Published

April 21, 2020

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

Alston & Bird LLP

Welcome to the second installment of the COVID-19 Litigation Roundup.  In addition to the nine types of cases we identified last week, new filings have fallen into five more important categories for business:

  • COVID-19 Service-Related Suits
  • Force Majeure/Impossibility Defense
  • “Essential Business” Exemption
  • Price-Gouging Litigation
  • Trademark Infringement

Courts have acted quickly in some cases, issuing decisions concerning employment, government loan programs, and services to nursing homes.  We’re also beginning to see certain areas of COVID-19 business litigation shape up as particularly prominent.  Consumer claims for refunds, employee claims relating to employers’ protective measures and alleged failures to warn, insurance claims, and high-profile private suits over perceived price gouging were on a distinct upswing last week. 

Check the Litigation Roundup weekly to track what courts are doing, how the balance among these categories of cases is shifting, and whether clear patterns emerge.  We’ll be your guide.             

 

Noteworthy COVID-19 Business Cases Filed Before April 16, 2020

1.     Consumer Class Action Refund Claims

Plaintiffs’ lawyers continue to file class actions seeking refunds for services rendered impossible (or commercially impracticable) by the pandemic. The first wave of lawsuits continues to focus on member fees for use of facilities, the travel industry, and live events. For example:

  • Hunt v. Vail Corp., No. 4:20-cv-02463 (N.D. Cal.). Putative class action alleging mountain resort operator retained millions of dollars in customer passholder fees while closing all mountain resorts due to the pandemic.
  • Shahriya Rezai-Hariri, et al. v. Magic Mountain LLC, No. 8:20-cv-716 (C.D. Cal.). Plaintiffs seek to represent a class of theme park season passholders who were charged membership fees despite the theme park’s closure.  Here is another similar complaint.
  • Yessica Jimenez, v. Do Lab Inc., No. 2:20-cv-3462 (C.D. Cal.).  Putative class action challenging a festival organizer’s purported refusal to provide refunds to ticketholders after cancelling its Lightning in a Bottle Festival.
  • Brandon Hill v. Spirit Airlines Inc., No. 0:20-cv-60746 (S.D. Fla.). This putative class action challenges an airline’s alleged refusal to provide cash refunds for cancelled flights. Similar class claims brought against other airlines have been filed across the country, as discussed in last week’s Litigation Roundup. 
  • Brian Hunt, et al. v. Fitness Evolution Inc. dba Fit Republic, No. 4:20-cv-2461 (N.D. Cal.). This is another class action against a fitness studio alleging that it wrongfully continues to charge monthly membership fees despite closing all locations.  Similar suits have been filed elsewhere, as discussed in last week’s Litigation Roundup.
  • Mitchell v. NurseCon at Sea LLC and Royal Caribbean Int’l, No. 1:20-cv-21503 (S.D. Fla.). Putative class action alleges that Royal Caribbean wrongfully refused to refund costs and fees paid for cancelled nurses’ convention. 

2.     Consumer Class Action  Misrepresentation And Failure-To-Warn Suits

Beyond refund claims, class action counsel continue to file tort suits alleging misrepresentation, false advertising, or failure to warn of risks associated with products or services in the COVID-19 era, such as:

  • Miller v. Gojo Industries, Inc. d/b/a Purell, No. 4:20-cv-00562 (N.D. Ohio). This putative class action alleges that Purell made misleading claims related to the effectiveness of its hand sanitizer. Plaintiffs focus on the claim that Purell “kills 99.99% of illness causing germs.” Interestingly, Plaintiffs have since voluntarily dismissed their complaint without prejudice. But similar claims are on file against Germ-X and Target.

3.     COVID-19 Service-Related Suits

Consumers and businesses have begun to file suits related to the provision of services specific to the COVID-19 crisis. For example:

  • Profiles, Inc. v. Bank of America Corp., No. 1:20-cv-00894 (D. Md.).  A purported class of small businesses sought a temporary restraining order to force Bank of America to suspend its policy of accepting Paycheck Protection Program loan applications only from small-business checking customers that either are already borrowers at the bank or aren’t borrowers at any other bank. The request for a temporary restraining order was denied on April 13, 2020, and an appeal has been docketed as Fourth Circuit Case No. 20-1438.

