COVID-19 Litigation Round Up

July 20, 2020

Jason A. Levine, Peter E. Masaitis, Alex Akerman, Gillian H. Clow, Debolina Das, and Kaelyne Wietelman, Alston & Bird LLP

After a brief slowdown around July Fourth, the COVID-19 litigation machine has cranked back into high gear, with a number of important opinions, a high-profile retreat by the federal government, and scores of new filings. 

OVERVIEW

State and local governments were not immune to lawsuits this past week. Plaintiffs filed challenges to face-mask ordinances in several states, and parents sued New York over a requirement that public schools must operate in a remote-only environment this fall.

Houston won a lawsuit, with the Texas Supreme Court upholding its right to cancel the Texas Republican Party’s use of the Houston Convention Center for its convention.  And the United States chose not to defend a suit, with the Trump Administration instead rescinding its previously-announced policy requiring foreign students on F-1 visas to return home if their college classes are entirely online.

On the workplace front, Virginia became the first state to adopt its own emergency workplace safety standards to address coronavirus, after the Occupational Safety and Health Administration (“OSHA”) opted not to enact an emergency regulation in favor of other measures.  In addition, worker advocacy groups channeled workplace-safety concerns into discrimination claims, asserting that the racial makeup of floor employees versus managers meant that an alleged absence of safety standards was discriminatory.

The pandemic continued to infiltrate tort law as well. A California court dismissed claims by passengers against a cruise line that allegedly put them at risk of exposure to COVID-19. A company and its owner filed suit against a Louisiana news station for defamation, claiming that it falsely accused them of perpetrating a COVID-19 related scam. A sticker manufacturer in Maine filed suit for copyright infringement over “essential worker” stickers it had designed, and a day spa in Texas sued a franchisee for unfair competition by allegedly appropriating the spa’s branding after it had closed.

Finally, suits for refunds over cancelled events, business-interruption insurance claims, Paycheck Protection Program (“PPP”) agent fees, non-payment of rent, and securities fraud related to supposed non-disclosure of pandemic risks continued to pile up.

GOVERNMENT

Challenges to mandatory face-mask ordinances spread this week to numerous states, including  Louisiana and Colorado.  

Whether schools will reopen for in-person classes this fall is a topic of heated debate across the country.  A recent New York case seeks to force the government’s hand.  Plaintiff parents challenge the constitutionality of orders that require schools to operate in a purely remote-learning environment, claiming that remote learning – as utilized this past spring – proved to be a completely inadequate system that violates students’ right to an education.

In a high-profile challenge to the jurisdiction of cities to regulate businesses within their borders, the Texas Supreme Court upheld Houston’s right to cancel the Texas Republican Party Convention—set to be held at the Houston Convention Center—for COVID-19 related safety reasons.  The Court ruled that while the GOP had a right to hold its convention, it did not have a constitutional right to hold it in the Houston Convention Center specifically.

Finally, after facing lawsuits by numerous plaintiffs, which drew amicus support from the US Chamber of Commerce and others, the Trump Administration reversed course on an announced policy requiring foreign students on F-1 visas to return home if their classes are entirely online.  The policy has been rescinded.

WORKPLACE

As in past weeks, lawsuits continue to pile up alleging wrongful termination and wrongful denial of benefits.

Virginia became the first state to adopt an emergency workplace safety standard to address the pandemic.  Virginia’s benchmark mandates that businesses must provide workers with personal protective equipment, enforce social distancing protocols, and sanitize worksites.  Additionally, if a worker tests positive for COVID-19, businesses must implement infectious disease response plans, among other requirements. Virginia adopted this standard after OSHA declined to implement an emergency temporary regulation related to COVID-19.  AFL-CIO challenged OSHA’s decision in the D.C. Circuit, which denied relief; AFL-CIO’s petition for rehearing is pending.

Worker advocacy groups filed a complaint with the U.S. Department of Agriculture against Tyson Foods and JBS USA.  Plaintiffs allege that after taking in over $150 million in federal contracts during 2020, the companies exposed their meat processing workers – who are mostly Black, Latino, and Asian – to a disproportionate risk of COVID-19 exposure based on inadequate safety policies.  In contrast, the mostly White managers allegedly are not exposed to the same risk because they don’t work on the front lines. Plaintiffs characterize this as racial discrimination in violation of Title VI of the Civil Rights Act, and request that the U.S. Department of Agriculture refuse financial assistance to the companies and refer the matter to DOJ.  

DISABILITY LAW

A new suit filed in  Pennsylvania highlights an asserted conflict between disability rights law and COVID-19 safety measures. The parents of several children with conditions such as autism and attention deficit hyperactivity disorder sued three Pittsburgh-area amusement parks.  The parents allege that their children’s medically diagnosed disabilities prevent them from wearing masks, yet the parks refused to make an exception to their mandatory mask policies.  As businesses develop their own mask-related safety policies, cases such as this are worth monitoring for guidance as to how to balance safety concerns with other consumer and worker rights.

NEGLIGENCE

We have previously reported several cases filed against cruise lines for allegedly putting passengers at risk of exposure to COVID-19. This past week, Princess Cruise Lines defeated numerous claims in the Central District of California.  Granting consolidated motions to dismiss, the court held that a person who manifests no physical symptoms cannot recover for negligent infliction of emotional distress for being exposed to a person with COVID-19.

