COVID-19 Litigation Roundup

June 1, 2020
Alston & Bird LLP

It was another busy week for litigation related to COVID-19, with scores of new filings – including interesting new variations on several old themes – and courts deciding several important cases. 

An Illinois court has again enjoined that state’s stay-at-home order as applied to an individual who sought an injunction against it, with the court criticizing the order in very harsh terms.  Similar challenges to stay-at-home orders were filed last week in four other states, and plaintiffs in two additional states sued to accelerate the pace of the “reopening” process.  Conversely, one state sued a gym owner, not only for reopening in defiance of a closure order, but also for competing unfairly with other gyms complying with the order.

Also on the government front, a Democratic Michigan state representative filed suit against the Michigan Democratic Party for effectively excommunicating her because she publicly stated that she had taken hydroxychloroquine for her COVID-19 symptoms – and then thanked President Trump for recommending it.  She claimed that the party defamed her by asserting she had “conspired” with the President. 

The government prevailed in a Paycheck Protection Program case, as the D.C. Circuit agreed with the Small Business Administration that lobbying firms are barred from receiving PPP loans. 

Plaintiffs asserted several new theories of recovery in different contexts. In the ADA realm, a visually-impaired plaintiff asserted that a retailer’s website violates the law because it is not compatible with a certain screen reader; the plaintiff also emphasized the heightened need for online access to consumer goods at this point in time. Under the WARN Act, plaintiffs claimed that a car rental company failed to provide required advance notice of a mass layoff caused by the pandemic. 

Crew members on a cruise ship claimed that their employer “trapped” them on board in unsafe conditions and without pay since March. And the daughter of a deceased COVID-19 victim sued a funeral home for improperly storing his (and others’) remains in an unrefrigerated truck. 

In addition, we continued to see many more purported class actions for refunds against universities, hotels, airlines, and event organizers.  Several government enforcement actions were taken with respect to allegedly fraudulent COVID-19 test kits and for price gouging personal protective equipment, including one prosecution for violation of the Defense Production Act.  More suits were filed against nursing homes for failure to protect, against employers in multiple industries for wrongful termination based on absences due to COVID-19 infection, against insurers for business interruption coverage, and against banks for their handling of PPP loans.  A prominent accounting firm was also sued for allegedly exposing the personal information of applicants for pandemic-related unemployment benefits.

                  Noteworthy COVID-19 Business Cases Filed Before May 28, 2020

Consumer Class Action Refund Claims

More class actions seeking refunds for services rendered impossible or impracticable by the COVID-19 pandemic were filed last week targeting universities, hotels, resorts, and airlines.  Organizers of athletic competitions likewise cannot escape these claims.  This past week, a purported class of purchasers sued the organizers of the Ironman and Rock ‘n’ Roll Marathon Series events for refusing to offer refunds in view of their cancellations. 

Misrepresentation/Fraud Claims

This week brings another government enforcement action against a company that allegedly made unsubstantiated claims regarding a COVID-19 test kit.  In California v. Wellness Matrix Group, Inc. dba Corona Stop 28, No. 20-STCV-19955 (Los Angeles Super. Ct., May 26, 2020), California alleges that the defendant falsely advertised at-home COVID-19 test kits because they were not approved by the FDA.

Actions Against Government Agencies

Challengers to “stay-at-home” orders had yet another victory this past week.  This time, an Illinois judge granted a TRO that stayed the Illinois stay-at-home order as applied to an individual plaintiff.  Although the judge found he did not have the power to issue a broader injunctive order, he had strong words about the scope and legality of the COVID-19 orders.  Among other choice turns of phrase, he described the orders as “devoid of anything even remotely approaching common sense,” calling them “royal decrees.”

New, similar challenges to stay-at-home orders have been filed against Mississippi, New Hampshire, North Carolina, and Texas.  Further, as states begin the reopening process, plaintiffs seeking to restart their businesses are beginning to challenge the scope and pace of the reopening orders.  Such challenges have been filed against Ohio and Florida.  As more states reopen in “phases,” we expect an uptick in these sorts of challenges.

