COVID-19 Litigation Roundup

May 4, 2020
Alston & Bird LLP

There was an explosion of new litigation relating to the pandemic this past week.  Approximately 100 new filings brought the total number of cases well over 350.  Case filings multiplied in most of the categories we’ve been tracking.  And we saw a new category of litigation emerge this week: a claim under the Telephone Consumer Protection Act involving COVID-19 solicitations.  It probably won’t be the last.

We expect the volume of litigation to keep increasing, with plaintiffs seeking MDLs for certain types of cases.  Because of the sharp growth in new case filings, we’ve consolidated our reporting to highlight particularly important or interesting complaints, rather than attempting to cover the full range of new filings. We hope you’ll find this more readable.

The perennial categories of consumer refund, misrepresentation, and workplace suits continued to have significant activity this week, and MDLs for these suits have been sought.  Alleged fraudsters have also continued to find themselves sued for lying about the availability and suitability of protective gear, and new suits have popped up over false claims of available COVID-19 relief funds.  Along the same lines, states have pressed new suits for price gouging, and a medical equipment manufacturer has advanced its campaign of using trademark law against apparent price-gougers. Several employers have also been sued over supposedly lacking COVID-19 protective equipment, and for adverse employment actions against employees who missed work pending COVID-19 test results. 

New last week was a sharp uptick in suits challenging the validity and constitutionality of stay-at-home and business-closure orders.  A constitutional challenge to Pennsylvania’s broad business-closure order already reached the U.S. Supreme Court, with Justice Alito ordering the state to respond within days to an application for a stay of enforcement.  Other challenges to statewide orders are now pending in California, New Mexico, and North Dakota.  Plaintiffs have also won narrow cases seeking to enjoin enforcement of a stay-at-home order in Illinois, and of a business-closure order in Virginia, effectively exempting themselves from these edicts.  Copycat cases may well follow.  Several states have also been sued over the scope of their unemployment and workers’ compensation benefits with respect to COVID-19. 

Finally, last week saw substantial growth in cases filed against insurance companies for business interruption and related coverage, including purported class actions by policyholders.  And insurers continue to counterpunch, often seeking declaratory judgments regarding the meaning and scope of policy exclusions.  This is another category where MDLs have been sought.    

As always, we hope you’ll check in with us each week to track interesting new cases and the emerging patterns of lawsuits.   

 

Noteworthy COVID-19 Business Cases Filed Before May 1, 2020

1. Consumer Class Action Refund Claims

Plaintiffs’ lawyers continue to file class actions seeking refunds for services rendered impossible or impracticable at present by the COVID-19 pandemic.  New lawsuits this week include actions against: universities such as Cornell, NYU, and Columbia, which have transitioned to on-line classes, for allegedly refusing to provide full refunds to students; ticker sellers such as Ticketmaster, Vivid Seats, and SeatGeek over cash refunds for events that were either cancelled or postponed; ski resorts that closed early due to COVID-19 (here and here); and airlines, including Delta and Air Canada, allegedly providing credits instead of cash refunds for cancelled flights.

 

2.  Misrepresentation/Fraud Claims

This week saw an upswing in cases brought by government and private plaintiffs alleging that various defendants have engaged in fraudulent practices or made misrepresentations related to providing COVID-19 related services.  

  • Government attention is focused on merchants for allegedly fraudulent claims related to the effectiveness of their products in treating COVID-19.  For example, in Federal Trade Commission v. Marc Ching, dba Whole Leaf Organics, No. 2:20-cv-3775 (C.D. Cal.), the FTC seeks a temporary restraining order and preliminary injunction enjoining the defendant from disseminating false or unsubstantiated advertising claims about Thrive, a product that purportedly treats, prevents, or reduces the risk of COVID-19.
  • Alleged misrepresentations related to companies’ ability to provide COVID-19 related protective equipment have also led to new lawsuits brought by both the government and private plaintiffs.  For example, in SEC v. Praxysn Corp., No. 9:20-cv-80706 (S.D. Fla.) the SEC took enforcement action alleging that defendant wrongly issued a press release stating it had numerous N-95 masks when it did not.  Likewise, in Vipshop International Holdings Limited v. Transpacific Trade Center LLC, No. 1:20-cv-2557 (N.D. Ill.) plaintiff alleged that defendants agreed to provide $2.5 million in protective gear, failed to do so, and stole most of plaintiff’s payment.
  • Government and private plaintiffs have also filed suits arising from statements related to the purported availability of COVID-19 related funds.  In Office of Attorney General, State of Florida v. Traffic Jam Events LLC, No. 2020CA003536 (Hillsborough Cnty. Cir. Ct., Fla.), the State of Florida asserts that defendants falsely claimed in direct mail advertisements to consumers that they had COVID-19 relief funds available at a tent sale at a car dealership.  And in DNM Contracting Inc. v. Wells Fargo Bank NA, No. 2020-25807 (Harris Cnty. Dist. Ct., Texas), a proposed class of plaintiffs alleges that Wells Fargo misrepresented plaintiffs’ potential to receive Paycheck Protection Program loans.

