COVID-19 Litigation Roundup

August 31, 2020

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

OVERVIEW

This week’s new filings were dominated by a slew of suits by and against governments over mask ordinances, business regulations, price-gouging claims, and closure orders—including a creative new claim asserting that the shutdown of a “family fun center” amounted to inverse condemnation, for which the business is entitled to compensation.

Multiple securities actions were filed targeting similar alleged misconduct, including allegedly exaggerated or fabricated announcements of successes with COVID-19 testing kits or vaccines; the announcements led to stock price increases, followed by drops when contrary facts were revealed.

The Arizona Board of Regents filed an interesting trademark suit this week alleging that an Instagram account was using Arizona State University trademarks to post misinformation about COVID-19 and to promote a “Hoax-19” party.

Finally, we report on a few updates to previously discussed cases, including the filing of a class certification motion in a suit by immunocompromised shoppers against Walmart, follow-on suits by California’s Attorney General regarding egg price gouging, and a class action against Smithfield Packaged Meats alleging employee pay violations.

GOVERNMENT SUITS

Mask Ordinances

Constitutional challenges to mask ordinances continue to roll in, with new cases filed this week against Montana’s Attorney General, the State of Nebraska and cities of Lincoln and Omaha, and the Governor and Attorney General of Minnesota.

Recreation

A “family fun center” and birthday party venue in Albuquerque, New Mexico, has sued the governor, alleging that the COVID-19 shutdown measures equate to inverse condemnation and that the party venue is entitled to compensation for the property taken from it.  A Las Vegas hotel and convention center sued Nevada’s governor, alleging the enforcement of emergency directives violated its civil rights because it was forced to cancel events despite the fact that it was complying with reopening requirements.  In New York, various bars and venues challenged New York State Liquor Authority guidelines designed to ensure that music is merely “‘incidental’ to the dining experience”; the guidelines prohibit venues from advertising or selling tickets for music performances.  The plaintiffs allege that these rules violate their First Amendment and substantive due process rights. 

Education

The controversy over school reopenings continues to prompt litigation.  In California, the County of Fresno sued the CEO of a private school, alleging the school reopened for in-person instruction in violation of statewide orders.  And in Iowa, a school district and the Iowa State Education Association allege that Iowa’s governor exceeded her authority in mandating that public schools and state-accredited private schools provide at least 50% of instruction in-person during the pandemic.  Plaintiffs seek an injunction to prevent the enforcement of that mandate.

Price-Gouging

In the second suit in as many weeks about egg price gouging, California’s Attorney General seeks to enforce an investigative subpoena against wholesalers of chicken eggs, alleging they have not complied with the AG’s investigation of their dramatic increase in egg prices shortly after a statewide emergency was declared. 

In Pennsylvania, the Attorney General seeks $1 million in penalties from a company accused of driving up the prices of hand sanitizer it sold through Amazon as the pandemic began in March.

EMPLOYMENT

In the Eastern District of New York, a terminated employee claims his employer fired him in retaliation for whistleblowing about inflated COVID-19 patient numbers in a federal government grant application. Plaintiff alleges that the retaliatory firing violates the False Claims Act, New York labor laws, and breaches his contract. 

In yet another lawsuit against a meat packaging company, Smithfield Packaged Meats faces a putative class action asserting violations of the Fair Labor Standards Act and state law.  According to the complaint, the company has been characterized as having “America’s biggest outbreak of COVID-19,” accounting for 55% of the infection rate in the entire state of South Dakota.  An ongoing lawsuit exists regarding allegations of unsafe work conditions there. This newest suit alleges that, in order to entice workers to continue to report for their shifts, Smithfield promised a $5 per hour “Responsibility Bonus,” but failed to factor the bonus into the overtime rate, and thus substantially underpaid workers who worked overtime.

