Top Developments in COVID-19 Litigation

July 19, 2021

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

OVERVIEW

This week’s top COVID-19 litigation developments include: a lawsuit filed by cruise lines against Florida over its ban on “vaccine passports” for cruise ship passengers; the 11th Circuit’s rejection of a preliminary injunction against the CDC’s residential eviction moratorium; and the Eighth Circuit’s decision in favor of insurers in the first federal appeal involving a pandemic-related business interruption coverage claim.

1. Cruise Lines Sue Florida Over “Vaccine Passport” Ban

Overview: On July 13, 2021, several popular cruise lines sued the State Surgeon General of Florida to overturn Florida’s ban on the use of so-called “vaccine passports.”

The Complaint:  Cruise lines operating in Florida were subject to the CDC’s No Sail Order, which was issued on March 14, 2020.  The CDC superseded that order with guidance that culminated, on May 26, with further guidance permitting cruise operators to treat passengers with documentation of a vaccination for COVID-19 differently from passengers without such documentation.

This new guidance directly conflicted with an April 2, 2021 executive order by Governor DeSantis, later confirmed by legislation, that bars businesses that operate in Florida from requiring documentation of a COVID-19 vaccine for any service.  This ban on so-called “vaccine passports” took effect on June 1.  In the interim, several cruise operators advertised⸺and tickets were purchased in reliance on⸺100% passenger vaccination.

Cruise operators filed their complaint on July 13, alleging that Florida’s ban is preempted by federal law, that it violates the First Amendment and due process rights of cruise operators, and that it violates the Dormant Commerce Clause.

Our Take: After spending much of the last year fighting CDC restrictions alongside the state of Florida, cruise lines now find themselves fighting the state of Florida alongside the CDC.  The results of this suit, particularly a decision on the issue of preemption, will have considerable implications for the viability of vaccine passports in much of the country.

2. 11th Circuit Rejects Preliminary Injunction Against Residential Eviction Moratorium

Overview: On July 14, 2021, a split panel of the 11th Circuit held that landlords had not shown sufficient irreparable harm to justify a preliminary injunction against the CDC’s much-litigated moratorium on residential evictions (the “Eviction Moratorium”).

Background:  The CDC’s Eviction Moratorium was first issued on September 4, 2020, and suspended the execution of eviction orders against certain tenants for failure to pay rent.  The Eviction Moratorium does not suspend the obligation to pay rent, but it does prevent landlords from utilizing the traditional enforcement mechanism for failure to pay rent: evictions.  Plaintiffs, landlords in Georgia, allege that the Eviction Moratorium exceeds the CDC’s statutory and regulatory authority, is arbitrary and capricious, and violates landlords’ constitutional right to access the courts.  Plaintiffs moved for a preliminary injunction, which the district court denied. 

The Ruling: The court of appeals affirmed the denial of a preliminary injunction.  The court held that the violation of constitutional rights is not a sufficient “irreparable injury” to issue an injunction, which it characterized as an “extraordinary remedy.”  The court went on to describe the alleged harm as “chiefly, if not completely, economic,” and therefore not worthy of an injunction.  Judge Branch penned a lengthy dissent, and would have held that irreparable harm could be found in the protected tenants’ likely inability to pay rent in the future.

Our Take: With the Eviction Moratorium currently set to expire on July 31, as we have previously covered, and after indications from the CDC that it will not further extend the Eviction Moratorium, this ruling may be the final judicial word on its viability.  After several challenges and extensions, landlords will be able to serve eviction notices on August 1st; but in the 11th Circuit, not a day before.

3. Insurers Win First Federal Appeal Over COVID-19 Business Interruption Coverage

Overview: On July 2, 2021, the 8th Circuit handed down the first federal appellate ruling in a COVID-19 insurance coverage dispute, holding that COVID-19 did not cause “physical damage” and that the insurance policy at issue did not cover associated business interruption losses.

Background:  Plaintiff, an oral and maxillofacial surgery clinic in Des Moines, Iowa, halted non-emergency procedures in March 2020.  Non-emergency surgery resumed in May 2020.  After defendants denied plaintiff’s insurance claim for losses suffered as a result of the pandemic, plaintiff sued for declaratory judgment and breach of contract.  The district court granted the defendant insurer’s motion to dismiss, and plaintiff appealed to the 8th Circuit.

The Ruling: The court of appeals affirmed, following rulings reached in most other COVID-19 insurance cases.  The policy only covered “physical loss” and “physical damage,” and the complaint’s allegation of physical damage rested entirely on shutdown orders.  The court of appeals concluded that because the pandemic did not cause “physical alteration, physical contamination, or physical destruction,” any losses due to COVID-19 closures were not covered by the policy.

Our Take: The 8th Circuit’s ruling is the latest in a string of victories won by insurers in similar disputes we have previously covered.  While lawyers for covered entities may take some comfort that the underlying complaint did not include allegations of physical damage from the presence of the virus itself, the win is still a big one for insurers.

Jason Levine is a commercial and antitrust litigation partner in the Washington, D.C. office of Alston & Bird LLP.  Ryan Martin-Patterson, Giles Judd, and Stephen Tagert are associates at the firm.