COVID-19 Litigation Roundup

June 29, 2020

Jason A. Levine, Peter E. Masaitis, Alex Akerman, Gillian H. Clow, Debolina Das, Kaelyne Wietelman, Alston & Bird LLP

OVERVIEW

Last week’s slew of new COVID-19 lawsuits included many more workplace actions, challenges to stay-at-home and reopening orders, and government enforcement actions.  We also saw several court orders as suits that we’ve reported on for many weeks have continued to mature. 

Workplace lawsuits premised on “public nuisance” theories saw the most interesting action this week.  McDonald’s restaurants in California and Illinois received injunctions in separate actions.  In California, the franchise has been ordered to provide more protective gear to employees, enforce social distancing rules, grant sick leave to workers, and deep clean the restaurant before it may re-open.  In Illinois, some restaurants were ordered to better train employees regarding social distancing and to enforce mask-wearing policies.  We also saw a new order from the Department of Labor indicating the circumstances under which it will no longer seek prelitigation liquidated damages for certain violations of the Fair Labor Standards Act.

Challenges to governmental “stay at home” and reopening orders continue to expand.  This week a Michigan court allowed a gym to reopen because the state had not identified sufficient reasons why the gym must remain closed when other, similar businesses were allowed to open.  In New York, a Jewish summer camp brought a new type of challenge to closure orders, alleging that the closure of the camp violated the campers’ First Amendment religious rights.

Immigration and privacy issues converged this week in an unusual new class action filed in California state court.  A manufacturer of GPS tracking bracelets has allegedly used tracking information to find immigrants who received bracelets as a condition of their release from detention.  The manufacturer then allegedly convinced individuals to relinquish their bracelets, so it could re-distribute the bracelets at much higher prices as a result of increased demand for them due to COVID-19, leaving the individuals exposed to potential deportation.

REFUND/CANCELLATION

This past week brought more than a dozen new suits seeking refunds for monies paid for services made impossible or impractical by COVID-19. The suits continue to target airlines, universities, ticket-brokers, resorts, summer camps, theme parks and event venues for failure to refund monies on demand.

MISREPRESENTATION/FRAUD

State enforcers remain alert for any claims that products cure, treat, prevent, or mitigate COVID-19. Oregon brought an enforcement action last week against a natural medicine provider to enjoin it from claiming that its supplements have a positive effect on COVID-19 symptoms. Oregon, like all other states that have brought these actions, requires that any such claims be based on FDA approval

In the Central District of California, BYD Company Ltd. filed suit alleging defendants are operating an illegal scheme to advertise and sell counterfeit BYD N95 respirator masks to buyers, often state and local governments, hospitals, and nonprofits who believe they are receiving authentic BYD masks.  BYD alleges the counterfeit masks are not safe, effective, and certified by U.S. and international regulators in the manner BYD masks are, and the counterfeit masks are being distributed to doctors, nurses, and other first responders.

GOVERNMENT

Challenges to “stay-at-home” orders and reopening plans continue. Businesses ranging from gyms to motor speedways have challenged the phased reopening plans of numerous states this week including Kentucky, Massachusetts, Maine, and Ohio. 

A recent Michigan District Court decision emphasized that the government must provide a rational basis grounded in science in order to defend its plans.  A Michigan gym was allowed to reopen because the state did not “identify any set of facts on which the gym restriction has a rational relation to public health, in light of the opening of similar venues and activities like swimming pools, restaurants and bars, and ‘personal touch services like salons.’”

A challenge to New York’s reopening plan relied on a novel constitutional argument made in conjunction with the due process and equal protection arguments we’ve seen in other cases.  A Jewish summer camp sought injunctive relief on the ground that New York State’s enforcement of an executive order closing all Jewish overnight summer camps violated the campers’ First Amendment religious rights.

As we discussed last week, the legality of any state-administered “test and trace” system is highly relevant to private businesses at work on developing plans to safely reopen.  This past week brought another challenge to such a system, this time by Sasabune Beverly Hills, one of the premier sushi restaurants in the United States.  Sasabune argues that Los Angeles County’s requirement that businesses collect the personal information of each patron, and disclose it upon demand to the County of Los Angeles to facilitate the County’s contact tracing efforts, is a warrantless search regime without appropriate safeguards that infringes on the fundamental rights of citizens.

Lastly, this past week brought a first-of-its-kind challenge to Miami-Dade’s order mandating that Floridians wear masks in public within the County.  The claim raises due process and lack of authority arguments based on Florida’s constitution.

