing all operators to cancel, including Nautilus Adventures.

Lever says, all the guests on his canceled Guadalupe trips had agreed to terms and conditions before paying including a clause that provides Nautilus Adventures with no legal obligation for refunds or alternate trips. Their "Force Majeure" clause reads that in the event of "weather or seas, mechanical breakdown, governmental orders, port authority directions and other factors beyond our reasonable control, no refund or credit will be issued."

The small print clause was probably left unread by most people.

That's a small print clause, probably unread by most people who paid for the trip, and in retrospect, it's a tough pill to swallow. Yet it's a common contractual clause, and while any clause can be challenged, the aggrieved clients would have to sue in Mexico, where Nautilus Adventures is registered. Even the Guadalupe contract they agreed to stipulates that. A prominent American dive attorney told Undercurrent Lever "takes great pains to operate only out of Mexico, to avoid potential Jones Act liability in the U.S."

While Lever believes he has no legal obligation to refund clients, he told Undercurrent that he has "refunded some clients who were in tough circumstances." He switched others to "Socorro, Magdalena Bay Sardine Run, Sea of Cortez diving, Cocos, and Costa Rica, and others. We have nondiving folks doing mobulas and orcas with a spotter airplane, San Ignacio Lagoon gray whale glamping experience, sailboat charters, kayaking trips, swim safaris, and much more.

"The big issue for us is that we expend a lot of the trip fees before the guests ever board . . . for a well maintained, mortgaged, permitted, insured, crewed, fueled, and provisioned boat complete with shore support team, safety management systems and . . . ready to board at the promised boarding time. The government's unexpected and illegal closures of Guad knocked us on our *ss far harder than any of our guests. We lost millions of dollars over the closures. I am very sympathetic to our clients. We are all in the same situation.

"I don't have a plan yet on refunding [the rest of the customers]. I feel for them. I totally get it. We are fighting to get ourselves out of a deep hole from the virus and Guadalupe closure over the last three years. Full credits, yes. Some guests in really tough personal situations have already been refunded. For those other guests, I don't know yet."

Lever hasn't appeased some who don't want an alternate trip and simply want their money back, regardless of agreeing to the Force Majeure clause. While the return of their funds is entirely up to the good graces of Lever, some frustrated clients turned to the Guadalupe Island Shark Group Facebook page to hammer away at him and his refusal so far to refund them. One aggrieved customer says she is out as much as $10,000 after spending her life savings for her elderly mother to go with her. Others joined in with angry posts critical of Lever and the Nautilus Adventures. The words of some didn't escape Lever and his lawyer.

Lever claims that "of the 4000-plus bookings that were affected by the closure, only a handful - maybe 25-30 - are upset with us." Tired of the invective they posted on Facebook, he took the unprecedented route of suing 20 posters - mostly his clients - for libel.

"Our issue is solely with a very small group of people who seem to feel it was OK to sit at their computer and post whatever they want no matter how nasty or defamatory. It's not OK, for example, to post that I run a criminal organization and murder sharks. [One fellow] loves to say that we kept our clients' money and profited from it. That's crap. That money, plus a lot more, was spent getting ready for the season."

The members of the customer group have employed a Canadian lawyer to defend against Lever's legal action. It may be that Lever's suit was intended only to stifle the criticism and won't proceed. We shall see.

In a well-capitalized travel company, money collected for future travel is never spent on a client's trip until it ends, so the company can return that money if necessary. For virtually all businesses, that's only a dream because they spend early money to build their businesses and pay themselves. So, when a travel-related company gets into hot water, as many have in the diving business, they leave their customers holding the bag. Whether all Nautilus Adventures customers will be made whole remains to be seen.

Lever believes Guadalupe will reopen. "We have already had success in one of the legal actions. It's a certainty that Guad is going to reopen. The question is when. The challenge now is getting damages that we can return to our clients."

- Ben Davison

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