COVID-19 Litigation Roundup

April 27, 2020

Jason A. Levine, Peter E. Masaitis, Alex Akerman, Raechel Bimmerle and Fiona O’Carroll, Alston & Bird LLP

Welcome to the third weekly installment of the COVID-19 Litigation Roundup.  The litigation tsunami continued to build last week.  Well over 250 business lawsuits related to the pandemic are already pending, with seemingly dozens more filed every day. 

Last week we continued to see many consumer class actions for refunds of various sorts and many more assertions of the force majeure and impossibility defenses to contract claims.  Workplace-related suits, including complaints accusing businesses of exposing workers or customers to COVID-19, are also continuing to increase with many more likely to follow.  Suits for business interruption insurance have proliferated at such a rate that some plaintiffs have asked the Judicial Panel on Multidistrict Litigation to consolidate all such suits in a single MDL.  We also saw more securities fraud and price-gouging actions.

Litigation related to government programs continues to build.  Multiple lawsuits claimed that banks inappropriately prioritized large Paycheck Protection Program loans.  In another case, political consultants challenged the Small Business Administration’s exclusion of lobbyists and political consultants from that program.  After a district court rejected the challenge, the D.C. Circuit set a highly expedited briefing schedule on appeal.  In the meantime, states got in on the action.  One state sued China for causing the pandemic while another state’s legislature sued its own Executive Branch to challenge the extension of a stay-at-home order.

We describe those and many more cases below.  Check in with us each week to track interesting new cases, court decisions, and the emerging patterns of lawsuits.            

 

Noteworthy COVID-19 Business Cases Filed Before April 23, 2020

1.   Consumer Class Action Refund Claims

Plaintiffs’ lawyers continue to file class actions seeking refunds for services rendered impossible or impracticable by the COVID-19 pandemic.  The initial waves of lawsuits focused on businesses that charge member fees for use of facilities, education providers, the travel industry, and live events/entertainment. High profile cases filed this week have sought refunds for postponed live events. For example:

  • Major League Baseball was sued in Ajzenman v. Office of the Commissioner of Baseball, No. 2:20-cv-03643 (C.D. Cal.).  This putative class action claims that with the baseball season delayed more than a month past Opening Day, ticket holders are due a full refund for tickets.  Plaintiffs further allege that MLB’s categorization of games as postponed, rather than canceled, is a “pretext” to permit it and online ticket sellers to avoid paying refunds.
  • Ticketmaster is facing a similar lawsuit related to concert tickets in Hansen v. Ticketmaster Entertainment Inc., No. 3:20-cv-02685 (N.D. Cal.), where a putative class of concertgoers alleges that Ticketmaster Entertainment Inc. and its parent Live Nation Entertainment Co. wrongly refused to offer refunds for postponed events that have not officially been canceled by event organizers.
  • The ski resort industry continues to face refund lawsuits arising from closed resorts. In Steijn v. Alterra Mountain Company U.S. Inc., No. 8:20-cv-755 (C.D. Cal.), a putative class action brought under California law alleges that the defendant wrongfully retained customer passholder fees despite closing its ski resorts due to COVID-19. We highlighted a similar complaint last week.
  • As we discussed last week, customers also continue to file putative class actions challenging airlines’ alleged refusal to provide cash refunds for cancelled flights.  New lawsuits have been filed against Spirit, JetBlue, Hawaiian, American, Frontier, and Delta.
  • Finally, students have filed a series of class actions demanding full refunds of tuition and living expenses from universities as a result of the partial closure of university facilities and the universities’ transition to on-line classes.  New suits have been filed against the University of Vermont, the University of Miami, Drexel University, and Long Island University.

 

2.   COVID-19 Service-Related Suits

Litigation arising from financial institutions’ procedures and prioritization for processing Paycheck Protection Program (“PPP”) loan applications accelerated this week.

  • Banks continue to be a target of class action lawsuits brought by small businesses alleging wrongful discrimination arising from the banks’ alleged refusal to process PPP loan applications on a first-come first-served basis.  Additional lawsuits have now been filed against Wells Fargo (links here and here), JPMorgan Chase (links here, here, and here),  Bank of America, U.S. Bancorp and U.S. Bank. N.A., and Frost Bank.

 

3.   Workplace Suits

This week saw an upswing in lawsuits alleging unlawful employment practices related to the effects of the COVID-19 pandemic. 