4.     Workplace Suits

Businesses across industries continue to face liability risks for alleged failures to protect employees and independent contractors from pandemic-related risks. For example:

  • Rogers v. Lyft, Inc., No. 20-cv-01938 (N.D. Cal.).  Three drivers filed an emergency motion to require Lyft to reclassify all of its drivers in California from “independent contractor” to “employee” status. On April 7, the court granted Lyft’s motion to compel arbitration and denied plaintiffs’ motion for an emergency injunction, noting that their hurriedly-filed lawsuit was “riddled with defects” and “the question whether Lyft drivers . . . qualify for California sick pay is less of an emergency than the plaintiffs suggest.” An appeal is pending as Ninth Circuit Case No. 20-15689. Similar claims are pending in Verhines v. Uber Technologies Inc., No. 3:20-cv-01886 (N.D. Cal.).
  • Nedeltcheva v. Celebrity Cruises Inc., No. 1:20-cv-21569 (S.D. Fla.). A cruise crewmember brought this putative class action alleging that Celebrity failed to follow safety precautions, such as providing crewmembers with masks and implementing social distancing measures.
  • King v. Trader Joe’s, No. 20-ci-02406 (Cir. Ct. Jefferson Cty. Ky.). In this wrongful discharge action, Plaintiff alleges that he was fired for creating a private Facebook group in which he and other employees voiced concerns about the company’s failure to implement safety measures to protect employees.

5.     Securities Class Actions

  • Brams v. Zoom Video Communications, Inc., No. 3:20-cv-02396 (N.D. Cal.). A purported class action brought on behalf of all persons who purchased Zoom securities from April 18, 2019 through April 6, 2020. Plaintiff alleges that Zoom made false and misleading statements regarding its data privacy and security measures, and that its stock price plummeted when the alleged deficiencies came to light.

6.     Force Majeure/Impossibility Defense

The impact of COVID-19 on parties’ contractual obligations is a subject of uncertainty and disagreement across industries, from construction to nursing home services. For example:

  • Bon Visage LLC v. Cannolo, No. CV 20 931787 (Oh. Ct. Com. Pl.). Defendant allegedly contracted to purchase the assets of Plaintiff's skincare and spa business but refused to close on the deal after the Governor of Ohio ordered the closure of all non-essential businesses.  Plaintiff seeks a declaration that the purchase agreement is valid and binding.
  • Lexington Healthcare Center of Bloomingdale, Inc. et al. v. Morrison Management Specialists, Inc., No. 1:20-cv-1949 (N.D. Ill.). This dispute between a nursing home operator and a contractor who provides food, cleaning, and laundry services presents the reverse of a force majeure scenario.  Both parties are trying to terminate the service contract they entered last year, but the court recently ordered the parties to maintain their contract through April 24 so that 1,600 senior citizens continue to receive essential supplies and services during the pandemic.
  • Concrete Structures Inc. v. Armory Builder III LLC, No. 508000/2020 (Sup. Ct. Kings Cty. NY). Plaintiff claims Defendant wrongfully terminated its construction contract after it notified Defendant that several of Plaintiff’s employees had symptoms of COVID-19 and could not report to the worksite. Seeking specific performance, Plaintiff maintains that its employee protection measures are appropriate and do not hinder its ability to perform under the contract.

7.     “Essential Business” Exemption  

State and local government orders requiring the closure of non-essential businesses have become ripe for litigation, such as:

  • Fratelli Designs LLC v. The Park Square Co-Owners Assn., No. 2020-22266 (Dist. Ct. Harris Cty. Tex.).  Plaintiff’s renovation of his condominium units came to a halt when building management prohibited all contractors from accessing residential units in light of COVID-19. Plaintiff sued, claiming that his contractors should be allowed to continue renovation work under the exemption for essential businesses in the stay-at-home orders.  The court granted Plaintiff’s motion for a TRO.

8.     Failure to Warn / Negligent Exposure Claims

The cruise industry has come under fire for its continued operations despite the risk posed by COVID-19. The industry’s troubles mounted this week with the filing of several new lawsuits alleging failure to warn and negligent exposure. For example:

  • Several lawsuits were filed against Princess Cruise Lines with respect to one of its cruises, alleging that Princess negligently set sail, failed to implement proper screening protocols, delayed ordering passengers into quarantine, and failed to adequately warn passengers of the risk of COVID-19. Archer v. Carnival Corp. et al., No. 3:20-cv-02381 (N.D. Cal.); Chao v. Princess Cruise Lines, No. 2:20-cv-03314 (C.D. Cal.); Dorety v. Princess Cruise Lines, No. 2:20-cv-02458 (C.D. Cal.).
  • Rumrill v. Princess Cruise Lines, No. 2:20-cv-03317 (C.D. Cal.).  Plaintiffs allege that Defendant negligently exposed passengers on the Ruby Princess to an unreasonable risk of harm by setting sail on March 8, failing to warn them of the risk, failing to implement proper screening protocols, and failing to quarantine any of the passengers. Similar allegations were made with respect to Costa Cruise Lines’ Costa Luminosa as well, in Nevis v. Costa Crociere S.P.A., et al., No. 0:20-cv-60759 (S.D. Fla.).