INSURANCE

Unsurprisingly, more business interruption claims have been filed this week across many industries. One case filed by Minor League Baseball teams against their insurers alleges the insurers either wrongly denied or soon will wrongly deny teams’ claims for business interruption, despite the teams’ inability pay their ballpark leases due to the League’s shutdown.

In Iowa, a restaurant filed suit against its insurer for failing to pay its business interruption claim.  The insurer allegedly cited an exclusion for loss “due to a virus” in its denial.  The restaurant argues that because none of its employees or customers were infected with COVID-19, it is the governor’s order, not a virus, that interrupted its business.

PRIVACY

Immigration and privacy issues converge in a new class action filed in California state court.  Defendants lease GPS tracking bracelets to third parties who use them at immigration detention centers.  Plaintiffs allege COVID-19 has increased demand for these tracking bracelets, and defendants are attempting to fraudulently recover and re-lease their devices at a higher price.  Plaintiffs allege defendants are contacting program participants and falsely stating they are authorized to remove the bracelets, putting plaintiffs at risk of deportation and also unlawfully using the bracelets’ GPS data to locate the participants.

PRICE-GOUGING

The Minnesota Attorney General’s Office has filed suit against a retailer selling KN95 masks for $12.99, far above the market rate.

WORKPLACE

Claims of wrongful termination and wrongful denial of benefits continue from employees across all industries. Three cases we’ve covered in past roundups have had significant developments this week.

A California state judge issued a temporary restraining order through July 2 directing a McDonald’s franchise in Oakland not to reopen for business until after a hearing where McDonald’s must show, among other things, that it will make protective gear available to employees, enforce reasonable social distancing, grant sick leave to workers, and deep clean the restaurant before opening.

Two days later, other McDonald’s restaurants in Illinois were hit with a partial preliminary injunction.  The Cook County Circuit Court judge held that, although the restaurants were providing sufficient masks, gloves, and hand sanitizers in the stores, and were sufficiently monitoring COVID-19 cases among employees, they were not training employees sufficiently regarding social distancing and were failing to enforce the mask policy or comply with statewide Illinois mask requirements.

We recently covered the D.C. Circuit’s decision denying the AFL-CIO’s request to require the Occupational Safety and Health Administration’s (“OSHA”) to promulgate an emergency rule establishing certain categorical workplace standards to protect workers from COVID-19. The AFL-CIO has now petitioned for en banc review, claiming the panel misstated OSHA’s rationale and failed to address the AFL-CIO’s argument that OSHA’s actual rational is inconsistent with the Occupational Safety and Health Act.

Finally, the Department of Labor announced that it would no longer pursue prelitigation liquidated damages for certain violations of the Fair Labor Standards Act. This notice comes as a result of President Trump’s Executive Order 13924, Regulatory Relief to Support Economic Recovery, attempting to remove regulatory and enforcement barriers to help the economy rebound from the pandemic. The notice describes the types of instances in which the DOL will not seek pre-litigation liquidated damages, including:  

  • there is not clear evidence of bad faith and willfulness;
  • the employer’s explanation for the violation(s) show that the violation(s) were the result of a bona fide dispute of unsettled law under the FLSA;
  • the employer has no previous history of violations;
  • the matter involves individual coverage only;
  • the matter involves complex section 13(a)(1) and 13(b)(1) exemptions; or
  • the matter involves State and local government agencies or other non-profits.

 

CARES ACT/PPP

Loan processing agents continue to file lawsuits against financial institutions for failure to pay agent fees associated with processing PPP loan applications.

A criminal complaint was unsealed in the District of Massachusetts alleging that a man fraudulently applied for at least four PPP loans on behalf of the same entity with various financial institutions and used conflicting and false information in each application.

SECURITIES

Companies continue to face derivative lawsuits for artificially inflating stock prices and exposing themselves to litigation.  Similar to last week’s cases, shareholders are suing Chembio Diagnostics for allegedly concealing the fact that their COVID-19 antibody tests had a high rate of false results.

MEDMAL

The tragic death of a nineteen-year old girl is now the center of a medical malpractice suit in Franklin County, Ohio.  The girl’s parents are alleging professional negligence and suing the hospital and physicians for discharging the decedent despite allegedly exhibiting signs of sepsis and impending respiratory failure.

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,  Gillian Clow, Debolina Das, and Kaelyne Wietelman are litigation associates at the firm.