This seventh edition of Unprecedented, our weekly update on COVID-19-related litigation, sees a continuation of the trend we identified last week: shutdown challenges, workers' compensation claims, and wrongful death lawsuits have dominated the past week’s news cycle. We expect these latter two types of cases, which we consider more broadly as COVID-19 exposure cases, to pick up significantly as the country reopens over the next several weeks.
We hope you find these cases, and the questions they raise, to be informative.
Will the challenges over shutdown orders burn out once restrictions are lifted?
This past week once again saw a significant number of lawsuits, and even orders, in cases challenging government-imposed restrictions on businesses and individuals. Although we ask here whether these lawsuits will burn out once restrictions are lifted, the question is rhetorical. We believe it is far more likely plaintiffs will shift focus and, rather than seek to enjoin shutdown orders, seek instead damages for any harm the shutdown orders are alleged to have caused. These early cases thus offer a view into how courts may treat the critical issue of liability going forward.
Michigan Governor Whitmer already has been the target of several lawsuits over her shutdown orders, including one filed by the Michigan Legislature. But, the most recent is reported to be the first shutdown-related lawsuit filed by medical providers and a patient. Their complaint, filed in the U.S. District Court for the Western District of Michigan, alleges the prohibitions on non-essential medical services have brought their businesses to the brink of insolvency while also denying patients important, or even life-sustaining, care. In addition to due process, equal protection, commerce clause, and state constitutional claims, the plaintiffs challenge Governor Whitmer’s authority to perpetuate shutdowns when the Michigan Legislature has refused to consent to an extension of the state of emergency. The complaint is available here.
In a case involving a Kentucky Baptist church, the U.S. District Court for the Eastern District of Kentucky entered an order temporarily restraining Kentucky Governor Beshear from prohibiting in-person religious gatherings that comply with social distancing and hygiene guidelines. This means that there is not only a split between the two federal district courts in Kentucky—with the Western District earlier denying injunctive relief before being partially reversed by the Sixth Circuit—but also within the Eastern District itself. The distinguishing factor in the courts’ decisions is whether they believe the shutdown orders to be laws of neutral and general application, in which case the government is entitled to deference, or not, in which case the government must narrowly tailor the laws to advance a compelling governmental interest. News coverage is available here, and the opinion is available here.
In neighboring Illinois, however, the U.S. District Court for the Northern District of Illinois refused a Baptist church’s request for an injunction against that state’s restrictions on in-person religious services. Like the other courts that have rejected First Amendment free-exercise clause challenges, the Court held the shutdown order was neutral and of general application, which led the Court to conclude that the restrictions were justified by public health responses to COVID-19. The Court then swiftly rejected the church’s First Amendment establishment and free-speech clause challenges. The Court’s opinion is available here.
In another Illinois shutdown case, the Supreme Court of Illinois declined to allow Governor Pritzker a direct appeal from a trial court order that enjoined the enforcement of that state’s stay-at-home order as it applied to Republican State Representative Darren Bailey. Although another setback for Governor Pritzker, the Court’s order does not resolve the case but instead requires the Governor to first litigate his case in the intermediate appellate court. The Court’s order is available here.
And yet another Illinois shutdown case, brought by Illinois Republican Party officials and small business owners, alleges that Governor Pritzker and Illinois have taken their property without just compensation in violation of the federal and state constitutions. Although many other shutdown challenges have included takings claims, most have done so as part of a request for injunctive relief. And, to our knowledge, this is the first shutdown challenge to focus exclusively on alleged takings clause violations—thus putting the issue front-and-center before the Court. The complaint is available here.
In North Carolina, the U.S. District Court for the Eastern District of North Carolina temporarily restrained Governor Cooper from enforcing restrictions on in-person religious gatherings. In a twist on other state’s orders, North Carolina’s allowed religious groups to meet indoors if they could certify it was not possible to meet outdoors instead. Even so, applying the same heightened scrutiny as the other courts that have ruled in favor of religious plaintiffs, the Court held the restrictions were not narrowly tailored because hygiene and social distancing requirements could achieve the same compelling interest in preventing the novel coronavirus’s spread. News coverage is available here and here and here, the complaint is available here, and the opinion is available here.
In Virginia, a Gold’s Gym franchisee has appealed a Culpepper County Circuit Court’s order that refused to enjoin Governor Northam’s restrictions on health and fitness facilities. News coverage of the appeal is available here, and the docket for the appeal before the Supreme Court of Virginia is available here by searching for Record # 200582.
In a highly publicized lawsuit out of California, Tesla sued Alameda County over county-wide orders that closed down Tesla’s Fremont manufacturing facility. In addition to the standard due process and equal protection claims, Tesla alleged Alameda County’s orders were internally contradictory and preempted by statewide restrictions. Within days, however, Tesla and Alameda County announced a resolution that would allow Tesla to reopen. News coverage of the lawsuit (with a copy of the complaint) is available here, and news coverage of the resolution is available here.
