The 2020 Carlton Fields Class Action Survey—a report comprised of data from interviews with chief legal officers, general counsels and direct reports to general counsel at 400 large companies across a wide range of industries—was recently released.
The survey states that as of May 2020, corporate America is facing more than 500 new class action suits stemming from COVID-19 and shutdown-related matters. It further breaks down the new class actions associated with the pandemic and reports that:
- 25% have been filed against insurance carriers over business interruption coverage claims;
- 25% have been filed against educational institutions over tuition refunds;
- 10% have been filed against gyms, venues and other entertainment-related events;
- 8% have been filed against the airline industry and the government respectively; and
- 7% have been filed against financial institutions over Cares Act claims.
The survey conjectures that the full breadth of pandemic-related class action suits is yet to be seen, as risk remains prominent while the country continues to navigate the process of reopening.
The following details the types of class action cases that have seen an increase in filings since the start of the COVID-19 pandemic.
- Transmission and Failure to Warn Cases
One of the first pandemic-related class actions to surface was filed against the cruise line industry.
Beginning in mid-March 2020, Americans became increasingly aware of the situation emerging on many cruise ships, wherein passengers were forced to quarantine onboard as a result of discovering the presence of the coronavirus.
Subsequently, a series of class actions were filed against various cruise lines alleging that many were aware of the risk that the coronavirus posed to passengers and crew, yet failed to immediately implement proper physical distancing measures and other preventative precautions to curb the spread of the highly-contagious virus.
The suits allege that the cruise lines’ failure caused extended forced quarantine periods onboard the infected ships, resulting in a greater number of individuals falling ill. Generally, the causes of action include general negligence, negligent failure to warn, negligent infliction of emotional distress and intentional infliction of emotional distress.
- Tuition Reimbursement Class Actions
As the COVID-19 pandemic worsened in the United States, many educational institutions closed physical campuses and instituted online learning.
Despite campus closures, many colleges and universities declined to reimburse students for unused portions of the fees paid for room and board and other campus services no longer available to students, such as health facilities, student associations, athletic centers and on-campus dining.
In addition, students professed that online studies being offered were far inferior to on-campus learning and, consequently, seek partial tuition reimbursement.
Many class actions, similar in nature, were filed across the country for breach of contract, demanding reimbursement to students.
- CARES Act and Paycheck Protection Program Lawsuits
The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) is one of the largest economic relief programs ever introduced by the United States government and has been utilized by American businesses to maintain operations during the pandemic and accompanying shutdown.
In certain lawsuits filed regarding the CARES Act, plaintiffs allege that banks have failed to properly administer loans under the Paycheck Protection Program. Specifically, many are claiming that certain banks misused government funds available under the program by preventing qualifying small businesses from obtaining Small Business Administration loans, while extending preferential treatment to larger businesses and pre-existing banking clients.
Plaintiffs in the suits similarly seek monetary damages, as well as injunctive and declaratory relief.
- Membership Renewal and Season Pass Claims
Many Americans have paid for gym memberships or theme park season passes that are not currently usable. In some cases, these payments may be subscription-based and automatically charged on a recurring basis to the holder’s credit card, regardless of whether or not the facilities or services can be accessed.
Plaintiffs in the resulting lawsuits seek refunds of membership fees and seasonal pass payments made to businesses that are currently closed. The suits bring causes of action for breach of express warranty, negligent misrepresentation, unjust enrichment, conversion and breach of contract.
- Insurance Litigation
In the wake of the involuntary closure of many businesses, some companies have attempted to rely on insurance, only to be told by their carriers that losses due the COVID-19 shutdowns are not covered by the policies in place.
In several cases filed originally in Pennsylvania federal court, the presiding judge ordered the actions be transferred to state court. Judge Nora Barry Fischer of the Western District of Pennsylvania opined that if the federal court was to decide the matter, it would merely be predicting how Pennsylvania state courts would react to the novel issues surrounding denial of policy benefits. Judge Fischer went on to predict an influx of similar cases.
- Website Noncompliance with the Americans with Disabilities Act Lawsuits
While lawsuits centered on the Americans with Disabilities Act (“ADA”), may not immediately come to mind, the surge in online sales due to “stay at home” dictates may result in an increase in cases filed under the ADA.
As retail establishments continue to move further away from traditional brick-and-mortar stores to focus on online sales, such a shift demands increased compliance with ADA standards. Digital interfaces must be accessible to all, especially given the considerable move toward virtual communication and commerce.
- WARN Act Lawsuits
In the wake of the COVID-19 shutdown and the resulting rapid decrease in business activity, some Americans have found themselves suddenly without employment. This has triggered a large number of Worker Adjustment and Retraining Notification (“WARN”) Act suits to be filed in recent months. According to the federal WARN Act, an employer must provide 60 days written notice of intention to lay off more than 50 employees during any 30-day period.
There are only three circumstances under which the WARN Act 60-day notice period can be reduced: (1) unforeseeable business circumstances; (2) natural disasters and; (3) in the instance of a “faltering” company. Its important to note that thus far, the government has yet to provide guidance on whether these affirmative defenses to the WARN Act will apply to the circumstances surrounding the COVID-19 pandemic.
WARN Act suits have already been filed in several states.
The global nature of the current health crisis has encompassed every industry in its wake. As businesses operate or reopen and attempt to adapt to substantial operational shifts caused by the coronavirus and resulting government shutdowns, entities will still be held accountable for injustices, perhaps to an even greater extent. It is yet to be seen what the overall effect will be, but those outlined herein are likely to be at the forefront of resulting class action litigations.