Jason A. Levine, Peter E. Masaitis, Gillian H. Clow, Debolina Das, and Kaelyne Wietelman, Alston & Bird LLP
This past week saw several major pandemic-related legal developments, with important court decisions, continued litigation against employers, new lawsuits involving high-profile celebrities, and state legislation enacted to protect businesses from COVID-19 liability.
Federal district courts issued several decisions impacting the business community. In Pennsylvania, a district court judge struck down several of Pennsylvania’s statewide COVID-19 restrictions. In California, a district court dismissed a business-interruption suit against Travelers Casualty Insurance Company, and other district courts dismissed ticket refund cases filed against SeaWorld, TicketMaster, StubHub, and Live Nation.
Employers continue to face litigation stemming from the pandemic. This past week, employees sued for alleged failure to provide sufficient advance notice to employees of an impending business closure and for purported exposure to COVID-19 in the workplace. The Occupational Health & Safety Administration (“OSHA”) is taking action against employers as well. The agency recently imposed fines on several companies over their COVID-19 workplace protections.
In other new filings, property owners sued in Tennessee to challenge the constitutionality of the federal moratorium on residential foreclosures, and a coalition of gym owners sued the State of California for forcing their businesses to close for indoor exercise. A film production company working on a Ben Affleck film sued its insurer for coverage, and President Trump faces a lawsuit for his alleged dissemination of false information about the pandemic. On the flip side, the State of Ohio enacted new legislation designed to shield businesses from liability for COVID-19-related claims except under specific enumerated circumstances – making Ohio one of more than a dozen states with similar protections for businesses.
OSHA has recently ramped up its assessment of penalties against companies for not adequately protecting employees from COVID-19 exposure. This week, OSHA proposed fines for: Christus Shreveport-Bossier Health System in Shreveport, Louisiana; Hackensack Meredian Health Residential Care Inc. in New Jersey; JBS Foods Inc., a Brazilian-owned meatpacking company; and Smithfield Packaged Meats Corp. in Virginia.
Relatedly, California’s Division of Occupational Safety and Health proposed over $200,000 in penalties against Overhill Farms Inc. for exposure of employees to COVID-19.
Also in California, a group of current and former employees have sued Walmart for allegedly failing to maintain a safe and healthy workplace at its Chino Fulfillment Center. Walmart assertedly did not provide sufficient PPE and sanitation, or enact and enforce protocols like social distancing policies. Plaintiffs claim these purported lapses have resulted in at least 13 Chino employees contracting COVID-19, and they seek civil penalties under California state law.
As in most weeks, the surge of wrongful termination and wrongful denial of benefits cases continues. In the Middle District of Florida, employees of Fanatics Inc. filed a putative class action against the company for alleged violations of the Worker Adjustment and Retraining Notification Act (the “WARN Act”). Plaintiffs claim that the company did not provide sufficient advance written notice about the termination of their employment, which was due to COVID-19 impacts on the business. They seek back pay equal to their pay and benefits for the 60-day notice period required under the WARN Act.
As discussed in a prior post, a New York federal judge recently struck down various parts of the Department of Labor’s rule regarding eligibility for paid leave benefits under the Families First Coronavirus Response Act (“FFCRA”). In response, the Department issued a new “temporary rule,” effective September 16. It addresses the parts of the prior rule that were invalidated by: providing further explanation of the reasoning behind the work-availability requirement; emphasizing the need for approval from the employer for intermittent or periodic leave; updating the definition of “health care provider”; and clarifying issues about notice to employers of FFCRA leave.
Walmart Inc. is facing a negligence claim from a former employee because it allegedly refused his request for additional COVID-19 protection at work. Plaintiff is asthmatic. According to the complaint, he was placed into a medically-induced coma for three weeks and his wife passed away, allegedly from COVID-19.