Another lawsuit from California, led by a beauty industry trade association, challenges Governor Newsom’s restrictions on a variety of beauty industries, including barbers and cosmetologists. The plaintiffs bring the standard due process, equal protection, and takings claims under the federal and state constitutions, but with two twists. One twist is that the takings claim rests, in part, on the alleged deprivation of the state licenses required under California law. The other twist is that the plaintiffs allege Governor Newsom’s orders no longer have any lawful basis because the predicted impact from COVID-19 has not come to pass. A copy of the complaint is available here.
In New York, a law firm has sued Governor Cuomo and Attorney General James over their adoption and enforcement of restrictions on its operation. The law firm alleges it was given an exemption from the shutdown orders as an “essential business” and yet, despite applying social distancing and sanitation protocols, it has been subjected to investigations and demands from Attorney General James’ office. The law firm alleges violations under the commerce clause, contract clause, due process clause, equal protection clause, takings clause, and New York law. A copy of the complaint is available here.
Will COVID-19 exposure cases expand beyond the workplace and nursing homes?
The family of a nursing assistant filed a wrongful death claim against one of Texas’s largest nursing home operators. This complaint focuses on the alleged failure of Regency Integrated Health Services to supply the proper and appropriate PPE. Though the lawsuit acknowledges the changing standards during the early days of the public health emergency, it nonetheless seeks to hold the facility responsible for the nursing assistant’s death. On top of the difficult burden of proof on causation, however, the family also faces the interesting issue of how the Texas workers' compensation system and its employer immunity will apply. News coverage of the lawsuit is available here. The petition can be found here.
Our previous updates have noted that meat processing plants seem particularly susceptible to COVID-19-related lawsuits. In another wrongful death lawsuit filed against JBS USA in Pennsylvania, the family of a deceased former employee focuses on an alleged lack of PPE and enforced social distancing, even after government warnings. The complaint alleges that JBS failed to use weekends to clean and disinfect the plant—including an emphasis on break area, restrooms, and hallways—and alleges, generally, that JBS “failed to properly provide testing and monitoring for individuals who had or may have been exposed to the virus.” Even though the President’s order directing meat processing facilities to stay open gives these cases involving meat processing facilities a unique twist, all employers should take note of the complaint’s focus on social distancing and hygiene measures. News coverage of the lawsuit is available here and here. The complaint can be found here.
A death at the site of one of the United States’ earliest-known COVID-19 outbreaks is the subject of a multi-million dollar lawsuit. The family of a resident at a Portland, Oregon, nursing home where nearly 30 residents died has alleged that, not only did the care home fail to take necessary precautions, but it also failed to communicate with its residents or their families. “[D]efendants failed to provide accurate or sufficient information about COVID-19 conditions at Foster Creek to allow [the decedent’s] daughter to make informed decisions regarding her care, including whether to remove or transfer [the decedent] from Foster Creek.” The complaint can be found here. The state of Oregon eventually closed the facility, issuing a report stating “employees did not wash their hands, failed to properly socially distance and were not trained in how to slow the spread of infection.” Foster Creek has not responded to the allegations. It has however also been hit with an employee “whistleblower” type lawsuit. News coverage of the lawsuit is available here and here.
Another wrongful death lawsuit involves a nursing home facility in Kansas where 27 residents have died from COVID-19, accounting for approximately a quarter of that state’s total fatalities. The family of one of those residents alleges the nursing home was not transparent and failed to take timely action, such as monitoring patients and employees on a daily basis and communicating with family members. It also alleges an employee with a fever and cough was allowed to work and thus spread the disease throughout the facility. The nursing home facility has not responded to the complaint or requests for comment. News coverage of the lawsuit is available here.
Will landlords succeed in challenging rent freezes and eviction restrictions?
A group of landlords has challenged a Union City, New Jersey, ordinance that freezes rent increases in rent-controlled units retroactive to March 1, 2020, and prohibits evictions based on nonpayment of rent that became due during the state’s COVID-19 state of emergency. The landlords allege the restriction of rent freezes to rent-controlled units is arbitrary and capricious and the restrictions on evictions conflict with state law. They seek injunctive relief and damages under the contracts clause, due process clause, equal protection clause, takings clause, and several New Jersey statutes. In an early setback for the plaintiff, however, the presiding judge denied temporary injunctive relief pending briefing on a request to show cause. A copy of the complaint is available here, and the order denying the request for temporary injunctive relief is available here.
Is the U.S. Supreme Court waiting for the right case to weigh in on the merits of government officials’ responses to COVID-19?
We previously reported that, in a single-line ruling, the U.S. Supreme Court denied an application to stay filed by petitioners in the first COVID-19 case to reach that court—an appeal from a Supreme Court of Pennsylvania decision refusing to set aside Governor Wolf’s shutdown order.