 

3. Workplace Suits

Employees continue to sue for unpaid wages and failure to provide paid sick leave in accordance with the Families First Coronavirus Response Act.  Other interesting issues arose last week in employment contexts ranging from universities to meatpacking plants.

  • In Rural Community Worker’s Alliance v. Smithfield Foods Inc., No. 5:20-cv-6063 (W.D. Mo.), plaintiff claims that Smithfield’s Milan, Missouri meatpacking plant provides insufficient personal protective equipment, forces workers to work in cramped conditions, refuses to provide enough time for handwashing, discourages workers from taking sick leave, and implemented a bonus for employees who never miss a shift between April 1 and May 1.  Asserting public nuisance and breach of duty to provide a safe workplace, the workers’ alliance seeks an injunction to force Smithfield to comply with recommended public health measures. On April 26, the Court ordered Smithfield to follow federal guidelines pending a TRO hearing on April 30.  On April 27, Smithfield asked the court to dismiss the case in light of a Presidential Executive Order granting the U.S. Secretary of Agriculture authority over meat processors’ operations.
  • In Benavides v. Board of Regents of the University of Michigan, No. 20-000392-CD (Washtenaw Cty. Cir. Ct., Mich.), plaintiff alleges that she was fired from her job in the university hospital when she missed time from work due to illness and having to wait for the results of a COVID-19 test. A manager allegedly told her not to come back to work until she received the test results, but then fired her when test results were not received by the following week.

 

4. Failure to Warn/Negligent Exposure

No smooth sailing for the cruise industry yet: several more negligence lawsuits were filed against Princess Cruise Lines last week.  In addition, new cases were also filed against a senior assisted living facility in Atlanta, Georgia by the estates of residents who allegedly died as a result of contracting COVID-19.  The lawsuits claim that the facility failed to follow its own rules with regard to restricting visitation and ensuring that staff wear personal protective equipment. An example of these suits is McWhorter v. Arbor Terrace at Cascade, LLC, No. 20-ev-002364 (Fulton Cnty. State Court, GA).

 

5. Actions Against Government Agencies

Plaintiffs across the nation continue to bring challenges to local, state, and national actions. This week has brought a notable surge of suits challenging state and local “stay at home” and “shutdown” orders. 

  • Most importantly, the U.S. Supreme Court has signaled an interest in the constitutionality of Pennsylvania’s shutdown order.  Petitioners in Danny DeVito v. Tom Wolf, No. 19A1032 (U.S.), sought a stay of Pennsylvania’s emergency order, which shut down all “non-life-sustaining” businesses in Pennsylvania but allowed them to seek waivers from the state to avoid the shutdown mandate, assertedly in violation of due process.  After petitioners lost a challenge to the order before the Pennsylvania Supreme Court by a 4-3 vote, Justice Alito ordered Pennsylvania to respond to the stay application by May 4, 2020. Numerous states are now facing challenges similar to the one in Pennsylvania. These states include California, New Mexico, and North Dakota.     
  • Plaintiffs have also had success this week challenging state COVID-19 orders on an as- applied basis. For example, an Illinois state representative successfully enjoined the application to himself of Illinois’ stay-at-home order, on the grounds that it was unreasonable in duration and irreparably harmed him. Darren Bailey v. Governor Jay Robert Pritzker, No. 2020CH6 (Clay Cnty., Ill.).  Representative Bailey’s success has spurred a follow on suit by Representative John Cabello. John Cabello v. Governor Jay Robert Pritzker, No. 2020CH0000210 (Winnebago Cnty., Ill.).  Likewise, a Virginia shooting range succeeded in challenging the application of Virginia’s shutdown order to it on constitutional grounds.  In Lynchburg Range & Training, LLC v. Ralph Northam, No. CL20-333 (Cir. Ct. City of Lynchburg, Va.), the court held the order exceeds the state’s authority because it violates the Second Amendment and Virginia’s constitution.

