COVID-19 Litigation Report – July 2020 #1

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Using timely research, Blank Rome’s COVID-19 litigation team provides a weekly report highlighting the latest cases and updates in key litigation areas, such as workplace claims, class actions, breach of contract claims, and more. The team also looks at emerging trends surrounding the pandemic and offers practical considerations for your business needs.  


TRENDS THAT WE ARE SEEING:

  • Discrimination and unlawful termination claims due to employers’ alleged actions in failing to properly consider an employee’s situation during the pandemic.
  • Contract claims based upon a failure of performance due to COVID-related cancellations or other pandemic-related reasons.
  • Class actions seeking the return of monies paid for services that were never delivered due to the pandemic.
  • Insurance suits seeking coverage for losses due to business closures required by governmental orders and pandemic issues.

PRACTICAL CONSIDERATIONS:

  1. Follow CDC Guidelines, and any state or local orders, for your workplace, and make periodic updates to your business reopening guidelines.
  2. Consider all potential COVID-related arguments that will made by employees when contemplating any termination decision; carefully consider requests for employee accommodations, and properly document.
  3. Consider all contract claims for cancelled events and failed deliverables due to COVID.
  4. Seek advice from insurance counsel if unable to obtain coverage from an insurer that has denied coverage during the pandemic.
Subject Matter Case Details

Workplace Claims

  • Masks (Texas): worker-cashier removed her mask to catch her breath, and her managers “harassed her” even though she had been struggling to breathe; alleged that the store’s air conditioning was not working and she was “forced” to wear a mask; seeking $5 million in emotional pain, distress and loss of employment.
  • Personal protective equipment (Texas): worker refused to “re-use” PPE at an assisted living facility during pandemic and was then fired.
  • Breach of fiduciary duty (Idaho): employees, while working from home, started a competing business and failed to work hours for employer; upon resignation, employees allegedly stole files with confidential and proprietary information and office furniture.
  • Trade secrets (Virginia): employee removed trade secrets and customer lists while business was temporarily closed due to COVID.
  • Retaliation claims (Ohio, North Carolina, and Texas): workers notified their employers of being unable to return to work because of having to stay home to care for children whose schools were closed because of COVID; workers were then fired.
  • Failure to pay overtime (New York): union alleged State failed to pay (or miscalculated) overtime to workers who worked overtime fielding calls to the COVID health hotline and assisting with unemployment claims.
  • Disability discrimination (Illinois): visually impaired customer could not access defendant’s online services to research products during pandemic.
  • FMLA (Tennessee): school district refused to pay a teacher who had taken leave to adopt a child, contending that schools were closed because of the pandemic.
  • Discrimination (Texas): company fired employee who self-quarantined after feeling COVID symptoms and then testing positive; company refused to pay sick time.
  • Age discrimination (California): over 60-year old worker had been harassed about retiring and his medical history, including Alzheimer’s and having COVID; worker was forced to take a fitness test under the guise of weeding out older employees, then demoted, and wrongly placed on a performance plan.
  • FMLA (South Carolina): worker was wrongfully fired after missing seven workdays after being ill with COVID and missing another five workdays because her son’s daycare was closed because of the pandemic.
  • Short pay (Texas): employee complained that she received less than full pay while on furlough and then was fired.

Class Actions

  • Unfair Credit Reporting (California): Credit reporting services wrongfully reported negative remarks on students’ credit reports for being delinquent in making student loan payments.
  • Tuition and fees for higher education (Texas, Washington, and New York): students who were not offered refunds sued universities for fees paid for classes that changed from in-person to online and students were deprived of their campus facilities
  • Securities (Florida): cruise line allegedly made false representations about its COVID safety precautions; when these representations were discovered to be false, the share price dropped drastically, affecting stockholders.
  • Workplace (California): meat processing company allegedly forced sick employees to work through pandemic, spreading the virus and causing further sickness.
  • Cares Act (California): banks allegedly failed to pay fees to accounting company for its work in assisting small businesses in obtaining federally guaranteed loans through the Paycheck Protection Program.
  • Automobile insurance (Illinois): insurer allegedly profited from pandemic from charging excessive premiums to drivers even though the pandemic drastically reduced driving.

Breach of Contract Claims

  • Arkansas: Companies made buyer believe it could deliver COVID PPE and failed to do so and refused to return nearly $1 million deposit.
  • California: Buyer made an $8 million deposit for respirators to assist with pandemic; company never delivered and refused to return the deposit.
  • Florida: Landlord of sports bar has alleged sports bar has gone into default on a lease following being closed because of the pandemic.
  • Missouri: Company refused to welcome plaintiff’s customers during COVID pandemic, as was required by their agreement.
  • New Jersey: Franchisor allegedly wrongfully attempted to force franchisees into modifying eTutoring agreements due to COVID, which impacted franchisees ability to provide in-person tutoring services.
  • New York: Buyer’s mortgage commitment was withdrawn due to pandemic and seeks specific performance from seller nonetheless or the return of down payment.
  • New York: Landlord has demanded event facility to re-open its outdoor space even though orders from New York State prohibited it.
  • New York: Borrower missed a payment on a mezzanine loan due to pandemic, and lender began allegedly unreasonable actions, including an auction without fully informing the borrower.
  • Texas: Because of pandemic, dock owner could not keep up with repairs on a dock that it leases to a restaurant and cut off access to the restaurant.
  • Texas: Borrower failed to make a payment and access to account was then cut off during pandemic

Weddings and Other Event Cancellations (Contract)

  • Cancelled wedding due to COVID, and facility is refusing to return deposit (Alabama & New York).
  • Event was cancelled due to COVID, and facility refused to return deposit (Texas).
  • Group trip was cancelled because of COVID and tour company refused to refund payments (Florida).
  • Performance by musical artist was cancelled because of COVID and artist refused to return payment (Ohio).

Insurance Coverage

Several suits alleging business interruption and revenue/profit losses by restaurants, retail stores, hotels, casinos, salons and spas, an orthodontics office, a production company, and a knife sharpening business (Pennsylvania, California, Florida, Illinois, Ohio, Minnesota, and New Jersey). Other cases:

  • Florida: Insurer allegedly failed to cover medical spa’s business interruption losses, issuing a reservation of rights letter that excludes coverage from “pathogens,” and the policyholder has contended that ROR letter is vague and ambiguous.
  • New York: Insurer failed to provide coverage to movie theater after it was forced to shut down due to COVID; policy allegedly includes coverage for action required by a “civil authority” and even though governments had closed movie theaters, insurer refused to provide coverage.
  • Insureds have filed class actions, alleging that insurers have wrongly denied business interruption coverage (barbershops (California); baking company (Massachusetts); higher education university (Missouri); restaurants (Missouri)). 

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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