TRADEMARK

An interesting trademark lawsuit was filed this week by the Arizona Board of Regents, on behalf of Arizona State University, which alleges claims of federal trademark infringement against an Instagram account, “asu_covid.parties.” The complaint alleges the Instagram account promotes a “Hoax-19” COVID party, claiming that the virus is a “big fat hoax” and spreading misinformation about the virus.  The Regents also name Facebook, Inc., the owner of Instagram, as a contributory infringer. The Regents’ investigation has led it to believe the John Doe holder of the account may be based in Russia.  

FALSE ADVERTISING

In a lawsuit in the Northern District of Illinois, plaintiffs allege they were fraudulently induced into purchasing over $1.5 million in PPE from defendant Hugo Posh Medical, which allegedly knew it could not deliver on the order.  Plaintiffs successfully cancelled two of the purchases and received their money back, but defendant has allegedly failed to cancel and return the money for the final order.

PRIVACY

Deloitte faces a putative class action stemming from its contract with the Illinois Department of Employment Security to assist in the administration of the Pandemic Unemployment Assistance Program for those who lost their jobs as a result of the pandemic.  The complaint alleges Deloitte built website portals for individuals to use to apply for benefits, but failed to secure those users’ personally identifiable information, and a data breach occurred.

ADA COMPLIANCE

A supermarket faces a putative class action for violations of the Americans with Disabilities Act as a result of allegedly denying plaintiff entry into its store because he was unable to put on his mask.  Plaintiff alleges he is confined to a wheelchair and has atrophy in his arms, hands, and shoulders. 

SECURITIES ACTIONS

SCWorx Corp. is facing a derivative lawsuit relating to the company’s announcement that it had received a purchase order for two million antibody test kits, with a provision for an additional 48 million test kits in the future.  In response to the announcement, the company’s stock multiplied from $2.25 per share to $12.05 per share. The day after the announcement, a report was published that called into question the company’s claims, resulting in a 30% drop in stock value. Additional reports were published concluding that SCWorx’s purchase orders were “completely bogus.” The company’s stock plummeted to $5.76 per share. Plaintiff shareholders assert claims including breach of fiduciary duty, unjust enrichment, and gross mismanagement.

Vaxart, Inc. periodically announced positive news regarding its work on a COVID-19 vaccine, its efforts to enter into deals that would “enable the large scale manufacturing” of the vaccine, and its invitation to participate in the U.S. Government’s Operation Warp Speed. As a result, Vaxart’s stock price increased exponentially—from $0.35 per share to its high of $14.30. The New York Times published an article stating “Vaxart is not among the companies selected to receive significant financial support from Warp Speed,” resulting in a plunge in stock price. Shareholders now seek redress for financial loss suffered after purchasing stock during the period of allegedly artificially inflated prices.

TORTS AND NEGLIGENCE

Florida homeowners filed claims against a pest control company and employee for trespassing after their in-home cameras allegedly showed the employee rummaging through their belongings while they were out of the house. They claim that the employee also opened their refrigerator and drank directly out of the bottle. The homeowners cited fear of COVID-19 contamination as part of their claim.

In Ohio, parents are suing a childcare facility for allegedly refusing to refund the $1,100 they paid for tuition after they removed their child due to COVID-19 concerns. The parents assert a myriad of claims including breach of contract, unjust enrichment, and intentional infliction of emotional distress.

In the District of Columbia, immunocompromised shoppers previously filed a lawsuit against Walmart, accusing the retail giant of discrimination for its practice of relying on security guards to determine who is eligible to shop during the company’s designated hours for disabled people. Plaintiff has now filed a motion for class certification seeking to represent potentially thousands of immunocompromised shoppers affected by Walmart’s policy.

INSURANCE

The stream of business interruption cases we have reported on over the last several months continues unabated.  As we discussed last week, travelers who had to cancel trips continue to bring putative class actions to recover cancellation benefits.  In a new case filed in New York, plaintiff alleges that Allianz refused to cover his cancelled trip from Alabama to Johannesburg, South Africa.

 

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.  Gillian Clow, Debolina Das, and Kaelyne Wietelman are litigation associates at the firm.