  • Employees have brought suits for wages, termination payments, and benefits.  For example:
    • Hair stylists have brought class actions alleging that the owners of the salons where they worked refused to pay them earned wages for the pay period leading up to the salons’ COVID-19 closures. Miller v. Creative Hairdressers, Inc., No. 20-cv-00912 (M.D. Fla.); Olsen v. Ratner Cos., No. 20-cv-03760 (D.N.J.).  
    • In Carcamo v. CMC Contractors LLC, No. 20-8465CA01 (Miami-Dade Cty. Cir. Ct.), plaintiff alleges that defendant terminated plaintiff’s employment due to limited work during the pandemic, but then allegedly refused to pay his termination payment of three months’ salary, claiming that he was fired for cause.  
    • Finally, staffers from Mayor Bloomberg’s presidential campaign have brought a putative class action alleging breach of a contractual promise of pay and benefits through November 2020, leaving staffers without health insurance in the midst of the pandemic.  Fernandez v. Mike Bloomberg 2020 Inc., No. 1:20-cv-3132 (S.D.N.Y.). The case has since been voluntarily dismissed.
  • Employees have asserted violations of the federal WARN Act for improper notice of layoffs.  In Scott v. Hooters III Inc., No. 8:20-cv-882 (M.D. Fla.), plaintiffs brought a putative class action claiming that Hooters violated the WARN Act by failing to give employees notice before a layoff in late March.  They assert that Hooters could have assessed the impact of COVID-19 upon its employees sooner.
  • Plaintiffs are asserting violations of new federal leave laws.  In  Andrews v. Anderson Hydra Platforms Inc., No. 2020-cp-4601299 (York Cty. Ct. of Comm. Pl.), plaintiff claims that she was wrongfully fired after she requested paid leave under the Families First Coronavirus Response Act in order to take care of her minor children.
  • There has been an uptick in negligence lawsuits brought by employees who contract COVID-19.  In a series of notable new lawsuits in this area, the New York State nurses’ union has sued two hospitals (here and here) and the state’s Department of Health, claiming they failed to adequately protect nurses working on the front lines of the COVID-19 response. 

 

4.   Securities Class Actions

Securities lawsuits continue to be filed in relation to the COVID-19 pandemic and related disclosures to investors.  Representative new filings include:

  • Beheshti v. Kim, No. 20-cv-01962 (E.D. Pa.). A shareholder derivative suit filed on behalf of Inovio Pharmaceuticals against several executives of the company, alleging that they breached their fiduciary duties to the company by misrepresenting that the company had developed a COVID-19 vaccine when it had not.  This follows the securities fraud class action filed against Inovio earlier this month.
  • Banuelos v. Norwegian Cruise Lines, No 1:20-cv-21685 (S.D. Fla.). A purported class action alleging that Norwegian Cruise Lines violated federal securities laws by making false and materially misleading statements regarding the company’s allegedly positive financial results and anticipated future results, including by omitting or failing to disclose certain allegedly deceptive sales tactics used to entice customers to purchase cruises in spite of the COVID-19 outbreak.

 

5.   Force Majeure/Impossibility Defense

When does the pandemic excuse non-performance?  That question will continue to be worked out through lawsuits involving scenarios such as:

  • Breach of leases due to the pandemic.  In Palm Springs Mile Associates, Ltd. v. American Multi-Cinema, Inc., No. 1:20-cv-21687 (S.D. Fla.), AMC Theaters was sued for breach of lease by its Palm Springs landlord when it failed to pay rent on April 1, 2020 and advised its landlord that it would not be paying rent for the following months due to the COVID-19 pandemic.  Seeking over $7.5 million in damages, the landlord argues that the pandemic does not excuse AMC’s failure to pay under the force majeure provision in the lease agreement.
  • Termination of purchasing agreements due to the pandemic.  In SP VS Buyer LP v. L Brands, Inc. (Del. Ch.), the would-be buyer of a majority interest in the Victoria’s Secret and PINK retail chains has brought suit seeking a declaration that the buyer’s termination of the purchase agreement is valid.  The seller claims that the buyer breached the agreement by closing nearly all of its Victoria’s Secret and PINK locations globally, furloughing workers, and taking other pandemic-related measures—arguing that the pandemic is no defense.
  • Termination of leases due to the pandemic.  In Square 46 v. White Star Mkt., No. C-695912-22 (Dist. Ct., E. Baton Rouge Parish, La.), an upscale food hall was sued by its landlord when it purported to unilaterally terminate its lease.  The landlord claims the food hall was facing declining sales and other troubles before the pandemic, and is now “attempt[ing] to exploit a public health crisis to be freed of its leases.”

 

6.   Actions Against Government Agencies

Challenges to state, national, and even international agency and government action (and alleged inaction) continue to be brought by States, public interest groups, legislators, and businesses.

