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INSIGHT: Businesses Better Brace for Post-Coronavirus Lawsuits

April 17, 2020, 8:01 AM

Most businesses are paying attention during this pandemic on exigent implications of the crisis in areas like health and safety issues, operations, regulatory compliance, and employment issues. But they should know that litigation related to their actions is brewing right around the corner.

Plaintiffs’ attorneys are already beginning to file a variety of commercial class actions targeting businesses’ reactions to the crisis and there is good reason to expect a wide array of novel pandemic-related consumer, product liability, negligence, and securities claims to arrive soon.

Consumer Class Actions

An 11-count complaint filed on March 27 in the Northern District of California seeks to represent a nationwide class of 24 Hour Fitness gym members who have been charged monthly gym dues while the national gym chain is closed in accordance with governmental directives.

On the same day, another plaintiff firm filed a class action against the Arizona Board of Regents challenging multiple universities’ and colleges’ decision to not refund students’ room and board fees after their campuses were closed for the remainder of the semester.

Similarly, the planners of a comics convention in New York just filed suit against a ticket processing company claiming it wrongfully withheld funds that should have been used to refund ticket purchasers when the event was canceled.

These actions, and more by the day, are narrowly focused on recovering sums paid for services that couldn’t be rendered due to the pandemic.

We can expect many more copycat suits of this same type, but the scope of consumer class actions that are likely to spring out of the pandemic undoubtedly will be broader. Class claims targeting insurers, travel-related businesses, and employers’ operation of essential facilities are all likely. Price-gouging claims may be one of the more common class claims pursued—generally, charging more than 10% above an item’s price before a state of emergency is declared is actionable, and plaintiffs’ attorneys will likely be watching carefully for any technical violations.

There may even be an increase in class claims that are not directly related to a specific pandemic impact but garner the attention of plaintiffs’ attorneys by virtue of the brighter light shone on the defendant as a result of the crisis.

An example is the recent putative class action (again, filed in the Northern District of California) against Zoom Video Communications Inc., claiming it failed to protect users’ personal information. Had Zoom not shot to such immediate prominence in the rush to schedule previously unnecessary virtual meetings for groups like teachers and at-home pupils, such suits may not have been filed.

Product Liability Claims

Experienced plaintiff firms are already planning to target manufacturers of personal protective equipment (PPE) that is alleged to have failed or is being foreseeably misused. Perhaps spurred by recent recalls of face masks and the single recall of over nine million surgical gowns, plaintiffs’ attorneys will be looking for any and all plaintiffs who can claim a harm as a result of using allegedly defective PPE products.

Likewise, claims that all manner of products marketed to protect individuals from infection failed to do their job or were misrepresented in advertising are likely to be commonplace. California’s attorney general has warned consumers to be on alert for false claims of Covid-19 cures, highlighting the sudden prominence of coronavirus “snake oil.”

Because many state laws do not require that an advertising claim be literally false—just likely to mislead—claims for false advertising and violations of consumer protection statutes will likely focus on any questionable coronavirus-related products.

General Negligence Claims

Recent strikes organized by groups of Instacart and Amazon fulfillment workers highlight growing concern among workers about the conditions of their work. These concerns are likely to spread to workers in the fields of health care, construction, sanitation, and many others on the front lines of businesses deemed to be essential services.

The grievances expressed by these workers could easily translate into individual, mass, or class claims alleging unsafe work environments, or if a workplace has a spike of infections, claims that employers negligently failed to protect workers. Shortages of PPE in various sectors could make such claims common.

The FDA’s emergency authorization of anti-malarial drugs to treat severe cases of coronavirus and other similar steps that may soon be taken to hurry the availability of treatments and vaccines to address Covid-19 could also very well spur a future generation of pharma litigation.

Securities Claims

As with any economically tumultuous time, the Covid-19 crisis will undoubtedly lead to an increase in stock-drop litigation and shareholder derivative actions, as well as increased governmental agency investigations.

Plaintiffs’ attorneys may try to establish that a company’s disclosures inadequately warned about the nature or scope of risks it faced from a pandemic, similar to what plaintiffs claimed after the SARS and Ebola outbreaks. The first sign of this new wave of securities litigation may be an increase in shareholder plaintiffs making record requests for documents reflecting a board’s evaluation of pandemic risks.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Scott Elder is a partner and leader of Alston & Bird’s Products Liability team. He represents corporations in mass torts, class actions, and other complex litigation, from inception through trial, throughout the U.S.

Peter Masaitis is a trial attorney on Alston & Bird’s Products Liability team. He focuses his practice on toxic torts, consumer class actions, and business-to-business disputes, and has significant experience representing China-based companies in U.S. litigation.

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