COVID-19 Litigation Roundup
Jason A. Levine, Peter E. Masaitis, Gillian H. Clow, Ryan Martin-Patterson, and Kaelyne Wietelman
Alston & Bird LLP
This week continues a recent trend of fewer noteworthy COVID-19 related cases being filed, although there was still a broad diversity of claims raised in new lawsuits.
On the securities front, investors sued French conglomerate LVMH—owner of luxury brands such as Louis Vuitton—for backing out of a merger deal with Tiffany & Co. due to the pandemic. The SEC sued biotech company Arrayit Corporation for its allegedly false claims about COVID-19 tests.
3M filed another trademark infringement lawsuit in its campaign against dubious purveyors of N95 masks. A different kind of private enforcement action was filed against All World Resorts, for its allegedly wrongful conversion of Paycheck Protection Program (“PPP”) loans.
Suits against government agencies abounded this week. Landlords filed constitutional challenges against the federal and Minnesota moratoriums on residential evictions. In addition, a priest and parishioners sued Alabama and California over restrictions on church services, and indoor mall owners sought to invalidate Los Angeles’s restrictions on mall operations. Prisoners also sued the Jacksonville Sheriff’s Department for allegedly exposing them to COVID-19.
In the commercial arena, the named plaintiff in a purported class action seeking ticket refunds from Sea World opted to appeal the dismissal of his complaint rather than amending. An accused price-gouger in New York agreed to donate personal protective equipment in exchange for a deferred prosecution. And in the chutzpah category, two students at NYU sued to annul their suspensions for attending parties in violation of the university’s social distancing rules.
We’ve previously reported on several biotech companies facing derivative lawsuits for alleged stock-price inflation and misleading shareholders. Now, the SEC has gotten involved and has sued another biotech company, Arrayit Corporation, alleging that it misled investors into believing that the company had created a COVID-19 test, and that it lied about the status of certain financial reports.
COVID-19 also continues to affect how public companies conduct their corporate affairs. Due to the pandemic, the French conglomerate owner of Louis Vuitton, Dior, and other luxury brands decided to back out of a merger deal with the American jewelry brand Tiffany & Co. Investors are now suing LVMH for fraud and violations of Sections 10(b) of the Exchange Act.
All Worlds Resort, a resort hotel in Palm Springs, CA, and one of its employees, were sued in California Superior Court this week for allegedly embezzling and converting funds received from the federal government as PPP loans.
In Georgia, the Department of Health and Human Services (“HHS”) and the Centers for Disease Control (“CDC”) were sued by a group of landlords and the National Apartment Association in a purported class action challenging the recent pandemic-related federal moratorium on evictions (the “CDC Order”). The lawsuit alleges that the CDC Order was promulgated in violation of the Administrative Procedure Act, deprives landlords of their rights to due process and access to the judiciary, and exceeded the scope of permissible federal power under the Tenth Amendment and the Supremacy Clause.
Similarly, landlords in Minnesota sued the Governor, claiming that his statewide executive order suspending certain eviction proceedings as a result of the pandemic violated their civil rights under the First, Fifth, and Fourteenth Amendments. Plaintiffs also argue that the Governor’s emergency powers do not authorize him to halt evictions.
In a previous Roundup, we reported that a judge granted SeaWorld’s motion to dismiss a class action alleging that the company continued to wrongfully charge its season pass holders fees even after the theme parks were closed due to COVID-19. The named plaintiff has now filed a statement of intent to appeal the dismissal rather than amend the complaint.
3M filed another lawsuit this week in the Central District of California alleging trademark infringement by defendants who allegedly made false and misleading representations that they were bulk buyers and distributors of 3M respirators with the ability to purchase billions of respirators. In reality, however, 3M contends that these statements were false and were made to aid in defendants’ scheme to defraud customers seeking personal protective equipment.
Challenges to mandates requiring masks and prohibiting gathering in person for church services continued this week, including a lawsuit filed against the Governor of Alabama. A priest has also sued the Governor of California alleging his ongoing “state of emergency” since March 2020 violates plaintiff’s civil rights, including the freedom of worship.
Meanwhile, a group of California indoor malls have sued Los Angeles County and its Board of Supervisors, alleging that the closure of the malls had no valid scientific basis yet deprived thousands of LA county residents of their employment, harmed businesses, and caused millions of dollars in lost wages and revenue. Plaintiffs contend that the malls have taken safety precautions, but that the county has discriminated against them. Two days after the complaint was filed, LA County announced it was reopening malls at 25% capacity, but with common areas and food courts to remain closed.
Relatedly, in New Jersey, a gym has sued the Governor seeking an order that it is entitled to compensation as a result of the statewide order forcing the gym to close due to the pandemic.
An inmate sued the Jacksonville Sheriff’s Department in state court in Florida, alleging that the Department wrongfully transferred 75 inmates, who had already been exposed to COVID-19, to a new housing situation that mixed them with “unexposed inmates.” The Department also allegedly failed to allow for appropriate social distancing by reducing prison populations.
In New York, a sneaker salesman pled guilty to hoarding and price gouging of personal protective equipment (“PPE”). Under a deferred prosecution agreement, he agreed to donate approximately $455,000 of PPE to hospitals, health care workers, and other first responders.
New York University was sued twice this week by undergraduate students who were suspended for allegedly attending parties that violated the university’s COVID-19 social distancing guidelines. Both suits seek to annul the suspensions.
Consistent with the inception of the COVID-19 pandemic, cases for wrongful denial of business interruption benefits continue to be filed, along the same lines as many prior cases.
COVID-19 has created internal strife in many small businesses. It has now also caused one dental office holding company to dissolve over its owners’ difference in opinion on how to treat patients during the pandemic.
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. Gillian Clow, Ryan Martin-Patterson, and Kaelyne Wietelman are litigation associates at the firm.