In a watershed decision, a federal district court judge in the Western District of Pennsylvania invalidated Governor Wolf’s COVID-19-related orders that banned indoor gatherings of more than 25 people and closed all “non-life sustaining” businesses in the state. Plaintiffs comprised three different groups: several largely rural counties, Republican politicians, and various businesses. The court held that the limitations on indoor gatherings violated the First Amendment right to assemble, and that the closure of “non-life-sustaining” businesses violated the right to travel and the proprietors’ right to choose their own professions. The court also went further and ruled that these business closures violated plaintiffs’ equal protection rights under the Fourteenth Amendment, finding no rational basis for the regulations. Although the orders were not currently being enforced, they had not been revoked and were subject to possible reinstatement, and thus were not moot. This decision represents a departure from prior orders we have covered, which have typically invalidated COVID-19 restrictions on much narrower grounds or, in most cases, have upheld them. Governor Wolf has already appealed the decision to the Third Circuit, and we will continue to monitor the case for further developments.
As in prior weeks, we also continue to see other new suits alleging that various COVID-19-related restrictions infringe constitutional rights, including a suit filed in California against the Governor and other state officials. In that case, a group of gym owners seeks an order declaring that Governor Newsom’s closure order is null and void because the conditions relied upon as grounds to ban indoor fitness activities either did not actually occur or no longer exist.
Responding to the heightened threat of litigation, Ohio Governor Mike DeWine signed a bill into law that protects businesses, health care providers, and schools from civil liability for COVID-19-related wrongful death and personal injury lawsuits. The new law provides that there can be no liability unless a defendant engaged in conduct that was reckless, intentional, or “willful or wanton.” Ohio is now one of more than a dozen states with legislation of this type in place.
Finally, President Trump also finds himself entangled in COVID-19 litigation this week, facing allegations (presumably headed for dismissal on immunity grounds) that he disseminated false information regarding the pandemic.
In the Northern District of California, a court granted Travelers Casualty Insurance Co.’s motion to dismiss a coverage suit, holding that the company was not required to cover San Francisco-based retailer Mudpie, Inc.’s losses resulting from the pandemic-related shutdowns. Mudpie, the court concluded, did not allege that it suffered covered physical damage or physical loss of its property. An insurer in litigation in the Northern District of Texas has raised a similar argument in a motion to dismiss a coverage suit filed by dental offices.
A different variant of insurance litigation arose in a suit filed this week by a film production company. Plaintiff seeks to resume work on a Ben Affleck heist film that was put on hold due to the pandemic. Before that state of play can resume, however, the production company must hunt for the court’s good will and overcome what it contends are reindeer games: the insurer’s alleged refusal to extend its policy to cover production work during the pandemic.
In the Western District of Tennessee, a group of individuals and business organizations that own or manage residential properties have challenged the federal foreclosure moratorium put in place through December 31, 2020. Plaintiffs allege that the moratorium violates the Takings Clause of the Fifth Amendment by amounting to a taking of property without just (or indeed, any) compensation. Among other claims, plaintiffs also assert: a Fifth Amendment substantive due process claim because the federal agencies behind the moratorium wrongfully and irrationally purported to exercise their power; a Fifth Amendment procedural due process claim because plaintiffs have had no opportunity for a pre-moratorium hearing; and a violation of the Tenth Amendment and the Supremacy Clause because nothing in the authorizing statute or regulation gives federal agencies authority to issue the moratorium in contravention of the Contract Clause.
California district courts issued two important decisions in cases seeking ticket refunds this week. First, the Southern District of California granted SeaWorld’s motion to dismiss a consumer class action where plaintiffs claimed the company had violated several California laws because it did not refund monthly payments for annual passes despite the closure of parks due to COVID-19.
Second, the Central District of California granted a motion to dismiss filed by StubHub, Ticketmaster, and Live Nation in a class action brought by Major League Baseball fans who alleged they were owed refunds for tickets to cancelled games. Judge Fischer held that plaintiffs did not sufficiently allege that a conspiracy existed among the league, teams, and ticketing companies, and that the complaint’s allegations were unduly vague.
In a Florida lawsuit this week, an individual defendant was sued for falsely representing that he was acting on behalf of a defendant company in selling plaintiff a stockpile of PPE for $287,310 but failing to deliver it. The individual defendant allegedly embezzled the funds. Plaintiff has sued for breach of contract, fraud, and unfair and deceptive trade practices.
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, Debolina Das, and Kaelyne Wietelman are litigation associates at the firm.