  • This week highlighted emerging tension within states regarding when to lift COVID-19 restrictions. In Wisconsin Legislature v. Secretary-Designee Andrea Palm, et al., (Wis. Sup. Ct.), the Wisconsin legislature filed suit against the state’s own Executive Branch, seeking an injunction staying a recently issued extension of Wisconsin’s stay-at-home order.
  • Businesses have begun to challenge state regulations that restrict their core commercial practices.  For example, in ACA International v. Healey, No. 1:20-cv-10767 (D. Mass.), a credit industry trade group filed suit against Massachusetts challenging its emergency regulation banning most types of debt collection during the COVID-19 pandemic, calling the move harmful to business and unconstitutional.
  • Disputes are emerging regarding government allocation of COVID-19 related relief funds. For example, a trade association of political consultants demanding access to COVID-19 relief loans sought an injunction staying a U.S. Small Business Administration regulation prohibiting businesses that “primarily engaged in political or lobbying activities” from tapping into the PPP.  American Assn. of Political Consultants et al. v. U.S. Small Business Admin. et al., No. 1:20-cv-00970 (D.D.C.). The consultants’ motion for preliminary injunctive relief was denied.  They filed an appeal, D.C. Cir. Case No. 20-5101, which the D.C. Circuit has agreed to expedite.
  • Likewise, in Confederated Tribes of the Chehalis Reservation v. Mnuchin, No. 1:20-cv-01002 (D.D.C.), 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, saying the Treasury Department is planning to illegally send “desperately needed funds” meant for tribal governments to the for-profit companies.
  • Missouri is the first U.S. state to join the wave of lawsuits against the Peoples Republic of China.  In Missouri v. People’s Republic of China, No. 1:20-cv-00099 (E.D. Mo.), Missouri alleges that Chinese officials and others, including laboratories and China’s Communist Party, were all “engaged in misrepresentations, concealment, and retaliation to conceal the gravity and seriousness of the COVID-19 outbreak from the rest of the world.” 
  • Plaintiffs have also taken aim at international organizations. In Richard O’Kling et al. v. The World Health Organization, No. 7:20-cv-3124 (S.D.N.Y) a putative class action alleges negligence against the WHO for failure to timely declare the COVID-19 pandemic a public health emergency of international concern.

 

7.   Insurance Coverage Claims

Litigation relating to insurance coverage for business losses resulting from COVID-19 and related state and local stay-at-home and shelter-in-place orders picked up steam in the last week, with more than two dozen new complaints filed in state and federal courts across the country.  Notably, there has been an uptick in class action filings alleging both breach of contract and bad faith. 

There have been two new developments this week.  Some plaintiffs have requested that the Judicial Panel on Multidistrict Litigation create an MDL for all COVID-19 business interruption insurance coverage lawsuits.  And one insurer has filed suit against an insured seeking declaratory relief.  Representative cases include:

  • GIO Pizzeria & Bar Hospitality LLC v. Lloyds London, No. 1:20-cv-3107 (S.D.N.Y). A putative nationwide class action alleging that defendant refused to pay restaurant plaintiffs for losses suffered due to COVID-19 from the suspension of business covered under business income, civil authority, extra expense, and labor insurance policies. Similar class actions have been filed against the Cincinnati Insurance Company, Erie Insurance Company, Chubb Limited, Society Insurance, and Owners Insurance Company, among others.
  • For Mark Geragos, it’s sue and be sued.  In Travelers Casualty Insurance Company v. Geragos & Geragos, No. 2:20-cv-3619 (C.D. Cal.), Travelers filed an action in federal court seeking a declaration that it has no obligation under the policies for defendant’s claimed losses of business income related to the worldwide COVID-19 pandemic.  This is in answer to the breach of contract suit filed in California state court by Geragos & Geragos earlier this month.  
  • Newchops Restaurant Comcast LLC v. Admiral Indemnity Co., No. 2:20-cv-1949 (E.D. Pa.). An action for declaratory relief seeking clarification as to whether plaintiff’s policy coverage for business interruption was triggered by certain Civil Authority closure orders relating to COVID-19 and whether the Policy’s exclusion of loss due to virus or bacteria is applicable. Notably, Newchops, LH Dining, and several other plaintiffs have requested that the Judicial Panel on Multidistrict Litigation consolidate all pending business interruption coverage litigation into a single MDL. 

 

8.   Price-Gouging Litigation

Finally, concerns about price-gouging have circulated since early in the COVID-19 pandemic, as stores rapidly sold out of hand sanitizer, cleaning supplies, toilet paper and face masks. Last week, more price-gouging actions involving food staples were filed, including:

  • Fraser v. Cal-Maine Foods Inc., No. 20-cv-2733 (N.D. Cal.). A purported class action alleging that some or all of Amazon, Walmart, Costco, and other major supermarket chains including Kroger and Trader Joes have participated in a price-gouging scheme resulting in a “near-tripling” of egg prices in the last month, in alleged violation of California’s Unfair Competition Law.
  • McQueen v. Amazon.com, Inc., No. 4:20-cv-02782 (N.D. Cal.). A purported class action alleging violation of California’s Unfair Competition Law, and common-law torts, in connection with Amazon’s allegedly unlawful price increases in some categories, including flour, face masks, and pain relievers.

 

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.