Additionally, state governments have been sued over their unemployment and workers’ compensation benefits systems.  For example, in Richard Walls v. Ron DeSantis, No. 2020CA000802 (Leon Cnty. Cir. Ct., Fla.), a purported class alleges that the State of Florida negligently failed to maintain an adequate unemployment compensation system to pay valid claims by citizens who became unemployed as a result of the COVID-19 pandemic.  Employers achieved a victory in Illinois Manufacturers’ Association v. Illinois Workers’ Compensation Commission, No. 2020CH00098 (Sangamon Cnty Cir. Ct., Ill.), a suit by business associations to enjoin the Illinois Workers’ Compensation Commission’s new rule declaring COVID-19 to be a prima facie workplace occupation disease.  They argued that the Commission exceeded its authority in issuing the rule because it would grant workers’ compensation benefits to any employee deemed essential who contracts COVID-19, even those working from home.  After the judge granted a TRO, the Commission reportedly withdrew the challenged rule.

Lastly, disputes regarding government allocation of COVID-19 related relief funds are also progressing. For example, last week we discussed In Confederated Tribes of the Chehalis Reservation v. Mnuchin, No. 1:20-cv-01002 (D.D.C.), where a group of federally recognized tribes urged a court to block any of the $8 billion allocated for tribes combating the coronavirus from going to Alaska Native Corporations.  This court has now entered a preliminary injunction against the Secretary of the Treasury, prohibiting such disbursement of funds.

 

6. Government Suits to Enforce Closure Orders

Last week also saw efforts of localities to enforce their orders against allegedly non-complying merchants. For instance, in City of Dallas v. S&B Hot Mess Enterprises LLC, No.  DC-20-06131-A (Dallas Cnty. Dist. Ct., Tex.), Dallas alleges that defendant’s salon refuses to comply with COVID-19 shelter-in-place orders issued by the city and county, and improperly reopened last week.

 

7. Insurance Coverage Claims

Insurance coverage litigation continues to pile up in federal and state courts nationwide, including multiple cases against household-name insurance industry leaders.  Plaintiffs’ allegations fall into three main categories, namely claims that: (1) commercial property insurance policies do not include exclusions for losses caused by viruses or bacteria, and therefore claims for such losses should be covered; (2) to the extent policies include exclusions for losses caused by viruses and bacteria, they are inapplicable because coverage was triggered by a Civil Authority order, not the presence of a virus or bacteria; and (3) a generic virus or bacteria exclusion is inapplicable because the policy does not specifically exclude coverage for losses caused by a global pandemic.

Particularly noteworthy is Tambellini, Inc. v. Erie Insurance Exchange, No. GD-20-005137 (Penn.), where a Pittsburgh restaurant asked the Supreme Court of Pennsylvania to exercise jurisdiction over an insurance coverage dispute in the first instance.  Noting that “[h]undreds, if not thousands” of similar suits are expected to be filed in the Commonwealth, the restaurant also asked the Court to exercise plenary jurisdiction to establish something akin to a federal MDL to coordinate and resolve all similar cases. Another exemplary insurance case is Biltrite Furniture, Inc. v. Liberty Mutual Insurance Company, No. 2:20-cv-656 (E.D. Wis.), a nationwide insurance class action in which plaintiffs claim bad faith.

Insurers also continue to seek declaratory relief affirming that they are not obligated to cover business losses arising out of the COVID-19 pandemic.  See First Community Insurance Co. v. Clasan Management, No. 20002057CI (Pinellas Cnty Cir. Ct., Fla).

 

8. Price-Gouging Litigation

State governments have joined the fray in price-gouging litigation, and 3M continues its efforts to curb price gouging and fraudulent misrepresentation by unrelated entities concerning its N95 respirator masks. In State of Texas v. Cal-Maine Foods Inc., No. 2020-25427 (Harris Cnty Dist. Ct., Tex.), Texas filed a deceptive trade practices action alleging that defendants overcharged grocers for wholesale eggs during the COVID-19 state of emergency.  And in 3M Company v. Hulomil LLC, No. 3:20-cv-394 (W.D. Wis.), 3M claims that defendant fraudulently offered to sell 3M’s N95 respirator masks to the State of Wisconsin at a 250-350% mark up.

 

9. TCPA Litigation

Finally, COVID-19 litigation has ensued under the Telephone Consumer Protection Act, although not in the usual context of a purported class action.  In State of Texas v. Leadgen Sales and Marketing LLC, No. 1:20-cv-00435 (W.D. Tex.), Texas sued a telemarketing company for allegedly initiating deceptive telephone calls to Texas residents in which the recorded message represents that the marketed health plans offer COVID-19 testing and treatment.  The complaint asserts violations of the TCPA, among other laws.

 

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, Raechel Bimmerle, and Fiona O’Carroll are litigation associates at the firm.