9.     Actions Against Government Agencies

Last week saw the filing of several important challenges to agency action (and alleged inaction) by States, public interest groups, and businesses.

10.     Privacy Lawsuits

As more businesses and individuals come to rely on video communications services in the wake of the pandemic, such services are finding themselves subject to increasing scrutiny over privacy practices.  This scrutiny has resulted in new privacy lawsuits, including:

  • Hurvitz v. Zoom Video Communications Inc. et al., No. 2:20-cv-03400 (C.D. Cal.).  Purported class action against Zoom Video Communications, Inc., Facebook, Inc., and LinkedIn Corporation alleging that Zoom unlawfully allowed Facebook and LinkedIn to gather Zoom users’ personal information for financial benefit.

11.     Insurance Coverage Claims

As the COVID-19 pandemic has caused many businesses to close their doors and others to lose revenue, insureds have filed insurance claims for business interruption coverage.  Representative cases include:

  • El Novillo Restaurant v. Underwriters at Lloyd’s London, No. 1:20-cv-21525 (S.D. Fla.). A purported nationwide class action of restaurants seeking a declaratory judgment of rights under their all-risk property insurance policies relating to business interruption coverage for COVID-19 related claims.  Plaintiffs allege the policies do not include an exclusion for viral pandemic.  Another purported nationwide class action alleging similar claims has been filed in Ohio state court (Torre Rossa).  Meanwhile, a group of Illinois restaurants had brought a substantively similar class action in the Northern District of Illinois. 
  • Geragos & Geragos, APC v. The Travelers Indemnity Co. of Connecticut, No. 20STCV14022 (Ca. Sup. Ct.).  Criminal defense attorney Mark Geragos filed suit on behalf of his firm against both Travelers and Los Angeles Mayor Eric Garcetti, alleging the firm has lost substantial business as a result of the pandemic and stay-at-home orders. Geragos has filed a similar complaint on his own behalf relating to losses sustained by a rental property he owns, as well as similar complaints on behalf of firm clients.
  • LH Dining LLC v. Admiral Indemnity Co., No. 2:20-cv-01869 (E.D. Pa.). Plaintiff restaurant alleges that its policy’s virus and bacteria exclusions do not apply because Plaintiff was forced to close its doors as a result of both state and local civil authority orders. Similar lawsuits have been filed by restaurant groups, barber shops, and other businesses in Florida, Texas, and Ohio, among other states.
  • Sanjay Singh; Royal Bengal Logistics Inc. v. E.T.I. Financial Corp.; Prime Property & Casualty Ins. Inc., No. 0:20-cv-60758 (S.D. Fla.). A pro se business owner seeks injunctive relief against its insurers alleging that they wrongfully cancelled his policy for failure to make premium payments.  Plaintiff alleges that he failed to make premium payments due to the COVID-19 pandemic and seeks reinstatement of the policy.

12.     Price-Gouging Litigation

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. Several price-gouging actions have now been filed, including:

  • 3M Company v. Performance Supply LLC, No. 1:20-cv-2949 (S.D.N.Y.).  3M filed a trademark infringement and price-gouging suit against Performance Supply, LLC alleging Performance falsely represented it was an authorized vendor of 3M-branded N95 respirator masks and offered to sell millions of masks at grossly inflated prices. 3M has also filed a similar lawsuit against Rx2Live.
  • Armas v. Amazon.com Inc, No. 2020-5653 (Fla. Cir. Ct.). Putative class action against Amazon.com in Florida state court alleging that Amazon charged unconscionable prices during a declared state of emergency for toilet paper and Purell hand sanitizer. 

13.     Trademark Infringement  

The COVID-19 pandemic has also given rise to trademark infringement claims by manufacturers of medical supplies.  In addition to 3M Company v. Performance Supply LLC, noted above, there is:

  • CoronaCide LLC v. Wellness Matrix Group Inc., No. 8:20-cv-00816 (M.D. Fla.).  A COVID-19 test kit manufacturer sued Wellness Matrix Group (WM Group) under the Lanham Act alleging that WM Group is falsely advertising and offering for sale CoronaCide’s COVID-19 test kits.  CoronaCide alleges that WM Group does not have any such kits in its possession and is not authorized to sell them.

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.

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