Last, states continue to bring actions to enforce their stay-at-home orders.  A case from Washington is noteworthy on this front. There, the state alleges that by refusing to comply with the relevant order, not only is a gym putting Washingtonians in danger, it is also engaging in unfair competition with gyms that comply with the order.  Unfair competition is a new enforcement theory which, if accepted, would add some in terrorem power beyond merely requiring compliance with an order.

Americans With Disabilities Act

This week also brings another example of the plaintiffs’ bar weaponizing COVID-19 to bolster otherwise commonly pleaded claims.  In Fiallo v. Curv Group LLC dba Key Smart, No. 1:20-cv-3049 (N.D. Ill., May 22, 2020), a visually-impaired plaintiff alleges that defendant’s website is inaccessible to blind and visually-impaired users because it is incompatible with screen reader programs.  The innovation here is plaintiff’s contention that this is particularly harmful during the COVID-19 pandemic, given the heightened need for access to online retail outlets.

Further, as frequently seen in news reports, customers continue to challenge COVID-19 safety measures implemented by private businesses to reduce the risk of exposure, sometimes through the ADA. In Pletcher v. Giant Eagle Inc., No. 2:20-cv-00754 (W.D. Pa., May 26, 2020), a plaintiff alleges that she was forced to leave a grocery store for failing to wear a mask despite her claim that she has a medical condition that substantially impacts her breathing and respiratory system. The complaint asserts that defendant’s face mask policy, which requires masks with no exceptions, treats those with certain medical conditions as “lepers” and violates the ADA.  As we have previously noted, claims like this present retailers with a potential Catch-22.

Price-Gouging

In Pennsylvania, the Attorney General filed a lawsuit against EZ Dollar Plus, alleging that the discount store violated the state’s consumer protection and price gouging laws by selling face masks and hand sanitizer products for an “unconscionably excessive price” during Pennsylvania’s COVID-19 state of emergency.  The suit alleges that the challenged prices were more than 20% over the average price for similar products in the affected area during the same time.

In United States v. Romano, No. 5:20-mj-5276 (S.D.N.Y., May, 21, 2020), a New Jersey used car salesman was charged with operating a $45 million scheme to sell 7 million price-gouged N95 face masks to New York City – at 400% markup on the list price – despite having no way to fulfill the order.  The government alleges that Romano said his company was a personal protective equipment supplier, yet had no record of selling face masks or other PPE.  Romano was charged with wire fraud and conspiracy to commit wire fraud and to violate the Defense Production Act.

Lease/Rent

Tenants continue to file suits seeking to bar the collection of rent payments. In Bath & Body Works LLC v. 304 Pas Owner LLC, No. 052620-05 (N.Y. Sup. Ct., May 25, 2020), a Bath & Body Works store seeks a judgment that its rent is not due under its commercial lease because of the COVID-19 crisis.  On the flip side, landlords are filing suits to compel rent payments. In Pittsburgh, a restaurant has sought to break its lease, citing the COVID-19 pandemic, but the landlord has requested a declaratory judgment as to the meaning and intent of the lease contract’s force majeure provisions, and a ruling that the tenant breached its contract by repudiating the lease.

Failure To Warn Or Protect

Failure to warn lawsuits in the cruise and the nursing home industries continue to mount.  In Piasecki v. Princess Cruise Lines Ltd., No. 2:20-cv-4663 (C.D. Cal., May 26, 2020), a purported class of cruise passengers claims that the defendant knew at least one of its passengers had COVID-19 symptoms, yet still sailed.  And in Bedenbauh v. Encompass Health Rehabilitation Hospital, No. 2020-CP-4002459 (Richland County, S.C. Ct. of Com. Pls., May 22, 2020), a short-term rehabilitation patient claimed that the defendant negligently failed to protect her from exposure to COVID-19.  This week also brought a new nursing home case where the decedent was allegedly exposed to COVID-19 while residing in defendants’ nursing home.