As unemployment increased due to COVID-19 and stay-at-home orders, many people turned to the gig economy as a way to make ends meet.  Arkansas recognized this shift and hired a company to create a website that would allow self-employed workers to apply online for unemployment benefits during COVID-19.  In a recent lawsuit, Arkansas alleges that the company failed to create a secure website because a data breach occurred and risked people’s personal information.

SECURITIES

Shareholders continue to file derivative suits against companies that allegedly fail to disclose information or misrepresent financials related to COVID-19. In Momo Wang v. United States Oil Fund, plaintiffs claim that defendants continued with a public offering on March 19, 2020 without fully disclosing the risks related to declining oil prices as a result of the COVID-19 pandemic and the Russia-Saudi Arabia oil price war. Plaintiffs allege that as a result, the share price dropped 60% in one month.

INSURANCE

Business interruption cases continue to roll in across many industries.  This week, we saw cases filed by opticians, salons, restaurants (including one by Denny’s in New Jersey), and wine bars, among others.  

DEFAMATION

In Louisiana, an individual and his company, Traffic Jam Events, LLC, filed a defamation lawsuit against local news affiliate FOX 8, alleging it ran a news story implying that plaintiffs were the perpetrators of a COVID-19 scam.  Plaintiffs claim that the story falsely described them as engaged in a “scheme” to get consumers to appear – under false pretenses – at a used car sale.  The story was reported following an FTC action alleging that the same company and its founder distributed mailers that looked like important COVID-19 stimulus check information, marked “time-sensitive fast-tracked mail: open immediately,” and “important COVID-19 economic document enclosed.”  The FTC alleged that in actuality, the mail was sent by plaintiffs, who run tent sales and other promotions on behalf of auto dealers.  

INTELLECTUAL PROPERTY

In Maine, a sticker manufacturer filed a lawsuit for copyright infringement  over decorative stickers defendant created that allegedly infringe on plaintiff’s design.  Plaintiff contends it created an original “Essential Worker COVID-19 2020” design, which included an image of a skull wearing a stylized gas mask, surrounded by design elements.  Plaintiff contends that the defendant sells a sticker online that is substantively identical to this copyrighted design.

In Texas state court, a Dallas-based spa and salon catering to young girls, operating as “Sweet & Sassy,” filed suit against a former franchisee.  After the salon was forced to close due to COVID-19, the franchisee allegedly re-opened the salon under a different name, but traded on the goodwill of Sweet & Sassy by offering the same services to the same customers, selling Sweet & Sassy merchandise, and using the Sweet & Sassy point-of-sale system to access its customer database. Plaintiff brings claims for breach of the franchise agreement, unfair competition, and unjust enrichment.

CARES ACT

Lawsuits by loan processing agents continue to assert that financial institutions are unlawfully failing to pay agent fees in connection with PPP loan application processing. 

LEASES/RENT

Though lease and rent disputes continue to make frequent appearances on dockets nationwide, an interesting twist showed up on the Santa Clara County, California docket this past week. In Lakha Properties v. Mexicali Restaurant Group, Inc., a restaurant’s landlord alleges that the restaurant switched from serving Mexican food to Malaysian cuisine, which negatively impacted the business and resulted in the restaurant defaulting on rent in March 2020. In the wake of COVID-19, the landlord alleges that the restaurant completely shut down instead of opting for modified carry-out, delivery, or curbside services.  Plaintiff alleges breach of contract, among other civil actions.

Major companies also are still being sued for not paying rent.  Barnes & Noble, in particular, is facing nonpayment allegations, which it attributes to the COVID-19 pandemic.  The landlord notes that Barnes & Noble is owned by Elliott Management Company, a New York hedge fund with over $35 billion in assets, and alleges that Barnes & Noble has continued to use the leased premises to generate revenue.  

As the school year approaches, issues with dormitories and rent are predicted to be on the rise. New York already has one such case on the docket—The Laboratory Institute of Merchandising, Inc. v. 1760 Third Avenue Property Owner LLC.  Plaintiff seeks a declaratory judgment that a dormitory room lease is unenforceable due to the COVID-19 pandemic and related government-mandated shutdowns of all New York State schools and colleges.  

REFUND/CANCELLATION

Universities, convention centers, resorts, summer camps, and event venues continue to be the targets of new suits seeking refunds for monies paid for services made impossible or impractical by COVID-19.

 In addition to targeting these businesses, plaintiffs continue to go after ancillary service providers in new ways. This week, Berkshire Hathaway Insurance was sued by plaintiff insurance holders who allege that the insurer has an unfair and unlawful practice of not refunding “unearned” travel insurance premiums for trips that were cancelled due to COVID-19 travel restrictions. This could be a new front in the ongoing wars over insurance coverage.

Jason Levine is a commercial and antitrust litigation partner in the Washington, D.C. office of Alston & Bird LLP. Peter Masaitis is a product liability and toxic tort litigation partner in the firm’s Los Angeles office.  Alex Akerman,  Gillian Clow, Debolina Das, and Kaelyne Wietelman are litigation associates at the firm.