Procedural Check-In on COVID-Related Litigations
As COVID-19 developed into a global crisis, many legal experts have speculated as to which lawsuits were likely to rise to the forefront. Seven months into the pandemic, here is a snapshot of the procedural status of some of the resulting litigations:
Tuition Reimbursement Class Actions:
Tuition reimbursement suits are likely to rise in popularity and frequency as the pandemic stretches into another academic year. An increasing number of college campuses are reporting COVID-19 cases on premise while grappling with students who refuse to heed social distancing guidelines. As such, many higher education institutions have been forced to revert back to an online learning format. Lawsuits surrounding the issue first began to surface in April 2020, as parents and students found themselves deadlocked with collegiate institutions that refused to refund a portion of students’ massive tuition bills after campuses shut down and classes transitioned to an all-digital format.
Many of the suits in the litigation similarly allege that plaintiffs are entitled to a reimbursement for the unused portions of tuition fees, room and board and other campus services no longer available to students such as health facilities, student associations, athletic centers and on-campus dining plans. Currently, defendant collegiate institutions are attempting to fight the cases by claiming that the fees in question represent a flat rate paid by all students whether they use the included services or not, and that the cases should be barred in many states as they constitute educational malpractice. It is unlikely that the defendants will succeed and there is a high probability that additional cases will be filed as further campus shutdowns occur.
WARN Act Suits:
As it became clear that the pandemic and its effects would present long-term issues, many companies began to furlough and, in some cases, subsequently fire employees at astonishing rates, often times without adequate warning in violation of the federal WARN Act. According to the WARN Act, an employer must provide 60 days written notice of the intention to lay off more than 50 employees during any 30-day period.
Several lawsuits have been filed citing the WARN Act. Notably, class claims were filed against Enterprise Leasing Company in federal court in the Middle District of Florida in May 2020. More recently, in September 2020, former employees of sports fan apparel company Fanatics Inc., filed suit against the company claiming it failed to give notice as required under the WARN Act before laying off hundreds of employees who had already been furloughed. In the complaint, the plaintiffs allege that the sudden layoffs deprived class members and their families of adequate time to adjust to the loss of employment, to seek and obtain new employment and to, if necessary, secure skilled training or retraining that would have allowed them to successfully compete in the job market. The complaint argues that despite the unforeseen circumstances presented by the pandemic, the defendants were still mandated by the WARN Act to give plaintiffs as much notice as is practicable, which they failed to do when they gave former employees just four days’ notice.
Plaintiffs in WARN Act suits are similarly asking for wages and benefits equivalent to 60 days of employment, as well as damages for any medical expenses incurred by plaintiffs that would have previously been covered by insurance through their former employers.
CARES Act PPP 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 many American business to maintain operations during the pandemic and subsequent shutdown. However, the CARES Act and its Paycheck Protection Program (“PPP”) have not been without controversy.
Many lawsuits have been filed since the start of the program, alleging that banks failed to properly administer loans under the PPP. These suits have been ongoing since nearly the onset of the shutdown and new cases continue to be filed. Recently, progress was made in the suit between Wells Fargo and a class of shareholders who allege that the bank hurt investors by mismanaging its PPP lending. Northern California District Judge Richard Seebord announced the lead plaintiff and lead counsel in the litigation on September 8, 2020.
Plaintiffs in the Wells Fargo litigation specifically claim that Wells Fargo made false/misleading statements and failed to disclose that (1) Wells Fargo planned to, and did, improperly allocate government-backed loans under the PPP and/or had inadequate controls in place to prevent such misallocation; (2) the foregoing foreseeably increased the company’s litigation risk with respect to PPP allocation, as well as increased regulatory scrutiny and or potential enforcement actions and; (3) as a result, the company’s public statements were materially false and misleading at all relevant times.
Insurance Business Interruption:
In the wake of the involuntary closures, many businesses have been informed by their insurance carriers that losses incurred due to the COVID-19 shutdown are not covered by their policies. These cases have struggled a bit to find their footing. In August 2020, California federal court Judge Stephen V. Wilson ruled that the Travelers Indemnity Co. of Connecticut is not required to cover an Los Angeles restaurant’s claims stemming from the pandemic because the plaintiff was not entitled to coverage under the policy, as it hasn’t suffered any “direct physical loss or damage to the property” under California law.
The court held that physical loss or damage occurs only when property undergoes a “distinct, demonstrable, physical altercation.” However, legal experts caution attorneys not to be hasty in discounting COVID-19 insurance coverage cases and advise that there will be differing approaches in different courts, which will depend on specific facts of each situation. There will likely be more suits of this nature filed, as well as several appeals, in the coming months.
Cruise Industry Failure-to-Warn and Transmission Suits:
Lawsuits against the cruise industry were some of the first class action suits filed in response to the COVID-19 pandemic, as cruise ships became some of the first locations of publicized outbreaks of the coronavirus. Just months into the health crisis, almost all of the major cruise lines had been named as defendants including Carnival, Celebrity and Princess.
Plaintiffs in these suits alleged that the defendant cruise lines were aware of how quickly the virus spread on board, but failed to enact a quarantine or any physical distancing measures for either staff or passengers for the duration of the voyages. Due to the operators’ failure to properly respond, both crew and passengers were put at risk and in several cases became sick with COVID-19.
The suits bring causes of action for general negligence, negligent failure to warn, negligent infliction of emotional distress and intentional infliction of emotional distress. However, the cruise industry has been fighting back against these suits. In July 2020, plaintiffs in a proposed class suit made up of Celebrity Cruise employees, removed their suit from Florida federal court stating that the class members’ experiences with COVID-19 were too unique for a class suit and that the plaintiffs would file suit individually. In general, cruise line defendants have similarly argued that class members don’t have enough commonality in terms of injury to make up a class. Like insurance interruption cases, the cruise line cases are likely to see a turnaround in the appeals phase.
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