Top Developments in COVID-19 Litigation

January 10, 2022

Jason A. Levine, Ryan Martin-Patterson, and Stephen Tagert

OVERVIEW

The top developments in COVID-19 litigation since our last post include: court action on federal vaccine mandate challenges, including oral argument in the Supreme Court; a purported whistleblower complaint against Moderna concerning supposedly inaccurate public disclosures about its patents; Pfizer’s settlement of a patent dispute relating to its vaccine; and a class action against New York State’s omission of a religious exemption from its statewide vaccine mandate for healthcare workers. 

1. Challenges to Biden Administration Vaccine Mandates

Overview: Since our last update, the Supreme Court heard oral argument regarding a stay application on the federal vaccine mandates for certain health care workers and companies with at least 100 employees.  The Sixth Circuit declined to stay an injunction blocking President Biden’s COVID-19 vaccine mandate for federal contractors. And a federal district court in Fort Worth, Texas entered an injunction against application of the Navy’s vaccine mandate.  

Supreme Court Oral Argument: The Supreme Court consolidated four cases and, on January 7, 2022, heard oral argument on whether to stay enforcement of the OSHA Emergency Temporary Standard (“ETS”) and the federal healthcare worker vaccine mandate.

During oral argument, several Justices appeared particularly hostile to the ETS, which requires vaccinations or masking and testing for all employees of all companies with more than 100 workers.  Some expressed concern that the ETS fell outside authority granted by OSHA’s 1970 authorizing statute and Chief Justice Roberts, for example, questioned the Biden Administration’s strategy of using different federal agencies to implement vaccine mandates.  By contrast, other Justices stressed the extraordinary nature of the COVID-19 pandemic as a rationale for extraordinary action by OSHA.

Overall, the Justices appeared more sympathetic to the new federal rule requiring recipients of Medicare and Medicaid funds, such as hospitals, nursing homes, and other health care providers, to vaccinate their employees or risk losing funds. Several Justices noted that federal agencies typically have more power and discretion over spending allocations than simple rulemaking. They also noted that the group challenging the health care worker mandate did not actually include any health care workers: those directly affected by the rule brought no challenge.

Federal Contractor Mandate: On January 5, 2022, a divided panel of the Sixth Circuit denied the government’s motion to stay an injunction entered by the U.S. District Court for the District of Kentucky that prevented the government from enforcing the vaccine mandate for employers of federal contractors. That mandate had been issued by the Safer Federal Workforce Task Force in November 16, 2021, and required “covered contractor employees” to be fully vaccinated unless they were exempt by reason of disability or religious objection. By its own terms, the mandate applied not just to employees performing on a covered contract; it also applied to other employees who might come into contact with employees performing a covered contract, likely including human resources, billing, and legal personnel. The Sixth Circuit found that the mandate covered a large portion of the workforces of several States, and as a result was not authorized by the Property Act under which it was originally promulgated. Additionally, the Sixth Circuit noted that other courts of appeals had issued nationwide injunctions against the same mandate, and therefore the court had no power to restore the mandate’s requirements.

Department of Defense Vaccine Mandate: On January 3, 2022, the U.S. District Court for the Northern District of Texas enjoined the Department of Defense’s (“DOD”) and the Navy’s vaccine mandates for all servicemembers. Thirty-five members of the Navy, including several Navy Seals, sought religious exceptions to the mandate, all of which have either been denied by the Navy or are still pending. The court held that the Navy and DOD likely violated the Religious Freedom Restoration Act with the mandates by substantially burdening the challengers’ free exercise of religion without a compelling governmental interest. The court likewise held that the Navy and DOD likely violated the servicemembers’ free exercise rights under the First Amendment.

Our Take: As noted by the Sixth Circuit in particular, federal courts have not been shy about enjoining the various COVID-19 vaccine mandates promulgated by the Biden Administration. Although the Supreme Court has taken a light touch so far, it will likely express definitive—and likely sharply divided—views regarding the mandates in its forthcoming decisions on the OSHA ETS and the federal healthcare worker vaccine mandate. Certainly, the federal government has had difficulty enforcing its attempted mandates, being forced to litigate every step of the way.

2. COVID-19 Vaccine Patent Litigation

Overview: Moderna, Inc. faces an SEC whistleblower complaint regarding credit for its COVID-19 vaccine. Meanwhile, Allele Biotechnology and Pharmaceuticals Inc. dropped its suit against Pfizer, Inc., in which Allele accused Pfizer of poaching its research technology while they jointly produced their COVID-19 vaccine.

Moderna Whistleblower Complaint: On December 21, 2021, Oxfam America filed a whistleblower complaint with the SEC against Moderna, alleging that Moderna had filed misleading statements with the SEC in its 10-K of February 26, 2021 and its 10-Q of November 4, 2021. In particular, Oxfam America alleged that Moderna failed to adequately disclose a dispute between Moderna and the U.S. Government regarding credit for the sequencing of the mRNA 1273 vaccine for COVID-19. The plaintiff claims that while Moderna disclosed in its SEC filings that it may be subject to a patent dispute, it was also required to disclose the then-simmering dispute regarding the mRNA 1273 vaccine, which it allegedly did not. Oxfam America further alleged that Moderna did not adequately disclose the possibility of litigation with the U.S. Government over the dispute.

Allele v. Pfizer Voluntary Dismissal: On January 4, 2022, Allele and Pfizer jointly moved to dismiss all of Allele’s claims against Pfizer in their dispute over the development of Pfizer’s vaccine for COVID-19, saying they had settled the dispute. Allele had alleged that Pfizer violated Allele’s patents while Pfizer developed its vaccine for COVID-19. Details of the settlement were not filed publicly.

Our Take: While Pfizer has now seemingly settled potentially damaging litigation, vaccine rival Moderna now faces an SEC investigation initiated by a purported whistleblower. Both the suit and whistleblower complaint are reminders to companies engaging in medical or scientific work related to COVID-19 that they should be careful regarding patents held by other companies, and should scrutinize their public disclosures to ensure strict SEC compliance.

3. Class Action Against New York State for Removing Religious Exemption to Vaccine Mandate

Overview: On December 26, 2021, Governor Kathy Hochul and the State of New York were sued in Jefferson County Supreme Court to enjoin enforcement of the statewide vaccine mandate for health care professionals.

The Complaint: According to the Complaint, in the fall of 2021, New York began enforcing a vaccine mandate that did not include a religious exemption, despite such an exemption’s inclusion in a prior public health order. The mandate covers employees of hospitals, nursing homes, hospices, and other medical and long-term care providers. While the mandate contains a medical exemption, it does not contain a religious exemption. Plaintiff, a medical professional with a religious belief against taking the vaccine, was terminated in the fall of 2021 by her employer for failure to receive the vaccine for COVID-19.  Plaintiff claims, on behalf of a class of similarly situated persons, that the mandate violates her substantive and procedural rights to due process, and that the mandate is arbitrary and capricious and an abuse of discretion under New York administrative law.

Our Take: New York’s vaccine mandate is unusual in not providing for religious exemptions, which most other States and most federal mandates allow. Although the outcome of this litigation is uncertain, courts have generally been more hostile to vaccine mandates from governments than from companies.

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