A new type of case against a funeral home has been brought in New York.  In Shaw v. Dekalb Funeral Services, Inc., No. 1:20-cv-02327 (E.D.N.Y., May 25, 2020), the plaintiff filed suit after she learned that the funeral home she had entrusted with the cremation of her father’s remains was using an unrefrigerated truck to store bodies, including her father’s, due to a lack of space during the COVID-19 pandemic.  She asserts claims for breach of contract and fiduciary duty, mishandling of remains, negligence, intentional and negligent infliction of emotional distress, and violations of the New York Deceptive Trade Practices Act.  She seeks compensatory and punitive damages against the funeral home.

Workplace

Employment lawsuits continued to be hot this week.  In a twist on the typical layoff-inspired lawsuit, a proposed class action was filed against Enterprise Rent-A-Car, alleging that the company’s lack of written notice or warning that mass layoffs were coming was a violation of the WARN Act. Plaintiffs seek 60 days of compensation, benefits, and medical expenses. Benson v. Enterprise Holdings Inc., No. 6:20-cv-00891 (M.D. Fla., May 27, 2020).

The cruise industry has been the target of numerous lawsuits by passengers, but in Maglana v. Celebrity Cruises Inc., No. 1:20-cv-22133 (S.D. Fla., May 21, 2020), a purported class has sued Celebrity Cruises for allegedly “trapping” and continuing to hold since March Filipino crewmembers aboard its ships.  Plaintiffs claim they have not received wages, appropriate medical care, or safe working conditions.

This week also brought three new cases filed by employees claiming they were wrongfully terminated in retaliation for complaining that employers were not following COVID-19 safety precautions (here, here, and here). Additionally, two new lawsuits were filed for wrongful termination when employees could not come to work due to COVID-19 exposure risks (here and here), and another two  lawsuits were filed to challenge denials of leave benefits for pandemic-related absences (here and here).

Finally, employees continue to bring suits against food processing plants, most recently against Smithfield Foods for allegedly unsafe conditions.

Paycheck Protection Program/CARES Act

PPP-related lawsuits continued last week as well.  Suits were filed against another bank for allegedly failing to pay agents who processed PPP loans, and against additional financial institutions for purported delays and failure to process PPP applications on a first-come, first-served basis.

In an unpublished order from the D.C. Circuit, the American Association of Political Consultants lost its appeal of the district court’s denial of a temporary restraining order and preliminary injunction against the Small Business Association. The panel affirmed the district court’s ruling that the AAPC was unlikely to succeed in its challenge to a “nearly twenty-five-year-old regulation” that excludes “[b]usinesses primarily engaged in political or lobbying activities” from certain SBA loans, including PPP loans.

Insurance

As in prior weeks, this week brought new insurance coverage cases filed across many industries, from restaurants, to dental practices, distilleries, and even law offices.

Privacy

In Bozin v. Deloitte Consulting LLP, No. CV-20-932778 (Ct. of Com. Pls. Cuyahoga County, Ohio, May 21, 2020), efforts to expedite COVID-19 unemployment claims led to an alleged privacy breach.  Ohio hired Deloitte as a consultant to help speed up the processing of COVID-19 unemployment claims. A purported class alleges that Deloitte did not implement standard security measures and suffered a data breach, exposing the applicants to identify theft. 

Defamation/First Amendment

In Michigan, COVID-19 medical treatment, politics, and the First Amendment intermingled in a new lawsuit.  Karen Whitsett, a member of Michigan’s House of Representatives, brings defamation and First Amendment claims against the Governor of Michigan, as well as her state’s Democratic party and others.  Whitsett claims she was censured by the Democratic party after she disclosed to the public that she was prescribed hydroxychloroquine to help treat her COVID-19 symptoms and credited President Trump for advising her to try it.  Whitsett alleges that she was been wrongfully ousted from her political party and is thus unable to effectively represent her constituents, based on false allegations that she “conspired” with President Trump.

 

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.