COVID-19 Litigation Roundup: Top 4 Developments

December 14, 2020

Jason A. Levine, Peter E. Masaitis, Gillian H. Clow, Ryan Martin-Patterson, Giles Judd, and Stephen Tagert, Alston & Bird LLP

Below are the Top 4 COVID-19 Litigation Developments from the past week:

1. Cheesecake Factory Settles with SEC

On December 4, 2020, the Cheesecake Factory settled a cease-and-desist proceeding with the United States Securities and Exchange Commission, agreeing to a civil penalty of $125,000. 

The SEC alleged that the Cheesecake Factory violated securities laws and SEC regulations by concealing its cash situation during the spring, as shutdowns were ramping up due to the COVID-19 pandemic.  Specifically, the SEC alleged that the Cheesecake Factory’s disclosures on March 23, 2020, and April 3, 2020, did not adequately describe the precarious nature of the Cheesecake Factory’s cash reserves and falsely assured investors that the Cheesecake Factory was “operating sustainably at present.”  The Cheesecake Factory neither admitted nor denied the SEC’s allegations as part of the settlement.

The enforcement action against the Cheesecake Factory is the first time the SEC has charged a public company with misleading investors regarding its financial condition during the COVID-19 pandemic, and may signal a shift in SEC priorities away from “scam” activities in favor of these types of claims.  While it may be the first, it is almost certainly not the last.

2. Court Requires California to Conduct Risk-Benefit Analysis To Extend Restaurant Closures

We previously reported that various southern California restaurants and the California Restaurant Association have sued in state court alleging that LA County’s ban on outdoor dining, which took effect on November 25 and will last at least three weeks, is unconstitutional.  The ban applies to outdoor dining in regions where intensive care unit capacity drops below 15%.  A Los Angeles Superior Court judge granted a temporary restraining order to limit the restriction to just three weeks.  The judge instructed county public health officials to conduct a risk-benefit analysis if they want to extend the ban. 

While at first blush this is a victory for eateries, the judge’s ruling does not change the fact that California’s outdoor dining restriction remains in effect until at least December 27.  As a result, there is no immediate impact from the judge’s ruling, but should LA County seek to continue its ban after the state order expires, it will be required to conduct a risk-benefit analysis.

3. New Changes to the PREP Act

The U.S. Department of Health and Human Services issued an amendment to the Public Readiness and Emergency Preparedness (“PREP”) Act Declaration last week that extends liability protections for Covered Countermeasures against COVID-19.  The amendment makes three key changes:

  • Adds liability protection for healthcare professionals who administer authorized countermeasures using telehealth outside of the state in which the professional is permitted to practice;
  • Extends protections for Covered Persons using Covered Countermeasures which have been “licensed, approved, cleared, or authorized by the FDA,” regardless of the existence of an agreement with the federal government; and
  • Clarifies that protections may extend to an individual who elects not to administer a Covered Countermeasure.  This last example might apply to a situation wherein a healthcare professional chooses to administer a COVID-19 vaccine – which may be in short supply – to an individual in a more vulnerable population, rather than to an individual in a less vulnerable population.

4. More Takings Claims Against Universities  

Tuition refund suits have been a staple of COVID-related litigation since the pandemic began.  In a new class action brought against a state university this week, an Illinois plaintiff alleged that the University of Illinois System and its Board of Trustees violated the Takings Clauses of both the United States and Illinois constitutions by refusing to refund tuition after moving all classes online in March 2020.  The plaintiff proposed two classes: (1) those who paid tuition and fees for the Spring 2020 semester who had their classes moved online, and (2) those who paid room and/or board for the Spring 2020 semester.

Like the Georgia cases highlighted in last week’s blog, this case may signal a trend of students and their parents filing takings claims against public universities, with those plaintiffs claiming that (1) the universities’ failure to refund students is a taking of private property for public use without just compensation, and (2) the universities should be enjoined from charging full in-person on-campus tuition and fees for online-only education and limited access to campus.