Top Developments in COVID-19 Litigation
Jason A. Levine, Gillian H. Clow, and Ryan Martin-Patterson
This week’s top COVID-19 litigation developments include: the Biden Administration’s issuance of new guidance about “long COVID” as a federally-recognized disability; the 11th Circuit’s decision upholding a stay of CDC restrictions on the cruise industry; a new suit against the State of Florida over its termination of CARES Act federal unemployment benefits; a new securities suit against a pharmaceutical company over a purported COVID-19 treatment; and a motion to dismiss a refund suit filed by the official U.S. seller of tickets to the Tokyo Olympics.
1. Biden Administration Issues Guidance for “Long COVID” Disability Status
Overview: On July 26, 2021, during remarks on the 31st anniversary of the Americans with Disabilities Act, President Biden announced that certain executive agencies would be issuing guidance related to “long COVID” and disability status.
The Guidance: The Department of Justice and the Department of Health and Human Services jointly issued guidance to provide clarity on the applicability of nondiscrimination laws to those suffering from long COVID, sometimes referred to as COVID “long-haulers.” According to the new guidance, long COVID occurs when people with COVID-19 experience symptoms that last months after being first infected, or have recurring symptoms more than several weeks after infection. The guidance states that long COVID can be a disability under Titles II and III of the Americans with Disabilities Act, Section 504 of the Rehabilitation Act of 1973, and Section 1557 of the Patient Protection and Affordable Care Act. The guidance states that long COVID can be a “physical or mental impairment” that “substantially limits one or more of the major life activities” of an individual within the meaning of those disability statutes. Whether an individual’s experience with long COVID rises to the level of a disability is based on an assessment of those two factors.
Our Take: Although the total number of Americans suffering from long COVID is unknown, this guidance provides a warning to employers, insurers, and others about the current posture of these agencies. The courts will have the final say on this interpretation if it ends up in litigation.
2. Eleventh Circuit Lifts Cruise Industry Restrictions
Overview: An 11th Circuit panel that had previously reinstated the CDC’s COVID-19-related restrictions on the cruise industry back-pedaled last week, allowing a Florida federal judge’s decision lifting those restrictions to take effect.
Decision: On July 17, an 11th Circuit panel stayed a Florida federal judge’s injunction against implementation of the CDC’s cruise ship rules. Then, in an order dated July 23, the same panel reversed itself, finding that the federal government had “failed to demonstrate an entitlement to a stay pending appeal.” The district court’s order thus bans the CDC from enforcing its restrictive regulations on cruise ships arriving in or departing from Florida. That court concluded that the CDC likely exceeded the scope of its authority with its restrictive regulations, effectively halting “an entire multibillion-dollar industry nationwide” and placing the state of Florida in “immediate danger” of a continuing injury.
Our Take: The 11th Circuit’s decision does not end this litigation: the state of Florida will still need to prove on the merits that the CDC exceeded its authority with its regulations in order to obtain a permanent injunction. But assuming the injunction stays in place in the meantime, the cruise ship industry will have greater flexibility as it reopens.
3. Florida Sued for Early Termination of CARES Act Unemployment Benefits
Overview: On July 25, 2021, a group of individual plaintiffs sued the state of Florida and Governor Ron DeSantis over their termination of unemployment payments offered under the CARES Act.
The Complaint: The CARES Act, originally enacted on March 27, 2020, enhanced federal unemployment insurance benefits temporarily during the pandemic. The extra benefits were extended several times, and are currently scheduled to terminate on September 6, 2021. On May 24, 2021, Florida announced that it would terminate its participation in the extra benefits program effective June 26, 2021. The plaintiffs, all recipients of CARES Act unemployment benefits who have alleged that they suffered harm upon its termination, claim that Governor DeSantis terminated the benefits for purely partisan and political reasons. Plaintiffs assert claims under various Florida statues for declaratory relief, mandamus, and injunctive relief to order Florida to reinstate the extra benefits until the payments end on their own terms.
Our Take: Although the CARES Act authorizes states to terminate their participation in enhanced federal unemployment insurance benefits, this suit is one of many challenging states’ decisions to do so. Thus far results in these cases have been mixed, with the most recent decision rejecting such a suit in Ohio. That said, these suits tend to be brought under various state laws, so it is unclear how transferable their results may be. We will keep a close eye, however, as trends develop.
4. Pharmaceutical Company Sued for Securities Fraud Relating to Supposed COVID-19 Antibody Therapy
Overview: On July 23, 2021, a shareholder of Sorrento Therapeutics, Inc. sued Sorrento and its officers and directors in the U.S. District Court for the Southern District of California for securities fraud related to a purported antibody therapy for COVID-19.
The Complaint: The complaint alleges that in February 2020, shortly after the first outbreaks of COVID-19 in the United States, Sorrento began searching its catalogue of antibodies to find one that might be effective against COVID. Sorrento entered into partnerships with the University of Texas Medical Branch at Galveston for preclinical testing of its therapeutic product candidates and with Mount Sinai Health for developing an antibody cocktail to treat COVID. Plaintiff alleges that from May 15 to May 21, 2020, the individual defendants caused Sorrento to make false and misleading statements regarding one particular antibody’s viability as a cure for COVID when it was still in the early stages of clinical testing, causing an inflated share price. Sorrento later walked back its statements about the viability of the antibody, allegedly causing the share price to fall. Plaintiff alleges violations of Section 20(a) of the Exchange Act and also asserts claims for breach of fiduciary duties, unjust enrichment, and waste of corporate assets by the individual defendants.
Our Take: This suit is but one of many we have seen against companies investigating potential cures and treatments for COVID-19. Although we have not seen many achieve success thus far, the litigation reinforces that publicly-traded companies should take care to manage their messaging with securities suits in mind.
5. U.S. Seller of Olympics Tickets Seeks Dismissal of “Shakedown” Lawsuit
Overview: Jet Set Sports, LLC, the U.S. ticket provider for the Olympic Games in Tokyo, has filed a motion to dismiss claims brought against it in New Jersey for its alleged failure to provide customers with full refunds after they were banned from attending the Olympics in Tokyo as a result of COVID-19.
Motion: In its motion, Jet Set Sports argues that it has provided partial refunds even though it was not required to do so, and that its terms and conditions do not mandate the full refunds plaintiffs seek. It further argues that several of the plaintiffs released the company from any potential liability in exchange for the refunds they received. Jet Set derides the lawsuit as a “shakedown” seeking funds never promised to plaintiffs.
Our take: Although live events have resumed in some capacity, we have not seen the end of pandemic-related cancellations and refund suits. As COVID-19 infection rates change, ticket sellers should pay attention to their terms and conditions as the threat of cancellation-related disputes is still real.