California Federal Court Provides Insight On The Viability Of Class Waivers In The Era Of COVID-19

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Seyfarth Synopsis: In a recent decision from the U.S. District Court for the Central District of California, the Court examined the viability of class action waivers in the face of claims that the defendants’ negligence led to an outbreak of COVID-19. Ultimately holding that the class waivers previously signed by the plaintiffs were enforceable, the Court’s analysis gives some hope to employers that class action waivers signed by employees may be enforceable even against claims involving COVID-19. The opinion – in Archer v. Carnival Corp. and PLC, et al., No. 2:20-CV-04203, 2020 WL 6260003 (C.D. Cal. Oct. 20, 2020) – is a must-read for all employers and class action practitioners.      

Case Background

Plaintiffs in this case were passengers aboard Defendants’ Grand Princess cruise ship on February 21, 2020, when it departed from San Francisco bound for Hawaii. Prior to the departure for Hawaii, the ship had been on a roundtrip voyage from San Francisco to Mexico. Upon arrival back in San Francisco, the plan was for the ship to off-load all but 62 passengers and then board passengers for the Hawaii cruise. However, some of the passengers on the cruise to Mexico had contracted COVID-19, which led to an outbreak on the ship.

Plaintiffs filed a class action against Defendants asserting claims of negligence and infliction of emotional distress, alleging that: (i) Defendants knew or should have known about the risk of a COVID-19 outbreak on the ship, as they knew ships created a heightened risk of a viral outbreak; (ii) several international organizations had issued statements recognizing the severity of the situation; (iii) Defendants had an outbreak on another of their ships; and (iv) at least one passenger had been suffering from COVID-19 symptoms, but the ship set sail without providing personal protective equipment or putting in place other measures to prevent spread.

Plaintiffs filed a motion to certify the class. Defendants opposed the motion, primarily arguing that Plaintiffs were precluded from bringing a class action because they had signed a class action waiver as part of their Passenger Agreement with the cruise lines.

The Court’s Opinion

In considering Plaintiffs’ motion for class certification, the Court examined Defendants’ argument that the class waiver signed by Plaintiffs in the Passenger Agreement precluded the class from being certified. To determine whether the class waiver was enforceable, the Court analyzed the waiver using the “reasonable communicativeness test” under federal common law and maritime law, which is used to ascertain the enforceability of contractual provisions attached to passenger tickets. The test involves two prongs: first, the Court examines the physical characteristics of the provisions in question to determine the ease with which the an individual can read them; and second, the Court looks at the circumstances surrounding the purchase and retention of the ticket and corresponding contractual provisions and the opportunity for the individual to review them.

Hence, the Court examined the physical characteristics of the class action waiver. When passengers booked tickets through Defendants, the passenger was first required to review the Passenger Agreement and affirmatively agree to its provisions before finalizing the booking. The Agreement also contained several examples of advisory language to passengers, including bold language reading “IMPORTANT NOTICE” relative to the waiver of certain rights of the passengers. The Court found that these provisions were conspicuous enough to pass the first prong of the test.

As to the second prong, the Court noted that after passengers agreed to the provisions of the Passenger Agreement, a PDF copy of the Agreement was sent to their email addresses, allowing them to review the provisions at any time. The Court determined that this satisfied the second prong of the reasonable communicativeness test, as passengers had access to familiarize themselves with the Agreement’s terms whenever they chose.

Although the class action waiver satisfied the reasonable communicativeness test, Plaintiffs argued that the waiver should not be enforced based on the principles of fundamental fairness and unconscionability, as well as a matter of public policy. However, because Plaintiffs did not submit any evidence of a bad faith motive, fraud, overreaching, or that Defendants attempted to limit passengers’ substantive rights to bring a claim against the cruise line, the Court rejected these arguments. Instead, it held that the waiver was enforceable.

In light of the enforceability of the class action waiver, the Court declined to address any other arguments relative to class certification and denied Plaintiffs’ motion to certify the class.

Implications

The ruling in Archer gives some hope to employers that class action waivers signed in the employment context may be enforceable even in cases involving outbreaks of COVID-19. Although this case falls outside of the employment realm and involved interpretations of maritime law, employers should note the general principles that agreement terms involving the waiver of rights or otherwise available procedures, like class action waivers, should be conspicuous and easily accessible and apply such principles to their own agreements with employees.

This case was one of the first to interpret these principles in the era of COVID-19, and developments in this area will continue to be tracked by us here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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