Top Developments in COVID-19 Litigation

March 15, 2021

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

OVERVIEW

This week’s top COVID-19 litigation developments involve: the dismissal for mootness of a refund class action filed against Capital One Bank; a guilty plea in a large price-gouging case; a new business-interruption insurance suit filed by Madison Square Garden entities; and Wisconsin’s new COVID-10 liability shield for businesses, government entities, and tribes.

1. Capital One Refund Lawsuit Dismissed as Moot

Overview: The U.S. District Court for the District of New Jersey dismissed claims against Capital One Bank for allegedly failing to refund canceled flights due to the COVID-19 pandemic, because the case had become moot.

Opinion: Ellen Fensterer filed a proposed class action complaint against Capital One, accusing it of failing to refund her for plane tickets for a trip to Athens, Greece in April 2020 that was canceled due to pandemic travel restrictions. Fensterer alleged that the bank would not offer cash refunds or return her reward points for these tickets. But Capital One presented evidence showing that it had processed a full refund for Fensterer from the airline, including her reward points. So, even though Fensterer argued that she still had a concrete interest, the Court found that the case was moot and dismissed it with prejudice, because the class had not yet been certified. The district court recognized that some courts have allowed named plaintiffs whose claims are mooted to continue to serve as class representatives to avoid a defendant “picking off” plaintiffs to escape class certification, but concluded that such relation back was not appropriate in this case, where the refund was issued by the airline, not the bank. 

Our Take: We have previously covered class actions related to airline (and other) refunds during the COVID-19 pandemic, and this case shows how a fundamental flaw in the named plaintiff’s claim can be used to achieve dismissal before certification. We will see if other companies attempt to fend off refund litigation by issuing their own refunds and, if they do, whether courts accept such refunds to moot the claims or invoke the relation-back doctrine.

2. New York Pizza Restaurant Owner Pleads Guilty to PPE Price-Gouging

Overview: New York resident Imran Selcuk pleaded guilty to a charge of price-gouging for hoarding 100,000 KN95 facemasks and 25,000 surgical facemasks.

Plea Agreement: Selcuk bought approximately 100,000 KN95 facemasks at $1 per mask and 25,000 surgical facemasks at $0.50 from March 2020 to May 2020. He stored the items in his basement and at his pizza restaurant in Troy, New York. He sold the KN95 facemasks from his pizza restaurant and on a website for prices ranging from $4.50 to $10 apiece, and he attempted to sell them on eBay before it blocked his listings for price-gouging. Selcuk sold the surgical facemasks for $1.20 to $1.50 apiece. Selcuk also admitted to falsely advertising that the masks were certified by the FDA. He ended up selling only about 500 units, and law enforcement discovered most of the facemasks in a search of his restaurant. He faces up to a year in jail and up to a $10,000 fine in addition to the money he lost due to his failed scheme.

Our Take: Opportunists like Selcuk have attempted to profit from people’s fears during the pandemic. The consequences for hoarding and price-gouging can be stark, however, and the authorities pursue price-gouging cases with vigor.

3. Madison Square Garden and New York Knicks Sue Insurer

Overview: On March 5, 2021, the entity that owns the New York Knicks and Madison Square Garden sued their all-risk insurers in New York Supreme Court for financial losses related to COVID-19.

The Complaint: The complaint alleges that various Knicks and Madison Square Garden entities maintain all-risk insurance coverage with one or more of the defendant insurers. When writing the policies, none of the insurers elected to use the standard form “Exclusion of Loss Due to Virus or Bacteria.” The Madison Square Garden entities filed claims for losses due to the economic downturn caused by COVID-19 and shutdown orders.

Plaintiffs allege that defendants denied those claims, maintaining that coverage for “all risks of physical loss or damage” does not include loss of revenue due to the COVID-19 pandemic.  Defendants also maintained that, even if COVID-19 losses did constitute physical loss or damage, the “contamination” exclusion would apply.  And although the Madison Square Garden entities had obtained supplemental Communicable Disease Response and Interruption coverage, the insurer allegedly said it would not pay for such coverage unless and until “there has been any reported case of COVID-19 at any of the [Madison Square Gardens Insureds’] insured locations.” The Knicks and Madison Square Garden entities allege breach of contract and breach of the duty of good faith and fair dealing.

Our Take: This blog has covered all-risk insurance suits several times in 2021 alone.  In the main, claims against all-risk insurers for COVID-related damages have failed to achieve the desired results.  While this suit also faces an uphill battle, we will watch it to see if perhaps some unique element of the policies or a quirk in New York insurance law will work to the benefit of the insured parties.

4. Wisconsin Passes COVID-19 Immunity Bill for Businesses and Government Entities

Overview: On February 25, 2021, Wisconsin Gov. Tony Evers signed 2021 Wisconsin Act 4,  which shields businesses in Wisconsin from certain COVID-related liability.

The Bill: The new law provides certain entities with immunity from suits for the death or injury of any person, or damages to any person, caused by COVID-19. The entities protected include businesses, state and local governments, and tribes, and includes acts committed by their agents, employees, or contractors. Immunity only extends to acts “in the course of or through the performance or provision of the entity’s functions or services,” and does not apply to reckless, wanton, or intentional conduct. Thus, the bill largely serves to protect enumerated entities from suits alleging damages due to negligent transmission of or exposure to COVID-19. The bill does not apply to currently pending suits, but will apply retroactively to all other claims going forward.

Our Take: Wisconsin is not the first, nor will it be the last, state to pass a type of immunity shield related to COVID-19. A similar bill currently pending in the Florida House of Representatives would make Florida the largest state to pass such a bill. Without a similar federal bill, which currently appears unlikely, the patchwork of state-by-state developments is likely to continue.

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