What we believe to be the next COVID-19 case to reach the U.S. Supreme Court, however, prompted greater discussion. That case, Valentine et al. v. Collier et al, No. 19A1034, came to the Court from the U.S. Court of Appeals from the Fifth Circuit, which had stayed a district court injunction that imposed additional sanitation requirements at a Texas geriatric prison. The prisoners then applied to Justice Alito to vacate the Fifth Circuit’s stay. The full Court, upon referral from Justice Alito, denied the application in a single line. Justices Sotomayor and Ginsburg wrote separately, however, to note the applicants’ high burden and the Fifth Circuit’s arguable justification in relying on procedural bars under the Prison Litigation and Reform Act. Yet Justices Sotomayor and Ginsburg also expressed grave concern about the alleged prison conditions, stating that “federal courts  have an obligation to ensure that prisons are not deliberately indifferent in the face of danger and death.” Even amidst this temporary setback, the applicants—and others with their own health and safety claims—likely will find encouragement for further claims in these words. News coverage is available here, and the Court’s Order on the application to vacate is here.
Has the Supreme Court of Pennsylvania signaled that business interruption claims will need to play out first in the lower courts?
The Supreme Court of Pennsylvania has denied a Pittsburgh restaurant’s petition asking the court to streamline its case and issue a decision on whether insurers can deny businesses’ claims for losses due to COVID-19 shutdown orders. The Court’s order, which can be found here, does not specify its reason for denying the petition, and it is likely that we will continue to see these types of business interruption claims against insurers throughout the pandemic and after.
Will new action by the U.S. Department of Education forestall additional lawsuits by student loan borrowers?
We previously discussed the class action lawsuit filed against U.S. Department of Education Secretary Betsy DeVos, in which the plaintiffs alleged that some employers were continuing to garnish wages for defaulted student loans, despite the temporary pause ordered as a result of the COVID-19 pandemic. In response, the Department of Education has stated it has sent letters to nearly 37,500 employers ordering them to stop garnishing employees’ wages, and staff are actively calling the employers to ensure they have received the notice. It has also sent letters to 83,500 defaulted borrowers instructing them on how to contact their employer if the garnishment continues. News coverage is available here.
Will early COVID-19 fraud cases act as a deterrent, or are they a sign of things to come?
Homeland Security Investigations has opened more than 370 investigations and arrested 11 individuals as part of its efforts to halt fraud related to the pandemic. The U.S. government recently seized over $3.2 million from the accounts of a former Georgia investment manager who attempted to defraud the VA by offering to sell PPE—which he did not have—at 15 times the standard price. Although the VA did not bite, others allegedly did. According to federal authorities, the individual controlled a bank account that received more than $7.4 million beginning in March, mostly appearing to be for PPE.
Reality TV star Maurice Fayne, best known for his appearance on Love & Hip Hop: Atlanta, also has been arrested on a federal bank fraud charge. Fayne allegedly obtained a Paycheck Protection Program loan for his wholly-owned business, Flame Trucking, but then spent the $1.5+ million loan amount on jewelry and child support payments. The FBI and SBA OIG are still in the process of investigating. See further discussion of these cases here and here.
Are Paycheck Protection Program lawsuits on their way out or just experiencing a temporary slowdown?
A California lender has voluntarily dismissed its lawsuit challenging the bar on loans to lenders under the Paycheck Protection Program, but only after a bank approved its loan. Payday Money Centers filed its initial complaint in April, arguing its loan application was improperly denied because the SBA’s “flawed” interpretation of the CARES Act, which resulted in lenders not being eligible for PPP loans. The suit was dismissed on May 11 without prejudice, which will presumably allow the lender to once again bring a claim in the event the loan is not forgiven. A copy of the complaint is here, and the notice of voluntary dismissal is here.
Is there any area of litigation that COVID-19 will not touch?
A personal injury lawsuit has been filed against Texas grocer HEB, alleging a Plexiglass partition installed as a COVID-19 safety measure fell on a customer’s foot. The complaint, which states the reason for the incident was improper installation of the partition, asks for $1 million in damages for serious injury ultimately resulting in surgery. Although a garden-variety personal injury lawsuit, the case highlights some of the unexpected risks from measures that companies have taken in response to COVID-19. The case is styled as May Homsy v. HEB LP, Case No. 2020-28576, in the 113th District Court in Harris County, Texas. The complaint is available here.
A lawsuit filed last week against GrubHub accuses the food delivery service of using its app to deceive customers with false ads. The complaint, filed by a Denver restaurant owner, alleges the GrubHub app shows certain restaurants as being closed when they are, in fact, open. The complaint further alleges that displaying this type of false information encourages potential customers to order from restaurants that are GrubHhub partners and has hurt business for those that are not, particularly when demand for food delivery has increased amid the COVID-19 pandemic. News coverage on the case is available here and here.